2008 LEGISLATIVE REPORT RELIGIOUS ACCOMMODATION IN …€¦ · bailment in which Plaintiff was the bailor and Defendant was the bailee. While the railroad cars were in bailment (in - [PDF Document] (2024)

2008 LEGISLATIVE REPORT RELIGIOUS ACCOMMODATION IN …€¦· bailment in which Plaintiff was the bailor and Defendant was the bailee. While the railroad cars were in bailment (in - [PDF Document] (1)













2008 LEGISLATIVE REPORT RELIGIOUS ACCOMMODATION IN …€¦· bailment in which Plaintiff was the bailor and Defendant was the bailee. While the railroad cars were in bailment (in - [PDF Document] (2)


The President’s Column by Paul A. Rajkowski 1

MDLA CLE Credit Approvals 2

DUDE, WHERE’S MY CAB? The rights, responsibilities,and liabilities involved in loaning and borrowingproperty…with a focus on taxicab claims in theTwin Cities. by David M. Werwie, Esq. 3

2008 Legislative Report by Sandy Neren 13

Religious Accommodationin the Workplace by James R. Andreen 17

Defense Strategies for Seeking Dismissal of Common Lawand Warranty Claims in Commercial Construction DefectCases Under MINN. STAT. § 541.051Where the ContractRequires Arbitration of Disputes:A Case Study by Mark S. Brown and Kimberly L. Johnson 23

Commercial Litigation Corner 31

Association News 34

New and Returning Members 35

MDLA Committee Updates 36

MDLA Member Announcements 37

Articles from Past Issues 38

Upcoming Dates 38

Application for MDLA Membership 39

DRI Corner 40


PRESIDENTPaul A. Rajkowski11 North Seventh AvenueSt. Cloud, MN 56302(320) 251-1055VICE PRESIDENTKay E. Tuveson8100 34th Avenue SouthMinneapolis, MN 55440(952) 883-7186TREASURERThomas E. Marshall150 South Fifth StreetSuite 1450Minneapolis, MN 55402(612) 341-8131SECRETARYPatricia Y. Beety145 University Avenue WestSt. Paul, MN 55103(651) 281-1200PRESIDENT EMERITUSPatrick J. Sauter33 South Seventh StreetSuite 3800Minneapolis, MN 55402(612) 333-3000DIRECTORS

James R. AndreenMinneapolis

Dyan J. EbertSt. Cloud

Mark A. FredricksonMinneapolis

Lisa R. GriebelMinneapolis

Mark A. KleinschmidtMinneapolis

Victor E. LundMinneapolis

Shamus P. O’MearaMinneapolis

Paul D. ReuversMinneapolis

Mark A. SolheimSt. Paul

Terrance W. VotelSt. Paul

Barbara R. ZurekMinneapolis

Susan R. ZwaschkaMinneapolis

PAST PRESIDENTSRichard R. Quinlivan - Paul Q. O’Leary -G.Alan Cunningham - Richard P. Mahoney -William T. Egan - James D. Cahill -Clyde F.Anderson - George S. Roth -Tyrone P. Bujold - Martin N. Burke -Richard L. Pemberton - Lynn G. Truesdell -Gene P. Bradt - PhillipA. Cole -Thomas R. Thibodeau - Eric J. Magnuson -John M. Degnan - Lawrence R. King -Michael J. Ford - Dale B. Lindman - Steven J. Cahill -Theodore J. Smetak - Rebecca Egge Moos -Richard J. Thomas - Nick Ostapenko -John H. Scherer - Michael S. Ryan -Kathryn Davis Messerich - Steven J. Pfefferle -Leon R. Erstad - Steven R. Schwegman -Gregory P. Bulinski - Patrick J. Sauter

EXECUTIVE DIRECTORRenee C. Anderson600 Nicollet MallSuite 380AMinneapolis, MN 55402(612) 338-2717http://www.mdla.orge-mail: [emailprotected]

EDITORIAL COMMITTEELeo I. Brisbois Michael D. CarrMegan D. Hafner LouAnn McGlynnTimothy S. Poeschl Kelly A. PutneyStacey L. Sever Courtney E. Ward-Reichard

VOLUME 29, ISSUE 2 • SPRING 2008Minnesota Defense is a regular publication of the Minnesota Defense Lawyers Association forthe purpose of informing lawyers about current issues relating to the defense of civil actions. Allinquiries should be directed to MDLA, 600 Nicollet Mall, Suite 380A, Minneapolis, MN 55402.

© Copyright 2008 MDLA. All rights reserved.


The Editorial Committee welcomes articles for publication in MinnesotaDefense. If you are interested in writing an article, please contact one ofthe Editorial Committee members or call the MDLAoffice, 612-338-2717.

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MN � WINTER 2008 1

This spring I watched the Good Faith bill movethrough the legislative process and it was painful-ly obvious that without input from our organiza-

tion that the bill would simply have been unfair. SinceGovernor Pawlenty has signed the bill into law we andour clients will need to learn to live with it. The effectthis new law will have on resolution of first party claimsremain to be seen.

The involvement of the MDLA’s Law ImprovementCommittee in fashioning this new law again points out thebenefit of MDLA membership. Many Committee mem-bers spent countless hours reviewing the contents of thebill and testifying before the various Legislative commit-tees and my thanks go out to each and every member whoparticipated in the process. It would be great if we couldget all of our members active in the committee’s of theMDLA. Increasing participation would allow more opin-ions to be expressed and many new ideas could come outthe discussions between committee members. Rememberyou only have the right to complain about something ifyou raised your objections in a timely basis.

Other than the Law Improvement Committee there arenumerous other committees that members can be active in.All the committees are attempting to increase it’s member-ships and the opportunity for leadership roles in the com-mittees is there for those who are interested. Whether youpractice construction law, employment law or other areas

of law there are committee for you to join to discuss issuesunique to your practice area. This magazine is alwayslooking for contributors. Please contact the EditorialCommittee if you have a topic to write about. Rememberto take a look at what the various committees have to offer.

Besides committee activities, the MDLA continues tooffer good informative seminars for it’s members. TheMDLA, the Hennepin Bar Association and the MAJ recent-ly conducted a joint medical malpractice seminar.Remember the Ethics Seminar and Golf Tournament onJune 13, 2008 and the Women Lawyers Breakfast on July24, 2008. Finally, Kay Tuveson is putting together an excel-lent program for the Trial Techniques Seminar in Duluthstarting on August 14, 2008. This year Marc Williams, theincoming President of DRI will be attending the seminarand Annual Meeting. Please plan on attending and wel-come Marc to the seminar and to our organization.

I urge each of you to get involved and reap the benefitsthat the MDLAoffers its members. �



2008 LEGISLATIVE REPORT RELIGIOUS ACCOMMODATION IN …€¦· bailment in which Plaintiff was the bailor and Defendant was the bailee. While the railroad cars were in bailment (in - [PDF Document] (4)

2 MN � SPRING 2008

Trial Techniques Seminar, Duluth2007 32nd Annual TTS 6.25 Standard MN Code # 112168

& 1.5 Ethics6.25 Standard Iowa Activity ID 45424& 1.5 Ethics6.25 Standard North Dakota& 1.5 Ethics9.5 Standard Wisconsin7.5 Civil Trial Specialist.

2006 31st Annual TTS 7.75 Standard MN Code # 999968.0 Standard Iowa Activity ID 379448.0 Standard North Dakota9.0 Standard Wisconsin8.0 Civil Trial Specialist.

2005 30th Annual TTS 8.25 Standard MN Code # 920738.25 Standard Iowa Activity ID 320468.25 Standard North Dakota10.0 Standard Wisconsin8.25 Civil Trial Specialist.

Mid-Winter Conference2008 43rdd Annual 8.00 Standard MN Code # 105057

Duluth 8.00 Standard Iowa Activity ID 410198.00 Standard North Dakota9.50 Standard Wisconsin5.5 Civil Trial Specialist.

2007 42nd Annual 7.75 Standard MN Code # 105057Alexandria 7.75 Standard Iowa Activity ID 41019

7.75 Standard North Dakota9.50 Standard Wisconsin5.5 Civil Trial Specialist.

2006 41st Annual 8.0 Standard MN Code # 95751Biwabik 8.0 Standard Iowa Activity ID 35086

8.0 Standard North Dakota9.5 Standard Wisconsin5.5 Civil Trial Specialist.

2005 40th Annual 6.75 Standard MN Code # 86828Alexandria 7.5 Standard Iowa Activity ID 28323

7.5 Standard North Dakota9.0 Standard Wisconsin5.5 Civil Trial Specialist.

Medical Malpractice Conference, Minneapolis2008 5.0 Standard MN Code # 119163

5.0 Standard Iowa Activity ID 508095.0 Standard North Dakota5.0 Standard Wisconsin5.0 Civil Trial Spec.

2007 4.0 Standard MN Code # 107199& 1.0 Ethics5.0 Standard Wisconsin& 1.0 Ethics

2006 5.25 Standard MN Code # 974026.0 Standard Wisconsin

2005 5.5 Standard MN Code # 891685.5 Standard Iowa5.5 Standard North Dakota6.5 Standard Wisconsin5.5 Standard Civil Trial Spec.

Golf and CLE Seminar, Stillwater2007: Sanctioned! Traps and Hazards in Litigation and How to Avoid Them

2.0 Ethics MN Code# 1084262.0 Ethics Iowa Activity Code 43502.0 Ethics Wisconsin

Golf and CLE Seminar, Stillwater (continued)2006: Elimination of Bias 2.0 Elim. of BiasMN Code # 98438

2.0 Ethics Iowa Activity Code 369632.0 Ethics Wisconsin

2005: Ethics Seminar 2.0 Ethics MN Code # 890482.0 Ethics Iowa Activity Code 304542.0 Ethics Wisconsin

Women Lawyers Breakfast, Minneapolis2007 6th Annual 1.0 Elim. of BiasMN Code #111275

Denied Wisconsin

2006 5th Annual 1.0 Prof. Dev. MN Code #1002631.0 Standard Wisconsin

2005 4th Annual 1.0 Prof. Dev. MN Code #919221.0 Standard Wisconsin

Insurance Law Institute, St. Louis Park2007 6.0 Standard MN Code # 103710

6.0 Standard IA Activity ID 400086.0 Standard North Dakota7.0 Standard Wisconsin6.0 Civil Trial Specialist

Governmental Liability Committee, St. PaulAnnual Case Law Update 1.0 Standard MN Code # 11838February 27, 2008 1.0 Standard Wisconsin

6.0 Standard North Dakota

New Defense Lawyers “Brown Bags”Insurers in Dire Straits: Money for Nothing and Checks for FreeJanuary 17, 2007 1.5 Standard MN Code #105272

1.5 Standard Wisconsin

Now That I Have Passed the Bar Exam What Can I Do to Benefit MyCommunityNovember 1, 2006 1.5 Standard MN Code#103299

1.5 Standard Wisconsin

Economic Loss DoctrineMay 11, 2006 1.5 Standard MN Code #98288

1.5 Standard Wisconsin

No-Fault Arbitration – From Start to FinishMarch 27, 2006 1.5 Standard MN Code #97653

1.5 Standard Wisconsin

Residential Moisture Intrusion Cases: How to Get the Most Out of an ExpertNovember 29, 2005 1.5 Standard MN Code #94882

1.5 Standard Wisconsin

All I Ever Really Needed to Know I Learned From “My Cousin Vinny”October 19, 2005 1.5 Standard MN Code #94213

1.5 Standard Wisconsin

No-Fault in a NutshellSeptember 13, 2005 1.5 Standard MN Code #93219

1.5 Standard Wisconsin

A View from the BenchMay 25, 2005 1.0 Standard MN Code #90937

1.0 Standard Wisconsin

Preparing For an Administrative HearingApril 13, 2005 1.5 Standard MN Code#88524

1.5 Standard Wisconsin

North Central Region Trial Academy, Oakbrook, IL2008 14.25 Standard MN Code #1150842007 14.25 Standard MN Code #1049842006 15.25 Standard MN Code #941432005 14.5 Standard MN Code #85847

MDLA CLE CREDIT APPROVALSThis list is not inclusive of every MDLA program that has received approval since 2004.

For additional reporting assistance, contact [emailprotected] or 612-338-2717

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MN � SPRING 2008 3

Anyone who’s beeninvolved in an autoclaim involving a taxi-

cab in the Twin Cities hasprobably heard the term“bailment.” Not all of youknew what it meant…

What is a bailment?A bailment is a relationship

involving the transfer of agood whereby the owner ofthe good (the bailor) retainshis ownership interest but

another (the bailee) has the right of possession and controlof the good. The bailor’s retention of ownership of theobject and his expectation that the bailee will return thegood or dispose of it as the bailor directs are the importantelements of a bailment. See Norris v. Boston Music Co., 151N.W. 971, 972 (Minn. 1915). The relationship need not bereduced to writing or even declared a bailment. SeeNational Fire Ins. Co. v. Commodore Hotel, Inc., 107 N.W.2d708, 709 (Minn. 1961) (citing Norris, 151 N.W. 971). Also,compensation (or lack thereof) is not essential to create abailment. McCauley v. Davidson, 10 Minn. 418, 421 (Minn.1865). In the simplest of terms, you create a bailmentwhenever you give some thing to someone to use all thewhile expecting the object be returned to you—most likelyin the condition it was in when you lent it, ordinary wearand tear expected.

While bailments need not be in writing or expresslystated, the relationship is contractual between the bailorand the bailee. See id. A contract requires an offer of terms,acceptance of the identical terms, and consideration.“Offer” and “acceptance” need no explanation, but “con-sideration” might.

“Consideration” is basically the voluntary assumptionof an obligation by one party on the condition of an act orforebearance by the other. Cady v. Coleman, 315 N.W.2d593, 596 (Minn. 1982) (citing Baehr v. Penn-O-Tex Oil Corp.,

104 N.W.2d 661 (Minn. 1960)). Consideration, althoughnecessary to have an enforceable contract, is not a veryimportant component in bailment contexts. All bailments,regardless of whether the bailee is compensated, are con-tracts founded on a sufficient consideration because typi-cally the bailor, in transferring possession of the object tothe bailee, parts with some right in the property or delaysthe present use of a right, constituting consideration.McCauley, 10 Minn. at 421 (citing JUSTICE JOSEPHSTORY, COMMENTARIES ON THE LAW OF BAIL-MENTS § 171 a. (1832)).

Bailments being enforceable contracts then, as with allcontracts, have obligations, or duties, associated withthem. Most of the duties are on the part of the bailee.1 Thebailees’ primary duty is to exercise due care with respect tothe goods entrusted to them. See National Fire Ins. Co. v.Commodore Hotel, Inc., 107 N.W.2d 708, 709 (Minn. 1961)(citing Norris, 151 N.W. 971). And, just as other breachesof duty, when a bailee is negligent in causing damage tobailed property owned by the bailor, the bailor may main-tain an action for damages to the bailed property againstthe bailee. St. Paul & S. C. R. Co. v. Minneapolis & S. L R.Co., 2 N.W. 700, 702-03 (Minn. 1879); see also MilburnWagonCo. v. Evans, 14 N.W. 271 (1882); Jellett v. St. Paul, M. & M.R. Co., 15 N.W. 237(Minn. 1883); Moulton v. St. Paul, M. &M. R. Co., 16 N.W. 497 (Minn. 1883);Ware v. Squyer, 84 N.W.126 (Minn. 1900).

Damage to bailed property, however, does not createstrict liability on the bailee. In St. Paul & Sioux City RailroadCompany v. Minneapolis S.L.R. Co., Plaintiff owned wheat-filled railroad cars that were sent to a railway junction,where Defendant was to take control of the cars and bringthem to a point where the wheat was to be emptied, emptythe wheat, and return the empty cars to the junction forreturn to Plaintiff. 2 N.W. 700. This arrangement was a


DUDE,WHERE’SMYCAB?The rights, responsibilities, and liabilities involved in loaningand

borrowingproperty…witha focuson taxicab claims in theTwinCities.

DAVID M. WERWIE is a litigation attorney with the Brett W. Olander &Associates firm in St. Paul. His practice primarily focuses on insurancedefense involving bodily injury and property damage liability, No-Faultclaims, subrogation, indemnity, and coverage questions. Dave is a memberof the State Bar of Wisconsin, the Minnesota State Bar, and The Florida Bar.Dave is a graduate of the University of Wisconsin Law School (J.D. ‘02).

1 Bailors owe fewer duties to bailees than bailees owe tobailors mainly because it is the bailor entrusting his prop-erty to the bailee. That said, bailors still have some basicduties. For instance, a bailor is obligated to inform thebailee of a dangerous component or dangerous defect inthe object bailed when the bailor has knowledge of thedanger. Another example would be in shipping, where abailor, in shipping goods with a bailee, owes a duty toproperly package the goods for shipment.

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4 MN � SPRING 2008

bailment in which Plaintiff was the bailor and Defendantwas the bailee. While the railroad cars were in bailment(in Defendant’s control), they were destroyed by fire.Plaintiff did not allege Defendant was negligent in anyway for the fire or the cars’ damage. The Court held thatnegligence could not be presumed and, without any proofof a negligent act or omission by Defendant, Plaintiff couldnot recover from Defendant for the damaged cars.

The key to Plaintiff’s failure to recover in St. Paul &Sioux City Railroad Company is that the Plaintiff/bailor didnot allege and prove the bailee was negligent. However, incertain cases, a plaintiff/bailor may not need to prove theDefendant was negligent at all. In cases where the bailedproperty is not returned, the case can get a lot easier for thePlaintiff, for the potential exists to create a greater burdenon the defendant/bailee in defending his conduct withrespect to the bailed property. In Minnesota, if bailedproperty is not returned to the bailor, the bailor proves abailment, and the bailor proves damages, the bailee is thencharged with the obligation of producing evidence andpersuading the jury by a preponderance of the evidencethat he was not negligent in causing the disappearance ofthe property. Harding v. Shapiro, 206 N.W. 168 (Minn.1925); Hoel v. Flour City Fuel & Transfer Co., 175 N.W. 300(Minn. 1919); Rustad v. Great N. R. Co., 142 N.W. 727, 728(Minn. 1913); Davis v. Tribune Job-Printing Co., 72 N.W. 808,809 (Minn. 1897).

In Harding v. Shapiro, Plaintiff/car owner stored hisvehicle in Defendant’s storage garage. 206 N.W. 168. TheDefendant/garage owner simply secured the garage witha 3/8” steel chain, a 4x4 post, and a padlock. The car dis-appeared and evidence was introduced by the garageowner that the chain appeared cut by burglars using a boltcutter. The jury found the garage owner liable to the carowner, and the garage owner appealed. The SupremeCourt determined the jury’s verdict could stand becausethe bailee/garage owner had the burden of proving hewas not negligent. The Court reasoned the jury could rea-sonably find the garage owner failed to take adequatemeasures to secure his lot and the bailor’s car.

The courts, in repeatedly upholding the burden shiftinginvolved in “lost property” bailment cases, reason thatwhen a bailor turns over possession of his property, it ismore unfair to charge the bailor with proving how the

bailee acted wrongly than to charge the defendant/baileewith the burden of proving his actions were not wrongful.See id.

That said, the courts have seemed to limit when the bur-den to prove innocence is placed on a defendant/bailee.This burden is generally placed on the defendant/baileewhen the bailed property is lost or destroyed and thereforeunreturned to the bailor. See Johnson v. Smith, 56 N.W. 37(Minn. 1893). However, the defendant/bailee can shift theburden back to the bailor by offering evidence excusingthe loss of the bailed property. See id.

In Johnson v. Smith, Plaintiff/bailor delivered householdfurniture to Defendant/bailee for repairs. Id. The furni-ture was destroyed by fire at Defendant’s facility, andPlaintiff/bailor sued for destruction of the furniture. Attrial, verdict was directed in favor of Defendant/baileebecause Defendant offered unrefuted evidence tending toshow it was not negligent in causing the fire. Plaintiffappealed, but the Supreme Court affirmed the ruling. TheCourt held that when a plaintiff/bailor proves delivery ofgoods and a demand for return of the goods, the defen-dant/bailee is charged with the burden to excuse his fail-ure to return the goods. Id. The Court went on to rule thatif the bailee then excuses his return of the goods by show-ing the goods were destroyed, the burden is shifted back tothe plaintiff/bailor to show the defendant/bailee’s negli-gence caused the destruction. Id.

In cases where the bailee returns to the bailor damagedproperty, the burden of proof should remain with thebailor to prove the bailee was negligent in causing thedamages. Lebens v. Wolf, 165 N.W. 276, 277 (Minn. 1917).

