Meriwether Minn. Land & Timber, LLC v. State , No. A11–2162.

• Decision Date: 02 July 2012
• Docket Number: No. A11–2162.
• Parties: MERIWETHER MINNESOTA LAND & TIMBER, LLC, a Delaware limited liability company, et al., Respondents, v. STATE of Minnesota, et al., Appellants.
• Court: Minnesota Court of Appeals

818 N.W.2d 557

MERIWETHER MINNESOTA LAND & TIMBER, LLC, a Delaware limited liability company, et al., Respondents,

v.STATE of Minnesota, et al., Appellants.

No. A11–2162.

Court of Appeals of Minnesota.

July 2, 2012.

Syllabus by the Court

The $100,000 limit on 2010 payments (fiscal year 2011) under the Sustainable Forest Incentive Act, 2010 Minn. Laws 1st Spec. Sess. ch. 1, art. 13, § 4, at 2056, does not breach contractual rights or quasi-contractual rights under promissory estoppel; and does not violate constitutional provisions against impairment of contracts, takingswithout just compensation, or equal protection.

Sarah E. Crippen, Timothy A. Sullivan, Elizabeth C. Borer, Best & Flanagan LLP, Minneapolis, MN, for respondents.

Lori Swanson, Attorney General, Alan I. Gilbert, Solicitor General, Kevin Finnerty, Jason Pleggenkuhle, Assistant Attorneys General, St. Paul, MN, for appellants.

Considered and decided by WRIGHT, Presiding Judge; ROSS, Judge; and MUEHLBERG, Judge.

OPINION

MUEHLBERG, Judge.^*

Government-appellants challenge the district court's decision to grant summary judgment to landowner-respondents, arguing that summary judgment should have been granted in their favor. Appellants argue that the district court erred in finding quasi-contractual rights through promissory estoppel, in finding that these quasi-contractual rights were unconstitutionally impaired, in finding that the impairment of these rights was an unconstitutional taking, and in retaining the State of Minnesota as a party to this action. Respondents cross-appeal the district court's decision to award payments at a rate not stated in the statute. Appellants move to require correction of statements in respondents' appellate brief, and respondents move to strike appellants' reply memorandum pertaining to that motion. We reverse and remand on the merits and deny the motions.

FACTS

The Sustainable Forest Incentive Act (SFIA) was enacted in 2001. 2001 Minn. Laws 1st Spec. Sess. ch. 5, art. 8, §§ 5–15; Minn.Stat. §§ 290C.01–.13 (2010 & Supp.2011). The SFIA allows owners of forest land to receive annual payments for qualifying land that they subject to certain requirements, such as implementing a forest management plan, following guidelines for harvesting timber, recording a covenant on the land for a minimum of eight years, and allowing public access to large enrolled tracts. Minn.Stat. §§ 290C.03(a), .04(a)(vii) (2010). A landowner can begin to withdraw from the program only after being enrolled for a minimum of four years; but the termination is not effective until the fifth calendar year after the landowner begins the withdrawal process. Minn.Stat. § 290C.10 (2010). Enrolled land is required to be in the program for a minimum of eight years; should a landowner withdraw early or fail to fulfill the eligibility requirements in any year, that landowner is required to repay the total amount of payments received from the program in the previous four years, plus interest. Minn.Stat. § 290C.11 (2010). In order to enroll, landowner-claimants file documentation indicating compliance with the eligibility requirements with the commissioner of revenue “by September 30 in order for the land to become eligible beginning in the next year.” Minn.Stat. § 290C.04(a) (2010). By August 15 each year following the initial application, each claimant must certify that its land currently meets all the eligibility requirements, following which the commissioner makes incentive payments by October 1. Minn.Stat. §§ 290C.05, .08, subd. 1 (2010). Because claimants apply in one year to enroll their land the next year, payments are for compliance in the same year the payments are made.

Until 2010, the amount of SFIA payments were determined by multiplying the number of acres enrolled by each claimant by three per-acre rates, with the highest result being used. Minn.Stat. § 290C.07 (2008). The three per-acre rates originally consisted of a statutory minimum of $1.50 per acre and two rates based on average property tax rates for certain types of land. Minn.Stat. § 290C.07 (2006). The property tax based rates, despite fluctuating annually, were higher than the minimum per-acre rates every year. In 2008, the minimum payment was changed to $7 per acre, but the property tax based rates remained above that amount. 2008 Minn. Laws ch. 154, art. 2, § 23; Minn.Stat. § 290C.07(b)(2) (2008). In 2009, one of the formulas was changed slightly (from “timberland” to “managed forest land”) because of other changes in Minnesota tax law. See 2009 Minn. Laws ch. 88, art. 10, § 16. That change had an unexpectedly large effect and the 2010 payments would be calculated at $15.67 per acre, compared to $8.74 per acre the previous year.

