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Sun Prairie v. Cason

United States District Court, D. South Dakota, Central Division

April 7, 2015

SUN PRAIRIE, A PARTNERSHIP; AND BELL FARMS LLP, A NEBRASKA LIMITED LIABILITY PARTNERSHIP, Plaintiffs, and COTTONWOOD KNOLL, LLC., Intervenor Plaintiff,
v.
JAMES CASON, ACTING ASSISTANT SECRETARY — INDIAN AFFAIRS, U.S. DEPARTMENT OF THE INTERIOR, IN HIS OFFICIAL CAPACITY; GALE NORTON, SECRETARY OF THE DEPARTMENT OF THE INTERIOR, IN HER OFFICIAL CAPACITY; AND ROSEBUD SIOUX TRIBE, A FEDERALLY RECOGNIZED TRIBE, Defendants. and CONCERNED ROSEBUD AREA CITIZENS, HUMANE FARMING ASSOCIATION, SOUTH DAKOTA PEACE AND JUSTICE CENTER, AND GEORGE ENGLAND, Intervenor Defendants.

OPINION AND ORDER ON PENDING MOTIONS

ROBERTO A. LANGE, District Judge.

On February 2, 2015, this Court held a motion hearing on three pending motions in this case. Those three pending motions are: (1) Cottonwood Knoll, LLC's Motion for Relief from Consent Judgment, Doc. 192; (2) Rosebud Sioux Tribe's Motion to Compel Specific Performance, Doc. 196; and (3) Cottonwood Knoll, LLC's Motion to Stay Pending Motions and to Require Mediation, Doc. 199. Some background facts aid in understanding how the current issues arose and in ruling on the pending motions.

I. Background Facts

Plaintiff Sun Prairie, a general partnership (Sun Prairie) and the Rosebud Sioux Tribe (the Tribe) engaged in discussions about business opportunities to promote economic development on the Rosebud Sioux Indian Reservation in early 1998. Sun Prairie and the Tribe signed a letter of intent in April of 1998 and negotiated a Land Lease contemplating that Sun Prairie would secure financing to build multi-site hog confinement facilities on trust land in Mellette County, that Bell Farms, LLP (Bell Farms) would operate and manage the sites, and that the Tribe would provide water and other support. Sun Prairie secured financing for the project from U.S. Bancorp Ag Credit, Inc. (U.S. Bancorp). In September of 1998, the Tribe and Sun Prairie entered into a Land Lease, Doc. 177-4, which in tum was approved by the Aberdeen office of the Bureau of Indian Affairs. Sun Prairie then began construction of hog confinement facilities at the "Grassy Knoll" site and later at the "Cottonwood Farm" site.

The project met almost immediate public opposition, resulting in three separate lawsuits in two United States district courts-Concerned Rosebud Area Citizens v. Babbitt, No. 98-2841 (D.D.C. filed November 23, 1998, and dismissed July 12, 1999); Rosebud Sioux Tribe v. Gover, No. 99-3003-CBK (D.S.D. filed February 3, 1999, and dismissed May 30, 2003); and this action, Sun Prairie v. Rosebud Sioux Tribe, No. 02-3030-RAL (D.S.D. filed August 15, 2002). Sun Prairie and Bell Farms filed this action after the Tribe, which had elected a new tribal president, became unsupportive of Sun Prairie's business ventures on the reservation. In April of 2005, the parties in this case settled many of their disputes by negotiating and agreeing to the terms of a Judgment by Consent and Order (Judgment by Consent), which was signed by the Honorable Richard H. Battey on May 19, 2005. Doc. 164. That Judgment by Consent modified but did not nullify the Land Lease. Doc. 164 at ¶ 5.a. (vii).

Sun Prairie, through its operator Bell Farms, operated hog confinement operations at the two sites-Grassy Knoll and Cottonwood Farm-until 2012. Bell Farms reportedly ceased operations in May of 2012, and there apparently have been no hogs at either site since.

On June 13, 2012, the Tribe filed in this case a Motion for an Order to Show Cause, seeking to enforce certain provisions of the Judgment by Consent. Cottonwood Knoll, LLC (Cottonwood Knoll) intervened on July 24, 2012, as a party asserting an interest relating to the property. Cottonwood Knoll had become the successor to the original mortgagor U.S. Bancorp and was foreclosing on Sun Prairie at that time.

This Court scheduled and conducted an evidentiary hearing on July 30, 2012, in which the Rosebud Sioux Tribe, intervenor Cottonwood Knoll, and the United States Government participated. This Court entered an Order for Enforcement of Judgment by Consent on July 31, 2012, applying Paragraph 11[1] of the Judgment by Consent to bind successors and assigns of the Plaintiffs to that Judgment, ordering Plaintiffs and any successors and assigns to comply with the provisions of Paragraph 7[2] of the Judgment by Consent, and allowing any party to file a motion to enlarge the deadline for compliance with Paragraph 7 or otherwise seek relief from this Court. Doc. 187. Through an Amended Order for Enforcement of Judgment by Consent, this Court enlarged Cottonwood Knoll's deadline for compliance with Paragraph 7 of the Judgment by Consent or to otherwise seek relief to December 31, 2013. Doc. 189.