The Lebens v. Wolf, case dealt with Plaintiff/bailor loaninga stallion to Defendant/bailee. Id. Plaintiff/bailor allegedDefendant/bailee neglected the horse causing it to beinjured. The Court in Lebens clarified what has been charac-terized as the burden shifting, and in so doing, ruled thatPlaintiff had the burden to prove each element required forany plaintiff to prevail in a negligence action (i.e., duty,breach of duty, proximate cause, and damages) and, in hisdefense, Defendant had to offer evidence, and in essenceprove he was not negligent, if he was to avoid liability. Id.The Court explained this was the normal procedureinvolved in any other non-bailment negligence action. See id.

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Now, having touched on how bailors and bailees can beheld responsible to each other, it is important to discusswhether one can be liable to a third party because of the actof the other. More specifically, can a bailor be held liable tothird parties simply because a bailee caused damage to athird party? The answer is: Sometimes.


Based on the definition of a bailment, not surprisingly,in the automobile context, a bailment is created when a caris lent by the owner to another.

To hold one person responsible for the misdoings ofanother requires a special relationship between the twodetermined by law to create vicarious liability. SeeChristensen v. Hennepin Transp. Co., 10 N.W.2d 406, 416(Minn. 1943). Vicarious liability is sometimes called trans-ferred liability because the liability created by ones wrong-ful act is transferred to another person, whom the lawdetermines is responsible for the wrongdoer. For example,in the employer-employee relationship, (i.e., the “master-servant” relationship), employers can be held vicariouslyliable for the acts of their employees. In an agency, princi-pals can be held liable for the acts of their agents.Additionally, it used to be that the head of a family whoprovided a vehicle for the use of the family was liable forthe negligence of the family member driving the car withthe head’s permission. Pearson v. Northland Transp. Co., 239N.W. 602, 604 (Minn. 1931). The so-called “family car rule”or the “family-purpose doctrine” was replaced by theSafety Responsibility Act, which is in part codified inMINN. STAT. § 169.09, Subd. 5a. Jacobsen v. Dailey, 36N.W.2d 711, 715 (Minn. 1949).

Now, in the motor vehicle context involving ownersand drivers, the owner is held liable to third persons fortheir damages caused by the negligence of permissiveusers of the owner’s vehicle. This transferred liability situ-ation is the part of the Safety Responsibility Act codified asMINN. STAT. § 169.09, Subd. 5a.2 The “owner consent”

statute deems drivers operating a vehicle not their own,but with the owner’s permission, as agents of the owner.As the Court stated in Kangas v. Winquist, an owner of avehicle is ordinarily held liable for the negligence of thedriver of his vehicle when consent is given by the owner tothe driver and the vehicle is operated within the scope ofthat consent. 291 N.W. 292, 293 (Minn. 1940). The owner isnot held vicariously liable if, at the time the damage isdone to a third person, the driver is not operating theowner’s vehicle with permission.

Before the statute, some owners were held liable at com-mon law for their drivers’ negligence provided the damageoccurred while the vehicle was operated within the scopeof the owner’s permission. See Mulvehill v. Bates, 17 N.W.959 (Minn. 1884). Why then did the Minnesota Legislaturefeel the need to pass the law? “The enactment of the ownerconsent statute was impelled by strong considerations ofpublic necessity.” Hutchings v. Bourdages, 189 N.W.2d 706,708 (Minn. 1971). Before the law, not all owners of automo-biles were liable to innocent third persons injured throughthe negligence of the permissive users of their vehiclesunless a relationship of principal-agent or employer-employee existed between the owner-bailor and the opera-tor-bailee. Id. In the absence of statute or a special relation-ship in addition to the bailment, a bailor was not liable forthe negligence of his bailee. Haskin v. Northeast Airways,Inc., 123 N.W.2d 81, 83 n.3 (Minn. 1963) (citingMogle v. A.W.Scott Co., 174 N.W. 832 (Minn. 1919); Cornish v. Kreuer, 228N.W. 445 (Minn. 1929); Szyca v. Northern Light Lodge No.121, 271 N.W. 102 (Minn. 1937)).

Mulvehill v. Bates concerned the employer-employeerelationship, but the Court was quick to compare the factsto bailment. 17 N.W. 959. In Mulvehill, Plaintiff was theparent of a child negligently run over by an “expresswagon” owned by Defendant and driven by Defendant’semployee. The Court noted that if the accident hadoccurred at a time when the driver was operating thebailed property/wagon outside the scope of the employ-ment, then the owner/master would not be liable for dam-ages resulting from the driver/bailee’s negligence. Id. at960. So, the statute was needed to close this gap in liabilityand “to make the owner of motor vehicles liable to thoseinjured by their operation upon public streets or highwayswhere no such liability would otherwise exist." Hutchings,189 N.W.2d at 708-09 (quoting Christensen, 10 N.W.2d at

MN � SPRING 2008 5

2 The statute reads: “Whenever any motor vehicle shall beoperated within this state, by any person other than the owner,with the consent of the owner, express or implied, the operatorthereof shall in case of accident, be deemed the agent of theowner of such motor vehicle in the operation thereof.” (2007).

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6 MN � SPRING 2008

415; Holmes v. Lilygren Motor Co. Inc., 275 N.W.416, 418(Minn. 1937)). This, in turn, gave those injured by the neg-ligent operation of automobiles a greater chance at recov-ering damages because the registered owners are likely tohave insured their vehicles. Hutchins, 189 N.W.2d. at 709(citing RESTATEMENT OF TORTS, § 485 cmt. b; Jacobsen,36 N.W.2d at 714-15 (Minn. 1949)).

But, does the statute always transfer liability from thepermissive driver to the owner? No. If the statute alwaystransferred liability from the driver to the owner, an ownerinjured while a passenger in his vehicle, operated by a per-missive user, would not always be able to recover from hisnegligent driver. This is because the driver’s negligencecould be transferred to the injured owner and bar theowner’s claims for injury. These were the facts present inChristensen v. Hennepin Transp. Co., 10 N.W.2d 406.

Christensen dealt with a husband and wife wherein thewife was injured when riding in a vehicle they co-ownedand operated by her husband. Even though the ownerconsent statute transfers liability when the vehicle is oper-

ated by someone “other than the owner,” a co-owner issusceptible to transferred liability because co-owners aredeemed to consent to the other co-owner’s use of the vehi-cle. See Kangas, 291 N.W. at 294. However, the ChristensenCourt was unwilling to read the owner consent statute in away that barred the wife’s recovery.3

The Christensen Court gave the statute a “one-way”reading and limited the statute’s effect to hold ownersliable for the acts of their permissive drivers who causeinjury to third persons. See Christensen, 10 N.W.2d at 416.The Court determined the statute did not apply to injuriessustained by the owner because of the acts of his permis-sive driver. Id. The Court noted that the statute was reme-dial in nature, and remedial statutes should generally beread liberally. See id. However, the Court pointed out thata liberal reading should only be done to accomplish theremedy intended by the statute, not other “mischief” atwhich the statute was not aimed. Id. Meaning, the duty toread remedial statutes liberally also includes the duty tostop short of extending a statute beyond its purpose. Id.Since the owner consent statute was enacted to helpinjured third parties recover in automobile accidents andnot to prevent owners from recovering their damages, theCourt stopped short of transferring permissive drivers’negligence to vehicle owners when the owners seek to col-lect their damages.4

The accident involved in Christensen occurred whenMinnesota was a contributory negligence state instead of acomparative negligence state. Under contributory negli-gence, if a plaintiff is at all negligent, then he cannot recov-er. Under comparative negligence, if a plaintiff is less neg-ligent than a defendant, the plaintiff can recover damagesreduced by the percentage of liability attributed to theplaintiff.4 The same was true with respect to property damage. See,e.g., Ristau v. Riley, 41 N.W.2d 772 (Minn. 1950);Wick v.Widell, 149 N.W.2d 20 (Minn. 1967). In Ristau v. Riley,Plaintiff sued for the damages to his truck when his son wasinvolved in an accident with Defendant’s vehicle. TheCourt found a bailment because the father owned the truck,the son was driving it with the father’s consent, and the usewas for no purpose of the father. 149 N.W.2d at 773-74.Therefore, the bailee/son’s negligence was not transferredto his bailor/father to limit the father’s recovery. Id. at 774.

3 The Court of Appeals later held that, where a husbandand wife are joint owners of an automobile, the ownerconsent statute does not make one owner-spouse liable forthe vehicle-related negligence of the other owner-spouse.Ridler v. Madsen, 565 N.W.2d 38, 40 (Minn. Ct. App. 1997).This is because operation of the vehicle by a co-owner isnot operation by someone “other than the owner”—whichis required to trigger the owner consent statute. Since theco-owner is the owner, the statute does not apply.Whether the car is jointly owned by spouses is not alwayseasy to tell. In State v. One Buick Sedan Auto., the Courtdetermined that a family car used by the entire family, reg-istered in the wife’s name, and purchased in part by thehusband trading in his car and in part by the wife’s moneyshe received as a gift from her parents was a vehicle solelyowned by the wife. 12 N.W.2d 1, 3-4 (Minn. 1943). TheCourt reasoned that one spouse’s payment for all or partof an asset of the other is rebuttably presumed to be a giftto the receiving spouse. Id. at 3. Since the husband wasnot a co-owner, while driving, he was his wife’s agentunder the owner consent statute (and a bailee) and thewife therefore could be vicariously liable for his negli-gence. Id. at 4.

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After Minnesota switched to comparative negligence in1969, Minnesota courts have generally applied theChristensen reading in the same way. See MINN. STAT. §604.01, Subd. 1; see Smedsrud v. Brown, 227 N.W.2d 572(Minn. 1975). Meaning, an owner of a vehicle involved inan accident operated by another can recover his full dam-ages regardless of the share of negligence placed on hisdriver. The driver’s negligence will not be transferred tothe owner to bar or limit the owner’s recovery.

In Smedsrud v. Brown, Plaintiff was the owner of a vehi-cle that was driven by another with Plaintiff’s permissionand involved in an accident with Defendant. Id. TheCourt acknowledged the loaned vehicle situation involvedwas a bailment. Id. at 573. The jury found Defendant 15%at fault and Plaintiff’s bailee 85% at fault. Plaintiff/bailorsought to collect 100% of his property damages fromDefendant because, since he was not involved in the acci-dent, his fault was 0%. Plaintiff/bailor argued that thecomparative negligence statute allows one to recover fromanyone who has a greater share of liability than his own,and since Defendant’s 15% liability is greater thanPlaintiff/bailor’s 0%, he can recover fully. Defendantspecifically requested the Court reverse its prior rulingsdealing with the harsh contributory negligence, but theCourt refused and instead held that Plaintiff could recover100% from Defendant. Id. at 574.

The Court added that Defendant’s remedy was to pur-sue the bailee for contribution so that, in the end,Defendant only pays 15% of the damages and the baileepays Defendant the 85%. Id.

It is important to note that Defendant did not seek tobar Plaintiff from recovering at all by asking the Court totransfer the bailee’s negligence to Plaintiff/bailor, whichwould have made Plaintiff/bailor’s amount of negligencegreater than Defendant’s barring Plaintiff/bailor’s recov-ery. See id. This argument would likely have failed sincethe Smedsrud court noted that the comparative negligencestatute provided, “the person having the lesser degree ofnegligence shall not be barred from recovery.” Id.

When challenged, bailors continue to argue that abailee’s negligence will not be imputed to a bailor to limitthe bailor’s recovery because of the policy behind the prece-dential rulings; namely that, negligence law is based on per-sonal fault and, if a bailor himself is faultless, it is unfair to

deny him full recovery. SeeWeckerly v. Abear, 256 N.W.2d 79,81 (Minn. 1977) (addressing the employer-employee rela-tionship under contributory negligence and quoting Piersonv. Edstrom, 174 N.W.2d 712, 716 (Minn. 1970)).

Bailors argue any unfairness to non-bailee defendants iscorrected by their right to contribution, as in Smedsrud,whereas the transfer of liability to the bailor leaves theinnocent bailor without full compensation for his loss.Bailors would argue that transferring liability and limitingthe bailor’s recovery is akin to holding the bailor liable forentrusting his vehicle to the negligent bailee without proofthat the entrustment itself was negligent.5 This presump-tion of negligent entrustment is permitted to transfer lia-bility in the employer-employee context because theemployer holds out his employee as competent, and fit tobe trusted; and thereby in effect he warrants’ his fidelityand good conduct in all matters within the scope of theemployment. Meyers v. Tri-State Auto. Co., 140 N.W. 184,185 (Minn. 1913) (quoting JUSTICE JOSEPH STORY, LAWOF AGENCY § 452 (1839)). However, in a bailment, thereis no warranty of good conduct and no Minnesota courthas found the bailor presumably negligent merely becausehis vehicle is involved in an accident while operated bysomeone he let use the vehicle.

While not typically raised by bailors, there may be anadditional remedy to non-bailee defendants in bailmentcases. Even though no appellate-level Minnesota bailmentcase has addressed joint and several liability, which defen-dants should be asserting6, it is likely that the joint and sev-eral liability law also acts to remedy non-bailee defen-

5 Negligent entrustment, in simple terms, is a theory of lia-bility holding an owner of an object liable for physicalharm resulting from the use of the object when the ownersupplies the object for the use of another whom the sup-plier knows or has reason to know is likely to use theobject in a manner involving unreasonable risk of physicalharm to himself or others. Axelson v. Williamson, 324N.W.2d 241, 243 (Minn. 1982) (quoting RESTATEMENT(SECOND) OF TORTS § 390 (1977)).6 For accidents occurring on or after August 1, 2003, mostdefendants are not required to pay for another’s indepen-dent negligence unless the defendant’s fault exceeds 50%.MINN. STAT. § 604.02, Subd. 1(1).

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dants’ unfairness by limiting the amount non-baileedefendants pay to their specific share of liability (unlessthat liability exceeds 50%). Thus, if the accident inSmedsrud v. Brown would have happened today, the non-bailee defendant should argue that the joint and severalliability statute limits the non-bailee defendant’s liabilityto the plaintiff/bailor to 15% without the need to pay 100%and pursue the bailee for the 85% contribution.

Joint and several liability is often not raised by plain-tiff/bailors likely because it would require them to pursuetheir bailees with whom they may have a close relation-ship, who may not have the ability to pay a judgmentthemselves, or who may not have insurance coverage fortheir negligence in that situation.7 What is important,though, is that by applying joint and several liability, inno-cent bailors can recover 100% and non-bailee defendantswith minor shares of negligence are not forced to front theentire judgment and hunt down bailees for contribution.Meaning, if the bailee and non-bailee defendant werefound to be 60% and 40% at fault, respectively, the non-bailee defendant would only pay 40% and the bailor is leftto collect 60% against his bailee. This appears to treateveryone fairly and resolve the case efficiently, and thisshould be how bailment cases involving non-bailee defen-dants are handled—until a court says joint and several lia-bility does not apply to limit a bailor’s recovery againstnon-bailee defendants.

The logical extension of proceeding this way, however,is that bailors may claim the bailee’s share of the judgmentis uncollectible (especially if there is no insurance coverageavailable under the circ*mstances) and, within one year ofthe entry of judgment, seek to collect the bailee’s sharefrom the non-bailee defendant under MINN. STAT. §604.02, Subd. 2.8


It has been stated in this article that employer-employeerelationships are different from bailments, and that liabili-ty can be different depending on whether the relationshipis that of employer-employee or merely a bailment. Thisdistinction deserves some commentary so that one can bet-ter determine whether an employer-employee relationshipexists or just a bailment.

Generally speaking, control is the distinguishing factorbetween employer-employee situations and bailments.Additionally, it is the right of control that matters. SeeBurman Co. v. Zahler, 178 N.W.2d 234, 241 n.5 (Minn. 1970)(citing Cornish, 228 N.W. at 446). Thus, if one has the rightto supervise and control another and his work, regardlessof whether that right is exercised, the relationship is proba-bly that of employer-employee rather than a bailment. SeeBurman Co., 178 N.W.2d at 241 n.5. A bailment "does notclothe the bailor with any control, supervision, or directionover the acts of the bailee." Cornish, 228 N.W. at 446 (quot-ing Calumet Auto Co. v. Diny, 190 Wis. 84, 86, 208 N.W. 927(Wis. 1926)). So, a city bus driver is probably an employee,and your valet is probably your bailee.

Of course, the line is not always clear. The MinnesotaSupreme Court held that, when a sister lent her vehicle toher brother to use for the day and then pick her up fromwork at the end of the day, that relationship was both abailment and that of employer-employee. See Frankle v.Twedt, 47 N.W.2d 482, 487 (Minn. 1951). Further, the Courtindicated that where there is conflicting evidence the juryshould decide the relationship. Id.

In Frankle v. Twedt, the Court stated that compensationwas not a necessary element to find an employer-employeerelationship. Id. at 488. Further, the Court recognized thatthe sister had no ability to control or supervise the route or

7 Suing the bailee for property damage to the bailed prop-erty, to the extent it triggers the bailor’s insurance cover-age in defense of the bailee, turns the property damage lia-bility coverage of the bailor’s policy into deductible-freecollision coverage for the bailed car. This presents a prob-lem for auto insurers if their policy language does notexclude coverage in this situation.8 The statute reads: “Upon motion made not later than oneyear after judgment is entered, the court shall determinewhether all or part of a party's equitable share of the oblig-ation is uncollectible from that party and shall reallocateany uncollectible amount among the other parties, includ-ing a claimant at fault, according to their respective per-centages of fault. A party whose liability is reallocated isnonetheless subject to contribution and to any continuingliability to the claimant on the judgment.” (2007).

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manner of the brother’s driving during the trip. Id.However, the Court found no significant differencebetween the sister having a chauffeur and asking her broth-er to pick her up. Id. The Court drew on a Wisconsin deci-sion that found an employer-employee relationship when asister lent her car to her brother to go to a distant city andreturn, in part for her benefit and in part for his. See id. at487-88 (citing Le Sage v. Le Sage, 271 N.W. 369 (Wis. 1937));see also Olson v. Anderson, 28 N.W.2d 66, 68 (Minn. 1947)(where there was no bailment because a son was driving anerrand planned by his father, the owner of the vehicle.).

While compensation is not necessary to find an employ-er-employee relationship, the presence of compensationcan be a factor toward proving an employer-employee rela-tionship. Thus, proving compensation can be helpful if onewere attempting to transfer liability to a vehicle owner byarguing for a finding of an employer-employee relation-ship. In proving compensation, it is important to note thatmonetary payment is not required to establish the employ-er-employee relationship. Frankle, 47 N.W.2d at 488 (citingRogge v. G.N. Ry. Co., 47 N.W.2d 475 (Minn. 1951)).Determining whether an employer-employee relationshipexists requires a broad and non-technical analysis. Alecksonv. KennedyMotor Sales Co., 55 N.W.2d 696, 700 (Minn. 1952).

If, in consideration of services, one receives from anoth-er any services, goods, or accommodations of substantialfinancial value (e.g., fuel, heat, light, clothing, board, lodg-ing, laundry, tuition, etc.) an employer-employee relation-ship could be found. See id. In Aleckson v. Kennedy MotorSales Co., the Court determined that when a driver ofanother’s vehicle could use the vehicle for personal pur-poses while using it for business, the benefit of not havingto pay for the gasoline and oil which he would have usedhad he driven his own car along with the saved wear andtear of his own vehicle was sufficient to find “wages” andan employer-employee relationship. See id. at 700-01.

And why might it be important to prove a bailment wasalso an employment relationship? In the motor vehiclecontext, liability might be transferred to an employer to barthat employer’s claim against a third party—depending onwhether the employer is trying to recover for propertydamage or personal injuries. The negligence of an employ-ee is not transferred to the employer such as to bar theemployer from seeking compensation for personal injuriesagainst a third party, but liability is transferred to theemployer in property damage cases in which the employerseeks to collect against a third party for damage to the vehi-cle operated by the employee. Weckerly v. Abear, 256N.W.2d 79, 81 (Minn. 1977).

Why two different results? Well, the Court stated that,while legal symmetry is appealing, the law has to operate inan often asymmetrical world. See id. Basically, public policywon out. The Court reasoned that, with property damagelosses, employers typically make provisions for distributingproperty loss, but with personal injury losses, an employ-er’s innocence should be factored in to avoid barring hisrecovery. See id. (quoting Pierson, 174 N.W.2d at 716.).


