SDDS, Inc. v. State of S.D., 92-1898

• Decision Date: 01 June 1993
• Docket Number: No. 92-1898,92-1898
• Citation: 994 F.2d 486
• Parties: 23 Envtl. L. Rep. 21,285 SDDS, INC., a South Dakota corporation, Appellant, v. STATE OF SOUTH DAKOTA; Mark W. Barnett, Attorney General of the State of South Dakota; George S. Mickelson, Governor of the State of South Dakota; Joyce Hazeltine, Secretary of State of the State of South Dakota, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 486

994 F.2d 486

23 Envtl. L. Rep. 21,285

SDDS, INC., a South Dakota corporation, Appellant, v. STATE OF SOUTH DAKOTA; Mark W. Barnett, Attorney General of

the State of South Dakota; George S. Mickelson, Governor of

the State of South Dakota; Joyce Hazeltine, Secretary of

State of the State of South Dakota, Appellees.

No. 92-1898.

United States Court of Appeals,

Eighth Circuit.

Submitted Dec. 18, 1992.

Decided June 1, 1993.

Marcy G. Glenn of Denver, CO, argued (William Murane, Charles Johnson, and William Mooz, Jr., Denver, CO, Marvin Truhe and Dale Cockrell, Rapid City, SD, on the brief), for appellant.

Diane M. Best, Asst. Atty. Gen., Pierre, SD, argued (Roxanne Giedd and Charles McGuigan, Asst. Attys. Gen., on the brief), for appellees.

Before MAGILL, Circuit Judge, HEANEY, Senior Circuit Judge, and BEAM, Circuit Judge.

MAGILL, Circuit Judge.

This case involves the dispute surrounding the construction and operation of a waste disposal facility in South Dakota. South Dakota Disposal Systems, Inc., (SDDS) appeals the decision of the district court granting a judgment of dismissal in favor of the appellees (hereinafter collectively referred to as the State). The district court held that SDDS's present constitutional challenges in federal court were precluded under the doctrine of collateral estoppel by a judgment rendered in the South Dakota state courts. We hold that collateral estoppel does not act to preclude SDDS's present actions. We reverse the judgment of the district court and remand for further proceedings.

I.

For the past four and one-half years, SDDS has been seeking to construct and operate a municipal solid waste (MSW) disposal facility near Edgemont, South Dakota, to be known as the Lonetree facility. Lonetree was to be a massive, state-of-the-art disposal facility which would dwarf any existing solid waste disposal site in South Dakota. The Lonetree facility anticipated importing approximately ninety percent of the MSW it would process from states other than South Dakota. The Lonetree project has been very controversial in South Dakota arousing much environmental and economic concern among politicians and citizens. There have already been extensive administrative and state court proceedings in South Dakota, some of which bear on this court's opinion and many of which do not. We offer a concise recap of the relevant procedural history up to this point.

A. Background

South Dakota law requires anyone who seeks to establish and operate a solid waste facility to obtain a permit. S.D.Codified Laws Ann. §§ 34A-6-1.4, -1.13 (1992). The permits are initially valid for one year and may be renewed for periods of five years. S.D.Codified Laws Ann. § 34A-6-1.16 (1992). In November 1988, SDDS filed its application with the Department of Water and Natural Resources for an initial one-year permit. The Board of Minerals and Environment (BME) issued SDDS a one-year permit on September 7, 1989 (the One-Year Permit). The One-Year Permit allowed SDDS to construct and operate the Lonetree facility and to dispose of 300,000 tons of MSW. The One-Year Permit was to expire in September of 1990.

After the One-Year Permit issued in September 1989, an environmental group now known as ACTion for the Environment (ACT), which opposed the Lonetree project began collecting signatures to place an initiated measure (the Initiated Measure), which would require legislative approval of large-scale solid waste disposal facilities, on the ballot of the 1990 South Dakota general election. The Initiated Measure ultimately did appear on the November 6, 1990, South Dakota ballot. ¹ The voters approved the Initiated Measure, it became effective November 21, 1990, and it is codified at S.D.Codified Laws Ann. §§ 34A-6-53 to -56 (1992).

By its terms, the Initiated Measure required SDDS to immediately stop the construction of the Lonetree facility. On November 7, 1990, SDDS halted all construction activity at the Lonetree site and terminated its entire work force. SDDS had expended approximately $5 million as of that time on the Lonetree facility and related activities.

Prior to the expiration of its One-Year Permit, SDDS applied for a five-year renewal of that permit (the Five-Year Permit Renewal). At the time the One-Year Permit expired, and at the time the Initiated Measure became law and SDDS laid off its work force, the BME had yet to rule on SDDS's pending renewal application. SDDS, however, had the right to continue to operate under the One-Year Permit, as allowed by S.D.Codified Laws Ann. § 1-26-28 (1992), until the BME acted on the application. Ultimately, the BME did approve the Five-Year Permit Renewal on December 7, 1990. The Five-Year Permit Renewal allowed SDDS to dispose of 7,775,000 tons of MSW at the Lonetree site.

