author: GILBERT, Justice. PAGE, Justice

text:
    STATE of Minnesota, Respondent, v. William Jeffrey McDONOUGH, Appellant.
    No. C6-00-1626.
    Supreme Court of Minnesota.
    Aug. 2, 2001.

      Seven P. Russett, Assistant State Public Defender, Office of the State Public Defender, Minneapolis, for appellant.
    Mike Hatch, State Attorney General, Susan Gaertner, Ramsey County Attorney, Darrell C. Hill, Assistant Ramsey County Attorney, St. Paul, for Respondent.
   OPINION

GILBERT, Justice.

Appellant William McDonough was convicted of one count first-degree murder and one count attempted first-degree murder, and he was sentenced to life imprisonment for first-degree murder and a consecutive term of 180 months for attempted first-degree murder. On appeal, McDon-ough argues that he is entitled to a new trial because: (1) the district court erred by admitting statements McDonough made to a police officer after McDonough invoked his right to an attorney, (2) the district court erred by allowing the prosecutor to strike the sole African American juror, (3) the district court erred by not dismissing the indictment, (4) the state failed to preserve evidence and the district court failed to take any remedial action, (5) the district court erred by allowing a witness to testify that McDonough had a dispute with his brothers and by admitting as substantive evidence another witness’s testimony that she observed McDonough with a gun two weeks before the shooting, (6) the prosecutor committed three instances of misconduct, (7) the evidence was insufficient to support the jury’s verdicts, and (8) the search warrant was flawed. We affirm.

Shortly after 10:30 a.m. on June 12, 1999, Reginald Rodgers and Steven Cren-shaw left the apartment Crenshaw shared with Gebriela Ansera to deliver marijuana to a friend. Rodgers and Crenshaw left in Ansera’s blue Oldsmobile Cutlass Supreme. Crenshaw drove east on Iglehart and pulled into a driveway near 985 Igle-hart. A white Cadillac pulled up behind Crenshaw, which prevented Crenshaw from backing out of the driveway. Cren-shaw noticed that the Cadillac had a blue interior and rust above the wheel.

Crenshaw testified that the driver got out of the Cadillac and approached the vehicle Crenshaw and Rodgers occupied. Crenshaw heard Rodgers say that he thought “Leo,” a/k/a McDonough, drove a white Cadillac and that the man approaching had a gun. As the man began firing at Crenshaw and Rodgers, Crenshaw accelerated his car over the boulevard, around a tree, and off the curb in an effort to escape. Both Rodgers and Crenshaw ducked down, but one of the first shots hit Rodgers. As Crenshaw attempted to escape, he drove past the man, made eye contact with him, and saw the gun in his hand. Crenshaw immediately recognized the shooter as McDonough, whom Cren-shaw has known since elementary school. The last shot McDonough fired was at Crenshaw, which struck his shoulder, but he was nonetheless able to continue driving and soon reached his apartment.

When Crenshaw returned to his apartment, he quickly explained to Ansera what happened, including identifying the shooter as “Leo,” and Ansera telephoned 911. The police and the paramedics arrived and determined that Rodgers was dead. The paramedics then transported Crenshaw to the hospital where he was treated for a superficial gunshot wound. Crenshaw told the officers at the hospital that a man named “Leo” shot him and Rodgers. Although Crenshaw did not indicate a possible motive, at trial he testified that Mc-Donough was involved in a dispute with Crenshaw’s brothers. The police began their investigation immediately.

The police secured Ansera’s vehicle for processing while Rodgers’ body was still inside it. They found a .9mm shell casing on top of a seatbelt in the rear passenger area, and they also found a bullet hole— with the bullet still in the hole — on the passenger side post between the front and rear seats. In addition, a piece of lead from a bullet was found on the driver’s side floor mat, and a bullet’s copper jacket was found on the other side of the mat. There was also a bullet hole in the vehicle’s windshield. After Rodgers’ body was removed from Ansera’s vehicle, and during a later inspection, the police found an intact spent bullet alongside the driver’s door and seat and a baggie containing a substance the police believed to be marijuana. The police returned Ansera’s vehicle to her 3 days later after photographing, recording, and measuring all items of interest to the investigation.

The police also investigated the scene near the driveway at 985 Iglehart where the shooting took place. The police observed skid marks that began at the driveway and proceeded over the grassy boulevard and back onto the street. They also found two .9mm shell casings.

In addition, the police located several eyewitnesses. One neighbor heard a noise just before 11:13 a.m. and looked out her window to see a midsize blue car moving slowly in an eastwardly direction being chased by a man wearing dark clothes who was firing gunshots. Another neighbor who was awakened at 11:13 a.m. by the sound of four gunshots coming from in front of his home looked out his window to see a blue car traveling south being chased by a light-skinned African-American male with a gun in his hand. That neighbor described the shooter as in his 20s, medium build with large braids, and wearing a black shirt and black pants.

One other neighbor heard screeching tires followed by four gunshots and observed a “light-skinned male with braids” dressed in black with a black glove on his right hand who was holding a gun and crouching on the boulevard looking east towards Chatsworth. She also observed the man go to a white car she described as an “older” Cadillac or Lincoln Continental with a rear tire package.

Still another neighbor who was walking home along the sidewalk saw a blue car with two African-American males traveling east on Iglehart. As he got to the edge of his driveway, he heard gunshots ahead of him and he looked up to see the same blue car that passed him earlier drive across the boulevard, around a tree, and back on to Iglehart in order to get around a white vehicle blocking its path back onto the street. The neighbor also observed a young African American male running after the blue car firing gunshots at the blue car. The neighbor then observed the shooter get into the white car and speed away, passing the neighbor as the white car drove westerly on Iglehart. The neighbor testified that he saw only one person in the white car, which he described as an early 1980’s General Motors model with rust.

The police interviewed Crenshaw at Regions Hospital that same day. Crenshaw told the police officer that “Leo” shot him and Rodgers, and Crenshaw described “Leo” as an African American male with a light complexion, 23- or 24-years-old, and wearing braids on both sides of his head. Based on Crenshaw’s description, the police created a computer-generated photo lineup containing McDonough and five other similar looking males on a single sheet of paper with no names underneath the photos. Crenshaw, who was the only person to see the shooter’s face, identified McDonough as the shooter.

That evening, the police went to the apartment McDonough shared with Hope Green to execute a search warrant. Mc-Donough was not there, but the police found and seized a black jacket, black pants, and a black right-handed glove. Green told police that McDonough wore those clothes earlier in the day when he left to get gas and see if he could get Green’s white Cadillac fixed. Green also told police that she thought McDonough left at about 11:00 a.m., and a mechanic at a nearby service station told police that McDonough came by with Green’s car sometime after 10:30 a.m. Green also told police that McDonough returned after 10 or 15 minutes without the car, called Mc-Donough’s cousin Santo McDonough and friend Vernon Powers, who both came to the apartment, discussed something with William McDonough in a bedroom, and then the three men left at 11:54 a.m. During the search, the police accidentally disconnected Green’s caller ID box erasing its memory.

The police apprehended McDonough on June 13,1999 after conducting surveillance on McDonough’s sister’s Minneapolis home. He was then taken into custody and. interrogated. The police also found Green’s car near the garage of an apartment complex near Green’s apartment. McDonough was then taken to St. Paul Police Headquarters where he told an officer that he left the apartment he shared with Green sometime after 12:00 p.m. on the day of the shooting, and that Green would verify that.

The Ramsey County Medical Examiner conducted an autopsy on Rodgers’ body. The autopsy revealed entrance and exit gunshot vjounds on Rodgers’ right forearm and right leg that were fired from at least two feet away and could have been caused by the same bullet. In addition, a separate projectile caused a .9mm or .38mm gunshot entrance wound at the back of Rodgers’ neck, and the medical examiner concluded that bullet was also fired from at least two feet away, then entered Rodgers’ skull, struck his brain, and exited through Rodgers’ upper forehead. The medical examiner concluded that the wound track indicated that Rodgers probably had his head down and may have been bent forward at the waist.

The Bureau of Criminal Apprehension (BCA) performed tests on the shell casings and bullet fragments found in Ansera’s car and at the crime scene. The BCA determined that the shell casings were fired from one gun and the bullet fragments were fired from one gun, but the BCA could not determine whether the casings and fragments were all fired from the same gun.

McDonough was indicted on charges of first-degree murder, first-degree attempted murder, second-degree murder, and second-degree attempted murder. He pleaded not guilty. Before trial, McDon-ough challenged the indictment by asserting that the state failed to present exculpatory evidence to the grand jury. McDonough asserted that the grand jury was not told, among other things, that Crenshaw originally told the police that he had seen McDonough before pulling into the driveway and that Crenshaw was making a U-turn in the driveway “to go back and talk to Leo;” that Green told police that McDonough left his apartment at 11:00, returned fifteen minutes later, and left again at noon or that the shooting occurred 5.6 miles from the apartment; and that McDonough’s clothes had been examined for blood and that no blood spatter had been found.

McDonough also challenged the indictment by arguing that the state presented the grand jury with misleading and potentially false testimony consisting of two statements by a police officer. The officer stated that the police uncovered no evidence that would have led to the conclusion that McDonough was at home at the time of the shooting and that there were no other possible suspects in response to the jury’s question of whether there were additional suspects. The district court disagreed with McDonough’s argument and denied McDonough’s motion to dismiss the indictment.

McDonough also challenged the validity of the search warrant. He asserted that the police officer who applied for the search warrant made a false statement and a material omission in her application. But the district court disagreed and determined that the search warrant was supported by probable cause.

In addition, McDonough filed a motion to suppress the statement he gave to police during a custodial interrogation that he was home until noon the day of the shooting. After McDonough invoked his right to counsel, the officer continued talking with McDonough, stating:

Officer: [W]e’re continuing this investigation * * * [b]ut if you have a story to tell, ok. * * * You told the other officers you have something you wanted to tell me, ok.
McDonough: I don’t know what’s going on. Ok, I’ll wait for my lawyer.
Officer: It’s up, you know.
McDonough: I’ll just wait for my lawyer. I don’t even know, you know. This is just.
Officer: It’s, it’s up to.
McDonough: I don’t understand it.
Officer: You’re an adult, you can make these decisions for yourself. Ok, you’re the one in control here, you’re the one in charge. Ok. You talk to your lawyer, you talk to whoever it takes to help you make this decision. Ok, if you have a righteous story to tell.
McDonough: I can’t seem to get a hold of the lawyer right now, so all I can do is wait.
Officer: Ok, that’s up to you.
McDonough: Ok.
Officer: Whatever, you know like I said before Leo, you’re, you’re the one in charge here. You’re the one making all the decisions.
McDonough: Uh huh (affirmative).
Officer: And if you need the lawyer to help you make that decision on what you wanna say or what you wanna tell us.