When bailed property is damaged, what damages areavailable in compensation?

As discussed, bailment is a contractural relationship,and the bailee has the duty to return the property, typically,in the condition it was in when lent, ordinary wear and tearexpected. So, when bailed property is damaged by thebailee, the general rule is that the bailee is liable to thebailor for the diminution in the value resulting from theinjury. Laughren v. Barnard, 132 N.W. 301, 302 (Minn. 1911).Even then, the bailor has the same ordinary duty to miti-gate damages as any other plaintiff, and upon learning thata bailee has exposed the bailed property to injury, the bailormust use ordinary prudence to protect himself from addi-tional injury. Rettner v. Minnesota Cold-Storage Co., 93 N.W.120, 121 (Minn. 1903). One defending against the bailor canraise a failure to mitigate to reduce his liability to the bailor,and he can also attempt to reduce his liability by showingthat repairing the damaged property costs less than the dif-ference in value. Laughren, 132 N.W. at 302. The lowestamount of damages that fully compensates the plain-tiff/bailor is the appropriate measure of damages.

While compensation is not necessary tofind an employer-employee relationship,

the presence of compensation can be afactor toward proving an employer-

employee relationship.

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A bailee may also have a claim for damages when prop-erty he borrowed is damaged or lost through little or nofault of his own. A bailee can sue a third party for conver-sion or loss of the bailed property even if the bailee is notliable to the bailor for the conversion or loss. SeeChamberlain v. West, 33 N.W. 114 (Minn. 1887). However,the recovery of damages for the bailed property either bythe bailor or by the bailee deprives the other of his right ofaction. Vandiver v. O'Gorman, 58 N.W. 831 (Minn. 1894).

There will also be times when both the bailor and baileesuffer separate losses as a result of damage to the bailedprop-erty, and they will be permitted to bring their separate claims.For example, when a taxicab owner leases his cab to an inde-pendent contractor/cab driver (i.e., no employer-employeerelationship, only a bailment) and a third party is negligent incausing property damage to the cab, the owner/bailor has aclaim for property damage and loss of lease income, and thedriver/bailee may have a claim for loss of income for his lostfares while the vehicle is out of service.

Additionally, a vehicle owner has an indemnity claimagainst his permissive driver who injures a third partywhen that third party holds the owner liable pursuant tothe owner consent statute. Lunderberg v. Bierman, 63N.W.2d 355, 360 (Minn. 1954).


Most taxicabs in the Twin Cities are owned by a privateowner, who obtains a license to use a cab company’s nameand then leases the cab to an independent driver for aweekly rate.

Typically, the driver pays for all the gas, but gets reim-bursed for oil changes and other minor maintenance.Expenses for major maintenance and new tires are eitherhandled by the cab owner or reimbursed to the driver.

Often times, the cab driver lessee is allowed to use the cabfor personal use. There are often few restrictions placed onthe driver by the owner. Common examples of restrictionsinclude geographical boundaries. For example, some licens-es purchased by the owner for the cab limit where a fare canbe picked up (e.g., airport cabs typically cannot pick up faresin Minneapolis, but can drop off fares picked up at the air-port in Minneapolis). Also, owners typically do not wanttheir drivers taking fares to California, for instance, becausefor a nominal weekly rental fee, the cab incurs a lot ofmileage making it closer to being taken out of service due togovernmental mileage regulations on taxicabs.

Most taxicab situations in the Twin Cities are bail-ments. That said, what effect does the bailment relation-ship have on handling liability claims involving taxicabsin the Twin Cities?

The primary difficulty with these claims in the TwinCities is the misconstruing of the law by cab owners andtheir claims representative(s). I will refer to them collec-tively as “bailors.”

The bailors advance Smedsrud v. Brown and the absence ofany court decisions applying joint and several liability to bail-ment to argue that if a third party causes even 0.1% of theirdamages, the bailors are entitled to 100% of the their propertydamages and loss of lease income from that barely negligentthird party, whose remedy is contribution against the cab dri-ver. In defending against this argument, it is important tomaintain that Smedsrud v. Brown (1975) was decided prior tothe codification of joint and several liability in Minnesota(1978) and joint and several liability should apply.

Bailors further argue that even though their cab driverswere negligent, that negligence is not transferred to them tolimit or preclude their recovery. As discussed above, this isoften, but not always, true. However, even when it is true,the bailors still have to prove who was negligent. Thisallows for a defense on the merits and the opportunity tobring a contribution claim against the cab driver.

When is it not true? There are times when the cab ownerwas the driver at the time of the accident and there was nobailment. There are times when the relationship betweenthe cab owner and cab driver can be characterized as morethan a bailment, and the law suggests that, in propertydamage cases in the employer-employee context, the dri-

There will also be times when boththe bailor and bailee suffer separate

losses as a result of damage to the bailedproperty, and they will be permitted to

bring their separate claims.

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ver’s negligence is transferred to the owner to limit or barhis recovery. Weckerly, 256 N.W.2d at 81. Also, there is atleast one situation where specific municipal taxicab ordi-nances have been read to transfer the negligence of the dri-ver to the owner to bar the owner’s recovery in the absenceof an employer-employee relationship. Bennett v. McColl,1991 Minn. App. LEXIS 481 at *5 (interpreting MinneapolisCode of Ordinances ch. 341).

In Bennett v. McColl, the negligence of the taxicab driver(bailee), which was transferred to the owner (bailor), was70% and the non-bailee defendant’s negligence was 30%.1991 Minn.App. LEXIS 481 at *1. The unpublished decisionof the Court of Appeals, which has no precedential value,but is persuasive authority, held that “various requirementsof the [Minneapolis taxicab] ordinance result in imputationof liability to the owner for the taxi driver's negligence,which, in turn, results in no recovery for the owner here,whether or not the driver is considered an employee of theowner.” Id. at *5. The owner was barred from recoverybecause the amount of transferred negligence exceeded thenegligence of the non-bailee defendant. The Court ofAppeals’ decision was really without much explanation,but the court focused its attention on the parts of the ordi-nance that make the owner responsible to protect the driverfrom liability and set a $45 plus gas daily maximum on coststo the driver for vehicle operating expenses. Id.

The Minneapolis ordinance applies to cabs operated inthe City of Minneapolis. Thus, if a taxicab accident occurs inMinneapolis, there is a chance the district court will followBennett v. McColl and transfer the cab driver’s liability to thecab owner to limit or prevent the cab owner’s recovery.

If the accident happens in another municipality, whichhas a similar ordinance, then Bennett v. McColl could applythere, too. Also, absent a similar ordinance, if the cabowner and driver have an agreement of terms similar to therequirements in the ordinance, Bennett v. McColl couldapply, presumably, to show there was no true bailmentbecause of the level of control retained by the bailor.

So, when defending against a bailment taxi claim, thefirst thing to do is determine if there is a bailment, and if so,whether there could also be an employer-employee rela-tionship. If not, look to see if there is an agreement or ordi-nance that could bring Bennett v. McColl into play. If not,determine if your party’s negligence is greater than 50%. If

so, your party will likely be required to pay 100% and pur-sue contribution against the cab driver. If your party’s neg-ligence is 50% or less, a settlement offer can be considered,but the amount should not exceed the percentage of negli-gence likely attributable to your party.

With respect to a cab driver’s loss of income claim (in acar vs. taxi accident), the cab driver cannot recover if hisnegligence is greater than your party’s negligence. So,hypothetically, if only two parties could be negligent andyour party’s negligence is less than 50%, no settlement offershould be made because the driver’s negligence exceedsthat of your party and the cab driver cannot recover.

Now that claims brought by bailors and bailees againstthird parties have been discussed, what about claims ofthird parties brought against the bailors?

Bailors often incorrectly argue that the owner consentstatute does not apply to them because of the bailmentcases holding a driver’s negligence is not transferable tothe owner. However, those cases stand for the notion thatthe owner consent statute is not extended to bar an inno-cent owner from recovering his damages. These casesremind us, though, that the primary purpose of the ownerconsent statute is to aid third parties in recovering fromauto accidents by allowing claims against the registeredowners who likely bought insurance for the vehicleinvolved in the accident. Hutchings, 189 N.W.2d at 708-09.The owner consent statute applies, and it holds cab ownersliable to third parties injured through the negligence of thecab drivers. See Jacobsen, 36 N.W.2d at 713-14 (quotingChristensen, 275 N.W.2d at 418).

CONCLUSIONA bailment is the relationship created when an object is

temporarily used by someone other than the owner withthe owner’s consent, but without the owner controllingexactly how it’s used. The user of the object is called the

Bailors often incorrectly argue thatthe owner consent statute does not apply

to them because of the bailment casesholding a driver’s negligence is not

transferable to the owner.

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bailee, and that person has a duty to use due care in pro-tecting the object while in his possession and to return theobject to the owner as the owner directs. The owner isreferred to as the bailor and has to inform the bailee of anyknown, hidden dangers associated with the object.

A bailor can sue a bailee for damages to the bailed prop-erty, if the bailee failed to use due care and caused the dam-ages. The measure of damages is the lesser of the diminu-tion in value or the cost of repairs.

The bailor and bailee can sue a third person when thethird person causes damage to the bailed object. If the bailedobject is damaged through the combined fault of the baileeand a third person, the bailee’s fault is probably not trans-ferred to the bailor to prevent the bailor from fully recover-ing for the damages to his property—unless there is anemployment relationship between the bailor and bailee orsome other special circ*mstance. Additionally, joint andseveral liability principles should apply to prevent the baileeor third person from paying more than their fair share of lia-bility (to the extent that individual’s liability is 50% or less).

When the bailed object is a motor vehicle, the bailor isresponsible to third parties for damages caused to them bythe bailee, per the owner consent statute, MINN. STAT. §169.09, Subd. 5a. However, co-owners are typically notliable for the negligence of the other co-owner driverbecause the statute only transfers liability to an ownerwhen the vehicle is operated by someone “other than theowner,” and a co-owner is an owner, not someone otherthan the owner.

Additionally, the owner consent statute works “one-way;” meaning, the bailee’s liability is not transferred ontothe bailor to prevent the bailor from recovering. Forinstance, if the bailee is 55% negligent and the only othernegligent party, the third party, is 45% negligent, the bailorcan still recover fully because the bailor is 0% at fault.

There are two notable exceptions to this liability scenario.First, if there is an employer-employee relationship in addi-tion to the bailment, in property damage cases, the employ-ee-bailee’s negligence is transferred to the employer-bailorto limit or prevent his recovery for the damaged bailed vehi-cle. Second, if the bailed vehicle is a taxicab and a municipaltaxicab ordinance similar to Minneapolis’ applies, thenthere is persuasive case law holding that the cab driver-bailee’s negligence is transferred to the cab owner-bailor toprevent or limit the cab owner’s property damage recovery.

When presented with a motor vehicle bailment claim,first determine whether a bailment existed and if anyother relationship existed in addition to the bailment.Then determine the owner of the bailed vehicle and veri-fy whether there was any co-ownership by the bailee.Next, separately analyze claims made by the owner-bailor and claims made against the owner-bailor. Forclaims made by the bailor, find out if there is an agree-ment, ordinance, or additional relationship that changesthe general rule that the bailee’s liability is not trans-ferred to the bailor to limit or prevent the bailor’s recov-ery. Finally, for claims made against the bailor by thirdparties, when there is no co-ownership by the bailee, sim-ply apply the owner consent statute and transfer thebailee’s negligence to the bailor. �

A bailor can sue a bailee for damages tothe bailed property, if the bailee failed to

use due care and caused the damages.

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The Legislature convened the second half of their 85th reg-ular sessionon February12th, and adjourned just underthe wire 14 weeks later, at midnight on May 18th,

as required by the Constitution. Following around the clocknegotiations throughout the last week of the session, the gover-nor and legislators agreed on legislation to balance thestate’s$935M projected budget deficit, health care reform changes thatwill provide coverage for an estimated 12,000 uninsuredMinnesotans while reducing healthcosts, additional bondingproposals for Central Corridor and a new Vermilion State Park,moremoney forK-12 schools andnursinghomes, and tax legis-lation to capproperty taxes. TheLegislature also passed a com-prehensive transportation funding package early in session byoverriding theGovernor’sveto.

Following is a summary of the legislative issues MDLAmonitored and actively participated in this session.__________________________________________________________

DIRECT ACTION/BADFAITH CLAIMS (CHAPTER 208)The trial lawyers's top priority in 2007 was legislation

that would permit "direct actions" against insurance com-panies, and create a private cause of action against aninsurance company for damages caused by the insurancecompany's "bad faith" in refusing to pay a claim. That billfailed to pass the Senate floor and was ultimately returnedto Senator Scheid's Commerce committee.

The MTLA introduced a new version of this proposalthis session, dealing only with the issue of "bad faith." Thebill easily passed House Commerce committee and wentdirectly to the House floor.

The Senate companion bill, however, was significantlyamended in Commerce committee by the bill's author in anattempt to remove the resistance to the proposal by theinsurance industry and key legislators. On the Senate floor,Senator Scheid successfully offered another amendmentcontaining an alternate proposal supported by the insuranceindustry The amendment and the bill both contained thesame two-part standard for determining whether an insureracted without good faith. The amendment retained the pos-sibility of attorney fees being awarded, but capped fees at$40,000. In addition, the amendment provided for an addi-tional award to the insured of half the difference between theinsurer's pre-trial offer and the final award, up to $100,000.Senator Scheid said that a benefit to that approach is thatinsurers' exposure is more easily quantifiable, permittinginsurers to control and calculate premium increases.

House Commerce committee also considered andpassed a second bill on the issue, HF 3975, advocated for bya number of business interests, that had even looser stan-

dards for awarding of attorneys fees and interest against aninsurance company for a delay or failure to pay on a policy.

The House ultimately passed a version of the bill thatclosely mirrored the bill as it passed the Senate floor.

The conference committee adopted language that princi-pally follows the amendment that Senator Scheid put onthe bill on the Senate floor, with some changes. Under thefinal language, the court MAY (not shall) award an insuredthe following for a bad faith violation: 1) an amount equalto one half of the proceeds awarded that are in excess of anamount offered by the insurer at least 10 days before thetrial begins, or $250,000, whichever is less, and 2) reason-able attorney fees actually incurred to establish the insur-er's violation of the law. Attorney fees may be awardedonly if the fees sought are separately accounted for by theinsured's attorney and are not duplicative of the fees for theinsured's attorney otherwise expended in pursuit of pro-ceeds for the insured under the insurance policy. Attorneyfees must not exceed $100,000. Third party liability policiesare exempt, as are no fault claims.

The insurance industry and the governor's office weresatisfied with the legislation as drafted by conference com-mittee, and removed their opposition to it. As a result, itwas signed into law by the Governor.

Dale Thornsjo did yeoman's work on this legislation onbehalf of the Association; many thanks to him for his time-consuming efforts on the bill.

A copy of this legislation can be found atwww.senate.leg.state.mn.us. Enter SF 2822 in the box onthe left side, and then go to conference committee report.

35W VICTIMS COMPENSATION FUND (CHAPTER 288)Legislation to establish a compensation fund for the vic-

tims of the 35W bridge collapse was announced last fall, andseveral interim hearings on the issue were held by theClaims committee. Many groups and individuals testifiedon the issue, including the Association president, PaulRajkowski.

The bill that passed into law requires the chief justice toestablish a special master panel to consider claims, makeoffers of settlement, and enter into settlement agreementswith survivors on behalf of the state. The panel is to consistof 3 attorneys with experience in legal issues involving thesettlement of tort claims and the determination of dam-ages. A settlement agreement for an individual is not toexceed $400,000, and the $1,000,000 limitation on state ormunicipal liability for claims arising out of a single occur-rence otherwise applicable to the catastrophe does notapply to payments made to survivors. A survivor is eligibleSANDY NEREN is with Messerli & Kramer, working out of their St. Paul

office, and has monitored legislation for MDLA since 1995.


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for a supplemental payment if the offer of settlement calcu-lation for the survivor exceeds $400,000. The supplementalpayment must be calculated based solely on that portion ofthe uncompensated medical expenses, loss of income,future earning capacity, or other financial support forwhich compensation was not received under the offer ofsettlement or settlement agreement.

The bill's language is available at www.house.leg.state.mn.us. Enter HF 2553 in the box on the left side, andthen go to conference committee report.


Legislation to extend the sex abuse statute of limitationsfor civil actions was again introduced in 2007. The bill wouldhave permitted an action for damages caused by sexualabuse committed against a minor to be commenced withinthe later of: six years of the age of majority of the victim, or sixyears of the time that the victim fully comprehends the causalconnection between the sex abuse and the injury resultingfrom the abuse. The bill also permitted a victim whose claimwould be time-barred to file their case byAugust, 2010.

It had one hearing in a House budget committee, butwas sent back to policy committee, where it was neverconsidered; the Senate held no hearings on the bill lastyear.AHouse floor amendment on the issue was offered toanother bill, but was ultimately withdrawn.

The bill was heard in both the Senate Judiciary andHouse Public Safety committee this year, but was signifi-cantly amended to delete the provision permitting time-barred cases to be filed. The bill also provided that anaction against a person who negligently permitted sexabuse to occur to a minor must be commenced before thevictim reaches age 35; an action against a person who neg-ligently permitted sex abuse to occur to an adult must becommenced within 6 years of the last incidence of abuse.

The bill passed both House and Senate committees, butwas never considered on either floor; it thus failed to pass.MDLA wrote a letter of opposition to the bill as intro-duced.

SICK LEAVE BENEFITS (VETOED BY THE GOVERNOR)Legislation that would have extended sick leave bene-

fits for care for a spouse, sibling, parent, grandparent, orstepparent passed the Legislature this session, but wasvetoed by the governor. The governor's veto message canbe found by going to www.senate.leg.state.mn.us; enter SF1128 and scroll down to Governor's action veto.


Legislation to repeal Minnesota’s seatbelt gag rule andpermit the introduction of evidence in civil cases onwhether or not a party to a lawsuit was wearing his/herseatbelt was passed in the House Civil Law committee lastsession. It was scheduled in Senate Judiciary committeeseveral times, but was not heard before deadline. It wasslowed down by a fiscal note put on the bill by theSupreme Court, stating that passage of the bill wouldrequire additional court hearing time.

Because of the shortness of this year’s hearing sched-ules, the House author, Paul Kohls, and the Senate author,Don Betzold, initially decided to wait until next year torevisit the issue. With the lobbying support of severalgroups supportive of the legislation, though, Rep. Kohlsoffered this language as a floor amendment to the HouseTransportation policy bill, HF 2247, and it did pass theHouse floor. Advocacy groups then met with key Senatorsin an effort to convince them to acquiesce to the Houseposition on this issue in conference committee.Unfortunately, this bill was one of the many dozens ofmajor bills that fell victim to the legislative stalemate andnever even made it into conference committee.

If a special session is convened, it is certainly possiblethat this bill may be one of the items on the agenda for con-sideration. If so, advocates for the legislation will continueto encourage the Senate to accept this provision.


As introduced, this bill would have removed the cur-rent $8500 cap for punitive damages in human rightscases. Following testimony from members of MDLA andother groups, the bill was amended to raise the current capto $25,000.

AUTO INSURANCE CLAIMS (CHAPTER 214)This legislation prohibits a health care provider from

initiating direct contact with any person injured in the useof an automobile, for the purpose of influencing that per-son to receive treatment or purchase any item. .

AVIATION LIABILITY (CHAPTER 182)This bill results from a "meet and confer group" provided

for in 2007 legislation, to address issues related to aircraftliability insurance required under state law. It provides thatan insured's action or failure to act is not a basis for refusingto pay a claim, unless the action or failure to act had a "directcausal connection" to the event that led to the claim.

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SALES TAX ON LEGAL SERVICES (HF 21631)Legislation to extend the sales tax to many services,

including legal services, was heard in House Tax commit-tee this session. It did not move out of committee, and noSenate companion was even introduced.

The governor has appointed a 15 member 21st CenturyTax Reform Commission to meet over the interim andmake recommendations on Minnesota's tax structure forconsideration by the 2009 Legislature. The group will rec-ommend changes in tax laws that reflect changes in busi-ness practices, demographics and the economy. It is likelythat this group may consider extension of Minnesota'ssales tax base as part of that study. We will be monitoringthe deliberations of this commission.


Minnesota law provides a right of action under section8.31 (often referred to as the "private attorney generalstatute") which permits an individual to bring a claim indistrict court alleging violation of various laws respectingunfair, discriminatory, and other unlawful practices inbusiness, commerce, or trade.

