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Plaintiff seed companies filed an action against the County of Kauai, seeking to invalidate and enjoin enforcement of Kauai County Code § 22-22 (2013) (Ordinance 960), relating to pesticides and genetically modified organisms (GMO). Generally, the provision (which was originally set to take effect August 16, 2014, but was delayed until October 1, 2014) required commercial agricultural entities to: issue weekly and annual reports regarding their use of "restricted use" pesticides and their possession of GMOs and to establish pesticide buffer zones between crops to which “restricted use” pesticides were applied and surrounding properties. The plaintiffs argued that the law was preempted by state and federal law and that it imposed burdensome operational restrictions violating their due process and equal protection rights. They also alleged that the buffer zone requirement would result in “takings” without just compensation. On motions for summary judgment, the court ruled that Ordinance 960 was preempted by state law and was, therefore, invalid. The court stated that its decision “in no way diminishes the health and environmental concerns of the people of Kauai… [but] simply recognizes that the State of Hawaii has established a comprehensive framework for addressing the application of restricted use pesticides and the planting of GMO crops, which presently precludes local regulation by the County.” The court did not find that the Ordinance was preempted by federal law. It also did not need to rule on the constitutional claims since state preemption invalidated the law. Syngenta Seeds v. County of Kauai, NO. 14-00014 BMK, 2014 U.S. Dist. LEXIS 117820 (D. Haw. Aug. 23, 2014).

On the same day it upheld a large jury verdict in favor of employees in a similar class action against the same employer, the Eighth Circuit upheld a jury verdict in favor of the meat processor in this case.  The plaintiffs represented a class of employees at a meat-processing facility in Columbus Junction, Iowa. They sued the meat processor for not paying wages due under the Fair Labor Standards Act of 1938 (FLSA), 29 U.S.C. § 201 et seq., and the Iowa Wage Payment Collection Law (IWPCL), Iowa Code 91A.1 et seq. The plaintiffs alleged that they had been uncompensated for time spent “donning“ and “doffing” safety apparel and walking from where the apparel was located to and from the job site. The district court entered partial summary judgment for the meat processor, ruling that the claims for donning, doffing and walking during the 35-minute lunch period were not compensable. The jury returned a verdict for the processor on the other claims, finding that the plaintiffs did not prove that the activities in question were “integral and indispensable to a principal activity.” On appeal, the Eighth Circuit affirmed, finding that sufficient evidence existed that the disputed activities were not integral and indispensable class-wide. The court also found that the trial court did not err in allowing the jury to hear evidence supporting the processor's good faith defense. Summary judgment was properly granted as to the mealtime claims because the evidence showed that the mealtime period was primarily for the employees’ benefit, not for the benefit of the employer. Donning and doffing during the 35-minute meal period was thus not compensable.  Guyton v. Tyson Foods, No. 13-2036 , 2014 U.S. App. LEXIS 16278 (8th Cir. Iowa Aug. 25, 2014).

The plaintiff was a farming company that purchased 300 acres from an owner who had contracted with a private company to build grass waterways. The former owner received a federal subsidy from the Natural Resources Conservation Service for building the waterways. He did not, however, pay the contractor for building the waterways because he contended that there was a lip or ridge along the edge of the grass waterways that prevented proper draining. The contractor sued the former owner in state court, and the former owner filed counterclaims. The state court entered summary judgment against the former owner and denied the farming company’s motion to intervene (the farming company had by that time purchased the property). The farming company then filed its action in federal court alleging that the grass waterways were improperly designed and built and that they did not conform to federal law. All defendants moved to dismiss the suit on a variety of grounds, including lack of federal subject-matter jurisdiction. The district court concluded that the suit sounded in state tort law with no federal subject-matter jurisdiction and granted the motions dismissing the case. On appeal, the Sixth Circuit agreed, finding that the farming company could point to no statute providing an express or implied right of action for its suit. Stew Farm, Ltd. v. Natural Res. Conservation Serv., No. 13-4111, 2014 U.S. App. LEXIS 16274 (6th Cir. Ohio August 25, 2014). 