After reviewing the transcript of McDon-ough’s interrogation, the court determined that McDonough unequivocally invoked his right to counsel, but that the officer’s subsequent statements were “subtle suggestions that [McDonough] should make up his own mind about talking or not talking to her, [and] were not a coercive influence on the defendant who is intelligent, street smart, and has a prior felony experience.” The court also determined that it was Mc-Donough who reinitiated conversation with the officer, and the court denied McDon-ough’s motion to suppress the statement.

During jury selection, the state exercised a peremptory strike against the only African-American juror. McDonough raised a Batson challenge, but the district court allowed the strike upon finding the state’s reason for striking the juror to be race neutral.

During the trial, McDonough objected to Crenshaw’s testimony that at the time of the shooting Crenshaw’s brothers had a dispute with McDonough, but the court determined that this testimony was admissible. McDonough also attempted to admit into evidence the 911 “incident recall log,” but the court determined that the log was inadmissible hearsay. In addition, McDonough objected to the use of Green’s prior inconsistent statement to police about when she last saw McDonough with a gun, but the court admitted the statement for impeachment purposes. Finally, McDonough did not raise an evidentiary objection when the state elicited testimony regarding McDonough’s criminal history.

McDonough did not testify at trial. However, several witnesses testified in an effort to establish McDonough’s alibi. The apartment manager at Ansera’s apartment complex testified that when Crenshaw returned after the shooting, he was frantic and hysterical and may have said “they” were shooting. A resident at the same apartment complex testified that another vehicle besides Crenshaw’s returned from the shooting, and six or seven men got out of both cars, examined Rodgers’ body, and appeared to congratulate each other before leaving again. Also, a woman who was with McDonough when he was apprehended testified that throughout the morning until his arrest she did not notice anything unusual about McDonough’s demeanor and did not notice any evasive movements just before his arrest. Furthermore, a defense investigator testified that the driving time from the shooting scene to Hope Green’s apartment where McDonough was living was approximately 11 or 12 minutes.

During closing arguments, McDonough did not object to the state’s characterization of the burden of proof. In addition, McDonough did not object to the prosecutor’s statement expressing her personal opinion that Green was lying, and that another witness was mistaken in her testimony.

After considering the evidence, the jury convicted McDonough on all counts, and the district court sentenced him to life imprisonment for the first-degree murder conviction and a consecutive term of 180 months imprisonment -for the attempted first-degree murder conviction to be served consecutively. McDonough raises eight issues in his appeal.

I.

We first consider McDonough’s argument that the district court erred in admitting the statement McDonough made to a police officer during a custodial interrogation that he was at his apartment with Green until 12:00 p.m. Neither party disputes the district court’s determination that McDonough made this statement after he unequivocally invoked his right to an attorney. Thus, we are required to begin our review with the court’s determination that the statement was admissible because McDonough made the statement after he waived his right to an attorney by reinitiating conversation with the police officer. State v. Munson, 594 N.W.2d 128, 138-39 (Minn.1999) (citing Edwards v. Arizona, 451 U.S. 477, 484-85, 101 S.Ct. 1880, 68 L.Ed.2d 378 (1981)).

Under the Ed^vards test, which we applied in Munson, if a defendant invokes his right to counsel during a custodial interrogation, but then reinitiates conversation with a police officer, and the defendant knowingly and intelligently has waived his right to counsel, any statements he makes may be admissible at trial. Munson, 594 N.W.2d at 140. However, if the police initiate conversation after the defendant invokes his right to counsel, any subsequent waiver is invalid and any statements that the defendant makes must be excluded. Id. The state has the burden of showing that the defendant’s waiver and subsequent statements were not the product of words or actions that would constitute a reinitiating of the conversation by the police. Id. at 141.

In this case, the district court determined that McDonough waived his right to an attorney by reinitiating conversation with the officer and that the officer’s “subtle suggestions that he should make up his own mind about talking or not talking to her, were not a coercive influence on the defendant who is intelligent, street smart, and has a prior felony experience.” However, a detailed examination of McDon-ough’s custodial interrogation indicates that it was the officer — not McDonough— who initiated further conversation. After McDonough told the officer that he wanted an attorney, the officer told McDonough that the police were “continuing this investigation * * * [b]ut if you have a story to tell, ok. * * * You told the other officers you have something you wanted to tell * * ⅜.” McDonough then reiterated his request to speak with an attorney, but the officer said, “you talk to whoever it takes to help you make this decision. Ok, if you have a righteous story to tell * * * you’re the one in charge here. You’re the one making all the decisions [but] if you need the lawyer to help you make that decision on what you want to say or what you wanna tell us.” The officer’s statements were in the nature of a warning and an inducement to talk, and the officer should have known that her statements, which were made after McDonough invoked his right to counsel, were reasonably likely to elicit an incriminating response.

We are troubled by the interrogating officer’s apparent willingness to infringe on McDonough’s right to an attorney in light of our mandate prohibiting officers from impermissibly resuming a discussion amounting to an interrogation. Munson, 594 N.W.2d at 140-42. Once an individual invokes the right to counsel, the police are not permitted to make statements to the individual that are reasonably likely to elicit an incriminating response. Id. at 141. We are also concerned by the prosecutor’s decision to use this improperly elicited statement at trial and the district court’s decision to admit the statement. The court’s determination that McDonough knowingly waived his right to an attorney based on the court’s finding of “subtle suggestions” and that McDonough “is intelligent, street smart, and has a prior felony experience” is an inappropriate basis for making this determination. We conclude that the state did not meet its burden of showing that Mc-Donough’s alleged retraction and subsequent responses were not the product of words or action on the part of the police. Munson, 594 N.W.2d at 143. Accordingly, McDonough’s statements were admitted in error.

Nonetheless, a statement admitted in error is generally subject to a harmless error analysis. Munson, 594 N.W.2d at 143. An error is harmless beyond a reasonable doubt only if the verdict was surely unattributable to the error. Id. Here, McDonough never confessed, and his statement that he left his apartment at 12:00 p.m. is not direct evidence that he was the shooter — or that his actions satisfied an element of the crime for which he was convicted. In addition, McDonough had an opportunity to challenge the state’s evidence and present evidence of his own, and the state did not mention this testimony during closing arguments. Although the statement was admitted in error, we determine that it was harmless error because the verdict was surely unattributable to the statements McDonough made after he invoked his right to an attorney. Therefore, McDonough is not entitled to a new trial based on this claim.

II.

McDonough next argues that the district court erred when it determined that the state articulated a race-neutral reason for striking the sole African American juror. To make a successful Batson challenge, the defendant must first make a prima facie showing that the state exercised a peremptory challenge on the basis of race, the burden then shifts to the state to articulate a race-neutral explanation, then the district court must determine whether the defendant met his burden of proving intentional discrimination. State v. Martin, 614 N.W.2d 214, 221 (Minn.2000) (citing Batson, 476 U.S. at 98, 106 S.Ct. 1712). When a district court considers whether the defendant met his burden, “the issue is the facial validity of the prosecutor’s explanation. Unless a discriminatory intent was inherent in the prosecutor’s explanation, the reason offered will be deemed race neutral.” Id. at 222 (quoting Hernandez v. New York, 500 U.S. 352, 360, 111 S.Ct. 1859, 114 L.Ed.2d 395 (1991)). Furthermore, the district court’s determination will not be reversed unless clearly erroneous. Hernandez, 500 U.S. at 369, 111 S.Ct. 1859.

In the instant case, we agree with both parties that the only issue on appeal is whether the district court erred when it determined that the state’s reason for striking the sole African-American juror was race-neutral. The state exercised a preemptory strike against a prospective juror who expressed his belief that the outcome of a case often depends more on the lawyer’s resources and that people are frequently wrongfully accused of committing crimes when they look like the person who actually committed the crime. The juror stated:

[I]f one lawyer has the best investigator behind his or her back researching, digging up, finding the facts and presenting it to you, whereas another lawyer, * * * just doesn’t have the necessary resources as that, sometimes, you know, it’s pulled up and that person would get off — not get off, but get placed at the scene of the crime when they actually wasn’t.

The juror also stated, “if someone is so upset and they point the finger and they pull somebody out of a lineup, if that person doesn’t have an alibi, then it goes through, then it’s kind of hard to get out of it.”

Based on these answers, the state believed that the juror would be influenced by factors not in evidence, and the state’s articulated reasons for striking the juror related solely to the specific issues McDon-ough asserted as his defense of misidentifi-cation and disparity of resources. Both of these themes, which were referenced by McDonough’s defense attorney during closing arguments, were the precise issues to which the African American juror exhibited a bias favorable to the defense.

On the surface, the juror’s answers provide an adequate basis for the district court to conclude that the state’s articulated reason for striking the juror was race neutral; however, if the state’s questions would have elicited the same responses from any fair-minded person, the state’s reason for striking the juror was not race neutral. State v. McRae, 494 N.W.2d 252, 257 (Minn.1992). Here, the jurors were asked virtually the same questions in roughly the same order, and the only variations were in the follow-up questions. In McRae, the state changed its questions and asked about the general fairness of the system when it began questioning an African-American juror. Id. We determined that the state’s articulated reason for the strike was not race neutral because the African American juror answered the state’s questions in the same way that other reasonable fair-minded individuals would answer. Id. Because the state in this case asked the prospective African American juror virtually the same questions as other prospective jurors who did not answer the same questions in a way that exhibited a bias favorable to the defense, the state’s reason for striking the sole African American juror was race neutral. Therefore, the district court did not clearly err when it determined that Mc-Donough did not meet his burden of proving intentional discrimination, and McDon-ough is not entitled to a new trial based on this claim.

III.

