SDDS, Inc. v. State

• Decision Date: 24 July 2002
• Docket Number: No. 21428, No. 21448.
• Citation: 650 N.W.2d 1,2002 SD 90
• Parties: SDDS, INC., a South Dakota Corporation, Plaintiff and Appellant, v. STATE of South Dakota, Defendant and Appellee.
• Court: South Dakota Supreme Court

650 N.W.2d 1

2002 SD 90

SDDS, INC., a South Dakota Corporation, Plaintiff and Appellant, v. STATE of South Dakota, Defendant and Appellee.

Nos. 21428, 21448.

Supreme Court of South Dakota.

Argued March 19, 2001.

Reassigned May 1, 2002.

Considered on Supplemental Briefs June 19, 2002.

Decided July 24, 2002.

James E. McMahon of McMahon Law Office, Sioux Falls, Jeremiah D. Murphy, David J. Vickers of Boyce, Murphy, McDowell & Greenfield, Sioux Falls, Edward T. Lyons, Jr., and Thomas J. Burke, Jr., of Jones & Keller, Denver, Colorado, for plaintiff and appellant.

William P. Fuller and James E. Moore of Woods, Fuller, Shultz & Smith, Sioux Falls, Michael J. Schaffer of Davenport, Evans, Hurwitz & Smith, Sioux Falls, for defendant and appellee.

KONENKAMP, Justice (on reassignment).

[¶ 1.] South Dakota Disposal Systems, Inc. (SDDS) appeals the circuit court's order granting a new trial. A Hughes County jury awarded SDDS $10.1 million in damages against the State of South Dakota in an inverse condemnation action, resulting from the voters' disapproval in a 1992 referendum of a legislatively authorized waste disposal facility. The trial court later vacated the judgment and ordered a new trial, concluding that it had incorrectly instructed the jury. We hold that the court submitted to the jury the issue of damages under improper instructions on the method of calculation. Consequently, we affirm and remand with specific direction for computing damages.

A. Background

[¶ 2.] This appeal is one more chapter in a long series of cases arising out of SDDS's attempt to develop a large-scale multi-state solid waste disposal facility (the Lonetree site) near Edgemont, South Dakota. Litigation on this matter between SDDS and the State of South Dakota has proceeded in both state and federal courts. To avoid confusion, we will refer to the decisions of this Court as SDDS I — V and to the decisions of federal courts as Lonetree I — V. Accordingly, the state cases are:

SDDS I, 472 N.W.2d 502 (S.D.1991);

SDDS II, 481 N.W.2d 270 (S.D.1992);

SDDS III, 502 N.W.2d 852 (S.D.1993);

SDDS IV, 507 N.W.2d 702 (S.D.1993); and

SDDS V, 1997 SD 114, 569 N.W.2d 289.

The federal cases are:

Lonetree I, 994 F.2d 486 (8th Cir.1993);

Lonetree II, 843 F.Supp. 546 (D.S.D. 1994);

Lonetree III, 47 F.3d 263 (8th Cir.1995);

Lonetree IV, 97 F.3d 1030 (8th Cir. 1996), and

Lonetree V, 225 F.3d 970 (8th Cir.2000), cert. denied, 532 U.S. 1007, 121 S.Ct. 1733, 149 L.Ed.2d 658 (2001).

The factual background of the instant case has been set forth in those previous opinions. We provide a brief summary here.

[¶ 3.] In October 1988, SDDS purchased 1200 acres of rangeland near Edgemont in Fall River County, located in southwestern South Dakota. The company was interested in operating a balefill facility (Lonetree) that would eventually hold a total of 7.75 million tons of municipal solid waste (MSW).

[¶ 4.] On November 17, 1988, SDDS applied to the South Dakota Department of Water and Natural Resources for an initial one-year permit to operate Lonetree and process an initial 300,000 tons of MSW. The Department recommended against granting the permit. SDDS appealed to the Board of Minerals and Environment (BME), which, after a hearing, granted the permit in September 1989. A public interest group, Technical Information Project, intervened and appealed to circuit court, which affirmed the decision to grant the one-year permit. On June 26, 1991, we reversed and remanded the matter to the BME for more specific findings regarding the public interest in and the environmental safety of Lonetree as required by our statutes. SDDS I, supra.

[¶ 5.] Meanwhile, in March 1990, SDDS applied for a five-year renewal permit with the Department and the BME to allow it to dispose of 7.75 million tons of MSW, ninety percent of which was expected to come from other states. The BME conducted additional hearings and issued the five-year renewal permit to SDDS on December 7, 1990.

[¶ 6.] While SDDS I was wending its way through the judicial system, a parallel challenge was taking shape in the political sphere. An initiative drive conducted by the Surface Mining Initiative Fund collected sufficient signatures to place an initiated measure on the November 6, 1990, general election ballot. The initiative required that all MSW facilities in South Dakota processing more than 200,000 tons per year obtain legislative approval. This measure was approved by the electorate and became law on November 22, 1990. In February 1991, the South Dakota Legislature passed a bill approving the operation of Lonetree. This legislation, Senate Bill 169 (SB 169), was signed by the Governor and took effect on July 1, 1991.