The plaintiffs represented a class of employees at a meat-processing facility in Storm Lake, Iowa. They sued the meat processor for not paying wages due under the Fair Labor Standards Act of 1938 (FLSA), 29 U.S.C. § 201 et seq., and the Iowa Wage Payment Collection Law (IWPCL), Iowa Code 91A.1 et seq. The workers alleged that they were not paid for time they spent putting on and taking off personal protective equipment and clothing before production, before and after lunch, and at the end of the day. The employees also sought compensation for transporting the clothing items from their lockers to the production floor. Because this time resulting in hours that exceeded 40 hours per week, the plaintiffs sought overtime compensation. The jury entered a verdict in favor of the class, awarding damages (including liquidated damages) in the amount of $5,785,757.40. On appeal, the Eighth Circuit affirmed, ruling that the district court did not abuse its discretion in certifying the class because individual issues did not predominate over class issues. The court also found that the plaintiffs showed uncompensated overtime work by applying average donning, doffing, and walking times to employee timesheets. This evidence was "susceptible to the reasonable inference" that the jury's verdict was correct. Judge Beam dissented, arguing that the class should not have been certified and that the state law claims should not have been joined with the federal claims. Bouaphakeo v. Tyson Foods Inc., No. 12-3753, 2014 U.S. App. LEXIS 16283 (8th Cir. Iowa Aug. 25, 2014).

In this case, the petitioner had various real estate activities in addition to his day job.  He produced spreadsheets of his time spent in the real estate activities involving single-family homes, but did not produce any contemporaneous log or calendar.  The spreadsheets were created after-the-fact.  The court also determined that the spreadsheet data was excessive, duplicative and counterfactual.  The court determined that the petitioner was not a real estate professional and that losses associated with the real estate activities were not deductible.  The court also imposed a 20  percent accuracy-related penalty.  Graham v. Comr., T.C. Sum. Op. 2014-79.

The petitioner invested in three partnerships that were created to provide investors with charitable deductions from investments in cemetery plots that were held for over one year and then contributed to charity.  The partnerships failed to hold the plots for longer than a year, but reported that the investors could claim charitable contribution deductions for more than the appraised values, as opposed to basis.  The partnerships also had no income or expense for the tax years at issue other than the charitable deductions.  The petitioner claimed a loss on his investments based on the partnership interests being worthless at year-end.  IRS denied the losses on the basis that the petitioner's investment lacked profit intent.  The court agreed with the IRS and that profit intent was clearly lacking.  The partnerships, the court noted, were not created to realize any income or make a profit.  Just because the Congress allows a deduction for a charitable contribution does not mean that a loss incurred in generating a charitable deduction should be allowed.  The charitable contributions were allowed.  McElroy v. Comr., T.C. Memo. 2014-163.

The petitioner founded a company of which he turned over day-to-day management to his son and moved to Florida (from company headquarters in Louisiana).  When the business started to fail, he visited the business more often and increased his efforts on research and development, even inventing a new products and securing a new line of credit.  The business carried in excess of a $3 million loss from 2008 to a prior year and received a refund of approximately $1 million.  IRS denied the loss on audit on the basis that the petitioner was passive.  The petitioner claimed that he spent more than 100 hours in the business during the tax year at issue and that his involvement for those hours was regular, continuous and substantial.  The court agreed with the petitioner, based on all of the facts and circumstances, that he was materially participating for purposes of the passive loss rules.  The court noted that.  The court did not require the petitioner to produce a log book or calendar recording his participation.  Wade v. Comr., T.C. Memo. 2014-169.