McDonough next argues that he is entitled to a new trial because the district court should have dismissed the grand jury indictment as the state failed to present exculpatory evidence and misled members of the grand jury. He also argues in his supplemental pro se brief that the evidence presented to the grand jury was not sufficient to support the grand jury’s finding of probable cause. A grand jury proceeding is not a trial on the merits and grand jurors do not determine guilt or innocence but rather whether there is probable cause to believe the accused has committed the crime. State v. Inthavong, 402 N.W.2d 799, 801 (Minn.1987). A presumption of regularity attaches to the indictment and it is a rare case where an indictment will be invalidated. Id. Because of this presumption, a criminal defendant bears a heavy burden when seeking to overturn an indictment. State v. Scruggs, 421 N.W.2d 707, 717 (Minn.1988). The burden is heightened when the defendant has been found guilty beyond a reasonable doubt following a fair trial. Id.

A prosecutor’s failure to disclose exculpatory evidence to the grand jury will require dismissal of the indictment if the evidence would have materially affected the grand jury proceeding. State v. Moore, 438 N.W.2d 101, 105 (Minn.1989). The effect of the undisclosed evidence on the grand jury proceeding must be judged after looking at all of the evidence that the grand jury received. State v. Olkon, 299 N.W.2d 89, 106 (Minn.1980). In, addition, it is often proper to factor in the jury’s verdict in the analysis of whether the district court erred when denying a defendant’s motion to dismiss an indictment, because a petit jury’s subsequent guilty verdict means not only that there was probable cause to believe that the defendant was guilty as charged, but also that the defendant is in fact guilty as charged beyond a reasonable doubt. State v. Lynch, 590 N.W.2d 75, 79-80 (Minn.1999) (citing United States v. Mechanik, 475 U.S. 66, 70, 106 S.Ct. 938, 89 L.Ed.2d 50 (1986)).

Although the grand jury was not informed of Crenshaw’s statement to the police that he pulled into the driveway to make a U-turn “to go back and talk to Leo” or of Green’s statement to the police that McDonough left his apartment at 11:00 and at 12:00, the grand jury knew that Crenshaw identified McDonough as the shooter. The grand jury also knew that the description Crenshaw gave police was consistent with the description several eyewitnesses provided, all the eyewitnesses consistently stated they observed a white car similar to a Cadillac or Lincoln Continental with some rust, and McDon-ough was driving such a car on the day of the shooting.

Even more compelling is that in a trial on the merits, in which McDonough had the opportunity to impeach witnesses and discredit the state’s case with the evidence that was not disclosed to the grand jury and with evidence that McDonough believed to be false or misleading, the petit jury found McDonough guilty of first-degree murder and attempted first-degree murder. Therefore, we conclude that the district court did not err in denying Mc-Donough’s motion to dismiss the indictment, and McDonough is not entitled to a new trial based on this claim.

IV.

McDonough next argues that he is entitled to a new trial because the district court abused its discretion when it declined to impose sanctions to remedy alleged prejudice and when it determined that the state did not act in bad faith by releasing the car in which the victims were shot and by erasing a caller ID box. On these facts, to determine whether McDon-ough is entitled to relief based on the state’s failure to preserve evidence, we consider whether the destruction was intentional and whether the exculpatory value of the lost or destroyed evidence was apparent and material. State v. Friend, 493 N.W.2d 540, 545 (Minn.1992).

Here, the police intentionally released the vehicle, but McDonough has not shown that the evidence at issue had exculpatory value. McDonough only argues that if the car was available, he could have had his own expert determine the trajectory of the bullets and location of the shooter. However, the police collected, photographed, and recorded all the relevant data from the car in which the victims were shot. McDonough had access to this information, and the bullet’s trajectory and the location of the shooter were never in dispute.

With respect to the caller ID box, McDonough has not shown that the destruction of the information recorded was intentional. In addition, the information recorded in the caller ID box, if rehable, would not have helped McDonough’s defense because it would only have established that someone called at a particular time, and not that McDonough was actually in the apartment. Accordingly, the district court did not abuse its discretion when it determined that McDonough was not entitled to relief, because he has not shown that the evidence at issue had exculpatory value. Therefore, McDonough is not entitled to a new trial based on this claim.

V.

McDonough argues that he is entitled to a new trial because the district court abused its discretion (1) when it allowed Crenshaw to testify as to whether he knew if there was “any particular problem between any of [Crenshaw’s] brothers and [McDonough]” on the day of the shooting because the statement lacked foundation, (2) when it admitted Green’s prior inconsistent statement as substantive evidence without also providing the jury with a limiting instruction, and (3) when it refused his request to introduce a copy of the police department’s “incident recall log,” which summarizes the 911 call in which a caller states that she saw two men speed away from the scene in a white car. We will only overturn a district court’s evidentiary ruling if that court abused its discretion. State v. Ferguson, 581 N.W.2d 824, 831 (Minn.1998). Even if the court abused its discretion and admitted evidence in error, a new trial is not warranted if the error is harmless beyond a reasonable doubt, ie., if the verdict is “surely unattributable” to the error. State v. Juarez, 572 N.W.2d 286, 292 (Minn.1997).

Lack of Foundation

Despite McDonough’s hearsay and lack of foundation objection, Crenshaw testified that his brothers were involved in a dispute with McDonough. Before asking Crenshaw if his brothers were involved in a dispute with McDonough, the state asked Crenshaw whether he was “close” to his brothers, and Crenshaw’s affirmative answer may have provided the foundation for the state’s questions. However, even if the testimony was admitted in error, the error is harmless because motive is not an element of the crimes McDonough was charged. Minn.Stat. §§ 609.11; 609.17; 609.185, cl. 3; 609.19, subd. 1(2) (2000). As a result, the verdict is surely unattributable to evidence of a dispute between Crenshaw’s brothers and McDonough, which would indicate a motive. Therefore, the district court did not abuse its discretion in admitting Crenshaw’s statement, and McDonough is not entitled to a new trial based on this claim.

Prior Inconsistent Statement

McDonough also argues that the district court abused its discretion when it allowed the state to use as substantive evidence Green’s prior inconsistent statement that she saw McDonough at the apartment with a “little black gun” two weeks before the shooting. A witness’s prior inconsistent statement is admissible for impeachment purposes, but it is generally not admissible as substantive evidence. See State v. Martin, 614 N.W.2d 214, 224 (Minn.2000); Minn. R. Evid. 613(b). When a prior inconsistent statement is admitted for impeachment purposes, the district court is often requested to instruct the jury that the statement is not evidence and should not be considered in reaching the verdict. See, e.g., State v. Thames, 599 N.W.2d 122, 126 (Minn.1999).

McDonough’s argument lacks merit. At trial, Green testified that the last time she saw McDonough with a gun was roughly 1 year before the shooting. The state asked Green if she remembered telling a police officer at the time of the shooting that the last time she saw Mc-Donough with a gun was about two weeks before the shooting. After indicating she did not remember making that earlier statement to the police, the state introduced her earlier statement as a prior inconsistent statement. The court did not admit Green’s prior inconsistent statement as substantive evidence. Instead, the court stated “the fact that [counsel] asked [the police officers] if it was their question made their question substantive as well as the answer, * * The court did not state that Green’s prior inconsistent statement itself was substantive evidence, only the police officers’ questions and answers. In addition, in its instructions to the jury, the court stated:

In deciding the believability and weight to be given the testimony of a witness you may consider evidence of a statement by the witness on some prior occasion that is inconsistent with present testimony. Evidence of any prior inconsistent statement should be considered only to test the believability and weight of the witness’ testimony.

This instruction is consistent with the recommended jury instruction on prior inconsistent statements. 10 Minn, Dist. Judges Ass’n, Minnesota Practice — Jury Instruction Guides, Criminal, CRIMJIG 3.16 (4th ed.1999); Thames, 699 N.W.2d at 126. Accordingly, the district court did not abuse its discretion because the court did not admit the prior inconsistent statement as substantive evidence. The statement was admitted for impeachment purposes, and the court instructed the jury on prior inconsistent statements. Therefore, Mc-Donough is not entitled to a new trial based on this claim.

Hearsay

Finally, McDonough asserts that the district court erred in refusing his request to introduce a copy of the police department’s “incident recall log,” which summarizes the 911 call placed approximately 46 minutes after the shooting in which an unidentified caller states that two men sped away from the scene in a white car. A district court must follow a two-step inquiry to determine whether a hearsay statement may be admitted. State v. King, 622 N.W.2d 800, 807 (Minn.2001) (citing Ohio v. Roberts, 448 U.S. 56, 65, 100 S.Ct. 2531, 65 L.Ed.2d 597 (1980)). The necessity of the hearsay statement must first be established by showing the unavailability of the declarant. Roberts, 448 U.S. at 65, 100 S.Ct. 2531. If unavailability is proved, the statement must also bear adequate “indicia of reliability” for it to be admissible. Id.

Here, an anonymous caller placed the 911 call that was erased. The caller has not been identified, and the statement contains no indicia of reliability. The call contained information contrary to the testimony provided by every eyewitness who testified at trial that they saw one man— not two — in the vehicle, before and after as it sped away. Accordingly, the district court did not abuse its discretion in refusing to admit this hearsay evidence, and McDonough is not entitled to a new trial.

VI.

McDonough argues that even in the absence of an objection, he is entitled to a new trial because the prosecutor committed misconduct when she elicited testimony inferring that McDonough had a prior criminal record, when she allegedly misstated the burden of proof in her closing argument, and when she expressed her personal opinion that Green and an eyewitness were lying. When a defendant fails to object to a prosecutor’s statement, the defendant typically forfeits his right to have the issue considered on appeal. State v. Sanders, 598 N.W.2d 650, 656 (Minn.1999). If the prosecutor’s comments are sufficient to do so, we can reverse a conviction even when the defendant failed to object. State v. Johnson, 616 N.W.2d 720, 728 (Minn.2000). However, we may decline to consider an appellant’s prosecuto-rial misconduct claim when there is substantial evidence against him ensuring that the alleged misconduct was harmless beyond a reasonable doubt. Sanders, 598 N.W.2d at 656. Here, McDonough did not object to the prosecutor’s statements. Accordingly, we decline to address his prose-cutorial misconduct claims because of the substantial evidence against him, and McDonough is not entitled to a, new trial based on this claim.

VII.