II. Additional Facts and Pending Motions

On November 3, 2014, Cottonwood Knoll filed a Motion for Relief from Consent Judgment. Doc. 192. Cottonwood Knoll, after Sun Prairie and Bell Farms had ceased operations at Grassy Knoll and Cottonwood Farms, had initiated a foreclosure action in state court in Mellette County and had obtained a default judgment and decree of foreclosure against Sun Prairie in August of 2012, in the amount of $15, 370, 337.73. The Mellette County Circuit Court determined the fair and reasonable value of foreclosed property-the leasehold interest, structures, and equipment at Grassy Knoll and Cottonwood Farms-at that time to be $2, 275, 000.00. Doc. 194. Cottonwood Knoll was the winning bidder at a foreclosure sale on December 19, 2013, with a certificate of sale recorded in late December of 2013. Doc. 194. The one-year statutory redemption period on Sun Prairie's interest under South Dakota Codified Laws (SDCL) § 21-52-11 expired in December of 2014. As a result, Cottonwood Knoll now holds the leasehold interest in the Grassy Knoll and Cottonwood Farms.

Cottonwood Knoll in its motion sought to be relieved from the requirements of Paragraphs 4 and 7 of the Judgment by Consent in light of the "complete cessation of farming operations, " by Sun Prairie and Bell Farms. Doc. 193 at 12. Cottonwood Knoll argued that the Land Lease has expired, that there are no environmental issues with the site, and that Rule 60 of the Federal Rules of Civil Procedure justifies either relieving Cottonwood Knoll of responsibility or deeming the Judgment by Consent to have been satisfied and released. Doc. 193.

Cottonwood Knoll in its motion raised an issue involving property tax payments. Notwithstanding that the sites are on tribal lands, Mellette County invoked SDCL § 10-4-2.1 to assess taxes on the buildings and improvements at Grassy Knoll and Cottonwood Farms, asserting that Sun Prairie owed delinquent property tax payments from 2006 through 2011, in the amount of $634, 174.02. Doc. 194. Sun Prairie ultimately negotiated down that delinquency to $267, 000.000 and signed a settlement agreement with Mellette County to pay that amount. Doc. 194-5. Mellette County continues to assess annual property taxes on the two sites. Doc. 194. Cottonwood Knoll invoked Section 49 of the Land Lease to seek renegotiation and adjustment of what is owed to the Tribe in order to receive credit for the payments to Mellette County.

The Tribe opposed Cottonwood Knoll's Motion for Relief from Consent Judgment and filed its own Motion to Compel Specific Performance. Docs. 196, 197. The Tribe argued that Plaintiffs and Cottonwood Knoll have abandoned the premises, thereby triggering a reclamation obligation under Exhibit I to the Land Lease to remove all improvements from Grassy Knoll and Cottonwood Farm and to remediate and return the sites to their original conditions. Alternatively, the Tribe argued that the Judgment by Consent runs the land lease to May 19, 2020, and that the Tribe is owed past-due rent of $405, 000.000, plus interest, as well as water charges. The Tribe relied on Paragraph 9 of the Judgment by Consent to refuse any offset for property taxes paid by Sun Prairie or Cottonwood Knoll to Mellette County. Doc. 197.

Cottonwood Knoll opposed the Tribe's Motion for Specific Performance and filed a Motion to Stay Pending Motions and to Require Mediation. Docs. 199, 200, 202. Cottonwood Knoll invoked Paragraph 12.b. of the Judgment by Consent, under which the parties were to "negotiate in good faith to resolve any dispute relating to the interpretation and implementation of this Judgment by Consent before bringing the matter to the Court's attention." Doc. 164 ¶ 12.b. Cottonwood Knoll asserted that it tried to negotiate with the Tribe, but that the Tribe identified no one with authority to negotiate on its behalf. The Tribe responded that it had a number of communications with Cottonwood Knoll and presently wants Cottonwood Knoll to pay past-due rent and remove all of the improvements from the Grassy Knoll and Cottonwood Farms locations now that, in the Tribe's view, the sites are abandoned. Cottonwood Knoll countered that the sites are not abandoned, that it has a maintenance employee on site, and that it has sought-albeit unsuccessfully-to find a new operator. According to Cottonwood Knoll, the improvements on the sites are worth over $2 million, and Cottonwood Knoll has offered them back to the Tribe free of charge to end the relationship altogether, but the Tribe has spumed that opportunity.

Neither side presented evidence at the hearing on February 2, 2015, but at this point there appears to be little dispute of material fact, other than over whether any good faith negotiations have occurred concerning the current disputes. Resolution of the present disputes turns primarily oh interpretation of the Judgment by Consent and the underlying Land Lease, rather than on any disputed material fact. The parties have conflicting interpretations of certain provisions of the Land Lease and Judgment by Consent. Neither side has requested an evidentiary hearing. This Court accordingly can rule on many of the matters in dispute, although an evidentiary hearing may be necessary in the future if disputes between the parties fester.

III. ...


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