Here, the petitioner was a merchant marine that spent much time away from home and rented his home to a friend.  The rental amount was below fair market rental value, and the friend only paid for one month.  The petitioner did not attempt to collect the unpaid rent amounts.  The petitioner claimed a deduction for rental losses which IRS denied on the basis that the petitioner could not prove that he rented the home at market value and made no attempt to collect unpaid rent.  The court upheld the IRS position, noting additionally that the petitioner could not establish his time spent away from home and not at sea.  Hunter v. Comr., T.C. Memo. 2014-164

On review, the appellate court in this case affirmed the trial court's finding that the defendants' emission at its railyards of diesel particulate matter contained in exhaust is not a "disposal"of solid waste under the Resource Conservation Recovery Act.  Center for Community Action and Environmental Justice, et al. v. Burlington Northern Sante Fe Railway Company, et al., No. 12-56086, 2014 U.S. App. LEXIS 16065 (9th Cir. Aug. 20, 2014).

A jury awarded $500,000 in actual damages and $3.3 million in attorney fees for the defendant's underpaying employees for time spent donning and doffing protective clothing before and after work shifts.  The defendant had claimed on appeal that the plaintiffs had not established unpaid time on a class-wide basis.  However, the appellate court disagreed.  The court also upheld the award of attorney fees.  Garcia, et al. v. Tyson Foods, Inc., No. 12-3346, 2014 U.S. App. LEXIS 15917 (10th Cir. Aug. 19, 2014). 

The defendant owns a property and leased it to the plaintiff.  EPA designated 27 square miles around the property (former lead refinery) as CERCLA site.  The EPA sued the plaintiff for $400 million in "recovery" costs.  The plaintiff filed bankruptcy and the court approved a $214 million settlement that resolved the plaintiff's liability.  The defendant, as owner of the site, was a potentially responsible party and settled with the EPA for $25 million.  The defendant claimed that lead-based paint was the primary source of contamination and filed FOIA requests for EPA documents to prove its argument.  The plaintiff moved to intervene in the FOIA case in an attempt to void its government settlement.  The plaintiff also had outstanding claims against the defendant for a portion of its $214 million that it owed the EPA.  The defendant tolled the statute of limitations for a contribution action for two years after a final judgment in the FOIA case, but later reached a settlement with the EPA for $25 million.  The plaintiff did not object to the settlement which provided the defendant with "protection from contribution actions or claims"  via Sec. 113(f)(2) of CERCLA.  The appellate court upheld the trial court's determination that the plaintiff's failure to object barred any claims it had against the defendant.  The court noted that the plaintiff had failed to raise its estoppel argument prior to the appeal.  Asarco v. Union Pacific Railroad Company, No. 13-2830, 2014 U.S. App. LEXIS 15285 (8th Cir. Aug. 8, 2014), aff'g., 8:12cv416, 2013 U.S. Dist. LEXIS 108852 (D. Neb. Aug. 2, 2013).

The plaintiff, a chemical manufacturing plant, discharged dissolved minerals into two tributaries that ultimately flowed into regulated waters.  The state (AR) imposed more stringent water quality standards that impacted the plaintiff's discharges and gave the plaintiff three years to comply.  The plaintiff, however, filed a third party rulemaking which would allow it to continue the same level of discharges of minerals into the tributaries.  The state adopted the plaintiff's proposed revisions and submitted them to the Environmental Protection Agency (EPA) for approval.  The EPA rejected the changes on the basis that aquatic life in the downstream regulated waters  would not be adequately protected.  The trial court upheld the EPA position.  On appeal, the court affirmed, upholding the EPA regulations that allowed it to examine downstream waters when evaluating a state's water quality standards and noting that AR's supporting documentation was inadequate.  The EPA had a rational basis for adopting the regulations and the EPA's rejection was neither arbitrary nor capricious.  Eldorado Chemical Company v. United States Environmental Protection Agency, No. 13-1936, 2014 U.S. App. LEXIS 15694 (8th Cir. Aug. 15, 2014).