McDonough also argues in his supplemental pro se brief that the evidence presented at trial was not sufficient to support the jury’s guilty verdicts. In reviewing a jury verdict for sufficiency of the evidence, we view the evidence and any reasonable inference to be drawn from that evidence in the light most favorable to the verdict. State v. Ferguson, 581 N.W.2d 824, 836 (Minn.1998). Our focus on review is “whether the jury, acting with due regard for the presumption of innocence and for the necessity of overcoming it by proof beyond a reasonable doubt, could reasonably conclude that [the] defendant was proven guilty of the crime charged.” State v. Clark, 296 N.W.2d 359, 371 (Minn.1980). We also assume that the jury believed the state’s witnesses and disbelieved any evidence to the contrary. State v. Buchanan, 431 N.W.2d 542, 547 (Minn.1988).

In the present case, the jury had sufficient evidence to support McDon-ough’s convictions of first-degree murder and attempted first-degree murder. Viewing the evidence' in the light most favorable to the verdict, the evidence was sufficient for the jury to conclude beyond a reasonable doubt that McDonough was the murderer. Crenshaw identified McDon-ough as the shooter, and Crenshaw’s description of McDonough was consistent with the description given by the eyewitnesses who testified at trial. Crenshaw indicated that McDonough was alone, and the eyewitnesses who testified at trial also indicated that they saw only one shooter. In addition, physical evidence and expert testimony support the guilty verdicts.

Although McDonough asserted an alibi, the standard for overturning a jury verdict is high, and the possibility of innocence does not require reversal of a jury verdict so long as the evidence as a whole makes the defendant’s theory seem unreasonable. State v. Ostrem, 535 N.W.2d 916, 923 (Minn.1995). McDonough’s alibi was that he left his apartment at 11:00 a.m. and returned 15 minutes later and that he then stayed in his apartment until just before 12:00 p.m. the day of the shooting. Mc-Donough’s alibi witness indicated that she saw McDonough leave at about 11:00 a.m. and return 15 minutes later; however, the alibi witness’ testimony was discredited and contradicted by a significant amount of other evidence. Given this evidence and testimony, the jury could conclude that McDonough was guilty of the charged offenses. Therefore, the evidence was sufficient to support the jury’s verdicts, and McDonough is not entitled to a reversal based on this claim.

VIII.

McDonough argues in his supplemental pro se brief that he is entitled to a new trial because the police officer applying for the search warrant made a false statement and a material omission in her application, but he does not identify the false statement or material omission— aside from asserting that the police knew that he could not have committed the crime. McDonough challenged the search warrant at trial, but the district court applied Franks v. Delaware, 438 U.S. 154, 171-72, 98 S.Ct. 2674, 57 L.Ed.2d 667 (1978), and determined that McDonough failed to show that the officer made a reckless or deliberate material omission in her affidavit and search warrant application. The court also determined that even if the officer had made such an omission, which would have satisfied the first part of the Franks test, the search warrant and affidavit were nonetheless supported by probable cause. We will not disturb the district court’s findings unless they are clearly erroneous. State v. Randa, 342 N.W.2d 341, 343 (Minn.1984).

Under the Franks test, a defendant challenging a search warrant must show that the officer deliberately made a statement that was false or in reckless disregard of the truth, and that the statement was material to the probable cause determination. State v. Moore, 438 N.W.2d 101, 105 (Minn.1989). In the instant case, the district court found that the time factor presented by McDonough was “not a material factor” because the investigators received only “vague statements of time from the witnesses interviewed * * * As a resuft; McDonough has not shown that the officer’s statement was false or constituted a material omission. Accordingly, the district court’s determination that McDonough failed to show that the officer made a reckless or deliberate material omission in her affidavit and search warrant application was not clearly erroneous, and McDonough is not entitled to a new trial based on this claim.

Affirmed.

PAGE, Justice

(dissenting).

I respectfully dissent. I agree generally with the court’s analysis and resolution of all of the issues raised by McDonough except one. With regard to that one, I agree that McDonough unequivocally invoked his Sixth Amendment right to counsel. The transcript of the interrogation indicates that he did so at least 10 times. I also agree that the district court’s failure to suppress the statements McDonough made after he unequivocally invoked his right to counsel was error. However, I disagree with the court’s resolution of this issue. Because Officer Wuorinen’s conduct constituted such a blatant disregard for McDonough’s constitutional rights, I would exercise this court’s supervisory authority and remand for a new trial. See State v. Salitros, 499 N.W.2d 815, 820 (Minn.1993).

      . A Batson challenge is an objection to the use of a peremptory challenge based on race, as outlined in Batson v. Kentucky, 476 U.S. 79, 106 S.Ct. 1712, 90 L.Ed.2d 69 (1986).

      . Even if we were to consider his prosecutorial misconduct claims, we would nonetheless conclude that the alleged misconduct was harmless beyond a reasonable doubt. Although the prosecutor elicited testimony inferring that McDonough had a prior criminal record, this type of testimony does not always require a new trial. State v. Henriksen, 522 N.W.2d 928, 930 (Minn.1994). In addition, a prosecutor’s attempts to shift the burden of proof are often nonprejudicial and harmless where, as here, the district court clearly and thoroughly instructed the jury regarding the burden of proof. State v. Buggs, 581 N.W.2d 329, 341-42 (Minn.1998). Finally, the prosecutor’s opinion regarding the credibility of the defendant’s witness is often harmless if there is substantial evidence against defendant. Sanders, 598 N.W.2d at 656.


source: Caselaw Access Project

author: PAGE, Justice.

license: Public Domain

text:
    Edward W. JEFFERSON, et al., Relators, v. COMMISSIONER OF REVENUE, Respondent.
    No. C6-01-308.
    Supreme Court of Minnesota.
    Aug. 2, 2001.

      Lawrence H. Crosby, Jay Dennis Olson, Crosby & Associates, St. Paul, for Rela-tors.
    Mike Hatch, Attorney General, Cecelia K. Morrow, Assistant Attorney General, St. Paul, for Respondent.
   OPINION

PAGE, Justice.

The issue presented by this case is whether the State of Minnesota may impose its income tax on enrolled members of an Indian tribe who reside off the reservation or, more precisely, outside Indian country, but within the State of Minnesota, for income derived from reservation gaming operations authorized by the Indian Gaming Regulatory Act, 25 U.S.C. §§ 2701-2721 (1994 & Supp. V 1999) (IGRA). On August 26, 1999, and March 3, 2000, the Minnesota Commissioner of Revenue assessed income taxes, penalties, and interest against relators Edward and Tina Jefferson and each of their three minor children (collectively the Jeffersons) for the tax years 1991 through 1998. Specifically, the Commissioner sought to tax payments the Jeffersons received from the Prairie Island Indian Community’s gaming operations. It is undisputed that, at all relevant times, the Jeffersons were enrolled members of the Prairie Island Indian Community who resided off the Prairie Island Indian Reservation but within the State of Minnesota.

The Jeffersons appealed each of these assessments to the Minnesota Tax Court, arguing that: (1) the IGRA preempts the state from imposing its income tax on the per capita payments made to them by the Prairie Island Indian Community, (2) the state violated the Equal Protection Clause of the United States Constitution and the Uniformity Clause of the Minnesota Constitution by imposing its income tax on nonreservation Indians büt not on reservation Indians, and (3) the state’s imposition of its income tax on them infringes on tribal self-governance. Relying primarily on Brun v. Commissioner of Revenue, 549 N.W.2d 91 (Minn.1996), the tax court, in granting the Commissioner’s summary judgment motion, rejected the preemption and Equal Protection Clause/Uniformity Clause arguments, did not address the infringement argument, and affirmed the Commissioner’s assessments. Jefferson v. Comm’r of Revenue, Nos. 7190, 7243, 7191, 7192, 2001 WL 46248, at *2-3 (Minn. T.C. Jan. 17, 2001). In their appeal to this court, the Jeffersons make the same arguments they made below to the tax court. We affirm.

Our review of tax court decisions is limited to determining whether the tax court lacked jurisdiction, whether the tax court’s decision is supported by the evidence and is in conformity with the law, and whether the tax court committed any other error of law. Skyline Pres. Found. v. County of Polk, 621 N.W.2d 727, 731 (Minn.2001); see Minn.Stat. § 271.10, subd. 1 (2000). This court reviews an order granting summary judgment to determine whether there are any genuine issues of material fact and whether the lower court erred in applying the law. Burlington N.R.R. v. Comm’r of Revenue, 606 N.W.2d 54, 57 (Minn.2000). We view “the evidence in the light most favorable to the party against whom summary judgment was granted.” Ciardelli v. Rindal, 582 N.W.2d 910, 912 (Minn.1998). Because no material facts are in dispute in this case, we need only consider whether the applicable law was properly applied.

Under Minn.Stat. § 290.014, subd. 1 (2000), all net income of a “resident individual” is taxable under Minn.Stat. ch. 290. See Brun, 549 N.W.2d at 92-93. The government’s right to impose an income tax on its residents is justified by the advantages, rights, and protections it bestows in return. Luther v. Comm’r of Revenue, 588 N.W.2d 502, 509 (Minn.1999). It is the “sovereign right” and “ordinary prerogative” of a state to “tax the income of every resident,” including “income earned outside the taxing jurisdiction.” Chickasaw Nation, 515 U.S. at 462-63, 464, 466, 115 S.Ct. 2214.

In Bran, we considered whether Minnesota’s income tax could be imposed on a married couple who were enrolled members of the Red Lake Band of Chippewa Indians but who lived off the tribe’s reservation. 549 N.W.2d at 92. Citing McClanahan v. Arizona State Tax Commission, 411 U.S. 164, 181, 93 S.Ct. 1257, 36 L.Ed.2d 129 (1973), we observed that “states are without authority to tax income of tribal members who live and earn their income on a Reservation within the state.” Brun, 549 N.W.2d at 92. Quoting Mescalero Apache Tribe v. Jones, 411 U.S. 145, 148-49, 93 S.Ct. 1267, 36 L.Ed.2d 114 (1973), we also observed, however, that “tribal members ‘going beyond Reservation boundaries have generally been held subject to nondiscriminatory state law otherwise applicable to all citizens of the State.’” Brun, 549 N.W.2d at 92. Ultimately, we concluded that enrolled members of an Indian tribe who are domiciled within the geographic boundaries of the State of Minnesota but who reside off the tribe’s reservation are subject to Minnesota’s income tax. Id. at 93.

In this case, it is undisputed that the Jeffersons did not reside on the Prairie Island Indian Reservation during the tax years in issue. Accordingly, under Brim, the state properly imposed its income tax on the Jeffersons while they resided off their tribe’s reservation unless they establish preemption, a violation of the Equal Protection or Uniformity Clauses, or infringement on tribal self-governance.