In 2000, the Minnesota Supreme Court held that a pri-vate action brought by an individual under this section isonly permitted where there is a "public benefit" inherent inthe action, because the attorney general is only permittedto bring suits that are in the public interest. Resulting casesapplying this standard have most often held that, unlessthe suit is a class action or other special circ*mstancesexist, an action brought by an individual alleging a viola-tion of the laws noted above does not benefit the public. Asa result, most suits brought by individuals under this sec-tion fail or are dismissed outright, before the court consid-ers the substantive merits of the claim.

This bill provided that a private action brought underMinnesota law alleging an unfair, discriminatory, or otherunlawful practice in business, commerce, or trade is in thepublic interest and benefits the public. The bill did not cre-ate additionalcauses of action under chapter 72A (regula-tion of trade practices).

The legislation was strongly opposed by MDLA and anumber of business organizations; MDLA sent a letter ofopposition to the bill authors.

The courts put a significant fiscal note on the bill, whichhalted its progress in committee; it failed to pass.

PRIMARY SEATBELT OFFENSE (SF 16/HF 1061)Legislation was again introduced in 2007 to make viola-

tion of Minnesota's seatbelt law a primary offense. Itpassed the Senate, but was stopped in the House by thechair of the Public Safety committee, who did not hear thebill. The Senate author amended it onto the omnibus trans-portation policy bill, but it was not included in the finalconference committee report.

This session, the Senate author again amended the pro-vision onto the omnibus transportation policy bill, and itwas adopted by the conference committee. When the billwas considered on the House floor, though, a motion toreturn it to conference committee passed--principallybecause of the seatbelt provision. The House again consid-ered the issue when an attempt was made to amend anoth-er transportation bill with the language of the primaryoffense legislation; that motion was also handily defeated.The provision therefore failed to pass.


A number of bills supported by the business communi-ty on attorneys fees, class actions, and consumer fraudwere again introduced this session, as was legislation tomake changes to the no fault laws; none of them had hear-ings during this short session.

COURT BUDGET (CHAPTER 363)The governor's proposal to deal with the projected

$935M budget deficit included significant cuts to all stateagencies and branches, including a $8.556M cut to thecourts. The House and Senate Judiciary budget commit-tees generously softened the proposed cuts, and the bud-get conference committee reduced those cuts even further.

The final negotiations between the Governor and theLegislature resulted in a $3.881 M total cut to the courtbudget, or about 1.3% of budget. The trial courts cut was$2.8M, or 1.1 % of budget, court of appeals $250,000, or2.4%, and the Supreme Court $831,000, or 2.5%.

Legal aid was cut $120,000, and the public defenderswere cut $1.491 M.

Unless the economy turns around in the next year, theprojected budget deficit for the next biennium will presentadditional problems for all state agencies and branches ofgovernment.

QUIE COMMISSION LEGISLATION (SF 2401/HF 3023)The Quie Commission legislation proposing a constitu-

tional amendment to change to retention elections for thejudiciary passed House Government Operations committeein late February, and was sent to the Public Safety and CivilJustice committee. In the Senate, the bill had an extensivehearing in Senate Government Operations committee theday after the House hearing. A majority of committee mem-

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bers did not support the bill, and the motion to pass the billto Judiciary committee with recommendation failed. Amotion to send it to Judiciary committee without recommen-dation then passed. This action is considered a more politicalternative to outright defeat of a bill. Neither the House orSenate authors requested a hearing in the House Public

Safety or the Senate Judiciary committees; the bill there-fore never saw any action after the first committee in eachbody, and failed to pass.

The Minnesota District Judges Association has had aposition opposed to retention elections since 2002, and lob-bied against the proposal. Several jUdges sent lettersopposing the proposal.

The bill was also actively opposed by AFSCME Council5, several minority Bar Associations, the Minnesota FamilyCouncil, and the Minnesota County AttorneysAssociation; they all testified against the proposal in com-mittee, along with a number of district court judges andformer Speaker of the House Phil Caruthers. The RamseyBar Association also took a position in favor of retentionelections for the appellate courts only.

The Quie Minority report's proposal to eliminate judi-cial elections completely and have the decision on continu-ation in office decided by a commission was introduced inthe Senate this year, but was not heard (SF 3206).

What happens or doesn't happen in this fall's electionsmay determine the viability of this proposal for passageduring the next session. 136 judges are up for election inNovember. We'll be glad to provide that list upon request.


Current law does not contain any contribution limits onjudicial candidates. Legislation to impose some limits wasintroduced during the 2007 session, following meetingswith the judiciary. Because of the difficulty that judgessometimes have raising money, the judges requested thatthe limits be set at the same $2000 level that current law pro-vides for the Governor. The bill passed the Senate last year,but was not considered by the House before adjournment.

Late in session this year, the Senate amended this provi-sion onto an omnibus state government policy bill. Theyultimately decided to delete the provision from the billentirely. As a result, there will be NO contribution limitsfor judicial candidates.

APPELLATE COURTS/MERIT SELECTION (SF 31291)Legislation that would have made the appellate courts

subject to the current merit selection system in place for

the district courts was introduced and passed through theSenate by Senator Mee Moua, chair of the Judiciary com-mittee. She amended that provision onto a state govern-ment policy bill, but the provision was removed in confer-ence committeemit did NOT pass into law. A House com-panion bill was never introduced.


Various bills were introduced over the biennium toincrease the mandatory retirement age for judges from age70 to 75. None of the bills were heard in either Senate orHouse committee.


Over the interim, the Supreme Court's Advisory com-mittee on the Rules of the Board of Judicial Standards metextensively to discuss changes to the rules. A number ofrecommendations for change were made by severalMDLA members, and adopted by the advisory committee.We monitored all hearings of this committee, and will beglad to forward the committee's final report upon request.


The General Rules committee of the Supreme Court wasgiven the task of responding to a petition filed last year bythe news media proposing a more liberal rule on use ofcameras in the courtroom. The committee held severalhearings over the fall and winter on the issue. They tookpublic testimony from a number of groups and receivedwritten comments from others. Their report to the SupremeCourt did not support a loosening of these rules. The finaldecision on this issue will be made by the Supreme Court;there is a public hearing scheduled on this issue in July.

MDLA's Law Improvement committee and Board dis-cussed the issue, but did not take a position. We can for-ward a copy of the committee's final report upon request.__________________________________________________________

In addition to the bills described above, LawImprovement Committee members also reviewed hun-dreds of bills we forwarded to them this session. They alsomonitored legislative activity on many dozens of thosebills, and testified and wrote letters of opposition and sup-port on several proposals. The MDLAadditionally acted asan invaluable resource to other groups on numerous issues.The final MDLA Bill Status report on all legislation trackedfor the Association is posted on the MDLAwebsite.

Please feel free to contact us with questions or concerns.I can be reached at [emailprotected], or 651-228-9757. �

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Modern America hasbecome a diversenation of numerous

religions, some of which arefamiliar, some not. The lawsof the United States andMinnesota require a balanc-ing act of accommodatingreligious beliefs and notimposing religious beliefs.Employers must be vigilant inaccommodating theiremployees’ religious beliefs,

practices and activities. Failure to do so can subject theemployer to liability under Title VII and the MinnesotaHuman Rights Act (MHRA). See, e.g., Sturgill v. UnitedParcel Service, Inc. 2006 WL 3147665 (W.D.Ark. 2006),(Judgment for plaintiff awarding plaintiff $103,722.25 inlost wages and benefits, $207,444.50 in punitive damages,and directing UPS to reinstate plaintiff, with all attendantseniority and benefits, to his prior bid route or to a positionas an unassigned driver; also awarded attorney fees.)

This article will discuss the major issues in religiousaccommodation in the workplace, concentrating on issuesrelating to accommodating an employee in the secularworkplace. What is not included is the concept of accom-modating the secular employee in a religious or a religious-ly charged workplace. See Minn. Stat. § 363A.26. See alsoGeraci v. Eckankar, 526 N.W.2d 391 (Minn. Ct. App. 1995).There are also constitutional issues for governmentalemployers which are not discussed here. See, e.g., Altman v.Minnesota Dept. of Corrections, 251 F.3d 1199 (8th Cir. 2001),(Employees claimed that reprimanding them for readingtheir Bibles as a protest during a training program aboutgay/lesbian issues violated their First and FourteenthAmendment rights to freely exercise their religion.)


Under Title VII it is unlawful for an employer to “dis-

charge any individual, or otherwise to discriminate againstany individual with respect to his compensation, terms,conditions, or privileges of employment, because of suchindividual’s ... religion.” 42 U.S.C.2000e-2(a)(1) (2000). TheMinnesota Human Rights Act (MHRA) prohibits employ-ment discrimination “because of race, color, creed, religion,national origin, sex, marital status, status with regard topublic assistance, membership or activity in a local com-mission, disability, sexual orientation, or age.” Minn. Stat. §363A.08, subd. 2. Because there are so few cases relating toaccommodating religious beliefs of the employee solelyunder the MHRA, the balance of this article will focus onfederal cases. This is the approach the Minnesota Courtsseem to take. See, e.g., Benjamin v. County of Hennepin, 1996WL 679690 (Minn. Ct. App. 1996).1


The seminal case on religious accommodation is TransWorld Airlines, Inc. v. Hardison, 432 U.S. 63, 97 S.Ct. 2264(1977). In Hardison, the Supreme Court emphasized thatreligious discrimination can exist whether it is the majorityreligion not making room for a minority, or a secularauthority eliminating any religious beliefs.

The emphasis of both the language and the legislative histo-ry of the statute is on eliminating discrimination in employ-ment; similarly situated employees are not to be treated dif-ferently solely because they differ with respect to race,color, religion, sex, or national origin. This is true regardlessof whether the discrimination is directed against majoritiesor minorities.

432 U.S. at 71-72, 97 S.Ct. at 2270.

Hardison provides the basic blueprint for the elements ofa failure to accommodate religion claim. The plaintiff mustshow that he had a sincere religious belief known to theemployer and, because of it, he was adversely treated.


To establish a prima facie case of religious discrimina-tion under Title VII, Plaintiff must show: (1) he had a bonafide religious belief that conflicted with an employment

JAMES R. ANDREEN is a shareholder with Erstad & Riemer, P.A. His focus iscivil litigation and appellate practice, concentrating in the areas of employ-ment and civil rights litigation, defense of governmental and corporate lia-bility, land use and construction litigation. He was admitted to the bar in1986 and regularly appears before the Minnesota State Trial Courts, theMinnesota Court of Appeals, the Federal District Court for the District ofMinnesota, and the United States Eighth Circuit Court of Appeals.


By James R. AndreenERSTAD & RIEMER, P.A.

1 While there is plenty of federal authority on religiousaccommodation, sometimes accommodation cases underfederal disability statutes are used as models for religiousaccommodation cases. See, e.g. Husinga v. Federal-MogulIgnition Co., 519 F.Supp. 2d 929 (S.D. Iowa 2007).

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requirement; (2) he informed defendants of his belief; and(3) defendants adversely treated Plaintiff because he didnot comply with the requirement. Seaworth v. Pearson 203F.3d 1056, 1057 (8th Cir. 2000).

1. Bona Fide Religious Belief.Religion includes all aspects of religious observance and

practice, as well as beliefs held subjectively by the employ-ee. As a rule, it is not hard for the employee to show this.In most cases, whether a practice or belief is religious is notat issue. “However, in those cases in which the issue doesexist, the EEOC will define religious practices to includemoral or ethical beliefs as to what is right and wrong whichare sincerely held with the strength of traditional religiousviews.” 29 C.F.R. § 1605.1.

2. Notice to the Employer.Obviously, if an employee does not inform his employer

of the belief of the activity in question, the employer cannotaccommodate the employee. For example, in Johnson v.Angelica Uniform Group, Inc., 762 F.2d 671, 673 (8th Cir.1985), the plaintiff did not mention to the employer a needfor accommodation to attend religious services before hertermination for absenteeism:

Despite her opportunity to notify her employer in advanceof her need to observe these Holy Days, Johnson did notmention her religious affiliation or her religious require-ments until August 25, after she had missed twelve days ofwork. The district court found that Johnson's mention ofher religious needs at that time consisted only of a vaguereference to needing time off in October for religious pur-poses, without stating any specific dates.


In Al-Jabery v. ConAgra Foods, Inc. 2007 WL 3124628,(D.Neb. 2007),the court determined that “the plaintiff …failed to present competent evidence that he informedConAgra that he could not touch pork. Therefore, he can-not make out the second element of his prima facie case.”In Rose v. Midwest Express Airlines, Inc,. 2002 WL 31095361(D.Neb. 2002) the court held that the plaintiff had “notproved that she told Midwest Express of her need to pray –in any manner – before she was reported for sleeping orappearing to sleep.”

3. Adverse Treatment.Most cases involve an employee who was either not

hired, not promoted, or who was terminated because theirreligious practice purportedly interfered with a work rulethat was required by the employer. These are all obviouslyadverse acts. See, e.g., Seaworth v. Pearson 203 F.3d 1056,1057 (8th Cir. 2000) (Seaworth asserted that defendants dis-criminated against him because of his religious beliefswhen they refused to hire him unless he provided his socialsecurity number (SSN). Seaworth refused to use a SSNbecause he claimed it represented the “mark of the beast”as described in the Bible's Book of Revelation.)

Other cases find that employees are terminated becausethey do not follow the work rule or accept a reasonableaccommodation. Wilson v. U.S. West Communications, 58F.3d 1337, 1340 (8th Cir. 1995) (employee terminated afterrefusing to cover anti-abortion pin depicting fetus consid-ered a reasonable accommodation by allowing employee tostill wear pin.)

When discussing “adverse treatment” in conjunctionwith substantive discrimination,2 the treatment must affecta “term or condition” of employment. BurlingtonIndustries, Inc. v. Ellerth, 524 U.S. 742, 118 S.Ct. 2257 (1998)speaks of “tangible employment action” such as “hiring,firing, failing to promote, reassignment with significantlydifferent responsibilities, or a decision causing a significantchange in benefits.” 524 U.S. at 761. What is adverse in aretaliation case is what a “reasonable employee” wouldbelieve is materially adverse. Burlington Northern and SantaFe Ry. Co. v. White, 126 S.Ct. 2405, 2415 (2006). Nonetheless,the Supreme Court stresses not every act is adverse, only“material” ones. “We speak of material adversity becausewe believe it is important to separate significant from triv-ial harms. Title VII, we have said, does not set forth ‘a gen-eral civility code for the American workplace.’” Id.

4. Accommodation.Once the plaintiff establishes a prima facie case of reli-

gious discrimination, the burden shifts to the employer toshow “that he is unable to reasonably accommodate to anemployee’s ... religious observance or practice withoutundue hardship on the conduct of the employer’s busi-ness.” 42 U.S.C.2000e(j). An employer must prove either

2 The concept of “adverse treatment” seems to be consis-tent across the whole of discrimination law, not just reli-gious discrimination.

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that the employee was reasonably accommodated or thatthe employee could not be reasonably accommodatedwithout undue hardship. EEOC v. Chemsico, Inc., 216F.Supp.2d 940, 950 (E.D. Mo. 2002) (citing Seaworth v.Pearson, 203 F.3d 1056 (8th Cir.2000).

Most cases turn on whether an accommodation is ahardship, based primarily on the text of Hardison. This isthe undue hardship analysis. Other cases turn on whetheran accommodation was reasonable.

Many courts have found that a shift-swap system is areasonable accommodation. See Beadle v. HillsboroughCounty Sheriff's Dept., 29 F.3d 589 (11th Cir.1994) (holdingneutral rotating shift system and its authorization of shiftswaps within system represented reasonable accommoda-tion to plaintiff's religious beliefs under Title VII). See alsoSmith v. Pyro Mining Co., 827 F.2d 1081, 1088 (6th Cir.1987)(it is a sufficient reasonable accommodation to allow theemployee to swap schedules with other employees withoutthe employer’s assistance.) Merely granting employeespermission to find volunteers to swap shifts, however, doesnot definitively constitute reasonable accommodation as amatter of law in all cases. Pyro Mining, 827 F.2d at 1088.

In Sturgill v. United Parcel Service, Inc. 2006 WL 3147665(W.D.Ark. 2006), the plaintiff presented evidence thatdefendant could have accommodated his request to end hisshift by sundown on Fridays by “splitting” his deliveryload, or, in other words, transferring some of his packagesto other drivers. According to plaintiff, this was done on adaily basis to accommodate any driver that needed to beoff by a certain time for his child’s ball-games, PTA meet-ings, etc. Plaintiff testified that he would have only neededthis accommodation during the holiday season-after day-light savings time ended and deliveries peaked. “Based onthe above evidence, the Court believes the jury could havereasonably inferred and concluded that defendant couldhave provided a reasonable accommodation to plaintiff'sreligious observance of the Sabbath and that doing sowould not have caused defendant any undue hardship.Accordingly, the Court rejects defendant's challenge to thesufficiency of the evidence on plaintiff's religious accom-modation claim.”

5. Single Accommodation.Under Ansonia Board of Education v. Philbrook, 479 U.S. 60,

107 S.Ct. 367, 93 L.Ed.2d 305 (1986), the second of the semi-nal Supreme Court cases discussing accommodating anemployee’s religious practices, an employer fulfills its TitleVII obligation when it offers a single reasonable accommo-dation. If an employer reasonably accommodates anemployee’s religious observance, the statutory inquiry endsand the employer need not show that the employee’s pro-posed accommodations would cause an undue hardship.

We find no basis in either the statute or its legislative historyfor requiring an employer to choose any particular reason-able accommodation. By its very terms the statute directsthat any reasonable accommodation by the employer is suf-ficient to meet its accommodation obligation. The employerviolates the statute unless it ‘demonstrates that [it] is unableto reasonably accommodate ... an employee's ... religiousobservance or practice without undue hardship on the con-duct of the employer's business.’ 42 U.S.C. § 2000e(j). Thus,where the employer has already reasonably accommodatedthe employee's religious needs, the statutory inquiry is at anend. The employer need not further show that each of theemployee’s alternative accommodations would result inundue hardship.

Philbrook, 479 U.S. at 68-69.

InPhilbrook, a school district proposed an accommodationother than the one requested by the employees. “We thinkthat the school board policy in this case, requiring respon-dent to take unpaid leave for holy day observance thatexceeded the amount allowed by the collective-bargainingagreement, would generally be a reasonable one.” Philbrook,479 U.S. at 70-71, 107 S.Ct. at 373. In addition, even if theemployer offers multiple accommodations, only one ofwhich is deemed reasonable, the employer has dischargedits obligation. In Wilson v. U.S. West Communications, 58 F.3d1337, 1342 (8th Cir.1995), the employer suggested three alter-native methods of accommodation, only one of which wasfound to be reasonable. Nonetheless, the employer pre-vailed because the one accommodation fulfilled its statutoryobligation.Wilson, 58 F.3d at 1342. In Grant v. Fairview Hosp.and Healthcare Services, 2004 WL 326694 (D. Minn. 2004),Grant claimed his religion charged him to counsel pregnantwomen against abortions. Fairview allowed him to notwork with women who were considering abortions. Grantclaimed he needed to work with all women and counselthem. Fairview discharged Grant for his unwillingness toagree to cease from providing pastoral care to patients in thefuture. The court, citing Philbrook, held that Fairview rea-

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sonably accommodated Grant:The statute and case law require Fairview to “reasonablyaccommodate” Grant, not “accommodate” Grant. The useof the word “reasonably” is not accidental, and the Courtmust consider it in determining whether there is a genuineissue of material fact concerning whether Fairview offeredGrant a reasonable accommodation.

6. Undue HardshipOnce the plaintiff establishes a prima facie case of reli-

gious discrimination, the burden shifts to the employer toshow “that he is unable to reasonably accommodate to anemployee’s ... religious observance or practice withoutundue hardship on the conduct of the employer's busi-ness.” 42 U.S.C.2000e(j).

7. “De minimis cost.”In. Hardison, 432 U.S. at 71-72, 97 S.Ct. at 2270, the

Supreme Court held that to require the employer “to bearmore than a de minimis cost” to accommodate the employ-ee's religious beliefs is an undue hardship. Hardison, 432U.S. at 85, 97 S.Ct. at 2277. To determine whether an accom-modation would require the employer to bear more than ade minimis cost, “the circ*mstances under which a particu-lar accommodation may cause undue hardship . . . must bemade in the particular factual context of each case.” Id.