The debtor borrowed money from a lender and pledged dairy cattle as collateral.  The lender secured an interest in the cattle.  The debtor later borrowed additional money from the lender, pledging crops, farm products and livestock as collateral with lender's security interest containing a dragnet clause.  The lender secured its interest.  The debtor later entered into a "Dairy Cow Lease" with a third party to allow for expansion of the herd.  The third party lessor perfected its interest in the leased cattle.  The debtor filed bankruptcy and the bankruptcy court determined that the lease arrangement actually created a security interest rather than being a true lease.  The court noted that the "lease"  was not terminable by the debtor and the lease term was for longer than the economic life of the dairy cows.  The third party lessor also never provided any credible evidence of ownership of the cows, and the parties did not strictly adhere to the "lease" terms.  The court noted that the lender filed first and had priority as to the proceeds from dairy cows.  In addition, the bankruptcy court held that the lender's prior perfected security interest attached to all of the cows on the debtor's farm and to all milk produced post-petition and milk proceeds under 11 U.S.C. Sec. 552(b).   In a later action in the district court, a different creditor failed to comply with court’s order requiring posting of bond as a condition to stay the effect of the court’s prior ruling.  As a result, there was no stay in effect during pendency of the appeal and the lender was entitled to have the proceeds turned over to it.  A feed supplier creditor did not have standing to seek surcharge of the bank’s collateral under 11 U.S.C. Sec. 506(c).  The bankruptcy trustee did not file a motion for surcharge and court could not order the amount that the supplier paid for feed deliveries to be retained from funds turned over to the lender.  The lender's motion for abandonment and turnover of proceeds was granted.  On further review of the bankruptcy court's decision concerning the dairy cow lease, the appellate court reversed.  The appellate court determined that under applicable law (AZ) as set forth in the "lease" agreement, a fact-based analysis governed the determination of the nature of the agreement.  However, if the lease term is for longer than the economic life of the goods involved, the "lease" is a per se security agreement.  The bankruptcy court focused on the debtor's testimony that he culled about 30 percent of the cattle annually which would cause the entire herd to turnover in 40 months.  That turnover time of 40 months was less than the 50-month lease term.  Thus, according to the bankruptcy court, the lease was a security agreement.  The appellate court disagreed with this analysis, holding that the agreement required the focus to be on the life of the herd rather than individual cows in the herd because the debtor had a duty to return the same number of cattle originally leased rather than the same cattle.  Thus, the agreement was not a per se security agreement.  On the economics of the transaction, the appellate court held that the lender failed to carry its burden of establishing that the actual economics of the transaction indicated the lease was a disguised security agreement.  There was no option for the debtor to buy the cows at any price, and there was no option at all.  In re Purdy, No. 13-6412, 2014 U.S. App. LEXIS 15586 (6th Cir. Aug. 14, 2014), rev'g., 2013 Bankr. LEXIS 3813 (Bankr. W.D. Ky. Sept. 12, 2013).



In this case, the petitioner claimed a $33 million charitable deduction of a remainder interest in the membership interests of an LLC.  The LLC was the landlord of property that was subject to a triple net lease.  At issue was the value of the remainder interest and the application of the IRS tables contained in I.R.C. Sec. 7520.  The court determined that the contribution of the remainder interest (to the University of Mich.) resulted in a deduction that far exceeded the partnership's investment.  After the contribution, the University sold the remainder interest to another entity then resold it and the last purchaser then contributed it to another charity which again triggered a charitable deduction that exceeded the entity's or the donor's investment.  The court denied summary judgment, noting that the entire scheme suggested a tax shelter.  On whether the appraisal of the remainder interest was a qualified appraisal, the court determined that the appraisal barely satisfied the requirements of I.R.C. Sec. 170.  RERI Holdings I, LLC v. Comr., 143 T.C. No. 3 (2014); Zarlengo v. Comr., T.C. Memo. 2014-161. 

The plaintiff filed an action as her mother’s legal guardian and conservator and the successor trustee of her parents' living trusts, seeking to rescind or reform a deed they executed in 1995 and a contract they signed in 1998. The lower court dismissed the plaintiff’s claims, finding that the statutes of limitations had run before the plaintiff filed her lawsuit in 2005. On appeal, the court found that the statute of limitations did not apply to the equitable claims, but that they would be subject to the  defense of laches. Because the lower court did not consider a laches defense, the court vacated the dismissal and remanded for a determination of whether any factual questions would preclude summary judgment on the laches defense.  Moffitt v. Moffitt, No. S-14495, 2014 Alas. LEXIS 156 (Alaska Aug. 8, 2014).