We first consider whether the IGRA precludes the State of Minnesota from imposing its income tax on enrolled members of an Indian tribe who reside within Minnesota but off the tribe’s reservation. As we observed in Brun, a state has no authority to tax the income of the members of an Indian tribe who live and earn their income on the tribe’s reservation within the state. 549 N.W.2d at 92. This has been referred to as the “McClanahan presumption against state tax jurisdiction.” Oklahoma Tax Comm’n v. Sac and Fox Nation, 508 U.S. 114, 123, 113 S.Ct. 1985, 124 L.Ed.2d 30 (1993); see also McClanahan, 411 U.S. at 170-71, 93 S.Ct. 1257. Significantly, the Supreme Court has rejected the McClanahan presumption in cases involving state taxation of Indians who reside within the state but not on the reservation: “In the case of ‘Indians going beyond reservation boundaries,’ however, a ‘nondiscriminatory state law’ is generally applicable in the absence of ‘express federal law to the contrary.’ ” White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 144 n. 11, 100 S.Ct. 2578, 65 L.Ed.2d 665 (1980) (emphasis added) (quoting Mescalero Apache Tribe, 411 U.S. at 148-49, 93 S.Ct. 1267); see Chickasaw Nation, 515 U.S. at 463-65, 115 S.Ct. 2214. Thus, unless expressly prohibited by federal law, the State of Minnesota may impose its income tax on the Jeffersons.

The Jeffersons’ preemption argument relies solely on their contention that the IGRA preempts the imposition of Minnesota’s income tax. Specifically, the Jeffersons cite a provision of the IGRA that states: “Net revenues from any * * * gaming activities conducted * * * by any Indian tribe may be used to make per capita payments to members of the Indian tribe only if — * * * (D) the per capita payments are subject to Federal taxation and tribes notify members of such tax liability when payments are made.” 25 U.S.C. § 2710(b)(3)(D) (1994). Based on this provision, the Jeffersons argue: (1) that the IGRA preempts state laws purporting to prohibit or regulate “Indian gaming that occurs on Indian lands,” and that because “the distribution of proceeds [from such gaming] and the Federal taxation of these proceeds is within the sole ambit of IGRA, * * * there is no room for state regulation or taxation of those proceeds, regardless of where the proceeds are collected by Tribal members”; (2) that in situations involving a “pervasive or comprehensive federal regulatory scheme governing a particular aspect of Indian affairs, * * * state laws are preempted if they appear to disturb and disarrange that scheme” (citations and internal quotation marks omitted); (3) that the IGRA’s silence on the issue of state taxation means one of two things: either the statute must be given a “literal reading,” or it must be declared ambiguous and construed “in favor of the Tribe”; and (4) that the IGRA preempts “the States’ civil laws except for agreements reached through State-tribal compacts.”

The Jeffersons’ arguments fail for the simple reason that section 2710(b)(3)(D) does not expressly preempt state taxation of income received by tribal members in the form of per capita payments from reservation gaming activity. Indeed, the Jef-fersons themselves observe that the IGRA “does not mention or reference state taxation.” In the absence of any express provision indicating such an intent on the part of Congress, Chickasaiv Nation, Bracket, and Mescalero Apache Tribe lead inexorably to the conclusion that the IGRA does not preclude the State of Minnesota from imposing its income tax on the Jeffersons during periods when they resided within the state but off the Prairie Island Indian Reservation. We therefore reject the Jef-fersons’ preemption claim.

We next consider whether the Equal Protection Clause of the United States Constitution, U.S. Const, amend. XIV, § 1, or the Uniformity Clause of the Minnesota Constitution, Minn. Const, art. X, § 1, are violated when the state imposes its income tax on members of an Indian tribe who reside off the tribe’s reservation but not on tribal members who reside on the reservation. The scope of protection afforded by the Equal Protection Clause and the Uniformity Clause is “identical.” Kuiters v. County of Freeborn, 430 N.W.2d 461, 463 (Minn.1988).

The Jeffersons argue that an unlawful racial classification exists because the State of Minnesota differentiates between those Indians who reside on the reservation within the state, and those Indians who reside off the reservation within the state. This claim is devoid of merit. The state’s decision to tax Indians who reside off the reservation is not based on their race, but rather on the place where they reside. As noted above, it is a state’s “sovereign right” and “ordinary prerogative” to “tax the income of every resident,” including income earned outside the state. Chickasaw Nation, 515 U.S. at 462-63, 464, 466, 116 S.Ct. 2214. By taxing Indians who live outside Indian country, the state is not singling them out based on race, but is treating them like every other individual within its taxing jurisdiction. Thus, the Jeffersons’ Equal Protection Clause and Uniformity Clause claims fail.

Finally, we address whether the State of Minnesota-infringes on tribal self-governance by imposing its income tax on tribal members residing off the tribe’s reservation but within the State of Minnesota. “The exercise of state authority may also be barred by an independent barrier— inherent tribal sovereignty — if it unlawfully infringe[s] on the right of reservation Indians to make their own laws and be ruled by them.” New Mexico v. Mescalero Apache Tribe, 462 U.S. 324, 334 n. 16, 103 S.Ct. 2378, 76 L.Ed.2d 611 (1983) (citations and internal quotation marks omitted).

Beyond the bald assertion, the Jeffersons have not offered, either in their brief to this court or at oral argument, a clear explanation as to how the imposition of Minnesota’s income tax on tribal members residing off the reservation infringes on tribal self-governance. They do attempt to support their argument by pointing to a purported difference between the way Minnesota treats other states and the way it treats Indian tribes. By way of example, the Jeffersons assert that Minnesota and Wisconsin do not tax each other’s employees and do not interfere in each other’s self-government. The Jeffersons state that “[t]here may be agreements between two sovereign States, but these are drawn as between equals,” and Minnesota “may not and does not interfere in the affairs of its neighboring States.” By contrast, the Jeffersons argue that “Minnesota has no qualms about demanding that the tribal government withhold State income taxes and pay these over to Minnesota,” and that this “constitutes direct interference.”

This argument is flawed. Contrary to the Jeffersons’ view, a state can tax the income of its residents, including income earned outside the state’s borders.

Although sovereigns have authority to tax all income of their residents, including income earned outside their borders, they sometimes elect not to do so, and they commonly credit income taxes paid to other sovereigns. But “[i]f foreign income of a domiciliary taxpayer is exempted, this is an independent policy decision and not one compelled by jurisdictional considerations."

Chickasaw Nation, 515 U.S. at 463 n. 12, 115 S.Ct. 2214 (emphasis added) (citation omitted). Further, in discussing taxes imposed on activity conducted inside Indian country when the legal incidence of the taxes falls on non-Indians, the Court stated that, “if the balance of federal, state, and tribal interests favors the State, and federal law is not to the contrary, the State may impose its levy, and may place on a tribe or tribal members ‘minimal burdens’ in collecting the toll." Id. at 459, 115 S.Ct. 2214 (emphasis added) (citations omitted). Therefore, to the extent that the Jeffersons take issue with the requirement that a tribe withhold the state income tax from its per capita payments and forward the amount withheld to the state, such a requirement is hardly sufficient to infringe on tribal self-governance. Accordingly, we conclude that the State of Minnesota does not infringe on tribal self-governance by imposing its income tax on tribal members who reside within the state but off the tribe’s reservation.

We hold that the tax court’s grant of summary judgment in favor of the Minnesota Commissioner of Revenue was proper.

Affirmed.

      .The inquiry is not simply whether the taxpayers resided on a reservation, but whether they resided within "Indian country.” Oklahoma Tax Comm’n v. Chickasaw Nation, 515 U.S. 450, 453, 115 S.Ct. 2214, 132 L.Ed.2d 400 (1995). " 'Indian country,’ as Congress comprehends that term, includes 'formal and informal reservations, dependent Indian communities, and Indian allotments, whether restricted or held in trust by the United States.'” Id. at 453 n. 2, 115 S.Ct. 2214 (citations omitted). The Jeffersons do not contest the Commissioner's assertion that "[t]his case does not involve any distinction between” the terms "Indian lands,” "Indian country,” or "the reservation.” Although the Jeffersons discuss "Indian country” in their brief, they do not claim that any of their residences during the relevant tax years were within "Indian country.”

      . The assessments against Edward and Tina Jefferson were for tax years 1992 and 1994 through 1998. The assessments against two of the Jefferson children were for tax years 1991 through 1994, while the assessments against the third child were for tax years 1992 through 1994. Because the trustee for the Jefferson children’s tribal trust fund has already paid their tax liabilities to the Department of Revenue, their claims are for a refund of those payments.

      . Although the tax court's order did not expressly affirm the assessments of taxes, penalties, and interest against each of the Jefferson children, that holding is implicit in the order.

      . Relying on federal cases, the Jeffersons argue that Brun "wrongly uses 'domicile’ as an absolute and irrebuttable presumption." They claim they were not domiciled in Minnesota during the relevant tax period because they were forced off the reservation and intended to return to the reservation as soon as possible. The Jeffersons misconstrue Brun. To clarify, wo stated that, under Minn.Stat. § 290.014, subd. 1, all not income of a "resident individual" is taxable under Minn.Stat. ch. 290. Brun, 549 N.W.2d at 92-93. We further stated that the legislature has defined "resident” as "any individual domiciled in Minnesota." Id. at 93; see Minn.Stat. § 290.01, subd. 7 (2000), However, we observed that, while these statutory "definitions are instructive, they are not dispositive of the ultimate question with regard to the unique status accorded individuals who, while 'domiciled' within the geographical boundaries of the Slate of Minnesota, ‘reside’ on the Reservation.” Brun, 549 N.W.2d at 93. Thus, we did not create an "irrebuttable presumption” of domicile. Rather, we rejected altogether the relevance of domicile in determining whether a tribal member is subject to Minnesota’s income tax under section 290.014, and instead focused on physical residence. Brun, 549 N.W.2d at 92-93. Because neither the "[United States Supreme] Court nor any other federal tribunal has any authority to place a construction on a state statute different from the one rendered by the highest court of the State,” the Jeffersons' attempt to refute Brun with federal cases fails. Johnson v. Fankell, 520 U.S. 911, 916, 117 S.Ct. 1800, 138 L.Ed.2d 108 (1997); sea also Bush v. Palm Beach County Canvassing Bd., 531 U.S. 70, 76, 121 S.Ct. 471, 148 L.Ed.2d 366 (2000). The Jeffersons' argument based on their intent to return to the reservation is therefore irrelevant.


author: WILLIS, Judge

text:
    In re Matter of the TRUSTEESHIP OF the TRUST Created Under the Last Will and Testament and Codicil thereto OF James T. WILLIAMS, Deceased.
    No. C4-00-2239.
    Court of Appeals of Minnesota.
    July 9, 2001.
    Review Denied Sept. 25, 2001.