The Eighth Circuit has offered additional examples ofwhat is and is not undue hardship. The cost of hiring anadditional worker or the loss of production that resultsfrom not replacing a worker who is unavailable due to areligious conflict can amount to undue hardship. InSeaworth v. Pearson 203 F.3d 1056, 1057 (8th Cir. 2000) thecourt held that “[r]equiring defendants to restructure theirmethod of operation to accommodate Seaworth by hiringhim as an independent contractor also would subjectdefendants to a cost that is more than de minimis.”

Cost must be real, not speculative. Brown v. Polk County,61 F.3d 650, 655 (8th Cir.1995). De minimis cost entails morethan monetary concerns, and includes the employer’s bur-den in conducting its business. Id. Furthermore, any hard-ship asserted must be “real,” rather than “specula-tive,”“merely conceivable,” or “hypothetical.” Id. (cita-tions omitted.)

One would think that any monetary cost would do. Notso. Compare Cook v. Chrysler Corp. 981 F.2d 336 (8th Cir.

1992) with E.E.O.C. v. Southwestern Bell Telephone, L.P. 2007WL 2891379 (E.D.Ark. 2007) In Cook, the court found that$1500 per year was a significant cost:

Though we might have reached another conclusion, there isevidence to support the district court’s finding that morethan de minimis cost was involved. We cannot find thisconclusion clearly erroneous. All accommodation propos-als, other than a simple shift change, involved significantcosts to Chrysler: the proposal that Cook be allowedexcused absences every Friday meant that he would be apart-time employee but would be paid full-time benefits(Chrysler showed that a typical benefit package was costlyto the company; the cost of the benefit package lost becauseof being absent twenty percent of the time is over $1,500 peryear); allowing a temporary part-time employee (or floater)to replace Cook every Friday night meant that Chryslereither had to forego using a floater elsewhere or hire anoth-er floater; absences affect the quality of work because thereare more repairs than usual and lower efficiency when afloater is used on the line (there is no way to guarantee thesame floater to replace Cook without hiring a new floater).There was also evidence that it was not possible to allowCook to substitute working on a Sunday for a Friday; thecollective bargaining agreement required over-time pay onweekends and the plant was normally closed on Sundays.

981 F.2d at 339. In Southwestern Bell, the court found thathundreds was de minimis.

AT & T asserts that sixteen hours of overtime resulting in$882.88 in “premium wage payments” were required dueto the failure of Owen and Gonzalez to work on July 15.The EEOC says that the cost of accommodating Owen andGonzalez should properly be calculated as $441.44, or$220.72 each. The EEOC notes that AT & T's calculationdoes not recognize the amount that it saved by not payingOwen and Gonzalez on July 15. The record is silent as towhether Owen and Gonzalez could take a day without pay.If they could do so, the EEOC would seem to be correct thatthe cost of accommodating Owen and Gonzalez would be$220.72 per person. Furthermore, the EEOC argues thatthis overtime cost must be viewed in context. Specifically,the EEOC points to evidence that overtime is a regularoccurrence for AT & T's technicians in the JonesboroCenter. An overtime report for technicians in the JonesboroCenter showed that 987.56 overtime hours were worked inJuly 2005, and a total of 7,088.68 overtime hours wereworked during the first seven months of 2005. In that con-text, the sixteen hours of overtime paid by AT & T on July15 as a result of Owen and Gonzalez missing work, is deminimis. The Court cannot say as a matter of law that thecost to AT & T of accommodating Owen and Gonzalez wasno more than de minimis.

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Sometimes it is not always about money. In Mann v.Frank, 7 F.3d 1365, 1369 (8th Cir.1993), the Eighth Circuitupheld the district court’s determination that accommo-dating Mann's religious belief, which required her not towork from sundown Friday until sundown Saturday,would be an undue hardship on the employer. In that case,Mann had placed her name on a list to volunteer for over-time shifts but suggested that an employee who had notvolunteered on the list could be substituted for her whenthe shift was on Saturday. Id. She also suggested requiringother employees to work longer shifts or that the employernot replace her on those shifts. Id. The court recognized,however, that requiring other employees to work longerwould violate the collective bargaining agreement (anundue hardship the employer is not required to under-take), and that “just doing without” her would cause a“significant loss in efficiency.” Id. at 1369-70.

Sometimes a collective bargaining agreement (CBA) orunion contract will thwart a solution and thus cause anundue hardship. Employers should be wary of thisbecause it needs to show that the CBA is in fact an impedi-ment and not just an excuse. For example, the court in Cookv. Chrysler Corp. 981 F.2d 336, 338 -339 (8th Cir. 1992) heldthat “[e]fforts to accommodate Cook would violate theterms of the collective bargaining agreement and contra-vene the “book” procedures. Cook’s proposal for a changeof shift would contravene the seniority provisions. It is notdisputed that shift preference is a highly prized aspect ofseniority.”

However, in E.E.O.C. v. Chemsico, Inc., 216 F.Supp.2d 940,952 -953 (E.D. Mo. 2002) the court was less deferential.“Although Defendants correctly state that an employer isnot obligated to violate the terms of a collective bargainingagreement to accommodate an employee's religion, theburden remains on the employer to make an effort toresolve the conflict before terminating the employee.” Thecourt held that the existence of a CBA alone will not sufficeto avoid liability.

8. Employee’s Religious ConductWhat happens when the employee’s behavior is at issue

rather than an absence from work or accommodating a pro-cedure? The courts do not seem to have an easy explana-tion for this. In Johnson v. Halls Merchandising, Inc., 1989 WL23201 (W.D. Mo. 1989), the court held that as a matter of

law, an employer could not reasonably accommodate with-out undue hardship on an employee's religious beliefwhich required her to preface nearly every sentence shespoke with the phrase, “In the name of Jesus Christ ofNazareth.” However, in Banks v. Service America Corp. 952F.Supp. 703, 710 (D.Kan. 1996), plaintiffs frequently said“God bless you,” “Praise the Lord,” and/or other similarphrases to their employer’s fast food service customers.ServiceAmerica deemed plaintiffs’ greetings to be inappro-priate and contrary to its policy. The court held that“[p]laintiffs have demonstrated a triable issue of factwhether Service America, without undue hardship to itsbusiness operation and procedures, could reasonablyaccommodate their religious practice of greeting GM foodservice customers. Defendant has not shown that the evi-dence on this issue is so one-sided that Service Americamust prevail as a matter of law, or that a reasonable jurycould not sustain plaintiffs’ claim

In Wilson v. U.S. West Communications, 58 F.3d 1337, 1342(8th Cir.1995), the plaintiff, a Roman Catholic, made a reli-gious vow that she would wear an anti-abortion button“until there was an end to abortion or until [she] could nolonger fight the fight.” The button was two inches in diam-eter and showed a color photograph of an eighteen totwenty-week old fetus. The button also contained thephrases “Stop Abortion,” and “They're ForgettingSomeone.” The plaintiff chose this particular buttonbecause she wanted to be an instrument of God like theVirgin Mary. She believed that the Virgin Mary wouldhave chosen this particular button. She wore the button atall times, unless she was sleeping or bathing. She believedthat if she took off the button she would compromise hervow and lose her soul. The employer, U.S. West, told plain-tiff to (1) wear the button only in her work cubicle, leavingthe button in the cubicle when she moved around theoffice; (2) cover the button while at work; or (3) wear a dif-ferent button with the same message but without the pho-tograph. Wilson responded that she could neither covernor remove the button because it would break her promiseto God to wear the button and be a “living witness.” Thecourt held that options (1) and (2) were not reasonablebecause it required plaintiff to remove the button.However, it found option (3) to be reasonable and found infavor of U.S. West. Moreover, it found that if that was notreasonable, U.S. West could not implement any of plain-

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tiff’s suggested accommodations without imposing morethan a de minimis cost to U.S. West, and thus, that her alter-natives constituted an undue hardship. Id. Wilson sug-gested that U.S. West: (1) instruct Plaintiff's co-workers toignore the button; (2) separate Plaintiff’s work station fromother workers; or (3) transfer Plaintiff to another division.In Grant v. Fairview Hosp. and Healthcare Services, 2004 WL326694 (D. Minn. 2004), Grant, an ultrasound technician,desired to counsel patients he gave ultrasound examina-tions to about his views opposing abortion. Fairviewagreed to accommodate Grant insofar as it agreed that heshould not have to perform ultrasound examinations onany patient it knew was contemplating having an abortion.Fairview also agreed to allow Grant to leave any examina-tion in which a woman disclosed to him that she was con-templating having an abortion, but it did not agree to allowGrant to provide pastoral care to any patient. In response,Grant repeated that his belief required him to try to dis-suade a woman from having an abortion, even if thatmeant losing his job. As a result of his statements, Fairviewdischarged Grant for his unwillingness to agree to ceasefrom providing pastoral care to patients in the future. Thecourt, citing Philbrook, held that Fairview reasonablyaccommodated Grant.


As seen above, employers and attorneys facing religiousaccommodation suits have been receiving mixed messagesfrom the courts outside of the basic frame work of knownreligious belief, accommodation and undue hardship –

especially the latter – in this highly charged area. Certainly,it appears that the default position for employers is to be tol-erant and err on the side of accommodation, unless doing soposes a real undue hardship for the employer. If this is fol-lowed, attorneys defending such suits will have better argu-ments to prevail. �

Certainly, it appears that the defaultposition for employers is to be tolerantand err on the side of accommodation,

unless doing so poses a real unduehardship for the employer.



MDLA once again joined the Hennepin County BarAssociation (HCBA) and the Minnesota Association forJustice (MNAJ) to sponsor the 2008 Medical MalpracticeConference at the Doubletree Hotel Park Place in St. LouisPark on April 17. Rebecca Egge Moos, Bassford Remele,P.A. (MDLA) and Peter A. Schmitt, Robins, Kaplan, Miller& Ciresi, L.L.P. (MNAJ) put together an outstanding pro-gram with nearly 100 attendees. The seminar wasapproved for 6.0 CLE credits in Minnesota, North Dakotaand Iowa and 6.0 credits in Wisconsin. It was alsoapproved for 5.0 credits by the Minnesota Civil TrialCertification program.

Presentations included Negligent Credentialing - WhereWe Are Now, William J. Maddix, Robins, Kaplan, Miller &Ciresi, L.L.P; Statutes of Limitation – A New Idea, Kay NordHunt, Lommen, Abdo, Cole, King, Stageberg, P.A.; LASIKLitigation – ACase Report, Michael A Zimmer, M.S. ZimmerLaw; Causation – Clarification of the Rule, TerenceO’Loughlin and Carolin J. Nearing, Geraghty, O’Loughlin& Kenney; Technology in the Courtroom – What Works ForMe?, Cecilie Morris Loidolt, Meagher & Geer, PLLP;Dealing with Medicare, ERISA, Medical Assistance and PrivateInsurance Subrogation Claims, Joe Crosby, Crosby LawOffice; Case Law Update, Wendy Zeller, Robins, Kaplan,Miller & Ciresi, L.L.P.

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Understanding the effect of recent amendmentsto Minnesota’s statutes of limitation and reposefor claims alleging damages to real property ondetermining whether to seek dismissalon timeliness grounds, in either the arbitrationforum or district court, where the contractrequires submission of disputes to arbitration.

I. INTRODUCTION AND BACKGROUNDMinnesota has been a fertile ground for construction

defect litigation over the past decade. This is primarily so inthe residential “wet house” arena involving stucco-clad sin-gle and multiple family housing. Very often in these casesissues arise related to the timeliness of the underlyingclaims-whether sounding in common law or warranty.Timeliness issues are entirely understandable given thelatent and progressive nature of the alleged damages in alarge majority of these cases. Frequently, there is also a longtime lag time between the emergence of conditions that do,or arguably should, place a building owner on notice of apotential construction-related injury and commencement offormal legal proceedings against the architect, contractor,supplier, and/or others involved in the project.

The question of whether all or some of an owner’sclaims are time-barred is technically answered by Minn.

Stat. §541.051 which is entitled “Limitation of action fordamages based on services or construction to improve realproperty.” Generally, that statute, in its current form, con-tains both a statute of limitations (the time during which aparty must commence an action after the claim accrues)and a statute of repose (the period after which the claimexpires even if it has not yet accrued). These time periodshave different triggering events. The statute also containsdifferent accrual methods for express written or statutorywarranty and common law claims, as well as, for whencontribution and indemnity claims may be asserted.

The stakes are obviously high for all parties in construc-tion cases when there are issues as to the timeliness of theclaims. It is therefore no surprise that a large body of caselaw has been developed that exists interpreting the scopeand application of most of the provisions in Minn. Stat.§541.051 and their interplay with other statutes such asMinn. Stat. §327A (the Statutory Home Warranties) andMinn. Stat. §336.2-725 (UCC statute of limitations in con-tracts for sale). Moreover, the Legislature has amendedthe statute numerous times since its inception in 1965,almost always in response to an appellate decision oneside or the other perceives as amounting to an unfair orunintended application of the statute.

The Legislature has been particularly busy recently,amending the statute in significant ways in 2004 and 2007in reaction to several appellate court decisions. As a result,much of the case law applying various pre-amendmentinterpretations of the statute has been rendered obsoleterequiring practitioners to carefully analyze their cases inlight of the new amendments in order to develop a strate-gy (including proper pleadings, discovery, and motionpractice) in a way that maximizes their ability to success-fully litigate a timeliness defense.

The majority of construction defect cases involve single-family homes and the majority of construction defect casesare litigated in state district court. Most multi-familyhousing cases are litigated in state district court are aswell. The simple reason most cases find their way to statedistrict court is that the parties have not contractuallybound themselves to submit their disputes to arbitration.For several reasons, district court is a better forum thanarbitration in which to litigate a timeliness defense.

First, although we are a “notice pleading” state, thecomplaint will generally include the following important

By Mark S. Brown and Kimberly L. JohnsonARTHUR, CHAPMAN, KETTERING, SMETAK & PIKALA, P.A.




MARK S. BROWN joined Arthur, Chapman, Kettering, Smetak & Pikala, P.A.in early 2006. He brought with him a breadth of experience gained at sever-al Twin Cities defense firms since graduating with honors from HamlineUniversity School of Law in 1990.KIMBERLY L. JOHNSON is an associate atArthur, Chapman, Kettering, Smetak& Pikala, P.A. who focuses her practice in the areas of construction,employment, commercial and automobile law. Kim is a graduate of theUniversity of South Dakota School of Law.

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information: the date of substantial completion or certifi-cate of occupancy; the date (although often self-serving)the owner first became aware of the problems; effortsundertaken to address the problems ( including efforts tonotify the builder); and the separate causes of actionasserted (i.e, negligence, breach of contract, and breach ofwarranties whether implied, expressed in writing, orunder Minn. Stat. §327A. The complaint alone shouldtherefore give defense counsel an initial idea of whether astatute of limitations defense might be available.Regardless, counsel will usually assert a lack of timelinessas an affirmative defense in the answer as required by therules of civil procedure.

Second, counsel have at their disposal the entire arsenalof discovery tools permitted by the Rules of CivilProcedure. These include: the right to demand entry on theproperty for purposes of conducting an inspection; the rightto demand documents; the right to take depositions; and theright to expert opinions (technically through interrogato-ries, but in practice, by way of formal written reports).These discovery tools, therefore, permit the defense attor-ney to fully develop a statute of limitations or reposedefense, particularly with respect to the crucial issue ofaccrual of the cause of action as a prelude to properlypreparing and arguing a motion for summary judgment.

Third, the Rules of Civil Procedure and General Rulesof Practice for the District Courts provide procedural prac-tices which can further aide defense counsel in developinga timeliness defense. The Informational Statement allowsthe parties to propose the scope and duration of discovery,scheduling of pretrial conferences, motion deadlines, anda trial date (which often is set a year or more after the caseis filed). Further, because a case is commenced upon ser-vice of the complaint, much ground work in the form ofinspections, expert investigation, paper discovery, docu-ment reviews, and even depositions can occur before thecase is filed thus expanding the time to develop a timeli-ness defense.

Finally, the Rules of Civil Procedure allow for formalmotion practice by which timeliness defenses are usuallydisposed of one way or the other. Either the court con-cludes based upon the parties’ motion, memoranda, andoral arguments that a cause of action is time-barred as amatter of law, or that issues of fact remain for the jury toresolve regarding such things as when the owner did orshould have discovered a property injury or breach of a

warranty for purposes of fixing an accrual date. It neces-sarily follows that a Minnesota district court judge (specif-ically charged with applying Minnesota case and statutorylaw) will be deciding the motion.

In contrast to proceedings in the district court, does thecommercial construction case where the parties’ contractcontains an arbitration clause requiring disputes be sub-mitted to binding arbitration provide the defense attorneyan equal opportunity to identify, let alone develop, andseek dismissal, of potentially time-barred claims?Alternatively, does the option exist to have the districtcourt decide the timeliness issue if the defense attorneyand client consider that forum more favorable?

The purpose of the remainder of this article is to pro-vide guidance to the practitioner defending constructiondefect cases involving a potential statutes of limitation orrepose defense. We will first chronicle and review the 2004and 2007 legislative amendments to Minn. Stat. § 541.051and the underlying cases which inspired those amend-ments. We will then discuss those amendments in the con-text of an actual commercial construction case involvingcommon law and express warranty claims which weresubmitted to binding arbitration pursuant to the parties’contracts, but where defendants sought and obtained dis-trict court consideration of their statutes of limitation andrepose defenses.

II. MINN. STAT. §541.051: A RECENT HISTORYAs noted, Minn. Stat. §541.051 was first enacted in 1965.

Laws 1965, c. 564, §1. Since then it has been amended ninetimes, most recently in 2004 and again in 2007.

As now amended, Minn. Stat. §541.051 contains the fol-lowing pertinent provisions.

Subdivision 1. Limitation; service or construction of realproperty; improvements. (a) Except where fraud isinvolved, no action by any person in contract, tort, or oth-erwise to recover damages for any injury to property . . .arising out of the defective and unsafe condition of animprovement to real property, shall be brought against anyperson performing or furnishing the design, planning,supervision, materials or observation of construction orconstruction of the improvement to real property . . . morethan two years after discovery of the injury, nor in anyevent shall such a cause of action accrue more than tenyears after substantial completion of the construction . . .(b) . . . an action for contribution or indemnity arising outof the defective and unsafe condition of an improvement to

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real property may be brought no later than two years afterthe cause of action for contribution or indemnity hasaccrued, regardless of whether it accrued before or after theten-year period referenced in paragraph (a).(c) For purposes of paragraph (a), a cause of action accruesupon discovery of the injury; provided, however, that inthe case of an action for contribution or indemnity underparagraph (b), a cause of action accrues upon the earlier ofcommencement of the action against the party seeking con-tribution or indemnity, or payment of a final judgment,arbitration award, or settlement arising out of the defectiveand unsafe condition . . .Subd. 2. Action allowed; limitation. . . . in the case of acause of action that accrues during the ninth or tenth yearafter substantial completion of the construction, an actionto recover damages may be brought within two years afterthe date on which the cause of action accrued, but in noevent may such an action be brought more than 12 yearsafter substantial completion of the construction. Nothingin this subdivision shall limit the time for bringing anaction for contribution or indemnity. . .

* * *Subd. 4. Applicability. For the purposes of actions basedon breach of the statutory warranties set forth in section327A.02, or to actions based on breach of express writtenwarranty, such actions shall be brought within two years ofthe discovery of the breach. In the case of an action undersection 327A.05, which accrues during the ninth or tenthyear after the warranty date, . . . an action may be broughtwithin two years of the discovery of the breach, but in noevent may an action under section 327A.05 be broughtmore than 12 years after the effective warranty date. Anaction for contribution or indemnity arising out of actionsdescribed in this subdivision may be brought no later thantwo years after the earlier of commencement of the actionagainst the party seeking contribution or indemnity, orpayment of a final judgment, arbitration award, or settle-ment arising out of the breach.


The 2004 amendment rewrote Subd. 4, which formerlydid not provide that the repose period should be appliedto the breach of Minn. Stat. §327A.02 warranties or expresswritten warranties. The amendment became effectiveAugust 1, 2004, and was a legislative response to theobservation by our state appellate courts that Minn. Stat.§541.051 contained no repose period applicable to breachof express or statutory warranty claims.

