Kafka v. Montana Dept. of Fwp

• Decision Date: 31 December 2008
• Docket Number: No. 05-146.,05-146.
• Citation: 348 Mont. 80,201 P.3d 8,2008 MT 460
• Parties: Kim J. KAFKA and Cindy R. Kafka, Individually and as Husband and Wife; and as members of Diamond K Ranch Enterprises LLC, a Montana Limited Liability Company, Plaintiffs and Appellants, and Jack Bridgewater and Myra Bridgewater, Individually and as members of Phantom Bull Elk Ranch LLC, and Jim Bouma and Barbara Bouma, Plaintiff-Intervenors and Appellants, v. The MONTANA DEPARTMENT OF FISH, WILDLIFE AND PARKS, and The State of Montana, Defendants and Appellees, and Sportsmen for I-143, Montana Wildlife Federation, Defendant-Intervenors and Appellees.
• Court: Montana Supreme Court

201 P.3d 8

2008 MT 460

348 Mont. 80

Kim J. KAFKA and Cindy R. Kafka, Individually and as Husband and Wife; and as members of Diamond K Ranch Enterprises LLC, a Montana Limited Liability Company, Plaintiffs and Appellants, and Jack Bridgewater and Myra Bridgewater, Individually and as members of Phantom Bull Elk Ranch LLC, and Jim Bouma and Barbara Bouma, Plaintiff-Intervenors and Appellants, v. The MONTANA DEPARTMENT OF FISH, WILDLIFE AND PARKS, and The State of Montana, Defendants and Appellees, and Sportsmen for I-143, Montana Wildlife Federation, Defendant-Intervenors and Appellees.

No. 05-146.

Supreme Court of Montana.

Argued September 13, 2006.

Submitted June 20, 2007.

Decided December 31, 2008.

Rehearing Denied February 10, 2009.

For Appellants: John E. Bloomquist (argued), Abigail J. St. Lawrence, Doney Crowley Bloomquist Payne Uda P.C., Helena, Montana.

For Plaintiff-Intervenors and Appellants: Ward E. Taleff, Taleff Law Office, P.C., Great Falls, Montana.

For Appellee: Hon. Mike McGrath, Montana Attorney General, Chris D. Tweeten (argued), Assistant Attorney General, Helena, Montana, Robert N. Lane, Montana Department of Fish, Wildlife and Parks, Helena, Montana.

For Defendant-Intervenors and Appellees: Jack R. Tuholske (argued), Sarah K. McMillan, Tuholske Law Office, P.C., Missoula, Montana.

Justice PATRICIA O. COTTER delivered the Opinion of the Court.

¶ 1 Appellants Kim and Cindy Kafka, Jack and Myra Bridgewater, and Jim and Barbara Bouma appeal an order of the Twelfth Judicial District Court denying their takings claims against the state of Montana and the Department of Fish, Wildlife and Parks (FWP), an agency of the state of Montana. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 2 Appellants in this case are all owners and operators of alternative livestock game farms (Game Farms) within the state of Montana. To operate a Game Farm, the owner/operator must have a valid alternative Game Farm license (License) issued by FWP. The requirements for the Licenses are found in Title 87, chapter 4, part 4 of the Montana Code Annotated and are fairly demanding due to the threat posed by chronic wasting disease (CWD).¹ The appellants in this case all obtained their Licenses at varying times throughout the 1990's and have complied with the requirements of part 4 since that time.

¶ 3 Kim and Cindy Kafka (Kafkas) are members of Diamond K Ranch Enterprises, LLC, located in Hill County. In 1996, the Kafkas applied for a License with FWP and entered into a lease for a tract of land on which to operate an alternative livestock breeding operation. After receiving their License, they began operating in March 1997. In 1998, after obtaining a second License, the Kafkas expanded their operations to focus on the fee-shooting of alternative livestock as their primary revenue source. This operation was conducted on an 1100-acre parcel of land roughly twenty miles from the site of the original breeding operation. The Kafkas purchased this land through a series of three transactions, beginning in 1993 and ending with the finalization of a deed in 2003. In addition to purchasing land and going through the License application process, the Kafkas invested several hundred thousand dollars in other start-up costs, including fencing and the acquisition of stock. According to the record, these costs totaled roughly $463,000. In 1999, the Kafkas reported $11,000 in income from their Game Farm operations on their federal tax returns, with that figure rising significantly during the year 2000.

¶ 4 Jim and Barbara Bouma (Boumas) operate a Game Farm in Teton County. The Boumas began their Game Farm operations in May 1997, by operating a breeder facility which would allow them to market large shooter bulls to other Game Farms which allowed fee-shooting. Like the Kafkas, the Boumas hold Licenses issued by FWP. The Boumas' breeder operation spans three parcels of land, two of which they acquired in 1996 at a price of $55,000 and a third totaling 126.777 acres, which was acquired as part of a larger purchase of 258.067 acres in December 1999 for approximately $325,000. In March 2000, the Boumas sought to expand their operations onto the remaining 129 acres of their parcel. Like the Kafkas, the Boumas made other investments necessary to institute their breeder operation, such as acquiring stock, License-related application costs, and fencing. According to the record, the Boumas never sold significant numbers of alternative livestock and their operation never generated a taxable profit.

