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.
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-
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
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.
The agreement between these parties consists of the Land Lease, in which Cottonwood Knoll is the successor to the Permitted Mortgagee
The Judgment by Consent modifies and supersedes, but does not displace, the Land Lease. Doc. 164 ¶ 5.a.(vii). Such consent decrees have attributes of an ordinary contract and thus the same canons of contract construction generally apply.
The general rules for interpreting contracts include that contracts are to be enforced according to their terms, with the intent of the parties derived from reading the contract as a whole.
The last of the three motions filed-Cottonwood Knoll's Motion to Stay Pending Motions and to Require Mediation, Doc. 199-deserves to be addressed first. Cottonwood Knoll based this motion on Paragraph 12.b. of the Judgment by Consent, which provides:
Doc. 164 ¶ 12.b. Cottonwood Knoll asserted that the Tribe did not negotiate in good faith and that this Court should mandate mediation, thereby deferring resolution of the pending motions. The Tribe resisted the motion and argued that it had negotiated, however briefly, in good faith.
Cottonwood Knoll's motion to require mediation cannot be granted for several reasons. First, neither Paragraph 12.b. of the Judgment by Consent nor any other provision contemplated court-ordered mediation. To the contrary, Section 30 of the Land Lease, in addressing such subjects as waiver of tribal sovereign immunity and jurisdiction, lists arbitration, and not mediation, as the alternative dispute resolution option. Doc. 177-4 § 30(f).
Second, judicial economy militates against granting the motion to stay. The inherent power of a court to control its docket, including the power to stay proceedings, requires balancing the "economy of time and effort for itself, for counsel, and for litigants."
Third, there is an inconsistency to Cottonwood Knoll's argument here. Both Cottonwood Knoll in filing the initial motion for relief from the Judgment by Consent, Doc. 192, and the Tribe in filing its motion to compel specific performance, Doc. 196, brought issues relating to the interpretation and implementation of the Judgment by Consent to this Court. Only after each side to this dispute filed those motions did Cottonwood Knoll invoke Paragraph 12.b. of the fodgment by Consent to assert that the motions are premature and should be addressed only after mediation. When Cottonwood Knoll filed its motion for judicial resolution of this issue, it necessarily implied that the precondition for judicial relief-good-faith negotiations-had already been met. In short, Paragraph 12.b. of the Judgment by Consent does not require mediation, a delay to allow further negotiation or compelled mediation between Cottonwood Knoll and the Tribe would be futile, and both parties initially recognized the need for a court ruling to break the impasse in positions by filing their motions putting at issue interpretation of certain contract terms.
The motions of Cottonwood Knoll and the Tribe frame a dispute over the lease term and whether the lease has terminated or alternatively the sites have been abandoned. The Judgment by Consent in Paragraph 4 contains Term of Operation provisions, including the following:
Doc. 164 ¶ 4.a. The Judgment by Consent became effective on May 19, 2005. Doc. 164. Paragraphs 4.b. and 4.c. of the Judgment by Consent provide that, at the expiration of the fifteen-year term, the Tribe would have the right to purchase the buildings and improvements at the sites by paying half of the fair market value, and that if the Tribe did not exercise its right to purchase, Sun Prairie or its successors could exercise "a one-time extension of the Lease term for an additional five (5) years." Doc. 164 ¶ 4. Paragraph 4 of the Judgment by Consent modified the Term of Lease language in Section 8 of the Land Lease. Doc. 177-4 § 8. Neither Section 8 of the Land Lease nor Paragraph 4 of the Judgment by Consent provide for early termination by Sun Prairie or its successor Cottonwood Knoll. Indeed, the only provision of the Judgment by Consent or Land Lease that suggests a means for any early termination by Sun Prairie is Exhibit I to the Land Lease, which provides in part:
Doc. 177-4, Exhibit I. The reclamation plan contained in Exhibit I calls for a complete cleanup, including dismantling and removing structures from the site, removal of all poured concrete, and backfilling of all excavated areas after environmental cleanup.
Cottonwood Knoll has not given notice of termination of the lease, nor is there any provision regarding termination by way of such notice. Cottonwood Knoll apparently has not written to the Tribe to advise that it has either terminated the lease or has an interpretation of lease terms under which the lease has expired. Rather, Cottonwood Knoll foreclosed to acquire lease rights among other things from Sun Prairie, sought out an operator for the sites unsuccessfully, and then sought to negotiate with the Tribe over termination of the lease, including offering to the Tribe the improvements on the sites worth over $2 million in exchange for being released from further responsibility. In short, neither the terms of the Judgment by Consent and Land Lease nor the actions of Cottonwood Knoll support a conclusion that the lease term has expired.
The language of Paragraph 4.a. of the Judgment by Consent is curious in providing that "Sun Prairie and Bell Farms, or their respective successors and assigns, will operate the Farms for
The Tribe asserted that there has been "abandonment of the Premises by Lessee" thereby triggering the reclamation plan under Exhibit I to the Land Lease. However, Cottonwood Knoll became the Permitted Mortgagee, is now the lessee under the Land Lease, and thereby has a right to cure any default of Sun Prairie thereunder. Doc. 177-4 § 19. This Court has permitted Cottonwood Knoll to intervene and entered an order, consistent with Paragraph 11 of the Judgment by Consent, binding Cottonwood Knoll to that Judgment by Consent. Doc. 187. Thus, although Sun Prairie and Bell Farms have abandoned the project, Cottonwood Knoll's activities may prevent abandonment of the premises.
