Minnesota Court of Appeals holds that an out-of-state insurer that is not licensed to write motor-vehicle-accident insurance in Minnesota has no obligation under the Act to provide basic economic loss benefits to it insured injured in an accident in Minnesota.

Founders Insurance Company v. Yates
Minnesota Court of Appeals
2-29-16

In this Minnesota Court of Appeals case interpreting Minnesota’s No-Fault Act, the Court found that an out-of-state insurer that is not licensed to write motor-vehicle-accident insurance in Minnesota has no obligation under the Act to provide basic economic loss benefits to it insured injured in an accident in Minnesota.

Founders Insurance Company (“Founders”) insured Yates pursuant to an Illinois policy of insurance, issued to Yates while he was an Illinois resident.  Founders is licensed to write dram-shop insurance in Minnesota, but is not to write or issue motor-vehicle insurance in Minnesota.  Yates moved to Minnesota, and did not notify Founders of his move.  Shortly after moving to Minnesota, Yates lost control on a snowy highway and collided with another vehicle.  Yates sought no-fault benefits of $17,000 for chiropractic expenses arising out of the collision.  The Illinois policy, consistent with Illinois law, capped medical payments at $1,000.  Illinois law has no basic-economic-loss benefits and the policy did not provide for such.  Founders denied Yates’ no-fault claim.

Yates submitted the case to no-fault arbitration, to which Founders objected.  Founders filed a declaratory judgment action in Minnesota district court seeking a finding that it has no obligation to provide basic economic-loss benefits pursuant to Minnesota’s no-fault act.  The no-fault arbitrator then held a hearing (at which Founders objected again) and the arbitrator awarded Yates more than $19,000.  Yates moved to confirm and Founders moved to vacate the award.  The district court, after a hearing, found that Founders was licensed to write and issue motor-vehicle insurance in Minnesota and was, therefore, required to provide economic loss benefits to Yates.   Founders appealed.

The Minnesota Court of Appeals analyzed the plain language of the policy, which both parties agreed did not provide for the benefits requested.  The court then addressed Minnesota Statutes section 65B.50, Subdivision 1, and first found that Founders is not licensed to write automobile policies in Minnesota solely because it is licensed to write dram shop.  Minn. Stat. § 60A.06, subd. 1 (2014).  Therefore, the court concluded that section 65B.50 does not compel Founders to provide no-fault benefits per the Minnesota Act.  The court further concluded that the plain language of subdivision 2 also does not require Founders to provide economic loss benefits because it only applies to insurers licensed to write automobile policies in Minnesota – not simply any insurer authorized to do business in Minnesota.  The court concluded that the arbitrator exceeded his authority in awarding basic economic loss benefits and reversed the Order confirming the Award.

United State District Court determined, as a matter of first impression, that the costs related to the creation of an e-discovery platform are not taxable

Associated Electric & Gas Insurance Services, v BendTec, Inc.
United States District Court District of Minnesota
2-24-16

In this question of first impression in the Eighth Circuit regarding an unusual analysis of taxable costs and disbursements following the conclusion of a case, United States District Court Judge Michael J. Davis found that costs related to the creation and management of an e-discovery platform were not recoverable, but e-discovery costs that qualify as “exemplification fees” comparable to the cost of making copies are recoverable.

After resolution of the underlying case in BendTec, Inc’s favor, BendTec moved for the recovery of more than $120,000 in costs incurred in creating and maintaining an electronic database to hold documents produced by the plaintiffs and to collect and secure its own documents.  During discovery, the plaintiffs produced 19 gigabytes of data.  In addition, BendTexc secured and processed 192 gigabytes of its own data for litigation, including 302,445 individual emails, and 247,241 additional documents which would have cost $534,000 to print.  All of this data was hosted at the rate of $90.00/pr month by an outside data service.  BendTec argued that an electronic database was necessary to maintain and preserve litigation data and to avoid spoliation arguments.

The court acknowledged that the Eighth Circuit has not yet addressed this question of taxation, but incorporated the reasoning in Race Tires America, Inc. v. Hoosier Racing Tire Corp., 674 F.3d 158 (3d Cir. 2012).   The courts have acknowledged that §1920(4) should encompass more than simply paper copies.  Therefore, to the extent that e-discovery costs claimed represent conversion of native files to TIFF, scanning document to create digital duplicates, and the conversion of VHS to DVD format, those costs are taxable.  However, costs associated with the collection and preservation of ESI, keyword searching, processing, and indexing, such costs are not recoverable.   The court found that BendTec’s claim for the creation and maintenance of an electronic platform for e-discovery fell into the second category, and denied its request for taxation of those costs.

 

 

Minnesota Supreme Court determines a Rule 68 offer which provides double-costs to a plaintiff is substantive not procedural when determining preemption between federal and state Rules.

Boyd v. BNSF Railway Company
Minnesota Supreme Court
January 27, 2016

A new Minnesota Supreme Court decision addresses the interplay between Minnesota Rule of Civil Procedure 68 and federal law in the FELA context.  Minnesota Rule of Civil Procedure 68 governs offers of settlement and judgment in Minnesota cases and provides a cost-shifting mechanism designed to encourage settlement of claims by imposing fees and costs upon a party who failed to accept a settlement offer or offer of judgment that is more favorable than the trial results.  Minnesota Rule 68 also has a federal counterpart but it is significantly different and provides less motivation for settlement.  Both plaintiffs and defendants utilize Minnesota Rule 68 Offers as both a carrot and a stick to encourage early settlement.

The Federal Employers Liability Act (“FELA”) provides the sole legal remedy for many types of claims involving national services regulated by federal law; it is seen most often in Minnesota in the railroad context.  Although the governing law for FELA claims is federal, a FELA claim may be brought in either state or federal court at the plaintiff’s discretion.  If a FELA claim is brought in state court, the applicable rules of procedure are the rules for the district court.  However, if a rule of procedure is “substantive” and not specifically authorized by federal law, then it is not applicable in a FELA case.

In this FELA case, the Minnesota Supreme Court addressed whether the cost-shifting mechanisms in Rule 68 are procedural or substantive and, therefore, whether they can apply to a Rule 68 offer made in a FELA case.  After analysis, the Court concluded that double-costs are “substantive” and, therefore, inapplicable in a FELA case and found that the plaintiff was not entitled to double-costs.   Minnesota attorneys with a FELA case in district court should therefore be aware that they can utilize Federal Rule 68 offers of judgment to encourage settlement, but are not able to utilize the more favorable and flexible Minnesota Rule 68.  Likewise, this case could be argued to open the door to use of Minnesota Rule 68 offers in a civil case venued in federal court solely through diversity jurisdiction.