“Used car sellers know when they’re lying.”

This is an old joke. (In fact, we called it an old joke over six years ago.) But there might be a nauseating ring of truth to the joke for many readers.

It might have to do with the complexity of the products. It might have to do with the mysteriousness and intangibility of the products for many buyers. It might have to do with the relative newness of the product category (compared to, say, cars). It might have to do with the highly competitive and “change-on-a-dime” market for computer software or the low barriers to entry. (Anyone who can code (or download shareware?) can hold themselves out as a software company.) It might be a combination of all of these factors.

Whatever it is, there are many lawsuits between unhappy buyers and sellers of computer software, particularly high-end customized software for commercial applications.

Prairie River Home Care (“PRHC”) v. Procura, a.k.a., Complia Health is a classic example. According to Prairie River, Procura’s software “was disastrous…from the moment the [contract to buy it] was executed…”

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Update (April 15, 2019): The Minnesota heard oral argument in this case, described below, this past week. We predict Minnesota Sands will lose. Attorney Chris H. Dolan argued for Minnesota Sands and was peppered by questions from Justices Lillehaug, Thissen, Chutich, McKeig, and Hudson. Assuming all of these justices are unpersuaded by Minnesota Sands, Minnesota Sands obviously loses. Even if one of these justices favors Minnesota Sands, Minnesota Sands still loses.

Jay T. Squires argued for the County of Winona.

Mr. Squires distilled the question before the Court as (we paraphrase): “Can a right to mine on one’s property be taken away by the government when one has no right to mine?” It sounds quite obvious that the answer to this question would be, “No.” How can one object to someone taking away a right one does not have? But, under established Minnesota law, a right to build residential homes on a property can be an unconstitutional taking when one has no right to build residential homes on the property. (See Wensmann Realty Inc. v. City of Eagan.)

Chief Justice Gildea seemed quite concerned about Minnesota Sands’ claimed economic loss of more than $50 million in the value of its property interest due to the regulatory action. Justice Anderson seemed generally troubled by the government’s regulatory power over the use of private property and seemed to wonder what the limits are. Expect a dissent.

Original post (November 2, 2018): The petition for review of Minnesota Sands and the response on behalf of Winona County are classic examples of lawyering where each side’s arguments seem quite persuasive but they are impossible to reconcile. (The Minnesota Supreme Court recently granted the petition for review.)

Minnesota Sands argues that it bought certain lease rights in Winona county to mine silica sand for use in fracking, a controversial means of mining for oil, and Winona imposed a rule saying that silica sand mined in Winona could only be for “local use,” not for use in fracking and not, Minnesota Sands suggests, not for out-of-state use.

If there were so, it would appear to pose an obvious threat to what is known as “the dormant commerce clause” (the idea that the U.S. Constitution’s Commerce Clause giving the federal government the task of regulating interstate commerce implicitly bars states from regulating interstate commerce (or discriminating in interstate commerce)).

But have a look at Winona county’s opposition to Minnesota Sands’ petition for review and you will see an entirely different (and, we would suggest, inconsistent) argument. There is no mention of any prohibition of sales to out-of-state buyers. The ordinance, Winona argues, simply restricts “industrial mineral operations, while continuing to allow construction mineral operations.” In other words, the challenged regulation “does not favor in-state economic interests over out-of-state economic interests because no entity, whether in-state or out-of-state, is permitted to mine industrial minerals.”

The “tell,” the signal, of who’s right might be in the wiggle words in Minnesota Sands’ opening salvo, “Winona County banned, in effect, all mining, processing, and transportation of minerals to be used outside its ‘local’ area when it passed a zoning ordinance amendment in November 2016. The legislation wiped out almost all mineral rights within its borders.” The underlined words negate the arguments being made. Winona County did not ban mining of minerals to be used outside its local area. The legislation did not wipe out all mineral rights within its borders.