The cessation of hog confinement activities at Grassy Knoll and Cottonwood Farms and the desire of Cottonwood Knoll to give the facilities to the Tribe to be relieved of its responsibility is not necessarily "abandonment of the Premises." Abandonment is the "absolute relinquishment of [a] premises by a tenant, and consists of acts or omissions and an intent to abandon."
The next issue framed by the pending motions in this case is what amount Cottonwood Knoll owes to the Tribe and relatedly whether Cottonwood Knoll is entitled to offset certain property tax payments made to Mellette County. Paragraph 5 of the Judgment by Consent details the monetary payments that Sun Prairie or its successor Cottonwood Knoll owes to the Tribe. With the lease still running, Cottonwood Knoll owes rent and certain other payments. The Tribe asserted that the past-due rent was $405,000.00, plus interest, and there was no alternative calculation for past-due rent presented to this Court. Doc. 197 at 10.
Cottonwood asserted that, under Section 49 of the Land Lease, it is entitled to an adjustment for the property tax payments made to Mellette County for assessed taxes on buildings and improvements at Grassy Knoll and Cottonwood Farms. Mellette County initially assessed taxes and delinquencies of $634,174.02 for years 2006 through 2011, but Sun Prairie or Cottonwood Knoll negotiated down that amount and reached a settlement agreement with Mellette County to pay $267,000.00. Docs. 194, 194-5. Mellette County now assesses annual taxes on the sites of $15,522.20 and $11,451.14.
The Judgment by Consent, modifying and superseding certain provisions of the Land Lease, is the appropriate starting point for evaluating whether Mellette County property taxes affect the financial obligations between the parties. Paragraph 9 of the Judgment by Consent, in relevant part states:
Doc. 164 at ¶ 9. Cottonwood Knoll, however, based its entitlement to an adjustment on Section 49, and not on Section 25, of the Land Lease. The Judgment by Consent is silent as concerns Section 49 of the Land Lease.
Section 49 of the Land Lease provides:
Doc. 177-4 § 49. The Mellette County imposition of tax for the buildings and improvements on an annual basis qualifies as a "County . . . claim [of] taxing authority over the Premises," under Section 49 thereby triggering a responsibility "to renegotiate and adjust the terms of this Lease as appropriate to adjust for such . . . taxing authority or claim." Doc. 177-4 § 49.
Neither the language in Paragraph 9 of the Judgment by Consent nor any other provision nullifies or releases rights contained in Section 49 of the Land Lease. Paragraph 9 contains a release by Sun Prairie for claims for reimbursement by the Tribe of tax payments to Mellette County "as provided for under Section 25 of the Lease." Section 25 of the Land Lease is a broad provision with four subparts, some of which address taxation. Section 25 has as part of its design to avoid taxation of construction and operation of the hog confinement business by placing tax payment responsibilities with the Tribe presumably so that the Tribe's sovereign immunity and independence from state regulation would shelter the project from state and local regulation and taxation. State or local taxation is directly addressed in Section 25(c), which provides:
Doc. 177-4 ¶ 25(c). The definitions of "Project" and "Project Facilities Cost" in Paragraph 1 of the Land Lease suggest that this provision contemplates the contractors excise tax. Doc. 177-4 § 1(f), (g), Exhibit B. Section 25(a) has a broader scope, using the word "Premises," but is generic and does not specifically include the state or subdivision like Mellette County. Regardless, the last sentence of Paragraph 9 of the Judgment by Consent confines the release by Sun Prairie specifically to "tax payments to Mellette County as provided for under [Section] 25 of the Lease." Interpretation of a Judgment by Consent must focus on the "four corners,"
Ultimately, Cottonwood Knoll and the Tribe should be able to calculate how much Cottonwood Knoll owes the Tribe for rent, together with a negotiated adjustment for certain property taxes paid to Mellette County. That responsibility is ongoing, with the figures changing periodically. This Court accordingly leaves it to the parties at this time to perform that calculation.
For the reasons explained above, it is hereby
ORDERED that Cottonwood Knoll's Motion for Relief from Consent Judgment, Doc. 192, is denied, except as set forth above. It is further
ORDERED that the Rosebud Sioux Tribe's Motion to Compel Specific Performance, Doc. 196, is granted in part and denied in part as set forth above. It is further
ORDERED that Cottonwood Knoll, LLC's Motion to Stay Pending Motions and to Require Mediation, Doc. 199, is denied. It is finally
ORDERED that the parties cooperate to calculate the amount that Cottonwood Knoll owes to the Rosebud Sioux Tribe based on the interpretation of the Judgment by Consent and underlying Land Lease set forth in this Opinion and Order on Pending Motions.
Doc. 177-4 § 32.