The 2007 amendments were likewise a reaction to thestate appellate court decision Weston v. McWilliams &Assoc., Inc., 716 N.W.2d 634 (Minn. 2006). In Weston, the

Supreme Court held that Minn. Stat. §541.051 bars contri-bution and indemnity claims that have not accrued withinthe 10 year repose period following substantial comple-tion, even if an action against the party seeking to pursuecontribution and indemnity claims had been timely com-menced. This often happened because of the statute’sadditional two-year limitation provision for a plaintiff’sactions accruing in the ninth or tenth year post-substantialcompletion. The application of this provision allowed fortimely actions to be commenced up through year twelveagainst a primary defendant, but according to Weston,third-party contribution claims which had not yet accruedcould not be commenced after year ten.

The amendments were the Legislature’s response to theperceived inequity arising from Weston. The legislatureexpressly made the amendments retroactive to June 30,2006, the day after the Weston decision was issued.

III. THE SUBJECT CASEA. Facts and Procedure

We will now analyze the effect these recent amend-ments had on an actual case involving common law andbreach of express warranty claims arising out a large com-mercial building project involving contracts containing amandatory arbitration clause. We will discuss why andhow defendants sought and obtained district court reviewof their timeliness defenses.

Plaintiff, the owner of a large public building(“Building”), petitioned for arbitration with AAA onMarch 13, 2006, seeking recovery of repair costs approxi-mating $2 million for damage to the Building allegedlycaused by defective roofing and masonry workmanship.The Building was substantially completed by September1994.

The roofer and mason were prime contractors, and eachexecuted AIA Document A101/CM “Standard Form ofa*greement Between Owner and Contractor” (1980Edition). The contract documents included AIADocument A201/CM “General Conditions of a Contractfor Construction” (“General Conditions”), plus addenda,plans, and specifications. Paragraph 7.9 of the GeneralConditions required the owner and contractors to submitall disputes arising out of or related to the contract docu-ments or a breach of the contract to arbitration pursuant toAAA (American Arbitration Association) rules.

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Paragraph 7.9 of the Agreement further provides that noarbitration could include the architect or constructionmanager by consolidation, joinder, or any other mannerwithout their written consent, signed by all parties. Anarbitration could include, however, persons other than theowner and contractor “whose presence is required if com-plete relief is to be accorded in the arbitration.”

Plaintiff, the owner of a large public building(“Building”), petitioned for arbitration withAAAon March13, 2006, seeking recovery of repair costs approximating $2million for damage to the Building allegedly caused bydefective roofing and masonry workmanship. TheBuilding was substantially completed by September 1994.

The roofer and mason were prime contractors, and eachexecuted AIA Document A101/CM “Standard Form ofa*greement Between Owner and Contractor” (1980Edition). The contract documents included AIADocument A201/CM “General Conditions of a Contractfor Construction” (“General Conditions”), plus addenda,plans, and specifications. Paragraph 7.9 of the GeneralConditions required the owner and contractors to submitall disputes arising out of or related to the contract docu-ments or a breach of the contract to arbitration pursuant toAAA (American Arbitration Association) rules.Paragraph 7.9 of the Agreement further provides that noarbitration could include the architect or constructionmanager by consolidation, joinder, or any other mannerwithout their written consent, signed by all parties. Anarbitration could include, however, persons other than theowner and contractor “whose presence is required if com-plete relief is to be accorded in the arbitration.”

The warranty provision is set forth in Paragraph 4.5 ofthe General Conditions and states in part:

4.5.1 The contractor warrants to the Owner, the Architectand the Construction Manager …that all work will be ofgood quality, free from faults and defects and in confor-mance with the contract documents. All work not con-forming to these requirements, including substitutions notproperly approved and authorized, may be considereddefective…this warranty is not limited by the provisionsof Paragraph 13.2.

Paragraph 13.2, entitled “Correction of Work,” general-ly provides that the contractor must correct work found tobe defective or not in accordance with the contract docu-ment if the contractor receives written notice from theowner within one year of substantial completion.

Paragraph expressly states Paragraph 13.2 doesnot establish a period of limitation regarding any otherobligation, including the Paragraph 4.5 warranty.

The inspection report, which was dated November2004, reflected that the forensic consultant was retained bythe Plaintiff’s architect to identify and assess conditions inthe Building’s roof and exterior walls which were believedto be causing or contributing to water intrusion and relat-ed problems as reported by the Building staff. The Reportdid not reflect the date when the architect hired the consul-tant or when or why Plaintiff hired the architect.

B. Defense StrategyThe above-referenced dates were critical to assessing

the potential application of the two-year statute of limita-tions and 10-year statute of repose period set forth inMinn. Stat. §541.051., (i.e., the September 1994, date ofsubstantial completion; the date of the Report; and thedate the petition was filed). Obviously, the Building wasmore than 10-years-old when the Report was issued.Therefore, the questions for defense counsel were whetherPlaintiff’s claims accrued more than 10 years after the dateof substantial completion for purposes of applying thestatute of repose or whether they accrued in the ninth ortenth year after substantial completion, and whether thepetition was filed within two years of the accrual date.

1. Concerns with AAA RulesDefense counsel, therefore, deemed it necessary to con-

duct formal discovery in the form of document requests,interrogatories, and depositions to determine if valid time-liness defenses existed. They questioned whether theycould successfully develop those defenses and seek dis-missal of the claims given the potential restrictions of thearbitration rules. Specifically, the process would be gov-erned by the AAA’s Commercial Arbitration Rules andMediation Procedures (a complete set can be downloadedat no cost from the AAA website).

Defense counsels’ concerns were basically three-fold:(1) would they be confident the arbitration panel membersultimately selected would have the willingness and abilityto resolve the timeliness issues correctly and in accordancewith applicable statutory and case law; (2) would thepanel permit formal discovery sufficient to enable defen-dants to fully develop the timeliness defenses; and (3)would the panel allow the parties to brief and argue theissues in the form of a motion for dismissal?

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The basis of these concerns was the administrative andprocedural rules themselves. The parties had to agree on apanel (the Procedures for Large, Complex Commercialcases provide for a three-member panel, given the size ofthe claims). If they could not agree, the AAA wouldappoint the members from its Large, ComplexCommercial Case Panel, consisting of arbitrators withlegal, business, and construction backgrounds, and notlimited to Minnesota residents. Defendants wanted expe-rienced construction lawyers on the panel. Plaintiff pre-ferred design professionals and construction man-agers/contractors as panel members. Ultimately, after sig-nificant disagreement, a panel was appointed consisting ofone lawyer and two non-lawyers.

Further, while the applicable rules gave the panel dis-cretion to permit discovery and depositions, Defendantsdecided their chances of obtaining a favorable ruling onstatutory limitations or repose grounds were better with adistrict court judge than the arbitration panel.

Counsel, therefore, devised a two-step defense strategy.First, they would seek discovery of facts pertaining to thetimeliness of Plaintiff’s claims, as well as liability anddamage issues, pursuant to the discovery available underthe AAARules. Second, if ultimately supported by the evi-dence, Defendants would bring an action in district courtto stay the arbitration proceedings and seek a judicialdetermination on the statute of limitations and/or reposeissues under Minn. Stat. §541.051.

2. Discovery of Facts Bearing on TimelinessThe parties were permitted to conduct some formal dis-

covery including detailed interrogatories and depositions.The interrogatories sought, among other things, the identi-ty and scope of responsibility of anyone employed or hiredby Plaintiff, from the date of substantial completion, whowas involved in Building inspections, maintenance, orrepairs. Defendants also sought related documents.

Once written discovery was completed, defense coun-sel took the deposition of employees of the architect andconsulting firm, as well as, past and present head custodi-ans of the Building. The custodians testified they wereaware off, observed, responded to, and in part, attemptedto rectify water intrusion, leaks and related problems innumerous locations of the Building since it was completedin 1994. Based on the deposition testimony of Buildingcustodians that since 1994 had observed, responded to,

and attempted to remedy water intrusion problems,Defendants felt they had sufficient evidence to seek a dis-trict court order staying the arbitration pending resolutionof the timeliness question.

C. Defendants’ Motion to Stay the Arbitration ProceedingsDefendants proceeded by commencing an action in

state district court, after which time they filed a motion tostay the arbitration proceeding. Defendants premisedtheir motion to stay on a pair of reported Minnesota Courtof Appeals decisions: 200 Levee Drive Assoc., Ltd. v. Bor-SonBldg. Corp., 441 NW.2d 560 (Minn. App. 1989), and ISD No.775 v. Holm Bros., 660 NW.2d 146 (Minn. App. 2003). Bothcases involved commercial construction projects whichutilized AIA contracts containing limitations of actionsprovisions identical to those set forth in Article 7.9.2 of theparties’ Contract in the subject case. Article 7.9.2 provides,in part:

[T]he demand for arbitration shall be made within the timelimits specified in Subd. 2.3.15 where applicable, and in allother cases within a reasonable time after the claim, dis-pute or other matter in questions has arisen; and in noevent shall it be made after the date when institution oflegal or equitable proceedings based on such claim, dis-pute or other matter in question would be barred by theapplicable statute of limitations.”

(emphasis added)

In both 200 Levee Drive and ISD No. 775, the ownerspetitioned for arbitration pursuant to their respective con-tracts, and the contractors moved to stay the proceedings,contending the district courts had subject matter jurisdic-tion to determine whether the demand for arbitration wastimely under Minn. Stat. §541.051. In both cases, the Courtof Appeals affirmed the district court judgments stayingarbitration on the grounds the district courts reserved tothemselves subject matter jurisdiction to decide the timeli-ness issue.

The Court in the subject case granted Defendants’motion on the same grounds and issued an order stayingthe arbitration proceedings pending its determination ofthe timeliness of Plaintiff’s petition. Once in district court,Defendants were permitted to conduct additional discov-ery pursuant to the Rules of Civil Procedure, and deposedthe individuals currently and previously in charge of allhead custodians along with representatives of outside con-tractors hired by Plaintiff to address roof-related leaks andother conditions on several occasions since at least 2000.

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The deposition testimony of those witnesses furtheramplified the head custodians’ prior deposition testimony,and formed the basis of Defendants’ motions to dismissbased upon the expiration of the statute of limitations andstatute of repose under Minn. Stat. §541.051.

D.Defendants’ Motion to Dismiss-Applying Minn. Stat.§541.051 to Plaintiff’s Common Law and Breach ofExpress Warranty Claims

1. Statute of limitations bars common law andwarranty claims

The Court’s order staying the arbitration provided itwould decide the issue of timeliness only under the statuteof limitations. The Court gave the parties the option topresent the matter either by basically conducting a benchtrial or as a formal motion supported by live testimony,affidavits, and/or deposition transcripts.

Defendants each filed motion, memoranda, and affi-davits, but they tried to avoid duplicating efforts. Theirmain argument was that Plaintiff’s claims all accrued wellover two years before it filed its petition and thus, weretime-barred by the statute of limitations in Minn. Stat.§541.051, 1(a). Minnesota case law analyzing claims towhich that subdivision applies, provides that discovery of“any injury” sufficient to maintain a cause of action willtrigger the two year statute of limitation. See, GreenbriarVillage Condo Assoc., Inc. v. Keller, Inc., 409 N.W.2d 519, 524(Minn. App. 1987); see also, City of Willmar v. Short ElliottHendrickson, Inc., 475 N.W.2d 73, 76 (Minn. 1989) (discov-ery of the injury itself triggers the commencement of thelimitation period rather than discovery of the conditioncausing the injury, which had been the triggering eventprior to the 1988 amendment). Regardless of whether theprecise nature of the defect causing injury is known, thelimitation period begins to run when an actionable injuryis discovered or with the exercise of due diligence shouldhave been discovered. ISD No. 775, 660 N.W.2d at 150;Dakota County v. BWBR Architects, Inc., 645 N.W.2d 487, 492(Minn. App. 2002).

The two-year limitation period commences when aPlaintiff has “enough facts to be on notice that a potentialinjury may exist; it does not await a ‘leisurely discovery ofthe full details of the injury.’” Appletree Square I, Ltd.Partnership CHRS v. W.R. Grace & Co., 815 F. Supp. 1266,1279 (D. Minn. 1993), aff’d 29 F.3d 1283 (8th Cir. 1994).Actual discovery of the injury is not the standard, rather it

is the possession of enough facts to reasonably put theclaimant on notice that a potential injury may exist.Appletree Square, 815 F.Supp. at 1279. Defendants arguedthat by applying this standard, the Court should concludePlaintiff’s claims under subd. 1(a) of Minn. Stat. §541.051accrued long before March 13, 2004, and were, therefore,untimely.

Plaintiff responded with two arguments. First, itargued that the common law claims were not time-barredbecause Plaintiff did not discover an actionable injuryuntil after high-level administrators were informed byPlaintiff’s architect of the results of a June 2004, buildinginspection which revealed alleged defective constructiondetails in the Building causing or threatening water infil-tration and damage. Second, Plaintiff argued that regard-less of the applicability of Minn. Stat. §541.051 to its com-mon law claims, its breach of express warranty claimswere not time barred because arbitration was demandedwithin two years of “discovery of the breach,” which is theapplicable standard under Minn. Stat. §541.051, subd. 4.

Defendants asserted a number of counter-arguments toPlaintiff’s first argument, the essence of which were thatthe Plaintiff’s own employees were in the best position toknow the facts, and their knowledge was imputed toPlaintiff on the basis of their respective positions andresponsibilities. Defendants also argued that Plaintiff was,in essence, asking the court to apply the pre-1988 amend-ment version of Minn. Stat. §541.051, which required dis-covery of the defective condition rather than the injury totrigger the commencement of the limitations period.Finally, Defendants argued there was no direct legalauthority for the proposition that they must provide evi-dence that the persons at the top of the Plaintiff’s organiza-tional chart had knowledge of a potential injury, let alonethe cause of nature of a defective condition, for the limita-tions period to start to run.

In response to Plaintiff’s second argument, Defendantsargued that Paragraph 4.5.1 “Workmanship Warranty” inthe Contract did not constitute a promise or guaranty offuture performance, and therefore, is not subject to thesame accrual test applicable to an alleged breach of war-ranty of future performance. Plaintiff’s argument waspremised on the Minnesota Supreme Court’s decision inVlahos v. R&I Const. of Bloomington, Inc., 676 N.W.2d 672,678 (Minn. 2004). In Vlahos, the court stated that “thestatute of limitations Minn. Stat. §541.051, subd. 4 (2002)

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applicable to the statutory new home warranty providedby Minn. Stat. §327A.02, subd. 1(c) (1990) begins to runwhen the homeowner discovers or should have discov-ered the builder’s refusal or inability to ensure the home isfree from major construction defects.” Id.

The Vlahos case, as the holding suggests, involved alawsuit by the second owners of the home seeking recov-ery from the builder pursuant to the 10-year statutory newhome warranty for major construction defects after dis-covering extensive water damage during a major remodel-ing project nine years after the home was originally built.The homeowners commenced the action within one yearof notifying the builder of the problem.

The statutory new home warranty guarantees that“during the ten-year period from and after the warrantydate, the dwelling shall be free from major constructiondefects.” Minn. Stat. §327A.02, subd. 1(c). The SupremeCourt’s decision in Vlahos was supported by its earlierdecision construing the statute of limitations underMinnesota’s Uniform Commercial Code for breach of war-ranty involving the sale of goods (Minn. Stat. § 336.2-725).See, Church of the Nativity of Our Lord v. WatPro, Inc., 491N.W.2d 1 (Minn. 1992), overruled on other grounds, Ly v.Nystrom, 615 N.W.2d 302, 314, n.25 (Minn. 2000).

Section 336.2-725 of Minnesota’s UCC provides a four-year limitation period from the date of accrual to com-mence an action for breach. It further provides that acause of action accrues upon the breach, which occurs onthe date delivery is tendered unless the warranty extendsto future performance of the goods, in which case “thecause of action accrues when the breach is or should havebeen discovered.” Minn. Stat. §336.2-725(2). The court inChurch of the Nativity concluded that a warranty promisingto maintain a roof in a watertight condition for a period of10 years was a warranty of future performance.

In response, Defendants argued that the Paragraph4.5.1 warranty differs from the future performances war-ranties in Church of the Nativity and Vlahos, because itapplies to services, not a product (like a roof or adwelling), and it fails to identify any specific period oftime. Accordingly, Defendants contended that Plaintiff’sexpress warranty claims accrued under Minn. Stat.§541.051, subd. 4., at the same time as the common lawclaims under Minn. Stat. §541.051, subd. 1(a).

2. Statute of Repose bars Plaintiff’s warranty claimsIn the alternative, Defendants argued that even if the

Paragraph 4.5.1 warranty explicitly extended to futureperformance as Plaintiff asserted, the breach of expresswarranty claims were barred by the 10-year repose periodset forth in Minn. Stat. §541.051. Again, the Legislatureamended subd. 4 in 2004 in response to the decisions byour state appellate courts that the pre-amendment versionof the statute contained no repose period applicable toexpress statutory warranty claims. See e.g., Koes v.Advanced Design, Inc., 636 N.W.2d 352, 359-60 (Minn. App.2001), pet. for rev. denied (Minn. 2002) (recognizing thepotential for stale claims due to the absence of a statute ofrepose in §541.051, subd. 4, and stating that the legislaturemust act to change the statute); Sletto v. WesleyConstruction, Inc., 733 N.W.2d 838, 841-843 (Minn. App.2007). That 2004 amendment applies to causes of action forbreach of express written warranty accruing after August1, 2004 . Sletto, 733 N.W.2d at 844.

Under the theory that express warranty claims couldnot have accrued before the prime contractors received thenotice letters in December 2004, which was four monthsinto the eleventh year following the date of substantialcompletion, Plaintiff’s claims would consequently bebarred by the statute of repose. See, Gomez v. David A.Williams Realty & Construction, Inc., 740 N.W.2d 775, 782(Minn. App. 2007) (holding the 10-year statute of reposecontained in Minn. Stat. §541.051, subd. 1(a) applies toactions for breach of express written warranties, whichaccrue upon discovery of the breach, meaning when thebuilder exhibits an unwillingness or inability to satisfy thewarranty).

The opinions in Sletto and Gomez were issued long afterPlaintiff petitioned for arbitration in the subject case. Infact, Sletto was not issued until after the District Courtstayed the arbitration proceedings, and Gomez wasn’tissued until the day after the hearing on the Defendants’motions to dismiss. Nevertheless, both decisions pointed-ly reject Plaintiff’s argument that the statute of limitationsin effect at the time the contract is entered applies, andtherefore, its warranty claims were not subject to anystatute of repose.

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E.The effect of the 2007 amendments to Minn. Stat.§541.051

Finally, the Legislature’s 2007 retroactive amendmentsto Minn. Stat. §541.051 directly impacted the subject case.As noted, the amendments were a response to the Westondecision decided in June 2006, three months after Plaintiffpetitioned for arbitration in the subject case. UnderWeston, the masonry subcontractor contended that theprime masonry contractor’s contribution and indemnityclaim was barred by the statute of repose since it wasserved well beyond ten years after substantial completioneven though Plaintiff’s direct claims might be found time-ly if they accrued in the ninth or tenth year after substan-tial completion and were commenced within two yearsafter accrual.

The prime masonry contractor intended to rebut thatargument by citing Brink v. Smith Cos. Construction, Inc.,703 N.W.2d 871 (Minn. App. 2005), pet. for rev. denied(Minn. December 21, 2005) for the proposition that apply-ing Minn. Stat. §541.051 as the subcontractor proposedwas an unconstitutional violation of the prime contrac-tor’s due process and remedy rights since the Plaintiffscommenced their action more than 10 years after substan-tial completion, thus leaving the contractor no time toassert contribution and indemnity rights against its sub-contractor. The 2007 amendment obviated the need toadvance that argument or even litigate the issue with thesubcontractor.


It is important to note that the hearing on Defendants’motion on the timeliness of Plaintiff’s petition for arbitra-tion is essentially a “special proceeding.” The Defendantssought and obtained a judicial stay of an otherwise bind-ing and mandatory arbitration proceeding for the sole pur-pose of determining whether the demand for arbitrationitself was barred by the applicable statute of limitation, asincorporated into the parties’ Contract, and which demon-strates the parties’ intent to limit the right to demand arbi-tration. See, 200 Levee Drive, 441 N.W.2d at 563.

The 200 Levee Drive and ISD No. 775 cases suggest thatthe district court is authorized to resolve issues of fact inreaching its decision on the question of timeliness. Indeed,in 200 Levee Drive the court remanded the issue of timeli-ness to the trial court “for further consideration,” given theinadequacy of the record necessary to enable the Court tomake that determination as a matter of law. Id. at 565.Accordingly, practitioners pursuing this approach shouldwork with the district court and counsel to develop a pre-trial order sufficient to address such topics as: order ofpresentation; manner of presenting evidence (i.e., live tes-timony, deposition transcripts, hearsay, etc.); extent towhich arguments and authority should be set forth;motions/trial memorandum form; and whether it is neces-sary for the parties to submit proposed findings of fact,conclusions of law, and order for judgment following thehearing.