Nevertheless, it is clear that the County’s zoning ordinance amendment hurt Minnesota Sands badly and disappointed its commercial expectations. It remains to be seen whether the action rises to the level of a “taking” entitling Minnesota Sands compensation as a matter of constitutional law.

Update (April 12, 2019): Disgraced Minnesota litigator and U of M Law graduate, Mr. Paul Hansmeier, is headed off to prison but for how long? Stay tuned. The government is asking for over ten years, arguing that “Hansmeier was greedy, arrogant, devious, mendacious, and consistently positioned other people to be damaged by his conduct, even as he enjoyed the proceeds of the scheme he orchestrated.”

Mr. Hansmeier’s lawyer argues for “no more than 87-monhts [sic] followed by 3-years of supervision.

Update (January 30, 2019): The “It Gets Better Project” came onto the scene in 2010 and it is an inspiring movement to reach out to LGBTQ+ adolescents who face such challenges in a society (and in much of the world) where they are treated with irrational fear and hatred.

It has nothing to do with Mr. Paul Hansmeier.

In his case, it gets worse. (Unsurprisingly, the Director of the Office of Lawyers Professional Responsibility has filed a petition for his disbarment.)

The depth of his fall seems almost endless.

Original post (August 24, 2018): If you do not know the story of Mr. Paul Hansmeier’s meteoric “success” as a lawyer (that is, a fleeting financial success thanks to a multi-million dollar pornography-based shake-down scheme), followed by his precipitous fall into an almost bottomless abyss of ignominy, read about it here.

With his recent guilty plea on a number of criminal counts brought by the federal government against him, presumably Mr. Hansmeier has now hit bottom.

At one point, Mr. Hansmeier was participating in the production of porno movies and then suing people for downloading the movies from a website, which he and others had set up stealthily to enable the movies to be downloaded.

Mr. Hansmeier was scheduled to go to trial in early September. If you are curious to read his recently filed plea agreement, go here.

Mr. Hansmeier is apparently poised to plead guilty to mail fraud, wire fraud, and money laundering. Under the plea agreement and the sentencing guidelines, it looks like Mr. Hansmeier will be going to prison for over 10 years although he has not yet been sentenced and the judge will have the discretion to deviate from the sentencing guidelines. (See here at p. 10.)

U.S. District Court Judge Joan N. Ericksen (D. Minn.) will issue the sentence.

[Ed. note: A previous version of the post suggested that Mr. Hansmeier “starred” in the porno films that he “participated in” but a loyal Minnesota Litigator reader suggested that Mr. Hansmeier’s role may have been behind the camera rather than in front of the camera. Not having seen the films (nor having seen Mr. Hansmeier), we cannot say anything about who stars in the films aside from what is admitted in Mr. Hansmeier’s guilty plea, in which he admits to having “participated in filming pornographic movies.”]

fearUpdate (April 5, 2019): We have covered Upsher-Smith vs. Fifth Third Bank for a while now (see below) and it is looking like trial may be coming soon (or not). It seems that the prospect of trial is quite disturbing to the defendant Fifth Third Bank, which appears desperate to avoid trial feeling strongly that the claims against it should not have survived summary judgment.

Plaintiff Upsher-Smith, represented by hard-chargers from one of the preeminent Minneapolis civil litigation firms, Anthony Ostlund Baer & Louwagie, are pushing hard against what it characterizes as Fifth Third’s attempt to delay the day of reckoning.

Chief Judge John R. Tunheim (D. Minn.) promptly rejected Fifth Third’s motion for reconsideration or, alternately, for interlocutory appeal this week.

The issues in this case are quite fascinating but, as we discuss below in this thread of posts, we have been somewhat limited in researching the case because much has been filed under seal. But that makes sense. The case is about an internet-related scam of multiple millions of dollars. Presumably internal bank safe-guards and other related information is best kept secret. On the other hand, apportioning legal responsibility between the various actors is of great public interest. We will continue to follow the case, hobbled though we are by the sensitive subject matter involved.