In February 1991, the South Dakota legislature, acting pursuant to the requirements of the Initiated Measure, found that the Lonetree facility was environmentally safe and in the public interest. The legislature passed Senate Bill 169 (S.B. 169), now codified at S.D.Codified Laws Ann. § 34A-6-57 (1992), which approved the siting, construction and operation of the Lonetree facility subject to the terms and conditions of the One-Year Permit and the Five-Year Permit Renewal. The governor of South Dakota signed S.B. 169 into law on February 28, 1991.

Following the passage of S.B. 169, ACT collected signatures to refer the new law to a vote of the public at the next general election (the Referendum). ² The effective date of S.B. 169 was suspended by the filing of the petition seeking the Referendum. The Referendum appeared on the ballot for the 1992 general election and essentially asked the citizens whether they wished to approve S.B. 169. In the general election of November 3, 1992, the majority of those voting voted against S.B. 169. S.B. 169 was, therefore, effectively vetoed by the citizens of South Dakota and the Lonetree project has been unable to proceed since.

B. SDDS III

In December 1990, SDDS filed an action in state court which has become known to the litigants, and will be referred to in this opinion, as SDDS III. The preclusive effect of the SDDS III case is the specific issue which this court now decides.

SDDS III was a declaratory action filed by SDDS seeking judicial review of the constitutionality of the Initiated Measure. SDDS signed its first amended complaint in SDDS III on December 7, 1990, the very day that the BME approved its Five-Year Permit Renewal. This first amended complaint was filed in the South Dakota Circuit Court, Sixth Judicial Circuit, Hughes County, on December 10, 1990. The complaint alleges due process, equal protection and commerce clause violations by the Initiated Measure, and it seeks an adjudication of the validity of the Initiated Measure under both the United States and the South Dakota Constitutions. The complaint makes only one passing reference to any potential referendum, and at the time the complaint was filed, any referendum affecting the Lonetree controversy was only a speculative possibility. The final paragraph of SDDS's complaint states:

The Initiated Measure has inflicted and will continue to inflict substantial damage and injury to SDDS, the City [Edgemont], the School District [Edgemont School District No. 23-1], the past and future employees of SDDS, and the State of South Dakota, among others.

WHEREFORE, the Plaintiffs request judgment as follows:

1. For an order of the Court finding and declaring the Initiated Measure to be null and void, of no effect, and in conflict with and in violation of state law and the South Dakota and United States Constitutions.

2. For an order of the Court finding and declaring SDDS's statutory and constitutional rights to have been violated by the passage of the Initiated Measure.

3. For an order of the Court finding and declaring that the Initiated Measure is inapplicable to SDDS.

....

SDDS Compl. at p XXIX.

On October 31, 1991, South Dakota Circuit Court Judge Stephen L. Zinter issued a memorandum opinion in SDDS III. SDDS, Inc. v. State, Civil Case No. 90-412 (Sixth Judicial Circuit Oct. 31, 1991) (hereinafter SDDS III mem. op.). Judge Zinter also issued findings of fact and conclusions of law dated November 20, 1991 (hereinafter SDDS III findings). Judge Zinter rejected SDDS's commerce clause and equal protection arguments but did find one narrowly drawn violation of the due process clause. Judge Zinter concluded:

Section 3 of the Initiated Measure does violate the Due Process Clause of the United States and South Dakota Constitutions to the extent it required an immediate suspension, without notice or opportunity to be heard, of SDDS' right to operate the Lonetree facility under the September, 1989 permit. The Initiated Measure does not, however, violate the Due Process Clause of the United States and South Dakota Constitutions as it relates to SDDS' December, 1990 renewal permit of (sic) future permits because SDDS does not have a sufficient constitutionally protected property interest to require that due process to which Plaintiffs claim SDDS is entitled.

SDDS III mem. op. at 58.

Judge Zinter explained his analysis of the property rights distinction in the following manner. SDDS III was a challenge to the constitutionality of the Initiated Measure. At the time the Initiated Measure became law, SDDS held only the One-Year Permit. It had applied for the Five-Year Permit Renewal, but that application had not yet been approved. At the time the Initiated Measure became law, SDDS had an expectation of, but not an entitlement to, the Five-Year Permit Renewal. This expectation did not rise to the level of a constitutionally protected interest. Similarly, SDDS held no constitutionally protected interest in its status as an applicant. Therefore, as of the date the Initiated Measure became law, the extent of SDDS's protected property interest was defined by the One-Year Permit. See id. at 30-36.

...