The important point to take from this discussion is thatthis type of “special proceeding” is not a simple disposi-tive motion, and the proceeding does not have to be con-ducted like one. In the end, whether the hearing is con-ducted as a full-blown trial or a simple oral argument isultimately the Trial Court’s decision. Counsel can, howev-er, strongly influence the type of proceeding by carefullyanalyzing which process is most favorable to his or herclient, and then arguing in support of that process duringpre-hearing or status conferences scheduled at counsel’srequest.


As reflected above, Minn. Stat. §541.051 has evolvedsignificantly over the past decade. Depending upon thefacts of a specific case, the application of those statutoryand common law changes to commercial constructiondefect claims can be complex, and requires careful analy-sis. Defending the claims in an arbitration forum ratherthan the state court system raises additional issues thatcould adversely affect the interests of the client. The abovediscussion is intended to assist defense counsel in thedevelopment of their defense strategy, and the navigationthrough the procedural obstacles that may arise in com-mercial construction defect cases governed by AIA con-tracts where the statute of limitations and repose may pro-vide a basis for dismissal. �

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TheU.S.SupremeCourthascontinued its recent trendof nar-rowly construing thereachofprivateactionsunder§10(b)ofthe Securities Exchange Act of 1934 and SEC Rule 10b-5.

In Stoneridge Investment Partners, LLC v. Scientific-Atlanta,Inc., the Court held that the §10(b) implied private right ofaction does not reach third parties who do not in some waycommunicate with investors or the market, even if theyknowingly participate in a fraudulent scheme to misrepre-sent the financial condition of a publicly traded company.

The Stoneridge decision is good news to appraisers,investment banks, auditors, attorneys, and others whoworked with companies to facilitate subprime mortgageloan transactions. As long as these so-called secondaryactors did not themselves make misleading statements, orengage in deceptive conduct upon which investors relied,they should be shielded from private investor actionsunder the federal securities laws. Stoneridge does not,however, guarantee completely smooth sailing for suchparties because they may still face claims in other forums.For example, the SEC has the authority under §10(b) topursue those who aid and abet securities fraud. And,because Stoneridge only involved interpretation of §10(b),secondary actors in the subprime market may still faceexposure to state common law or statutory claims.

A. The StoneridgeDecisionIn Stoneridge, an investor in Charter Communications,

Inc., a cable TV company, brought a §10(b) suit against twovendors of the company who supplied digital cable con-verter boxes to Charter. In an effort to prop up its cashflow to meet Wall Street expectations, Charter agreed topay the vendors an additional $20 for each box it pur-chased, with the understanding that the vendors wouldreturn the overpayment by purchasing advertising fromCharter. Charter then recorded the advertising purchasesas revenue and capitalized its purchases of the converterboxes, thereby inflating its revenue and operating cashflow by approximately $17 million. Plaintiff alleged thatthe vendors knew, or should have known, that Charterwould use the transactions to misrepresent its financialcondition, and that research analysts and investors wouldrely on the resulting false financial statements. Plaintiffclaimed, therefore, that the vendors violated §10(b) by par-

ticipating in a fraudulent scheme to mislead investors.

In its 5-3 decision (Justice Breyer did not participate),the Court first looked to its 1994 decision in Central Bank ofDenver, N.A. v. First Interstate Bank, 511 U.S. 164 (1994), inwhich it held that there is no aiding and abetting liabilityunder §10(b). It then noted that, after Central Bank,Congress could have, but did not, amend §10(b) to providefor a private cause of action against aiders and abettors ofviolations of the securities laws. Therefore, in order tohold secondary actors such as the vendor defendantsliable, plaintiff was required to show that their conductmet each of the elements of primary liability under §10(b).

The Court held that plaintiff’s claim against the vendorsfoundered upon the reliance element of the §10(b) privatecause of action. The vendor defendants did not actuallyprepare or disseminate Charter’s false financial statementsand their deceptive acts were not communicated to thepublic. Therefore, as the Court held, because “no memberof the investing public had knowledge, either actual orpresumed, of [the vendors’] deceptive acts during the rele-vant times,” plaintiff could not show reliance on the ven-dors’ actions. As a result, the Court affirmed the dismissalof plaintiff’s claims against the vendors.

Shortly after, and consistent with, its decision inStoneridge, the Court denied certiorari in a case againstinvestment banks that allegedly engaged in deceptivetransactions with Enron that allowed Enron to misrepre-sent its financial condition. The Court, therefore, let standthe Fifth Circuit’s holding that the investment banks couldnot be liable under §10(b) where they had no duty of dis-closure to the plaintiff investors and the investment banks’actions were not known to the public. Regents of the Univ.of Calif. v. Credit Suisse First Boston (USA), Inc., 482 F.3d 372,384-86 (5th Cir. 2007), cert. denied, ___ U.S. ___ (2008).

B. Stoneridge’s Effect on Litigation Arising Out of theSubprime Mortgage Meltdown

Stoneridge provides accountants, lawyers, appraisers,warehouse lenders and other potential targets of aidingand abetting claims arising out of the subprime mortgagemarket collapse some shelter from federal securitiesclaims. Investors who saw share prices tumble as a resultof write-downs required by the collapse of the subprime



TERESA J. KIMKER is a shareholder at Halleland Lewis Nilan & Johnsonwhere she chairs the firm’s Commercial Litigation practice group.


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market will have a more difficult time asserting claimsunder the securities laws against parties other than theissuer. Even if the secondary parties knew of and facilitat-ed fraudulent statements to investors, they will be shield-ed from §10(b) and 10b-5 liability if they did not communi-cate the fraudulent statements to the market or if the mar-ket was unaware of their deceptive conduct.

C. Stoneridge is Not an All-Clear SignalWhile Stoneridge unquestionably removes the threat of

§10(b) and Rule 10b-5 suits against secondary players inthe subprime market who did not make statements to theinvesting public, it does not provide a shield against allclaims. As some companies have already seen, plaintiffshave used a number of other available vehicles to reachconduct of secondary actors in the subprime market that isnot actionable in a private suit for damages under the fed-eral securities laws.

1. SEC’s Enforcement PowersAs the Stoneridge Court noted, in the Private Securities

Litigation Reform Act of 1995, Congress directed the SECto prosecute aiders and abettors of securities fraud. 15U.S.C. §78t(e). The SEC has used this authority to pursuesecondary actors in the subprime mortgage market col-lapse. Last year, for example, the SEC charged FirstBanCorp, a Puerto Rico-based bank holding company,with aiding and abetting Doral Financial Corp.’s fraudu-lent recognition of income on sham sales transactionsinvolving subprime mortgages. First BanCorp purport-edly purchased more than $4 billion worth of non-con-forming mortgages from Doral, earning more than $100million in net interest income. The SEC alleged that thesales transactions between First BanCorp and Doral wereshams because Doral agreed orally and in e-mails toextend the recourse provisions for the duration of themortgages, even though the written agreements providedfor only a 24-month recourse period. First BanCorp, with-out admitting or denying the aiding and abetting charges,agreed to pay an $8.5 million civil penalty to the SEC, inaddition to injunctive relief.

First BanCorp’s dealings with Doral are similar to thetransactions between Charter and its vendors in theStoneridge case. Therefore, it seems likely that the SECcould bring an enforcement action against the vendors and

those who engage in similar conduct, even though suchactors are beyond the reach of a private suit for damagesunder §10(b).

2. Aiding and Abetting Liability under State Statutesor Common Law

The Stoneridge decision applies only to private causesof actions under §10(b) of the Securities and ExchangeAct of 1934 and SEC Rule 10b-5. Therefore, parties in thesubprime mortgage chain have found, and may stillfind, themselves facing aiding and abetting allegationsin common law fraud actions or pursuant to state securi-ties statutes.

For example, in In Re First Alliance Mtg. Co., 471 F.3d 977(9th Cir. 2006), the Ninth Circuit affirmed a jury verdictholding Lehman Brothers liable as an aider and abettor toFirst Alliance’s fraud under California law. First Allianceoriginated subprime mortgage loans to consumer borrow-ers and then pledged them to Lehman in return for a loanunder a revolving line of credit to fund the mortgages. Inaddition, once First Alliance reached a certain loan vol-ume, it issued bonds or notes to public investors that weresecured by the payment stream from the mortgage loans.Lehman co-managed four of these asset-backed securitiza-tion transactions for First Alliance.

A class of borrowers claimed that First Allianceengaged in fraudulent loan origination procedures, andsued Lehman as an aider and abettor of that fraud underCalifornia’s tort and Unfair Competition Law. The classalleged that Lehman agreed to provide financing for FirstAlliance’s mortgage business knowing of First Alliance’sdeceptive sales practices and, that without Lehman’sfinancing, First Alliance would not have been able to con-tinue funding its fraudulently obtained loans. Id. at 987.The jury found that Lehman was liable to the class of bor-rowers for aiding and abetting First Alliance’s fraud. TheNinth Circuit affirmed the finding of liability, but remand-ed for further proceedings on the calculation of damages.Id. at 1003.

It is interesting to note that the investors in the bondsand notes issued by First Alliance could not bring a similarclass action suit against Lehman. Because the investors’claims would relate to a security, the Securities LitigationUniform Standards Act would preempt the state law

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claims. 15 U.S.C. § 78bb(f)(1). The Stoneridge decisionthen would likely foreclose the investors’ federal securitieslaw claims unless they could show that Lehman did orsaid something that the investors were aware of and uponwhich they relied.

Finally, unlike the federal securities statute at issue inStoneridge, several state securities statutes expressly allowprivate causes of action for damages against aiders andabettors of securities fraud. See, e.g., Colo. Rev. Stat. Ann. §11-51-604(2)(c) (requires knowledge of and substantialassistance to primary wrongdoer’s violations); Ohio Rev.Code Ann. § 1707.43(A) (broadly extends liability to“every person that has participated in or aided the seller inany way” in violating Ohio’s securities laws); Tex. Civ.Stat. Art. 581-33(F)(2) (liability extends to any person “whodirectly or indirectly with intent to deceive or defraud orwith reckless disregard for the truth or the law materiallyaids a seller, buyer, or issuer of a security”). As long asplaintiffs are not asserting a class action, they can stillbring aiding and abetting claims in state court under statesecurities statutes that allow such claims.


The Stoneridge decision did not, as some feared it might,open a breach in Central Bank’s bulwark against aidingand abetting liability under the federal securities laws.Rather, in order to pursue claims against secondary actors,plaintiffs must prove reliance on a statement or action thatwas communicated to the market by the secondary actors.Potential defendants still may face exposure, however, toenforcement actions by the SEC or claims for damagesunder state common or statutory law. �

Everythingyou need to know aboutreleases and settlements

is covered in theMDLA RELEASE DESKBOOK, (5th Ed., 2006)David M. Bateson and Richard C. Scattergood, editors

Through its previous editions, the MDLARelease Deskbook has become a primary

resource for lawyers and judges throughout thestate. Updated sections in this new edition discussethical considerationsin settlements as wellas partial releases andemployment cases.Chapters include adetailed review of thelaw and practicalaspects of structuredsettlements.Suggestions to helpthe practitioner in thedrafting and analysisof settlements andrelease agreements and an extensive appendix offorms and a topical index are included.

N A M E __________________________________

F I R M ___________________________________

A D D R E S S _______________________________

C I T Y ____________________________________

S T A T E ________________ Z I P ______________

T E L E P H O N E (___) _______________________

E - M A I L ________________________________

M D L AReleaseDeskbook


Fifth EditionDavid M. Bateson andRichard C. Scattergood, Editors

O R D E R F O R MComplete and mail with a check payableto MDLA. (includes shipping and handling)

MDLA members $ 90Non-Members $120

Call the MDLA office (612) 338-2717 with questions.

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If you did not make it to the Mid-winter Conference – you missed averyworthwhileweekendadven-

ture inDuluth. Fromthe informativeCLE presentations to the luau partyand waterpark, there was plenty tokeep members and their familiesengaged. We were pleased to seeattendance at the conference on theupswing and hope it will continue inthatdirectionforyearstocome.

So much to do - so little time.That saying seems to fit what I

face each day when I look at my desk. One reason is the duesstatements that were mailed in January. If you have not yetpaid your 2008 dues, please take a few minutes to do so. Itwill not only keep your name out of the dreaded secondnotice pile, but save time and MDLAmailing costs. Also, if aform was sent to an attorney who is no longer employed atyour firm or company, please send it back, noting the cancel-lation, so the member can be deactivated and subsequentnotices avoided.

You may have noticed some slight changes on the duesform. At its December meeting, the Board approved anincrease to $150 for 2nd year lawyers and made a jump from$140 to $150 in the 2-5 years category. There were nochanges in the $210 category for lawyers who have prac-ticed 5 years or more. The Membership Committee is active-ly reviewing the dues structure for 2009 to determine poten-tial changes or promotions that could be made in efforts toincrease our membership.

Looking ahead, I’d like to remind you of upcoming eventsto mark on your calendars.

MDLA is co-sponsoring the annual Medical MalpracticeConference with HCBA and Minnesota Association forJustice on April 17 at the Doubletree Park Plaza Hotel in St.Louis Park. Conference details are being finalized and youshould be receiving registration information soon.

The annual golf tournament and CLE will be held atStoneRidge Golf Course near Stillwater on June 13. As in thepast, the CLE will take place in the clubhouse in the morning,followed by a lunch and shotgun start on the course in theafternoon. Think Green. The snow will soon disappear.

In mid-July, Quinlivan & Hughes will be hosting theannual Women Lawyers Breakfast at Windows onMinnesota.

The Trial Techniques Seminar in Duluth is August 11-14.Seminar Coordinator Kay Tuveson has already developed atentative outline of topics. She is also bringing back the pop-ular Vista Fleet dinner cruise Saturday evening for membersand families.

We hope to see huge turnouts at each of these events. Ifyou have not been an active member, this is the year to getinvolved. These are all great opportunities not only to earnyour CLE credits but to meet, share ideas, and developfriendships with your defense colleagues. MDLA can onlythrive and become even more valuable as an organizationwhen members say “count me in.” We look forward to see-ing you soon. �



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Thomas J. EvensonLind Jensen Sullivan & Peterson, P.A.150 South Sixth Street, Suite 1700Minneapolis, MN 55402612-333-3637 Fax: [emailprotected]

Portia Hampton FlowersOffice of St. Paul CityAttorney15 West Kellogg Blvd., Suite 750St. Paul, MN 55102651-266-8770 Fax: [emailprotected]

Joel FryeQuinlivan & Hughes, P.A.P.O. Box 1008St. Cloud, MN 56302(320) 251-1414 Fax: (320) [emailprotected]

G. Jeffrey GeorgeMoen Sheehan Meyer, Ltd.U.S. Bank Place201 Main Street, Suite 700P.O. Box 786LaCrosse, WI [emailprotected]

Elisa M. HatlevigJardine, Logan & O’Brien8519 Eagle Point Blvd.Lake Elmo, 55042651-290-6514 Fax: (651) 223- [emailprotected]

Kathryn N. HibbardGreene Espel, PLLP200 South Sixth Street, Suite 1200Minneapolis, MN 55402612-373-8346 Fax: [emailprotected]

Katherine KopperudAafedt, Forde, Gray, Monson and Hager150 South Fifth Street, Suite 2600Minneapolis, MN 55402612-339-8965 Fax: [emailprotected]

Susan E. MacMenaminHalleland Lewis Nilan & Johnson, P.A.220 South Sixth Street, Suite 600Minneapolis, MN 55402612-338-1838 Fax: [emailprotected]

Eric S. OelrichRajkowski Hansmeier, Ltd.11 7thAvenue NorthSt. Cloud, MN [emailprotected]

Patrick W. OstergrenLind, Jensen, Sullivan & Peterson, P.A.150 South Fifth Street, Suite 1700Minneapolis, MN 55402612- [emailprotected]

Christopher P. ParringtonSkjold•Bartel, PA222 South Ninth Street, Suite 3220Minneapolis, MN 55402612-746-2560 Fax: [emailprotected]

Tamara L. RollinsMeagher & Geer, PLLP33 South Sixth Street, Suite 4400Minneapolis, MN [emailprotected]

Judith Mlinar SeebergerReding & Pilney PLLP8661 Eagle Point Blvd.Lake Elmo, MN [emailprotected]

Gretchen K. SeymourFoley & Mansfield, PLLP250 MarquetteAvenue, Suite 1200Minneapolis, MN 55401612-338-8788 Fax: [emailprotected]

Aaron SimonTomsche, Sonnesyn & Tomsche, P.A.610 OttawaAvenue NorthMinneapolis, MN [emailprotected]

Leatha G. WolterMeagher & Geer, PLLP33 South Sixth Street, Suite 4400Minneapolis, MN 55402612-877-3114 Fax: [emailprotected]

RETURNINGDale A. HansenErickson, Zierke, Kuderer & Madsen114 West Second StreetFairmont, MN 56031507-238-4711 Fax: [emailprotected]

NEW AND RETURNING MEMBERSThe following attorneys have joined the MDLA.We welcome them into our membership.

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MDLA committees provide great opportunities to learnand discuss issues and topics of current interest or concernwith other members in similar practices. They serve as theheartbeat of the organization where important and valuablepractice-related information is shared or association-widepositions are initiated and developed.

Committee members are notified of upcoming meetingsvia a list serve. Meeting notices are also posted on MDLA’sweb site and in Requests and Events, a weekly e-mail publica-tion. All members are strongly encouraged to become activeparticipants. If you would like to be appointed to a commit-tee, simply submit a statement of interest to [emailprotected]. Non-members are welcome to attend a com-mittee meeting to learn more about the committee’s activitiesand member benefits.

AMICUS COMMITTEE: Corresponds via list serve to con-sider requests for appearances by MDLAas an amicus curiae.Chair is William Hart, Meagher & Geer, PLLP.

COMMERCIAL LITIGATION COMMITTEE: Meetsquarterly. The committee typically offers a presentation anddiscussion on a specific topic of interest to commercial liti-gation practitioners. Chair is Steve Laitinen of Larson •King, LLP; Vice Chair is CynthiaArends of Halleland LewisNilan & Johnson; Publications Chair is Patrick Robben ofMorrison Fenske & Sund, P.A.

CONSTRUCTION LAW COMMITTEE: Typically meets at4:00 p.m. on the third Monday of every other month(January, March, May, July, September, November) at TheLocal, 931 Nicollet Mall, Minneapolis. Chair is Steven Sitek,Bassford Remele, P.A.

EDITORIAL COMMITTEE: Meets to proof MinnesotaDefense, MDLA’s quarterly magazine. The magazine ispublished on or about February 1, May 1, August 1, andNovember 1. Proofing meetings are scheduled about twoweeks before the publication dates. Chair is Victor Lund,Mahoney, Dougherty & Mahoney, P.A.

EMPLOYMENT LAW COMMITTEE: Meets at noon on thefirst Wednesday of every other month (December, February,April, June, August, October). Co-chairs are Jim Andreen,Erstad & Riemer, P.A. andAmy Taber, Faegre & Benson, LLP.

GOVERNMENTAL LIABILITY COMMITTEE: Meetsquarterly with a CLE type format. In February, the committeepresents an annual update at the League of Minnesota Citiesin St. Paul.Othermeetings rotate amongfirms. TheDecemberholiday party is always enjoyable. Chair is Joseph Flynn,Jardine, Logan & O’Brien, PLLP

INSURANCE LAW COMMITTEE: Meets at noon on thesecond Tuesday of each odd-numbered month at the lawfirm of Bassford Remele, P.A. (33 South Sixth Street, Suite3800, Minneapolis). The committee typically offers a pre-sentation and discussion on a specific topic of interest toinsurance practitioners. Co-chairs are Brian Sande,Bassford Remele, P.A. and Dale Thornsjo, Johnson &Condon, P.A.

LAW IMPROVEMENT COMMITTEE: Monitors legisla-tion during Minnesota’s legislative sessions. A meeting istypically scheduled prior to or early in the legislative ses-sion and then periodically during the session as bills areintroduced and decisions are needed on proposed legisla-tion. Co-chairs are Tom Marshall, Jackson & Lewis and RichThomas, Burke & Thomas, PLLP.