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Minnesota Litigator’s mandate is “news and commentary about Minnesota civil litigation.” It is therefore unsurprising that Minnesota Litigator rarely discusses governmental seizure of private citizens’ real property in communist countries followed, decades later, by the government’s surrender of property back to private citizens.

This has not yet come up in Minnesota civil litigation.

It is therefore quite a coincidence that it comes up this week for Minnesota Litigator, TWICE: first briefly in the interview with Minnesota real property guru, Kevin Dunlevy (below), and now, in a decision by U.S. District Court Judge Susan R. Nelson (D. Minn), dismissing a case brought by Alexis Veljkovic and Nicholas Dimic concerning land seized from their family by the country formerly known as Yugoslavia, then re-privatized (but apparently not back to the family of Alexis Veljkovic and Nicholas Dimic) based on the doctrine of forum non conveniens (Latin, roughly translated: “not this court’s problem, go away”).

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Update (March 27, 2019): Minnesota Litigator has profiled many great Minnesota litigators (see the compilation at the bottom of the post) for several years.

No one compares with Kevin Dunlevy of Beisel & Dunlevy PA.

For sure, there are literally thousands of excellent Minnesota litigators (many of whom we have profiled, many more that we have admired but have not had the opportunity to profile). It is not clear, however, that there is any other Minnesota litigator (or lawyer) with deeper expertise, mastery, and knowledge of a discrete subject matter area of Minnesota law than Kevin Dunlevy has developed over more than 30 years in the law of Minnesota real property. 

LEVENTHAL pllc has retained Mr. Dunlevy as an expert and has referred real estate matters to Beisel & Dunlevy PA. This profile is not “paid advertising.” (None of our profiles are.) LEVENTHAL pllc has no financial interest in Beisel & Dunlevy PA. In other words, this testimonial is “the real deal,” a genuine strong recommendation from someone who knows what he’s talking about. If you have a legal problem that concerns Minnesota real property, why would you not consult with Kevin Dunlevy?

ML: In a “first” for Minnesota litigator, we’re having a repeat interviewee: Kevin Dunlevy. In our 2014 interview, we only scratched the surface of your expertise. Let’s dig deeper.

But, let’s start at the most superficial level: help our readers with a very basic real property issue in Minnesota: abstract vs. Torrens real property records.  What are these? Why do we have two systems? What difference does it make?

Dunlevy: Okay. All real property in Minnesota starts out as the abstract property. That means in order to check the title, historically you had to go to the courthouse and dig through all the documents back to the time of statehood to figure out who owns the property and what the liens are and so on.

The other method is to check the Torrens certificate of title.  About half of properties in Hennepin and Ramsey Counties are in the Torrens system. And large percentages of Saint Louis County, Anoka County, and other metro area counties, are Torrens as well.

For a property to become Torrens, somebody has to go to court and get the judge to say the magic words, that it’s Torrens and then has “certificated title.” It is a certificate similar to the motor vehicles certificates. You can look at that certificate and see what bank has a lien on your car or who has title to the car.

The Torrens system was invented by Sir Richard Robert Torrens.  He worked in a ship’s registry office in Australia in the 1800s. Ships have certificates of title, just cars. So you can look at the certificate of title and you can see a ship’s mortgage recorded on that certificate of title, and who has title to the ship.

Sir Torrens thought, “A ship’s certificate of title makes a lot of sense for real estate titles. Instead of having to dig through those dusty records at the courthouse to figure out the title, we could just look at this one piece of paper, a certificate of title.”

Most of the English-speaking world except for the U.S. uses the Torrens system: Canada, Great Britain, and, I believe, India.

I met with the professor that was involved in deciding whether India should go with Torrens in India back in about the 1990s and I’m pretty sure India went with Torrens. India’s title is based on the British government survey at the time of partition with Pakistan.  Whoever occupied the real property at the time of the survey, was deemed the owner.