In 2009, Governor Pawlenty unalloted funding for the SFIA program such that each claimant's payment was limited to or capped at $100,000. That cap was to be effective starting with 2010 payments. In 2010, this change was codified, but only applied to 2010 payments. See 2010 Minn. Laws 1st Spec. Sess. ch. 1, art. 13, § 4, subd. 3; Minn.Stat. § 290C.07, note (2010). This cap affected only six of the 1,700 total SFIA claimants.

In 2011,¹ the legislature made a number of changes to the SFIA. It amended the statute so that 2011 (fiscal year 2012) and later payments are made at a flat $7 per acre rate, subject to the $100,000 cap which was made permanent. 2011 Minn. Laws 1st Spec. Sess. ch. 7, art. 6, § 12; Minn.Stat. § 290C.07 (Supp.2011). The legislature also provided that a claimant whose 2010 or 2011 payments were limited in this manner could terminate participation in the SFIA without penalty if done by December 31, 2011. Id.

The respondents are each timber and paper companies, with land enrolled in the SFIA. They hold the three largest amounts of land enrolled in the SFIA program, with a collective total of more than 500,000 acres and about 60% of land enrolled in the program. Each respondent enrolled its land in the SFIA program and claimed payments. Their compliance with the eligibility, enrollment, and certification requirements of the SFIA is not in dispute.

Each timber-company respondent also voluntarily participates in private forest-management programs, either through the Sustainable Forest Initiative (SFI) or the Forest Stewardship Council (FSC). These programs also address sustainable forest management practices, although the requirements of these programs are not precisely aligned with those of the SFIA program. The private programs have more detailed requirements for certification and forest management and require on-site audits, are not legally enforceable, do not require a covenant be placed on the land, do not require that the public be allowed to use the enrolled land, and do not entail withdrawal penalties. Each of the timber companies publicizes its participation in these private programs on its websites, and participation in the programs is necessary to market their products as SFI and/or FSC certified.

The payments for 2010 were issued as expected on October 1, 2010, with each respondent receiving the capped amount of $100,000. Respondents filed suit on January 31, 2011, against various State of Minnesota officials and entities. Respondents asserted that the enactment of the limit on SFIA payments and the issuance of capped payments constituted a breach of contract or, alternatively, a breach of promise which the state was estopped from dishonoring, constituted an unconstitutional impairment of contract under both the Minnesota and United States Constitutions, and violated the Takings clauses and the Equal Protection clauses of the United States and Minnesota Constitutions. On February 11, 2011, appellants moved to dismiss the complaint, asserting that only the Commissioner of Revenue was a proper defendant and that respondents had failed to state a claim upon which relief could be granted. Respondents moved for partial summary judgment on April 11, 2011. The district court heard both motions on May 18, and took the matter under advisement.

On July 21, 2011, appellants notified the district court of changes to the statute in question. As discussed above, these changes include making the $100,000 cap permanent and adjusting the rate at which payments were calculated to $7 per acre. Minn.Stat. § 290C.07 (Supp.2011). Respondents moved the district court for leave to supplement the record with information on these changes, and later moved the court to supplement and amend the complaint to include the 2011 payments. On November 9, 2011, the district court granted respondents' motions.

On November 3, 2011, the district court dismissed Governor Dayton, the Minnesota Senate and Minnesota House of Representatives with prejudice, dismissed the Minnesota Management and Budget Commissioner without prejudice, denied appellants' motion to dismiss the complaint for failure to state a claim, denied appellants' motion to continue the proceedings for more discovery, and granted respondents' motion for partial summary judgment as to 2010 payments. The district court did not address 2011 and later payments. In granting respondents' motion for summary judgment, the district court ruled that the cap was an unconstitutional impairment of the quasi-contractual promise made in the SFIA, and that the limit was an unconstitutional taking without just compensation. The district court further determined that the $15.67 per acre rate at which payments for 2010 had been calculated would result in a windfall, and instead calculated the payment for 2010 at the rate of $10.38 per acre. Judgment on that order was entered on November 9, but on November 23, 2011, the district court stayed the judgment to the extent that it required the immediate payment of the amounts calculated under its order pending this appeal.

ISSUES

I. Does the SFIA create a contract or a quasi-contractual right through promissory estoppel?

II. Does the amendment constitute an...