¶ 5 Jack and Myra Bridgewater (Bridgewaters) are the owners of the Phantom Bull Elk Ranch, LLC, located in Broadwater County. The Bridgewaters entered into the Game Farm business in 1992, and focused primarily on fee-shooting as the primary source of income, although they had also harvested and marketed antlers from their alternative livestock for the velvet market. They purchased the property on which their Game Farm operated in 1990 for approximately $415,000. Like the other appellants, the Bridgewaters invested in the infrastructure necessary to operate a Game Farm. Between 1993 and 2000, their Game Farm generated cash flow in excess of $1.1 million dollars, although the Bridgewaters never reported any profit on their tax returns.

¶ 6 As is common among regulatory schemes, the requirements for maintaining a License under part 4 have changed somewhat throughout the years. However, on November 7, 2000, part 4 underwent a radical change as a result of the passage of Initiative Measure No. 143 (I-143) by the citizens of Montana. I-143 amended two very significant subsections of part 4. First, it resulted in the deletion of the existing language in § 87-4-412(2), MCA (1999),² which permitted a License holder to transfer his License, and substituted the following: "An alternative livestock ranch license for a specific facility is not transferable." Section 87-4-412(2), MCA (2001). More significant was I-143's effect on § 87-4-414(2), MCA (1999), as indicated below. The pre-I-143 version of the statute is in normal type face, and the I-143 addition to the statute is in bold.

(2) The licensee may acquire, breed, grow, keep, pursue, handle, harvest, use, sell, or dispose of the alternative livestock and their progeny in any quantity and at any time of year as long as the licensee complies with the requirements of this part, except that the licensee may not allow the shooting of game animals or alternative livestock, as defined in 87-2-101 or 87-4-406, or of any exotic big game species for a fee or other remuneration on an alternative livestock facility.

Section 87-4-414(2), MCA (2001) (emphasis added).

¶ 7 Notably, the initiative did not revoke appellants' Licenses, nor did it result in the confiscation of their alternative livestock. Instead, I-143 prohibited Game Farm operators from charging a fee to shoot alternative livestock. This was a significant departure from the previous scheme because some individuals were willing to expend significant amounts of money to shoot alternative livestock within the confines of a Game Farm. By prohibiting fee-shooting, I-143 eliminated the most profitable use of the alternative livestock, and thus the profitability of Game Farms in Montana. At the same time, it did not eliminate all uses of the alternative livestock, as part 4 still permitted Game Farm owners to maintain their herds, harvest the animals for their meat or antlers, or sell them in out-of-state markets where fee-shooting was still legal.

¶ 8 Aside from these small but extremely significant changes, the remainder of part 4 was unaltered by I143's passage. All parties concede that the Game Farm industry was, and still is, a highly regulated industry. Both before and after the passage of I-143, part 4 conditioned the ability of the licensee to breed, harvest, sell, or dispose of alternative livestock upon "compli[ance] with the requirement of this part...." Section 87-4-414(2), MCA. Part 4 also states that FWP reserves the right to revoke a License if the owner/operator "fail[s] to operate an alternative livestock ranch according to the provisions of this part, rules adopted under this part, or stipulations of the alternative livestock ranch license...." Section 87-4-427(1)(a), MCA. Part 4 outlines in detail the reporting, testing, and recording duties incumbent upon a Game Farm operator, details the steps the operator must take to receive a License, and gives FWP broad authority to inspect and quarantine alternative livestock if necessary. Part 4 also requires environmental assessments (EA) of any proposed operations. It places conditions upon the use and disposition of alternative livestock, and further provides that alternative livestock are the private property of the License holder "for which the licensee is responsible as provided by law." Section 87-4-414(1), MCA. Moreover, there are numerous implementing regulations governing the Game Farms which control virtually every aspect of the Game Farm industry. See Admin R.M. §§ 32.4.101-1320 (2008).

¶ 9 Because I-143 eliminated the in-state market for fee-shooting and impaired the profitability of their Game Farm operations, the Kafkas challenged the validity of I-143 in District Court. On April 5, 2002, the Kafkas filed suit against the State and FWP, challenging the lawfulness and constitutionality of I-143 on a variety of grounds. On May 8, 2002, appellees-intervenors Sportsmen for I-143 and Montana Wildlife Federation were permitted to intervene, opposing the Kafkas. On October 21, 2002, the District Court dismissed six of the seven counts alleged in the original complaint, none of which are on appeal before this Court. The remaining claim concerned whether the passage and implementation of I-143 resulted in a taking of various property interests held by the Kafkas under Article II, Section 29 of the Montana Constitution and the Fifth Amendment to the U.S. Constitution. The property...