A lot of the former communist countries are Torrens because they don’t have title records from before communism. In many of the former Soviet Union countries, property records were all destroyed. Poland retained its title records and I think Hungary, the Czech and Slovak Republics probably kept their records as well.

I do know Poland kept its pre-communism title records because I taught real estate law in Poland in October 2018. Poland had to go through an extensive litigation process to determine who owned the property after the government divested. The litigation was between those who claimed title through the historic title records and those who occupied the properties during communism.  In Ukraine, where I taught real estate law in 2013, the government still owns all the commercial and agricultural property and the government only divested the residential property. So, in Ukraine if you lived in an apartment at time communism fell, you simply took ownership when the country gave up ownership of that real estate. Occupancy was the source of title for residential property, like in India.

An attorney from the Hennepin County Examiner of Titles office, Justin Hall, went to Ukraine for about 10 years to set up the Torrens system for Ukraine. Before I went to Ukraine, I called Justin to ask about the Torrens system in Ukraine. I spoke with him on Skype and he was working in Afghanistan with its real estate title system.

So that’s a long explanation but essentially the Torrens system is judicially certified title. The court has issued a certificate of title. Otherwise it’s abstract.

There is a movement afoot to make the whole state Torrens based on the Canadian model. That would eliminate duplicate recording systems, simplify title examinations and save costs to the public.

Canada became Torrens first by having the property in every new plat declared Torrens. And after that, every time a deed was recorded, the property became Torrens. The country set aside an assurance fund, which is like insurance, to protect property owners from title problems because of the non-judicial process, compared to the judicial process previously used in Canada.

ML:  If I am a real property owner in Minnesota whose property is in the abstract recording system rather than Torrens, under what circumstances would I want to hire someone and to have the property switched from abstract to Torrens?

Dunlevy: There would be two main reasons to do it, maybe three.  The first one is if you’ve got some high value property, like the IDS Center.  You may want to register title under the Torrens system because there’s more certainty of title.

I spent quite a few years of legal practice working on title registration of a paper mill up into Duluth. It included 8,000 parcels and it eventually ended up all one certificate of title.

After high value property, the second reason to register title is a murky title problem you don’t know how to fix.

If it’s a black and white title problem, you can do a quiet title action and that’s going to be okay. Somebody can review the record, and understand the issue quickly and easily. If it’s a murky title problem, though, if you want to have more certainty that the problems have been eliminated, you can Torrens the property and that effectively buries the old title problems.

ML: Is it possible to estimate the cost of that?

Dunlevy: Registering title is more than a simple quiet title action. A simple quiet title action may be $2,500 to $3,000, without publication of a summons. A Torrens registration is usually about $5,000 to $7,500.

ML: I would think that the smallest disputes that you deal with as a real property litigation expert are boundary line disputes?

Dunlevy: Actually, those are kind of some of the thorniest problems because the people inevitably hate each other and they’re fighting over really inconsequential pieces of property. That’s very common. Sometimes it’s hard to get people to think rationally about a one-foot strip of grass.

In commercial situations that kind of behavior is less common. And it’s less common to have boundary line issues with commercial property because there usually have been surveys, title companies, and lawyers involved.

Boundary line issues are common around water. Part of the reason goes back to the 1800s when the federal government sent out surveyors.  They surveyed the whole state into one-mile squares. They did this using wagon wheels for measurement and magnetic compasses for direction. Minnesota is close to the zero magnetic variation line, which is the variation between magnetic north and true north, but there were three or more degrees of variation at the time of the US Government Survey.

Another problem with the 1850s surveys is that the wagon wheels worked fairly well to measure distance on the open prairie but when the surveyors got into forests, lakes and rivers, the wagon wheels did not work so well. So, for example, Lake Minnetonka has lots of boundary line issues because it’s a very irregular shaped lake and all the survey issues from back to the 1850s are still there. It’s similar with White Bear Lake. There are whole subdivisions in which every house crosses the boundary onto the neighboring property.