      Thomas L. Kimer, John F. Beukema, Bonnie M. Fleming, Faegre & Benson LLP, Minneapolis, MN, (for appellant Wells Fargo Bank Minnesota, N.A., f/k/a Norwest Bank Minnesota, N.A.).
    Alan I. Silver, Charles E. Lundberg, Bassford, Lockhart, Truesdell & Briggs, P.A., and Norman M. Abramson, Patterson, Thuente, Skaar & Christensen, P.A., Minneapolis, MN, (for respondent Robert K. Williams).
    Considered and decided by WILLIS, Presiding Judge, HALBROOKS and HANSON, Judges.
   OPINION

WILLIS, Judge

In this surcharge action, appellant professional trustee challenges the district court’s conclusion that, during the 1990-94 accounting period, trustees had a duty under Minn.Stat. § 501B.10 (1994) to diversify the assets of a trust. Appellant also contends that the district court abused its discretion by (1) calculating the surcharge from the beginning of the accounting period, (2) requiring appellant to reimburse to the trust all of its trustee fees for the accounting period, and (3) granting an award of attorney fees against appellant. Because the district court did not abuse its discretion in calculating the surcharge from the beginning of the accounting period, we affirm in part. But because the district court erred in (1) determining that Minn.Stat. § 501B.10 imposed a duty to diversify apart from the duty of prudent management imposed by that provision, (2) denying appellant all trustee fees for the accounting period without finding that those fees related to any improper actions by the trustee, and (3) granting attorney fees against appellant under an exception to the “American rule” that has not been recognized in Minnesota, we reverse in part and remand.

FACTS

In his 1949 last will and testament and a 1950 codicil thereto, James T. Williams, the founder of the Creamette Company, created a trust. At all relevant times, the professional trustee was, Northwestern National Bank of Minneapolis and its successors (Norwest). From 1979 until 1997, the trustees were Robert H. Williams, son of James T. Williams and father of respondent Robert K. Williams; Margaret W. Linstroth, daughter of James T. Williams; and appellant Norwest. Article VII, section 13, of the trust instrument provides that

a majority of the Trustees shall have the right to decide upon the course to pursue in any given situation, and such decisions shall be binding upon all the Trustees.

Article IX of the trust instrument confers specific powers on the trustees, including the authority:

To retain as a part of my estate or of the trust estate any or all of the properties or securities transferred to or acquired by them hereunder, so long as they may deem it advisable, or expedient so to do.
To invest and reinvest any and all funds which may become available for investment in, or exchange trust assets for, any securities or properties as would be purchased by diligent and prudent individuals of discretion and intelligence in the management of their own affairs. * * * jt is my wish and desire that the Trustees in making any and all investments and reinvestments hereunder be conservative and cautious and regard more the character, value, safety and security of the investments than the rate of interest and the amount of income and profits to be derived therefrom.

The Williams trust owned and operated Creamette from the death of James T. Williams in 1951 until 1979, when Cream-ette was acquired by Borden, Inc. At the time of the trust’s inception in 1951, its assets consisted almost exclusively of Creamette stock. As part of the acquisition by Borden, the trust’s Creamette stock was exchanged for Borden common stock. As of January 1, 1980, nearly 100% of the total market value of the trust was in Borden stock.

In 1980, the trustees began selling shares of Borden stock because of a perceived need to diversify trust assets. As of December 31, 1989, the trust owned 600,000 shares of Borden common stock of a value of $36,375 per share; that stock accounted for 39.3% of the total market value of the trust. At trustees’ meetings throughout the early 1990s, Robert H. Williams moved to sell large amounts of Borden stock. Norwest and Linstroth opposed these proposed sales. At several trustees’ meetings in 1990, Norwest recommended reducing the concentration of Borden stock to 25% by the end of 1992, but also recommended deferring sale of the stock until its price rose in value. In 1991, Norwest made no motions to sell Borden shares or to approve a diversification plan. In May 1992, Norwest presented a new plan to sell 10,000 Borden shares per quarter but did not move for approval of this plan until December 1992, by which time the value of Borden stock had fallen to $28,125 per share. Williams voted in favor of this proposal, and the trust began making sales of Borden stock. Borden stock continued to lose value in 1993 and 1994; Norwest continued to discommend any sales in excess of the agreed-on 10,000 per quarter, arguing that the stock’s value might rise. In June 1994, Norwest recommended additional sales of Borden stock, and between July and September of that year, 225,000 shares were sold at prices ranging from $12.00 to $13,875 per share. Borden was acquired by Kohlberg, Kravis, Roberts in March 1995, and the trustees disposed of the trust’s remaining Borden stock by exchanging it for RJR Nabisco stock. For purposes of this stock exchange, Borden common stock was valued at $14.25 per share.

In June 1996, Linstroth and Norwest petitioned the court- for approval of the trustees’ annual accounts for 1990 to 1995. Williams objected to the petition, claiming that Norwest, as the professional trustee, was responsible for a significant loss in the value of the trust from the beginning of 1990 to the end of 1994 and should be surcharged for that loss. Norwest asserted that article VIII, section 12, of the trust instrument protected it from liability. That clause states:

No Trustee shall be liable for the default or doing of any other Trustee, whether the act be one of misfeasance or nonfea-sance, nor shall he be held liable for any loss by reason of any mistake or errors of judgment made by him in good faith in the execution of his trust.

The district court dismissed the action against Norwest on the basis of this clause, finding that Norwest did not act with “malfeasance” and therefore was not liable. On appeal by Williams, this court reversed the dismissal, holding that the clause did not protect a professional trustee from liability for negligent acts and that a fact issue remained as to whether Nor-west had failed to meet the standard of care for a professional trustee. In re Trusteeship of Williams, 591 N.W.2d 743, 747-48 (Minn.App.1999).

On remand, the district court considered Williams’s surcharge claim. In an April 2000 order, the court concluded that the trustees had a duty to diversify the trust. The court also concluded that Norwest, as the professional trustee, had a duty to “educate or convince” the other trustees of the need to diversify the trust and that if Norwest was unable to do so, it had a duty “to seek instructions from the court concerning how to proceed. Failing that, it [had] an obligation to petition to withdraw.” The court concluded that by deferring and delaying sales of Borden stock, apparently in an effort to “time” the market, Norwest breached its duty to diversify the trust. Based on expert testimony and the diversification plan that Norwest tabled in December 1989, the court determined that, from the beginning of 1990, Norwest should have supported reducing the Borden concentration to 25% by the end of 1992. The court calculated damages to be the difference between the trust’s value at the end of 1994 and its estimated value at that time if it had been diversified consistent with this schedule.

The court imposed a surcharge on Nor-west of more than $4 million, with interest, to compensate the trust and its beneficiaries for their losses through the end of 1994. In addition, the court held that, “because it breached its duty as trustee,” Norwest .must refund to the trust all trustee fees that it received for the 1990-94 accounting period.

Norwest moved for amended findings and conclusions of law, or in the alternative, for a new trial. Williams moved for an award to the trust of his attorney fees, costs, and disbursements, and for pre-ver-dict interest on the refund of Norwest’s trustee fees. By amended findings of fact, conclusions of law, and order for judgment filed on October 2, 2000, the district court denied Norwest’s motion and granted Williams’s motion. Judgment entered pursuant to that order was subsequently vacated because of an error in the calculation of interest, and on October 30, 2000, an amended judgment was entered. Nor-west appeals.

ISSUES

1. Did the district court err in determining that Minn.Stat. § 501B.10 (1994) imposed a duty, apart from the duty of prudent management, to diversify trust assets?

2. When it had approved the trustees’ investment strategy in a trust-accounting proceeding, did the district court abuse its discretion by calculating a surcharge against the professional trustee from the first day of the subsequent accounting period?

3. Did the district court abuse its discretion in requiring appellant to forfeit all of its trustee fees for the 1990-94 accounting period?

4. Did the district court err in determining that, under an exception to the rule that parties bear their own attorney fees, it had the discretion to grant an attorney-fee award against a trustee that it found had breached a duty to diversify?

ANALYSIS

I.

Norwest argues that the district court erred as a matter of law in determining that, during the 1990-94 accounting period, it had a legal duty to diversify the trust assets. The existence of a legal duty is a question of law, which appellate courts review de novo. Larson v. Larson, 373 N.W.2d 287, 289 (Minn.1985).

Williams argues that the question of whether, during the relevant period, Minnesota law imposed a duty to diversify was settled by this court when it considered the first appeal of this case and is, therefore, the “law of the case.” The doctrine of law of the case applies when an appellate court has ruled on a legal issue and remanded to the lower court for further proceedings. Mattson v. Underwriters at Lloyds of London, 414 N.W.2d 717, 719-20 (Minn.1987). Issues determined in the first appeal “will not be relitigated in the trial court nor re-examined in a second appeal.” Id. at 720. In the first appeal, this court was asked to determine whether an exculpatory clause in the trust instrument shielded Norwest from liability. In re Trusteeship of Williams, 591 N.W.2d 743, 746 (Minn.App.1999). The court determined that the clause did not protect Norwest from liability for negligence and remanded for a determination of whether Norwest had failed to meet the minimum standard of care for a professional trustee. Id. at 748. This court did not determine whether the trustees had a legal duty to diversify trust assets; Norwest is not, therefore, precluded from raising this issue on appeal.

Williams also argues that Norwest cannot, on appeal, assert that the trustees had no duty to diversify because it did not raise this argument in the district court on remand. This court will generally not consider matters not argued and considered in the court below. Thiele v. Stich, 425 N.W.2d 580, 582 (Minn.1988). Norwest argued before the district court that, while trustees had a duty of prudent management under MinmStat. § 501B.10 (1994), any accompanying duty to diversify was not absolute. This argument is the basis of Norwest’s appeal. Because the issue was argued below, it is properly before this court.