In yet another case, the court held that a property settlement arising in the divorce context was not deductible alimony.  Here, the amount of the settlement, $63,500, was established by the divorce court as a property settlement.  Peery v. Comr., T.C. Memo. 2014-151.

In the second year of their Chapter 12 bankruptcy plan, the debtors sold-off 396.47 acres of a 458-acre tract of land for $295,576. The debtors had been allowed to retain the land under the plan as a potential source of income to fund the plan. The sales price exceeded by more than $100,000 the value established for the entire 458-acre tract at the time the debtors’ Chapter 12 plan was approved by the court. After paying the costs of the sale, claims secured by the land, taxes, and other expenses, the debtors were left with $35,341.59 and the rest of the land. Unpaid creditors sought distribution of the windfall to them. The court denied their request, ruling that the provisions of the confirmed plan were binding on the debtors and their creditors. The court stated that estate property vests in the debtor—and thus leaves the bankruptcy estate—upon confirmation of the plan. Thus, it is "free and clear of any claim or interest of any creditor provided for by the plan." The court also found that the proceeds were not “disposable income” because post-petition disposable income does not include prepetition property or its proceeds. As such, the debtors had no obligation to pay the proceeds to the creditors. In re Smith, No. 10-50096-rlj-12, 2014 Bankr. LEXIS 3335 (Bankr. N.D. Tex. Aug. 6, 2014).

The petitioners, a married couple, bought a 40-acre tract within the Pike's Peak viewshed.  They also owned another adjacent 60 acres and sought to plat both tracts as a subdivision with a 2.5 acre size limitation per lot.  Before platting the property, the petitioners  granted a conservation easement on the 40-acre parcel with a development size restriction of one lot of 40 acres.  The pre-easement value as established by the petitioners' appraiser was $1.6 million and the post-easement value was $400,000.  The IRS originally disallowed the entire deduction due to a failure to satisfy I.R.C. Sec. 170, but later conceded that the Code requirements were satisfied and then challenged the appraised values.  The Tax Court determined that the petitioners' appraised values were closer to what the court determined were most accurate.  The result was that the petitioners were entitled to a charitable deduction of over $1.1 million and no penalties or interest.  Schmidt v. Comr., T.C. Memo. 2014-159.

The plaintiffs and the defendants were adjoining landowners. The plaintiffs had used their property since 1989 and had purchased it in 2001. The defendants purchased their property in 2001. A dispute arose between the parties regarding a 17-foot strip of land that ran between their properties. The strip contained a driveway and a strip of land to the east of the driveway. A waterway ran parallel to the driveway on the west side. The plaintiffs had always contended that they owned the driveway and the strip of land to the east and that the defendants owned the waterway. In 2006, one defendant found a marker from a 1982 survey that was to the east of the 17-foot strip of land. He informed the plaintiffs he would be treating the driveway and the rest of the disputed strip as his own. In early 2011, the defendant made preparations to farm the disputed property. He filled in the waterway and began chiseling the driveway. The plaintiffs filed an action to quiet title. The district court quieted title in the plaintiffs and refused to grant the defendants a prescriptive easement (as they had requested as alternative relief in a cross-claim). On appeal, the court affirmed, finding that the plaintiffs had met their burden of proof as to all elements of adverse possession: actual, continuous, exclusive, notorious, and adverse possession under a claim of ownership for a statutory period of 10 years. There was sufficient evidence of the description of the disputed parcel to support the judgment.  The defendants were not entitled to a prescriptive easement because they had used the driveway with permission. Prescriptive rights were disfavored under the law. Schellhorn v. Schmieding, 288 Neb. 647 (Neb. Sup. Ct. 2014).