LONG TERM CARE COMMITTEE: Meets every othermonth (December, February, April, June, August, October)at various times and locations. Co-chairs are Megan Hafnerand Tony Kane, Terhaar, Archibald Pfefferle & Griebel, LLP.

NO-FAULT COMMITTEE: Meets at noon on the secondFriday of every other month beginning in January. The 2008meetings are scheduled to take place at Oskie, Hamilton &Sofio (970 Raymond Avenue, Suite 202, St. Paul, MN 55114)on January 11, March 14, May 9, July 11, September 12 andNovember 14. Co-chairs are Kelly Sofio, Oskie, Hamilton &Sofio, P.A. and Jessica Wymore, Stich Angell Kreidler &Dodge, P.A.

PRODUCTS LIABILITY COMMITTEE: Meets on an infor-mal basis. Co-chairs are Dana Lenahan and SusanMacMenamin, Halleland Lewis Nilan & Johnson, P.A.

WORKERS’ COMPENSATION COMMITTEE: Meets at4:00 p.m. every other month (December, February, April,June, August, October) rotating between the law firms ofErstad & Riemer (8009 34th Avenue South, Suite 200,Minneapolis) and Brown & Carlson (5411 Circle DownAvenue, Suite 100, Minneapolis). Co-chairs are DouglasBrown, Brown & Carlson, P.A. and Charlene Feenstra,Heacox, Hartman, Koshmrl, Cosgriff & Johnson, P.A.

2008 LEGISLATIVE REPORT RELIGIOUS ACCOMMODATION IN …€¦· bailment in which Plaintiff was the bailor and Defendant was the bailee. While the railroad cars were in bailment (in - [PDF Document] (39)

MN � SPRING 2008 37

Get Involved!Join an MDLA committee.

Amicus Curiae CommitteeWilliam M. Hart, Chair

Commercial Litigation CommitteeStephen P. Laitinen,Chair

Construction Law CommitteeSteven M. Sitek,Chair

Editorial CommitteeVictor E. Lund, Chair

Employment Law CommitteeJim Andreen and Amy Taber, Co-Chairs

Governmental Liability CommitteeJoe Flynn, Chair

Insurance Law CommitteeBrian Sande and Dale Thornsjo, Co-Chairs

Law Improvement CommitteeRich Thomas and Tom Marshall, Co-Chairs

Long Term Care CommitteeMegan Hafner and Tony Kane, Co-Chairs

New Defense Attorneys SectionAmyK.AmundsonandLaceeB.Anderson,Co-Chairs

No-Fault CommitteeJessica R. Wymore and Kelly Sofio, Co-Chairs

Products Liability GroupDana Lenahan and Susan MacMenamin, Co-Chairs

Workers’ Compensation CommitteeDouglas Brown and Charlene Feenstra, Co-Chairs







Renee C. Anderson, Executive DirectorMinnesota Defense Lawyers Association600 Nicollet MallSuite 380AMinneapolis, MN 55402OR email request to [emailprotected]



Governor Tim Pawlenty announced the MinnesotaSupreme Court’s next chief justice, naming Eric J.Magnuson of Briggs and Morgan, P. A. to the state’shighest court. He is the founding president of the 8thCircuit Bar Association, a fellow and past president ofthe American Academy of Appellate Lawyers, co-reporter to the Minnesota Supreme Court AppellateRules Committee, and past president and currentmember of the Minnesota Defense LawyersAssociation (MDLA). He has been a longtime memberof the American Bar Association, serving as co-chairof the Appellate Practice Committee of the Section onLitigation and in the same capacity for the AppellateAdvocacy Committee of the Tort Trial and InsurancePractice Section. He is also a member of the MinnesotaState Bar Association, where past leadership roleshave included serving as chair of the Court Rules andJudicial Administration Committee, as well as theCourt of Appeals Task Force. In addition, Magnusonhas served as chair of the governor’s Commission onJudicial Selection since 2003.

Magnuson received a B.A. in history from theUniversity of Minnesota and graduated cum laudefrom William Mitchell College of Law in 1976.

2008 LEGISLATIVE REPORT RELIGIOUS ACCOMMODATION IN …€¦· bailment in which Plaintiff was the bailor and Defendant was the bailee. While the railroad cars were in bailment (in - [PDF Document] (40)

38 MN � SPRING 2008


2008_____________________2008 Golf and CLE SeminarStoneridge Golf Course, StillwaterJune 13, 2008

MDLA 33rd Annual Trial Techniques SeminarDuluth Entertainment & Convention Center, DuluthAugust 14-16, 2008

Watch for more informationon these and other events inMinnesota Defense, by mail,

and at www.mdla.org

__________________________________________________________Summer 2006Barbarians at the Gate: Is Public Entity Lead-Based

Paint Litigation Coming to Minnesota? Matthew S. FrantzenWho’s on the Risk? Allocating Damages

Among Insurers in ConstructionDefect Claims Brian H. Sande and Mark R. Bradford

2006 Legislative Report Sandy Neren__________________________________________________________

Fall 2006The Corporate Death Defense:

AliveAnd Well in Minnesota Richard J. LeightonHot Off The Press: Minnesota Supreme Court ClarifiesPro-rata Insurance Coverage Allocation for Wet

Home Contractor Michael D. Carr and James F. MewbornClaims for Contribution and Indemnity AfterWeston v.McWilliams: Where Do the Claims Start and WhereDo the Claims Stop? Amy K. Amundson and Steven M. Sitek

Understanding Minnesota’s ContractualIndemnity Quagmire at a Glance Michael D. Carr

__________________________________________________________Winter 2007What Civil DefenseAttorneys Should Know

About ERISA Tiffany M. QuickWooddale Builders, Inc. v.Maryland Casualty Co.:

Supreme CourtAddresses Certain InsuranceCoverage Issues Pertaining to MoistureIntrusion Claims John M. Bjorkman and Paula Duggan Vraa

__________________________________________________________Spring 2007Advice for Goldilocks When Hiring

Good Help: Don’tAsk Too Much;Don’tAsk Too Little Jessica J. Theisen and Tamara Novotny

Recent Developments in EmploymentLaw for the Defense Attorney

Janet C. Ampe, Mary L. Senkbeil and Amy C. Taber__________________________________________________________

Summer 2007Offers of Judgement and Fee Shifting Statutes:

the “Un-American” Rule Thomas E. Marshall2007 Legislative Report Sandy Neren__________________________________________________________

Fall 2007Minnesota Supreme Court Considers Revisions to Rule 68 That

Would Make Defendents Pay Double Costs and Disbursem*ntsLimiting Liability for Sexual Harassment: New Guidance

from the Eighth Circuit Megan Backer and Joeseph SchmittCompliance With New Standard for Safety Information Can

Assist Production Manufacturer in Defending Failure toWarn Claims Christine M. Mennen and Sheila T. Kerwin

Navigating the Workers’ Compensation Subrogation Labyrinth...How to Resolve the “Unresolvable” Subrogation CaseThrough Alternative, Cutting-Edge SettlementNegotiationModels Joseph M. Nemo III

__________________________________________________________Winter 2008TheA.P.I. Case: The “Kiss O’ Death”

ofKissoondath? Dale O. ThornsjoGovernmental Immunity Update Carrie Hund

Members wishing to receive a copy of an article from a past issueof Minnesota Defense should forward a check made payable to theMinnesota Defense Lawyers Association in the amount of $5.00for postage and handling. In addition to the articles listed below,articles dating back to Fall ‘82 are available. Direct orders andinquiries to the MDLA office, Suite 380A, 600 Nicollet Mall,Minneapolis, MN 55402.


2008 LEGISLATIVE REPORT RELIGIOUS ACCOMMODATION IN …€¦· bailment in which Plaintiff was the bailor and Defendant was the bailee. While the railroad cars were in bailment (in - [PDF Document] (41)


Date __________________ Attorney ID__________________

I, ____________________________________________________________ , do hereby apply for membershipin the Minnesota Defense Lawyers Association and do hereby certify that I am an attorney primarily involvedin the defense of civil actions in the State of Minnesota.

Law firm/Employer __________________________________________________________________________


Admitted to practice ______/________(MM/YYYY) I am currently a member of DRI: Yes _____ No _____

Office address _______________________________________________________________________________


Direct phone ____________________Office phone __________________Fax number* ___________________

E-mail address* ______________________________________________________________________________*By providing a fax number and e-mail address, you are agreeing to receive fax or e-mail communications from the association that may contain a message of acommercial nature.

Legislative district (home) __________________(If unknown, go to www.house.leg.state.mn.us or call House Information, Minnesota Legislature at 651-296-2146.)

I attach my check payable to MDLA for $ _____________* (to be returned to me if this application is not accepted).

I agree to abide by the bylaws of the Minnesota Defense Lawyers Association.

Signed ____________________________________________________

*Annual MDLA Membership Fees:Member of the Bar less than 1 year $95Member of the Bar 1 to 5 years $150Member of the Bar 5 years or more $210Retired Status $40

(Fees established January 1, 2008)

Areas of practice and specialization:___ ADR ___ Employment ___ Products Liability___ Appellate ___ Environmental ___ Professional Liability___ Auto: No-Fault ___ General Litigation ___ Subrogation___ Commercial ___ Governmental Liability ___ Workers’ Compensation___ Construction Law ___ Insurance Coverage ___ Other _______________________ Dram Shop ___ Medical Malpractice

Copy, complete and mail to:Minnesota Defense Lawyers Association600 Nicollet Mall , Suite 380AMinneapolis, MN 55402

MDLA is exempt from Federal taxation under IRC 501 (c)(6).As a result, membership dues are not tax deductible as a charitablecontribution; they may be deductible as a business expense.

MN � SPRING 2008 39

2008 LEGISLATIVE REPORT RELIGIOUS ACCOMMODATION IN …€¦· bailment in which Plaintiff was the bailor and Defendant was the bailee. While the railroad cars were in bailment (in - [PDF Document] (42)

40 MN � SPRING 2008


By Steven R. SchwegmanQUINLIVAN & HUGHES, P.A.

MDLA DRI State Representative

This column affords me theopportunity to talk aboutDRI-The Voice of the

Defense Bar. DRI is an interna-tional organization of lawyersinvolved in the defense of civiljustice. Although we are com-prised of more than 22,000members, we are an organiza-tion of individual relationships.The camaraderie, friendshipsand professional interactionamong our membership are the

elements that keep us relevant, vital, and strong.

I attended the State Representatives’ annual meeting inChicago from March 13-14, 2008. We heard from a numberof very good speakers including Tim Schimberg of Denverwho delivered a powerful yet emotional message regardingaddiction, dependency and mental health. Let me quotefrom his article in DRI’s For The Defense in October 2007:“Lawyers have power and many opportunities to exerciseit: the power to solve problems and be zealous advocates;the power to challenge and resolve injustices; the opportu-nities to demand fairness and an even playing field; thepower to educate and create opportunities resulting in last-ing contributions in our communities. I offer to you a slight-ly different twist to the theme of “power.” I submit that youhave the power to heal, and to assist those who are vulnera-ble and in crisis. We are counselors, advisors and peace-makers. We need to turn our healing powers to each other –to our community of lawyers.” I would suggest you pull hisarticle and read it.

I also learned DRI has a section called DRI Europe whichconsists of lawyers who practice throughout Europe. DRIEurope provides an open forum for in-house counsel andlawyers in private practice to freely exchange ideas andinformation. It also offers many leadership and networkingopportunities. The European Leadership Council, com-posed of representatives from each country within DRI

Europe, has overall responsibility for the activities of thesection. Each country maintains a steering committee thatmanages the needs of its specific country.

I would strongly encourage you to make plans to attendthe 2008 DRI annual meeting in New Orleans October 21-25, 2008. We will be staying at the Sheraton New OrleansHotel. The top 5 reasons to attend: 5) A city that is easy toget around. 4) Lots of great food and entertainment. 3)Unlimited networking opportunities with colleagues andfriends. 2) Outstanding education. And the number onereason to attend is: Perfect place to “Spice up your practicein the Big Easy.” Speaking on Thursday, October 23 will beNewt Gingrich, Former House Speaker and Author andEleanor Clift, Contributing Editor of Newsweek Magazine.Annual meeting activities will include committee businessmeetings with stellar CLE offerings, an Exhibit Showcaseand Regional meetings involving State and Local DefenseOrganizations. We are also organizing a reception for theMinnesota attendees. I hope to see you in New Orleans.

As a State Representative I will facilitate the flow of com-munication between DRI and MDLA. I will also be attend-ing MDLABoard meetings and submitting quarterly reportsto DRI. If you have any questions, needs or concerns, pleasefeel free to give me a call (320.333.4195) or contact me byemail, [emailprotected]. �

2008 LEGISLATIVE REPORT RELIGIOUS ACCOMMODATION IN …€¦· bailment in which Plaintiff was the bailor and Defendant was the bailee. While the railroad cars were in bailment (in - [PDF Document] (43)


DRI – The Voice of the Defense Bar150 North Michigan Avenue, Suite 300

Chicago, Illinois 60601(312) 795-1101


Name Telephone



City State Zip

Year Admitted to the Bar: _____ State ___________________

I belong to a Local or State Defense Association:Yes ( ) No ( )

To the extent that I engage in personal injury litigation,I do not, for the most part, represent plaintiffs.

I have read the provision above and hereby make application forIndividual Membership.

My check for the annual dues ($195 U.S.) is enclosed.Please forward information on DRI publications, semi-nars and services.

I have been admitted to the bar for fewer than five years.My check for the annual dues for this category ($125 U.S.)is enclosed. Please forward the appropriate publications.

I wish to serve on a committee. Please send CommitteePreference List.

Please bill me.


DRI is exempt from Federal taxation under IRC 501(c)(6). As a result,membership dues are not tax deductible as a charitable contribution;they are deductible as a business expense.

( )

( )

( )

( )

MN � SPRING 2008 41



June 12-13 Diversity for SuccessChicago, IL

Aug. 18-19 National Workers’ Compensation ReviewOrlando, FL

Sept. 4-5 Intellectual Property LitigationChicago, IL

Sept. 4-5 Nursing Home/ALF LitigationOrlando, FL

Sept. 11-12 Construction LawLas Vegas, NV

Oct. 22-26 2008 Annual MeetingNew Orleans, LA

Nov. 6-7 Asbestos MedicineLas Vegas, NV

Nov. 13-14 Complex MedicineCoronado, CA

Nov. 20-21 Fire and CasualtyChicago, IL

Dec. 4-5 Insurance Coverage and PracticeNew York, NY


Jan. 28-30 Civil Rights and GovernmentalTort LiabilityNew Orleans, LA

Feb. 19-20 Toxic Torts and Environmental LawPhoenix, AZ

Feb. 19-20 Toxic Torts and Environmental LawPhoenix, AZ

Apr. 15-17 Product LiabilitySan Diego, CA

Apr. 30- Employment LawMay 1 Orlando, FL

May 14-15 Drug and Medical Device LitigationNew York, NY

Sept. 10-11 Nursing Home/ALF LitigationScottsdale, AZ

2008 LEGISLATIVE REPORT RELIGIOUS ACCOMMODATION IN …€¦· bailment in which Plaintiff was the bailor and Defendant was the bailee. While the railroad cars were in bailment (in - [PDF Document] (44)





Minnesota Defense Lawyers Association600 Nicollet MallSuite 380AMinneapolis, MN 55402



































Hit the links!Hit the links!Annual GolfTournament

and CLEJune 13, 2008

StoneRidge Golf Club13600 Hudson Boulevard No.

Stillwater, MN

Earn CLE credits in the morning,stay for golf in the afternoon!

Come to the 2008MDLA

Annual GolfTournament

and CLEJune 13, 2008

StoneRidge Golf Club13600 Hudson Boulevard No.

Stillwater, MN

Earn CLE credits in the morning,stay for golf in the afternoon!

For additional information contact:Minnesota Defense Lawyers Association600 Nicollet Mall, Suite 380AMinneapolis, MN 55402Phone: (612) 338-2717FAX: (612) 333-4927Internet: http://www.mdla.org

2008 LEGISLATIVE REPORT RELIGIOUS ACCOMMODATION IN …€¦ · bailment in which Plaintiff was the bailor and Defendant was the bailee. While the railroad cars were in bailment (in - [PDF Document] (2024)


Who is bailor and bailee in bailment? ›

The person delivering the goods is called the "bailor". The person to whom they are delivered is called, the "bailee".

What is bailment pdf? ›

As per Sec. 148 of Indian Contract Act, “ A bailment is the delivery of goods by one person to another for some purpose upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the direction of the person delivering them.”

What is an example of a bailment for the sole benefit of the bailee? ›

A bailment is created for the sole benefit of the bailee when both parties agree the property temporarily in the bailee's custody is to be used to his or her own advantage without giving anything to the bailor in return. The loan of a book from a library is a bailment for the sole benefit of the bailee.

Who has the burden of proof in a bailment lawsuit? ›

Burden of Proof

In a bailment case, the plaintiff bailor has the burden of proving that a loss was caused by the defendant bailee's failure to exercise due care.

What are the 3 types of bailments? ›

There are three types of bailments: (1) for the benefit of the bailor and bailee; (2) for the sole benefit of the bailor; and (3) for the sole benefit of the bailee. A bailment for the mutual benefit of the parties is created when there is an exchange of performances between the parties.

What are the rights of a bailment? ›

The bailee has certain rights, including the right of possession, the right to compensation for expenses, the right to claim compensation for damages, the right to lien, and the right to recover compensation for the value of improvements made to the goods.

What is bailment in tort law? ›

A 'bailment' is defined as a non-ownership transfer of possession. Under English common law, the right to possess a thing is separate and distinct from owning the thing. Interestingly, as a result of this distinction, in some jurisdictions, an owner of an object can steal their own property.

Who can create a valid bailment? ›

For a valid contract of bailment, both the bailor as well as bailee have to enter into an agreement that the bailor will transfer goods to the bailee for a specific purpose and after the completion of the purpose bailee will return the goods to the bailor and bailor will pay to the bailee for his services.

What is an example of a bailment in law? ›

Legal Definition

Contracts for the lease of a car, for sale of goods on consignment, and for the transport of goods are examples of bailments.

What condition of a bailor or bailee can end a bailment? ›

A bailment ends when the purpose of the bailment is completed, or when the bailor or bailee terminates the bailment by giving notice to the other party. If the bailment is for a specific period or until a specific event occurs, then it ends automatically upon completion of that period or event.

What is the difference between a bailment and a bailee? ›

A bailment is a delivery of personal property by one person to another for a specific purpose with the understanding that the property is to be returned when the purpose is accomplished. A bailor is the person who delivers the property. A bailee is the person who receives it.

What is the primary duty of a bailee? ›

As mentioned above, the bailee is expected to take reasonable care with the property, even if there is no fee involved. The bailee must, therefore, return the goods to the bailor as they were entrusted. The bailor can sue for damages if he can prove the bailee did not use reasonable care during the bailment.

What is burden of proof on plaintiff? ›

In a civil lawsuit, the burden of proof rests on the plaintiff or the person filing the suit. The plaintiff should prove that the allegations are true and that the defendant, or the other party, caused damages. When it comes to establishing a civil case, the plaintiff must usually do so by a preponderance of evidence.

Who makes the claim has the burden of proof? ›

Holder of the burden

When two parties are in a discussion and one makes a claim that the other disputes, the one who makes the claim typically has a burden of proof to justify or substantiate that claim, especially when it challenges a perceived status quo.

What are the consequences of bailment? ›

If the Bailee does not return or deliver the goods according to the Bailor's directions, after the accomplishment of purpose or after the expiry of the period of bailment, the Bailor has a right to claim compensation for any loss, destruction or deterioration of the goods from that time.

Is bailor the owner? ›

While the good is in the bailee's possession, the bailor is still the rightful owner. Originally a bailment gave the bailee possession of the good but not the right to use it and placed a strict duty of care for the good on the bailee, though this now varies based on the exact nature of the bailment.

Who are Pawnor and Pawnee? ›

The bailment of goods as security for payment of a debt or performance of a promise is called "pledge". The bailor is in this case called the "pawnor". The bailee is called "pawnee".

Is a bank a bailee or bailor? ›

What does Banker as bailee for property deposited in safe custody mean? The general rule is that the banker is a bailee for value as regards any property deposited with him for custody.

Who is the pledger and pledgee? ›

A pledge is a bailment that conveys title to property owned by a debtor (the pledgor) to a creditor (the pledgee) to secure repayment for some debt or obligation and to the mutual benefit of both parties. The term is also used to denote the property which constitutes the security.

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