ML: If I’m a homeowner and I have a property on a lake front and the lake recedes, do I own more property?

Dunlevy: Maybe, maybe not. That’s called accretions and relictions. Relictions occur when the water recedes and accretion is when the ground builds up, like on a river bend, where sediment might deposit and result in more land on a river’s edge.

The first question is whether the water body is part of a navigable waterway.  If it’s a navigable waterway the federal government owns the land underneath the water, whether it’s a lake or a river. Lake Superior is a navigable waterway, of course. So the federal government owns to the harbor line. Inside the harbor line, it’s under state jurisdiction. In Duluth, all of the slips in which ships are docked end at the harbor line. Other navigable waterways include Saint Croix River and the Mississippi River.

The next question is: was the property platted into the water? Because ownership of platted property line ends at the edge of the plat, and if the plat does not extend into the water, then you don’t own the land between the edge of the plat and the waterline.

If the property is unplatted, it has a metes and bounds description. With a metes and bounds legal description there’s a better chance if you would own that newly uncovered land at the water’s edge.

ML: You gave us a list of your practice areas and it includes work in bankruptcy lien avoidance defense, bankruptcy stay relief motions, bankruptcy plan objections, and bankruptcy adversary proceedings. Those areas don’t necessarily include real property issues. And I think of you as a real property expert. Are you involved in those kinds of matters when they involve real property?

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First U.S. Stamps 1847 Issue

Update (March 25, 2019):  The issues in the FOIA dispute, described below, involve “limited scope de novo review.” This term seems like an oxymoron. Does the Court get to do a complete re-evaluation (also known as “de novo review”) or is its review of “limited scope” (not de novo)?

And, the USPS points out in its reply brief, “While it is true that [FOIA] exemptions are ‘narrowly construed,’ the Supreme Court also ‘has recognized that the statutory exemptions are intended to have meaningful reach and application.’” This is not exactly oxymoronic, but it is a bit “three steps forward, three steps back reasoning” (at page 7).

Notwithstanding these equivocal utterances resembling koans (paradoxical anecdotes or riddles, used in Zen Buddhism to demonstrate the inadequacy of logical reasoning and to provoke enlightenment), the USPS’ reply brief is persuasive. We predict that the USPS will be able to rest on its Glomar response and stonewall Dorsey’s FOIA request.

Original post (March 4, 2019): We came across the caption Dorsey & Whitney LLP v. U.S. Postal Service recently and were intrigued.

We have recently been troubled by rising stamp prices and inexplicably delayed mail; perhaps, we wondered, Dorsey decided to do something about it?

Not quite. Dorsey’s Freedom of Information Act request of the U.S. Postal Service was rejected.

Is the information sought, ““information of a commercial nature, including trade secrets, whether or not obtained from a person outside the Postal Service, which under good business practice would not be publicly disclosed”? (5 U.S.C. § 410(c)(2)).

Who decides what “good business practice” is?

Dorsey, on behalf of some client who desires to go nameless, presumably, seeks information relating to “Negotiated Service Agreements (“NSAs”) between the Postal Service and three specific commercial partners.” The Postal Service responded with a flat-out “NO.” As if this were a matter of national security, the Postal Service even refuses to say whether any such NSAs exist. (This, apparently, is known as a “Glomar response.” The origin of the term is worth noting: see Phillippi v. CIA, 546 F.2d 1009, 1013 (D.C. Cir. 1976) (raising issue of whether CIA could refuse to confirm or deny its ties to Howard Hughes’ submarine retrieval ship, the Glomar Explorer).

The Postal Service sets out its basis for claiming that, under good business practice, the existence (let alone the substance) would not be publicly disclosed here (at page 8-9). We’ll follow the case to see whether Dorsey can persuade Judge Wilhemina M. Wright (D. Minn.) that the firm has a right to see the Postal Service’s particular NSAs.