The district court determined that MinmStat. § 501B.10 creates two distinct duties: “a duty to diversify which is part of the duty to invest prudently” and “an independent duty to diversify unless clearly exempted under Minn.Stat. § 501B.79,” citing for this proposition In re Trusts Created by Hormel, 504 N.W.2d 505 (Minn.App.1993), review denied (Minn. Oct. 13, 1993). Norwest argues that Hormel does not support this proposition. We agree.

In Hormel, a professional trustee rejected the income beneficiaries’ requests to diversify the assets of several trusts, which the settlors funded primarily with Geo. A. Hormel & Co. (Hormel) stock. Id. at 507. Instead, the trust maintained a controlling interest in Hormel, as intended by the settlor. Id. The income beneficiaries requested the district court to surcharge the professional trustee for breaching its fiduciary duty by failing to diversify the trusts. Id. at 508. The beneficiaries argued that MinmStat. § 501B.10, subd. 1(a) and (b)(2), imposed a duty to diversify trust assets. Id. at 511. Those provisions required that, in considering an investment, a trustee “shall consider the role that the investment plays within the trust’s overall portfolio of assets” and that one of the factors that a trustee should consider in determining the prudence of an investment was “the composition of the portfolio of the trust with regard to diversification.” Minn.Stat. § 501B.10, subd. 1(a), (b)(2). This court rejected the beneficiaries’ argument that this language imposes a duty to diversify trust assets. Rather, the court concluded that the standard for evaluating a trustee’s exercise of discretion was “whether the trustee prudently managed trust assets in light of the settlor’s intent and the beneficiary’s interests.” Hormel, 504 N.W.2d at 512. The district court erred in determining that section 501B.10 created an independent duty to diversify a trust separate from the duty of prudent management.

The district court also stated that there was a “duty to diversify which is part of the duty of prudent management.” Under Minn.Stat. § 501B.10, subd. 1(a), trustees had a duty of prudent management. And a trustee with “greater skills than a person of ordinary prudence,” which Norwest concedes that it has in the area of trusts, had “a duty to use those skills.” See Minn. Stat. § 501B.10, subd. 1(a). Section 501B.10 lists a number of factors to be considered by a trustee in considering the prudence of a particular investment, among which is diversification. Id., subd. 1(b)(2). But while it is true that in some cases the duty of prudent management required diversification, this is not true in every case. The standard for evaluating a trustee’s actions under section 501B.10 was “whether the trustee prudently managed trust assets in light of the settlor’s intent and beneficiary’s interests.” Hormel, 504 N.W.2d at 512. As the Hormel court noted, trust cases “present unique facts and circumstances that are difficult to analogize to other seemingly similar cases.” Id. In fact, the court concluded in Honnel that the professional trustee did not breach its duty of prudent management by refusing to diversify the trusts’ assets because one of the settlors’ dominant purposes for creating the trusts was to place ownership and control of Hormel with the trusts. Id. at 509-10.

The district court further concluded that the trust instrument here created a duty to diversify. The court based this conclusion on provisions in the trust instrument (1) requiring that in making investments and reinvestments, the trustees “be conservative and cautious and regard more the character, value, safety and security of the investments than the rate of interest and the amount of income” to be derived from them; and (2) allowing the trustees to retain cash uninvested. We note that the settlor’s intent, as expressed in the trust instrument, is relevant to the question of whether the trustees had a duty to diversify the trust assets. But it does not, alone, answer the question of whether the duty of prudent management required Norwest, as the professional trustee, to support diversification or convince the other trustees to diversify the trust.

We reverse and remand for the district court to apply the appropriate legal standard. On remand, the district court should address whether, in light of the settlor’s intent and the beneficiaries’ interests, Norwest’s duty as a prudent manager required it to support diversification or convince the other trustees to diversify the trust and, if so, whether it breached that duty.

II.

Norwest also challenges the district court’s (1) calculation of the surcharge against it, (2) denial of all its trustee fees for the 1990-94 accounting period, and (3) grant to Williams of an attorney-fee award against it. Although we remand on the issue of liability, we address these damages issues to aid the court and the parties in the event the issues recur on remand.

Damage awards are reviewed under an abuse-of-discretion standard. Holiday Recreational Indust., Inc. v. Manheim Servs. Corp., 599 N.W.2d 179, 183 (Minn.App.1999). Findings underlying those awards will not be set aside unless they are clearly erroneous. Id. Findings of fact should be upheld if they are reasonably supported by the evidence. Minn. R. Civ. P. 52.01; Neilan v. Braun, 354 N.W.2d 856, 859 (Minn.App.1984).

1. Surcharge

Norwest argues that the district court abused its discretion in calculating the surcharge from the first day of the accounting period, January 1, 1990, because the district court previously approved the trustee’s accounts through December 31, 1989. According to Norwest, any plan to diversify the trust beginning on January 1, 1990, would have had to have been initiated during the 1985-89 accounting period, and the court’s approval of the accounts for the 1985-89 period was, therefore, res judicata to denying it trustee fees from the beginning of 1990.

As the district court noted, the first time that Norwest asserted this argument was in its motion for a new trial. A party may not raise an issue for the first time in a motion for a new trial. Larson v. Anderson, Taunton & Walsh, Inc., 379 N.W.2d 615, 622-23 (Minn.App.1985), review denied (Minn. Mar. 14, 1986). There is an exception to this rule, under which a party who first learns of the existence of an underlying fact during trial may preserve the issue for appeal by raising it in a posttrial motion. Kitchar v. Kitchar, 553 N.W.2d 97, 100 (Minn.App.1996), review denied (Minn. Oct. 29, 1996). But Norwest knew of the September 1990 order long before trial; Norwest was one of the petitioners who, in August 1990, sought that order.

Even if Norwest could properly raise this argument, we conclude that the district court’s approval of the trust’s accounts through the end of the 1985-89 accounting period is not res judicata to a calculation of damages from the beginning of the next accounting period. Norwest argues that because the court approved its conduct as a trustee through the end of 1989, and in particular approved of the trust continuing to hold 40% of its value in Borden stock, the court may not impose liability on Norwest for any action or inaction on its part up to that point. But while it is true “that the judgment in a trust accounting proceeding is a final judgment deserving of res judicata effect,” it is incorrect to say that “an investment strategy once approved in an accounting proceeding is immune from challenge in subsequent accounting periods.” Hormel, 504 N.W.2d at 511. And here, the district court did not fault Norwest’s investment strategy during the 1985-89 accounting period; rather, it determined that from 1990 to 1994, Norwest’s action, or inaction, regarding divestment was “significantly different” from its actions during the previous accounting period. Specifically, the court found that during the earlier accounting period, Norwest supported the sale of Borden stock and proposed investment plans both in 1987 and 1989 to reduce the concentration of Borden stock to 25% of the trust assets by 1992, but that

the minutes of the trustees’ meetings and other evidence in the record establish that Norwest abandoned its own plan to reduce the Trust’s Borden concentration, beginning with the tabling of its motion to adopt the 1989 plan at the December, 1989, Trustees’ meeting, and never bringing that plan back for a vote. During the 1990-1994 accounting period, Norwest made continual recommendations to defer and delay sales of Borden shares, failed to make motions to sell Borden shares, failed to support Robert Williams’ motions to sell, and sought to time the market for diversification of the Borden investment.

Because a review of the record shows that these findings are reasonably supported by the evidence, we conclude that the court did not abuse its discretion by calculating damages from the beginning of 1990.

2. Trustee Fees

Norwest argues that the district court erred in ordering it to reimburse to the trust all of its trustee fees for the 1990-94 accounting period. The district court concluded that Minnesota courts have the discretion to allow or deny compensation to the trustee but that “in the event of fraud, bad faith, or inexcusable negligence, the court must deny an award of trustee fees,” citing In re Trust of Cornstock, 219 Minn. 325, 17 N.W.2d 656 (1945) and its progeny. Based on its finding of inexcusable negligence, the court denied all trustee fees for the 1990-94 accounting period. Norwest argues that (1) courts have the discretion to reduce a trust’s compensation to a trustee without a finding of fraud, bad faith, or inexcusable neglect but can deny all compensation only upon making such a finding; and (2) even upon a finding of fraud, bad faith, or inexcusable neglect, courts are not required to deny all compensation; rather they have the discretion to do so.

In Comstock, the supreme court determined that the trustee’s decision to retain certain common stock was not negligence but rather a “mere error of judgment” and that the district court did not abuse its discretion in approving trustee fees because

[t]he facts of this case do not bring it within the rule that a trustee should be denied compensation where he is guilty of fraud, bad faith, or inexcusable negligence resulting in loss to the trust estate.

Id. at 339, 17 N.W.2d at 664 (emphasis added). The conduct at issue in Comstock was an error in judgment; the issue of fraud, bad faith, or inexcusable neglect was not before the court. We determine that, insofar as it could be interpreted to require the denial of trustee fees on a finding of fraud, bad faith, or inexcusable neglect, the “rule” described in the above-cited passage is dictum. In fact, this court has affirmed the reduction, rather than denial, of trustee fees where there was an affirmative finding of fraud. See In re Trust Created by Boss, 487 N.W.2d 256, 262 (Minn.App.1992), review denied (Minn. Aug. 11, 1992). We conclude that when the district court makes a finding of fraud, bad faith, or inexcusable neglect, it has the discretion to deny all fees, to allow reduced compensation, or to allow full compensation.

This conclusion is supported by the Restatement (Second) of Trusts § 243, to which this court has turned in the past in addressing trustee-fee issues. See id. at 261-62. The commentary to Section 243 explains that when a trustee’s compensation is reduced or denied, the reduction or denial is not an additional penalty for the breach of duty but “is based upon the fact that the trustee has not rendered or has not properly rendered the services for which compensation is given.” Restatement (Second) of Trusts, § 243, cmt. a. Further, it is “within the discretion of the court” to determine whether a trustee that has breached its duty “shall receive full compensation or whether [its] compensation shall be reduced or denied.” Id., cmt. c. Thus, even absent a finding of fraud, bad faith, or inexcusable neglect, the district court has the discretion to reduce or deny trustee’s fees so long as it finds that the trustee’s failure to render or render properly its services results in a breach of duty. Id.