Before they were married in 1997, the decedent and his wife entered into an antenuptial agreement. At the time, the decedent owned property valued at almost $1.1 million, including farmland, a residence, and farm machinery. The wife’s assets were valued at approximately $150,000. The antenuptial agreement provided, "The will executed by [decedent] shall provide that he will leave his estate to [his wife], if she survives him." It further prohibited the alteration or revocation of the parties’ wills without consent of the other party. In 2011, the decedent executed a will in which he left 25% of his property to his wife and tp each of his three sisters. The decedent died in 2012. His wife filed a claim against the estate, asserting that the decedent’s will violated the terms of the antenuptial agreement.  The trial court agreed and entered summary judgment in the wife’s favor. The sisters appealed, arguing that the antenuptial agreement was ambiguous. The court affirmed, finding that the contract as a whole was not ambiguous. An early recital in the contract stating that each party retained an unhindered right to dispose of their individual property merely made it possible for the later provision to dictate how the decedent would dispose of it. Estate of Kleinlein v. Kauffman, NO. 4-13-1086, 2014 Ill. App. Unpub. LEXIS 1698 (Ill. Ct. App. Aug. 5, 2014).

The petitioner operated a business in which he trained telephone representatives and also he also practiced law.  He also conducted an airplane rental activity which the court found was unrelated to the telephone activity.  The court, agreeing with the IRS, disallowed the flying deductions against the income from the telephone business activity.  The petitioner also failed to establish that he had devoted sufficient hours to the airplane activity to satisfy the material participation tests under the passive loss rules - either the 500-hour test or the 100-hour test.  The court noted that the petitioner had failed to keep records of the time spent on the airplane activity.  The court also upheld the IRS-imposed negligence penalty and underreporting penalty.  Williams v. Comr., T.C. Memo. 2014-158.

At the time of the decedent's death, he was the sole owner of a satellite uplink company that provided satellite access to a religious non-profit company operated by the decedent's son.  In the year of the decedent's death, his company had $16 million in revenue. The decedent's estate was valued at $9.3 million, but IRS valued it at nearly three times that amount. The court determined that the key to the success of the decedent's corporation was his son and the son's goodwill which had not been transferred to the decedent's corporation.  The Tax Court accepted the $9.3 million valuation.  Estate of Adell v. Comr., T.C. Memo. 2014-155

The petitioner lived in NYC and worked for a business that was headquartered in L.A.  The petitioner worked from her apartment at the employer's request, and divided her studio apartment into thirds with one-third used for business.  During 2009, the tax year at issue, the petitioner paid for a cleaning service, cable, telephone and internet access, clothing for the employer, and a cell phone for business use.  The IRS disallowed all of the associated deductions that were claimed as unreimbursed employee business expenses.  However, the Tax Court allowed a deduction for one-third of the petitioner's apartment rent and cleaning service charges.  The Tax Court also deductions for telephone and 70 percent of the internet cost.  As for electricity charges, the petitioner's records were insufficient to allow a deduction for any amount.  Cell phone charges were not deductible due to lack of substantiation required (cell phones were listed property in 2009 and subject to strict substantiation rules which were removed by the SMJA of 2010).  The Tax Court did not allow any deduction for clothing expenses because the petitioner admitted that the purchased clothing were also suitable for personal wear.  Miller v. Comr., T.C. Sum. Op. 2014-74.

This case points out, again, that payments in a divorce by means of a property settlement are not deductible.   Here, the petitioner signed a separation agreement that was incorporated into a divorce decree.  The agreement awarded the petitioner's ex-wife $65,000 to be paid within 30 days of the execution of the agreement.  The petitioner deducted the $65,000 as alimony.  Under I.R.C. Sec. 71(b)(1)(B), such payments are generally not deductible.  The court disallowed the deduction the imposed a 20 percent substantial understatement penalty.  Also, numerous scrivenor errors in separation agreement.  Peery v. Comr., T.C. Memo. 2014-151.

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