[¶ 7.] In May 1991, a referendum petition was filed with the Secretary of State's office. This petition sought to overturn the legislative authorization for Lonetree by submitting the matter to a state-wide vote in November 1992. In light of these various challenges and roadblocks, SDDS had earlier laid off workers and ceased site preparations, while continuing its legal and political battle to obtain a valid permit.

[¶ 8] In February 1992, we decided SDDS II, ruling that SDDS was not authorized to start operations until after the 1992 referendum. Thereafter, in the November 1992 general election, the South Dakota electorate rejected the Legislature's authorization. Consequently, SDDS stopped all work on site preparation. SDDS then sought to overturn the referendum in federal court. In Lonetree III, the Eighth Circuit Court of Appeals found that the referendum was improper state protectionism violating the dormant aspects of the Commerce Clause of the United States Constitution. U.S. Constitution, Article I § 8.¹

[¶ 9.] At that point, SDDS brought the present suit, a takings or inverse condemnation action, in circuit court. The court initially granted summary judgment to the State on the grounds that SDDS had no protected property right in operating Lonetree because the grant of the five-year renewal permit was premised on an initial permit that this Court had ruled was void ab initio. See SDDS IV.

[¶ 10.] At the same time, SDDS sought injunctive relief in federal court to bar the State from relitigating the property issue. SDDS argued that in Lonetree III the Eighth Circuit recognized SDDS's property right in the five-year permit. The federal district court denied the injunction. SDDS v. State, Civ. No. 91-5121 (DSD May 28, 1996). SDDS then appealed to the Eighth Circuit, seeking a writ of mandamus requiring the district court to bar the State from relitigating the issue of the extent of SDDS's property rights affected by the referendum.

[¶ 11.] The Eighth Circuit, analyzing the mandamus action as an appeal, ordered the district court to issue an injunction barring South Dakota from relitigating in state court the following issues: (1) did SDDS have an entitlement to a permit to operate the Lonetree facility? and (2) was the referendum the proximate cause of SDDS's dissolution? Lonetree IV, 97 F.3d at 1042.² Thereafter, in SDDS V, we held that, under principles of comity, res judicata, and collateral estoppel, we were bound by the judgment of the Eighth Circuit in Lonetree IV. 1997 SD 114 at ¶¶ 14-18, 569 N.W.2d at 293-95. But see id. at ¶ 14, n9.

[¶ 12.] This case was thus remanded to the circuit court to determine what damages, if any, SDDS suffered as a result of the taking of its property through the referendum. This takings period covered the time between July 1, 1991, the date SB 169 would have been effective and would have permitted SDDS to operate had there been no referendum, and February 6, 1995, the date the Eighth Circuit found the referendum to be unconstitutional. A jury trial commenced on March 22, 1999, in Hughes County and ended on April 6, 1999, with a jury award of $10.1 million in damages to SDDS.

[¶ 13.] Motions for judgment notwithstanding the verdict and for a new trial were filed by the State. The trial court granted the motion for a new trial, explaining in a memorandum opinion that it believed jury instruction 19 had allowed the jury improperly to award consequential damages to SDDS. "It is a well-settled principle of Fifth Amendment taking law... that the measure of just compensation is the fair value of what was taken, and not the consequential damages the owner suffers as a result of the taking." Yuba Natural Resources, Inc. v. United States, 904 F.2d 1577, 1581 (Fed.Cir.1990) (citation omitted).³

[¶ 14.] Finally, for purposes of review and ready reference, we set forth, in chronological order, the holdings in the previous ten cases. The reader will note that there is a significant interplay (if not a tension) between the state and federal holdings.

• SDDS I (1991): The South Dakota Supreme Court, Amundson, J., held that (1) the BME properly denied the request of intervenor Technical Information Project for an environmental impact statement; (2) SDDS's ex parte contacts with the State Department of Water and Natural Resources did not deprive the intervenor or the general public of due process; and (3) the Board's findings were insufficient to support its determinations that the proposed Lonetree facility was in the public interest and was environmentally safe.

• SDDS II (1992): The South Dakota Supreme Court, Miller, C.J. (on reassignment), held that legislation passed pursuant to authorization in an initiative measure, authorizing operation of the Lonetree facility, would not become effective until after the referendum election, where referendum petitions were properly filed.

• Lonetree I (1993): The Court of Appeals, Magill, Circuit Judge, held that SDDS's suit challenging constitutionality of state referendum was not barred (1) by the doctrine of res judicata or (2) by the doctrine of collateral estoppel.

• SDDS III (June 30, 1993): The South Dakota Supreme Court, Miller, C.J. (on reassignment), held that SDDS's suit against state officials

...