This court has reversed a district court’s allowance of all trustee fees and remanded for findings to determine whether “all of the claimed fees” were reasonably related to “activities that furthered the trust’s interests.” In re Trusteeship Created by City of Sheridan, 593 N.W.2d 702, 709 (Minn.App.1999). Because the reduction or denial of fees is based on the trustee’s failure to render or to render properly the services for which compensation is given, we hold the corollary to be true: Before reducing or denying trustee fees, a district court must find that the fees to be reduced or denied relate to the trustee’s failure to render services or to render services properly. See Restatement (Second) of Trusts § 243, cmt. c (requiring court, in exercising its discretion to allow, reduce, or deny fees, to consider several factors, including whether trustee’s breach of duty “was related to the management of the whole trust or related only to a part of the trust property”); Id., cmt. d (stating that where trustee “intentionally or negligently mismanages the tuhole trust, he will ordinanly be allowed no compensation”) (emphasis added). If, on remand, the district court reduces or denies Nor-west’s trastee fees, it must do so based on a finding that the fees to be reduced or denied relate to a failure by Norwest to render services or to render services properly.

3. Attorney Fees

Norwest argues that the district court abused its discretion in ordering it to pay Williams’s attorney fees. A reviewing court will not reverse a district court’s award or denial of attorney fees absent an abuse of discretion. Becker v. Alloy Hardfacing & Eng’g Co., 401 N.W.2d 655, 661 (Minn.1987). Minnesota follows the “American rule” concerning the award of attorney fees; as the Minnesota Supreme Court recently noted, it is a

fundamental principle of law deeply ingrained in our common law jurisprudence that each party bears his own attorney fees in the absence of a statutory or contractual exception.

Ly v. Nystrom, 615 N.W.2d 302, 314 (Minn.2000). Here, the district court did not identify a statutory or contractual provision on which its award of attorney fees was based. Instead it cited a handful of cases from foreign jurisdictions for the proposition that, in trust cases, courts have the discretion to grant an award of attorney fees against a “breaching fiduciary.”

Minnesota cases provide that a trustee may be entitled to reasonable attorney fees paid out of the trust. See, e.g., In re Atwood’s Trust, 227 Minn. 495, 502, 35 N.W.2d 736, 740 (1949) (allowing reasonable attorney fees, paid out of trust corpus, to parties for proceeding brought to construct ambiguous trust provisions); Williams, 591 N.W.2d at 748 (noting that trustee entitled to reasonable attorney fees, chargeable to trust, for defending its administration of trust, defending proceeding for benefit of trust, and defending beneficiary’s challenge to trust’s administration). But there is no Minnesota case requiring a trustee whose management of a trust has been challenged to pay attorney fees incurred by the successful challenger.

The cases relied on by the district court discuss an exception to the American rule under which attorney fees may be awarded against a trustee, but only where a trustee is found to have engaged in “gross or inexcusable” misconduct. See Wilmington Trust Co. v. Coulter, 208 A.2d 677, 682 (Del.Ch.1966) (noting attorney-fee award would be appropriate only “in the very unusual situation,” for example where trustee’s behavior has been “of a gross or inexcusable nature”); Parker v. Rogerson, 49 A.D.2d 689, 690, 370 N.Y.S.2d 753, 755 (N.Y.App.Div.1975) (allowing attorney-fee award in proceeding to establish self-dealing); Allard v. Pacific Nat’l Bank, 99 Wash.2d 394, 663 P.2d 104, 110, 112 (1983) (requiring trustee to pay attorney fees for “inexcusable conduct” in “egregious breach” of its fiduciary duty; namely, failure to obtain independent appraisal of property or inform beneficiaries of its sale where property was trust’s only asset); Wolff v. Calla, 288 F.Supp. 891, 894 (E.D.Pa.1968) (quoting Wilmington for “gross or inexcusable” standard). In the only Minnesota case arguably on point, the supreme court noted that an attorney-fee award against a trustee was not proper when the trustee acted in good faith and was not prompted by an improper motive. In re Drake’s Will, 195 Minn. 464, 469, 263 N.W. 439, 442 (1935). But the court did not address whether a finding of bad faith or improper motive would justify such an award. This court

is an intermediate appellate court. It is primarily decisional and error correcting rather than a legislative or doctrinal court. Its primary function is the correction of error by application of legal principles. Its task is to find the law, to state it and to apply it to the facts. Only when there are no statutory or judicial precedents to follow will the Court of Appeals make new law.

St. Aubin v. Burke, 434 N.W.2d 282, 284 (Minn.App.1989) (quotation omitted), review denied (Minn. Mar. 29, 1989). If an exception to the American rule is to be adopted in Minnesota for trust cases, a clear expression of that change should be made by the supreme court or the legislature; it is not our role to do so. Further, even if we had the authority to adopt such an exception, we note that this case does not appear to present the type of “gross or inexcusable misconduct” or one of the other “unusual situations” that other jurisdictions have found to justify such an exception.

DECISION

The district court did not abuse its discretion by deciding to calculate the surcharge from the beginning of the trust accounting period, and we affirm that decision. But the district court erred in (1) determining that Minn.Stat. § 501B.10 (1994) created a separate duty to diversify a trust’s assets apart from the general duty of prudent management; (2) ordering Norwest to reimburse the trust for all of its trustee fees without finding that all of those fees related to any improper actions; and (3) concluding that it had the discretion to grant attorney fees against Nor-west under an exception to the American rule. We reverse and remand for the district court to address whether, in light of the settlor’s intent and the beneficiaries’ interests, Norwest breached its duty of prudent management by failing to support diversification or convince the other trustees to diversify the trust assets. We see no need to reopen the record on remand, but we leave that decision to the discretion of the district court.

Affirmed in part, reversed in part, and remanded.

      . Northwestern changed its name, first to Norwest Bank Minneapolis, National Association; then to Norwest Bank Minnesota, National Association; and then to Wells Fargo Bank Minnesota, National Association.

      . Norwest presented similar diversification plans to the board in September 1987 and December 1989. Norwest never moved for approval of its 1987 plan. Although it moved for approval of its 1989 plan, it then tabled its motion, recommending that the plan's implementation be delayed "until we see some light at the end of the tunnel here in terms of the economy’s performance.”

      . In accordance with Minn.Stal. § 501B.23 (2000), the Williams trust is subject to the continuing supervision of the district court. Trusteeship accounts from the trust's inception through December 31, 1989, were filed with the district court and were duly settled and allowed by orders of the court. The 1985-89 accounts were settled by an order dated September 27, 1990.

      . The district court and the parties refer to the period in question as both 1990-94 and 1990-95, and describe it both as a five-year and six-year period. Although Norwest and Linstroth petitioned the court for approval of the trustees’ accounts for 1990-95, the court considered whether Norwest breached a duty to diversify and calculated damages only for 1990-94. We, therefore, refer to the period in question as the “1990-94 accounting period.”

      . Although we cite to the 1994 version of Minn.Stat. § 501B.10 for convenience, that provision remained unchanged throughout the 1990-94 accounting period. It was later repealed, effective January 1, 1997, and replaced by the Minnesota Prudent Investor Act, currently codified as Minn.Stat. § 501B.151 (2000). See 1996 Minn. Laws ch. 314, §§ 4, 8. Under the Prudent Investor Act, trustees have a duty to "diversify the investments of the trust unless the trustee reasonably determines that, because of special circumstances, the purposes of the trust are better served without diversifying.” Minn. Stat. § 501B.151, subd. 3.

      . Minn.Stat. § 501B.79 (1994) merely defines the term "trustee.” Because the district court attributes language from Minn.Stat. § 501B.80 (1994) to section 501B.79 elsewhere in its order, we assume that the court also intended to refer to section 50IB.80 in this portion of its order. Section 501B.80 allowed the grantor to incorporate by reference in the trust instrument certain powers of a trustee that are enumerated in section 501B.81 (1994). These include the power to retain property "without regard to any effect retention may have on the diversification of the assets of the trust.” Minn.Stat. § 501B.81, subd. 1. As the court noted in Hormel, while this provision indicates that Minnesota was not "hostile, as a matter of public policy, to the concept of undiversified trusts,” it does not answer the question of "whether, in the absence of express language, there is a separate duty to diversify apart from the general duty of prudent management.” 504 N.W.2d at 511-12 n. 1.

      . We note that the Restatement (Second) of Trusts, § 184(c), on which, together with expert testimony, the district court relied in concluding that Norwest had a duty to "educate or convince" its co-trustees of the need to diversify and, if it was unable to do so, "to seek instructions from the court,” requires that when "the circumstances are such that it is the duty of the trustees to exercise a power conferred upon them," and a co-trustee refuses to exercise that power, "the other trustees are not justified in merely acquiescing in the non-exercise of the power” but rather "it is their duty to apply to the court for instructions.”

      . Williams argues that expert testimony he presented regarding community standards also imposes a duty to diversify. In a professional-malpractice action, the plaintiff “must present evidence of the applicable standard of care, and that the standard of care was breached.” Wartnick v. Moss & Barnett, 490 N.W.2d 108, 116 (Minn.1992). Generally, expert testimony is required to establish a standard of care and a departure from it. Id..; see also In re Trust of Kemske, 305 N.W.2d 755, 761 (Minn.1981) (noting that determination of negligent management of trust would have required "expert testimony on the key issue, i.e., what a prudent trustee would have done at the time.”). But a professional "will not be bound to conform its conduct to a standard of care unless a legally recognized duty exists.” ServiceMaster of St. Cloud v. GAB Business Services, Inc., 544 N.W.2d 302, 307 (Minn.1996) (citation omitted). Expert testimony regarding industry custom, while "important in establishing a standard of care, does not by itself establish a legal duty to exercise that care * * Id. (citation omitted). While the expert testimony here is relevant as to the standard of care for a prudent professional trust manager, it does not, by itself, establish a legal duty.

      . The restatement provides that in the exercise of this discretion, the court should consider the following factors: (1) whether or not the trustee acted in good faith; (2) whether the breach of trust was intentional, negligent, or without fault; (3) whether the breach related to the management of the whole trust or related only to a part of the trust assets; (4) whether or not the breach occasioned any loss and whether, if there was a loss, it has been made good by the trustee; and (5) whether the trustee’s services were of value to the trust. Id.

      . The other case cited by the district court, Estate of Bonin, is inapposite because the attorney-fee award in that case was not granted against the trustee for mismanagement of a trust but rather for pursuing an appeal that was without merit, frivolous, and intended for delay. Estate of Bonin, 457 A.2d 1123, 1125 (Me.1983).