Minnesota Supreme Court revives AG wage theft lawsuit

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A divided Minnesota Supreme Court held that tolling was justified in civil enforcement action filed by the Attorney General’s Office. However, the dissent claimed that the ruling created a special exception that other litigants were not bound by.

Madison Equities is a property management company that owns, manages, and leases residential and commercial properties, primarily in downtown St. Paul. It employs numerous hourly workers, including security guards.

In August 2019, several current and former employees contacted the Minnesota Attorney General’s Office to report alleged wage theft and violations of state and federal overtime laws. The employees claimed that Madison Equities had avoided paying overtime by routing their wages through its subsidiaries, even though they worked exclusively for Madison Equities.

The attorney general has an investigative mandate to examine violations of state business and labor laws. Subdivision 2 of Minn. Stat. § 8.31 (2024) provides investigative tools, including civil investigative demands (CIDs). This allows the attorney general to obtain information before filing a lawsuit if there are reasonable grounds to believe a law has been violated.

In October 2019, the Attorney General’s Office issued a CID to Madison Equities and nine subsidiaries associated with the properties where the security guards worked. Madison Equities sought a protective order, claiming the CID was overly broad, while the Attorney General’s Office moved to compel compliance. The district court denied Madison Equities’ motion and granted the attorney general’s request, and on appeal, the Supreme Court largely affirmed.

The CID litigation returned to the district court. Madison Equities initially provided some documents. However, the Attorney General’s Office identified deficiencies and requested additional documents, which Madison Equities refused to provide.

In 2023, the Attorney General’s Office filed a civil enforcement action, alleging that Madison Equities violated the Minnesota Fair Labor Standards Act (MFLSA) by failing to pay overtime to security guards, using subsidiaries to evade payments. Madison Equities moved to dismiss, arguing the claim was barred by the two-year statute of limitations. The district court agreed, ruling that the claim accrued in 2019 and the CID litigation did not toll the limitations period. The Court of Appeals affirmed.

Solicitor General Liz Kramer characterized Madison Equities’ actions as “gamesmanship and delay tactics,” which she argued should not allow the company to avoid liability.

“Equitable tolling and pendency tolling were created for exactly this type of situation, one in which a plaintiff is diligent in pursuing relief but is prevented from timely filing claims through no fault of its own,” Kramer said.

Representing Madison Equities, Kelly Hadac, of Hadac Law Office PLLC, denied that there was gamesmanship and delay tactics.

“Well, where are they?” Hadac asked. “Madison Equities and others simply did what 8.31 allows them to do, which is specifically bring a motion to the district court for them define what truly is in the bounds of what the attorney general can ask for.”

The Minnesota Supreme Court determined that requiring the Attorney General’s Office to initiate a civil enforcement action solely based on such complaints would undermine the investigative authority granted under subdivision 2. Without tolling, the statute of limitations could expire before the Attorney General’s Office could complete an investigation, forcing premature litigation based on incomplete information. It noted that this requirement would be inefficient and potentially harmful, compelling targets to defend actions that might have been avoided, while incentivizing extended CID challenges to exhaust the limitations period.

The court emphasized that Madison Equities’ prolonged CID litigation effectively prevented the attorney general from knowing the facts needed to file a timely claim. The court held that “this is one of the exceptional circumstances that justifies the application of equitable tolling.” It reversed and remanded.

Justices Paul Thissen and Sarah Hennesy disagreed, with Thissen authoring a 22-page dissent. “From where I stand, it appears the court is manufacturing a new tolling rule because the Attorney General missed a limitations period deadline in a single case,” Thissen wrote.

The dissenting justices found that, by fall 2019, the Attorney General’s Office had sufficient facts to initiate a civil enforcement action and seek additional discovery through ordinary litigation. They concluded that the CID litigation did not bar the attorney general from filing suit. Therefore, they did not find a reason for allowing the attorney general to file suit after the limitations period ended.

“I cannot discern any exceptional circumstances justifying the conclusion that the Attorney General should not have to play by the same rules as every other Minnesota litigant subject to statutes of limitation,” Thissen avowed.

“I am concerned that this is a case of bad facts making bad law,” Thissen added.