In Mark Twain’s The Adventures of Tom Sawyer, one of the most famous scenes in American literature, Tom Sawyer persuades the various neighborhood children to trade him small trinkets and treasures for the “privilege” of doing his tedious work, using reverse psychology to convince them it is an enjoyable activity.

Clio, by Themis Solutions, Inc. is a  cloud-based software company for legal practice management, client intake, and client relationship management.

It happens to be LEVENTHAL pllc’s practice management software, which we love almost more than any other software that we use in our practice. But that does not stop us from making fun of the company. Clio is pulling the same maneuver as Tom Sawyer.

Essentially, Clio customers are urged to give testimonials bragging about themselves and, presumably, their love of Clio and, in return, they are literally “awarded” with “small trinkets and treasures.”

We admit that this is an insignificant and shallow Minnesota Litigator post (in contrast to most, which, regular readers know, are weighty and profound) but, in our view, it scratches the surface of an important and difficult question: how should the law draw a line (if at all) between marketing as persuasion vs. marketing as manipulation vs. marketing as deception? For a long time now (since the 1970’s, in our view), the pendulum has swung hard in favor of “the free market” and “caveat emptor.”

There was a spasm of what might be called “conscience” after the 2008 meltdown (with the creation of the federal Consumer Finance Protection Bureau, for example) but that effort is being euthanized by the current administration.

Maybe it is best to let Clio free-ride on gullible clients who feel compelled to give Clio valuable advertising without compensation except for silly trinkets, meaningless swag, and free tickets to a trade show? But, at a certain point, is it not appropriate to sue the Tom Sawyers of the world for unfair and deceptive trade practices?

Francisco Goya: Saturn Devouring His Son

We recently heard a rumor that the preeminent law firm of Dorsey & Whitney dropped its long-held contract with Westlaw, the computerized legal research giant. If true, we think this is a positive development for the market for computerized legal research generally.

(Being a blogger and being a Dorsey alum (rather than a journalist), I felt odd contacting the firm for comment. Query whether this (running a “story” without confirmation) creates a “blogger ethics” problem? There are such things and we hope to adhere to them. We do not think such a call was required by them.)

We welcome the news. Westlaw has effectively held a near monopoly in computerized legal research in the United States for decades with Lexis-Nexis (and, really, no one else) in distant second place. As monopolies go, Westlaw has been fairly benign (compare Comcast). That is, in our view, Westlaw provides a great service; it is just the price that is exploitative. (Comcast (and other telcom providers with technological or geographically doled out monopolies) provide deeply flawed services and products at inflated prices.)

As almost every Minnesota lawyer knows Westlaw (West Publishing) has deep Minnesota roots although the business was sold to Thomson Reuters some years ago. Maybe some of us still feel a home-town allegiance (as, certainly, many of us know lawyers and others who work there).

On the other hand, Westlaw’s monopoly and its high price have been oppressive for law firms, large and small. We would think that lawyers, in particular, would recognize that signs of the shrinking power of a market giant are a positive development for the market’s consumers (that is, those that the monopoly has been devouring (or more, accurately parasitizing) for many years).

We were previously counsel of record in a case in which we promoted our expertise. We touted a summary judgment win at the trial court for a defendant against a claim for defamation. (We are no longer involved in the case in any capacity.)

But we had enough humility and experience in civil litigation to qualify the announcement of our victory (“for now, at least,” we said).

As hinted, the case went up on appeal, and, without the involvement of LEVENTHAL pllc, our defamation defendant former client won again at the Minnesota Court of Appeals!

But recently the Minnesota Supreme Court granted the plaintiff’s petition for further review, which could be ominous.

The Minnesota Supreme Court will tackle an interesting legal question: who is a “public figure” for purposes of First Amendment free speech legal analysis? (It is harder for “public figure plaintiffs” to win defamation claims. They must show “malice” (knowing falsity or reckless disregard for the truth). In common law defamation, one can be liable for defamation for saying something false and damaging even if one had a sincere good faith belief in the truth of the statement after reasonable investigation.

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