Petition for Writ of Certiorari — Iowa Coal Mining Co. v. Monroe County Board of Supervisors

Supreme Court brief1993

Ask Donna

What actually matters in this document.

Text

In The APR

Supreme Court of the United Stafemree of me cut

October Term, 1992

¢---

IOWA COAL MINING COMPANY, INC.;

STAR COAL MINING COMPANY, INC.;

and JIM HUYSER,

Petitioners,

THE BOARD OF SUPERVISORS OF MONROE COUNTY,

IOWA; and MONROE COUNTY, IOWA,

Respondents,

IDF ACQUISITION CORP.; and

FIRST STATE INSURANCE COMPANY,

Intervenors-Respondents.

—_ *

Petition For Writ Of Certiorari

To The Supreme Court Of Iowa

PETITION FOR WRIT OF CERTIORARI

S. P. DEVoLDER James Q. BLOMGREN

(Counsel of Record) POTHOVEN, BLOMGREN &

R. JEFFREY Lewis STRAVERS

JosepH G. VAN WINKLE 1201 High Avenue, West

GamBLe & Davis Oskaloosa, lowa 52577

A Professional Corporation (515) 673-4438

2600 Ruan Center

Des Moines, lowa 50309-2577

(515) 243-6251

Attorneys for Petitioners

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 42-2831

QUESTIONS PRESENTED FOR REVIEW

I. Whether the zoning ordinance’s dramatic effect

on the economic value of lowa Coal’s property rights

accomplished a taking which requires payment of “just

compensation” under the fifth and fourteenth amend-

ments?

II. Whether a regulatory taking under the fifth and

fourteenth amendments arises where the zoning ordi-

nance deprives property owner of that essential bundle of

property rights necessary to derive profit from the prop-

erty and only leaves property owner with use rights that

are economically valueless?

Ill. Whether the Iowa Supreme Court decided the

regulatory takings claim under the fifth and fourteenth

amendments in a way that conflicts with applicable deci-

sions of the United States Supreme Court and the Federal

Circuit Court of Appeals?

A. Whether the state court decision conflicts

with the Supreme Court’s Lucas and Key-

stone decisions?

B. Whether the state court decision conflicts

with the Federal Circuit’s Whitney Benefits

decision?

LIST OF ALL PARTIES TO THE PROCEEDINGS

The identity of all parties to these proceedings is

stated in the case caption. Star Coal Mining Company,

Inc. is a wholly owned subsidiary of lowa Coal Mining

Company, Inc. These companies do not own in whole or

in part any other subsidiary companies nor do they have

any other parent companies. Jim Huyser is the sole share-

holder of lowa Coal Mining Company, Inc.

TABLE OF CONTENTS

Page

Questions Presented For Review................... i

List Of All Parties To The Proceedings............. ii

SE er iii

dg acces reskadsecvecnaces V

Reference To Reports Of Opinions Delivered By

ey dae acdsee een 1

Grounds On Which Jurisdiction Of The Court Is

OT 1

Constitutional And Regulatory Provisions Involved

EE A ee a 1

NE 0 2

A. Stages Of Proceedings Where The Federal Ques-

ae ae

B. Statement Of Material Facts.................... 3

EE ee eee 11

I. The Zoning Ordinance’s Dramatic Effect On The

Economic Value Of Iowa Coal’s Property Rights

Accomplished A Taking Which Requires Pay-

ment Of “Just Compensation” Under The Fifth

And Fourteenth Amendments................. 11

Il. A Regulatory Taking Which Requires Payment

Of “Just Compensation” Under The Fifth And

Fourteenth Amendments Has Arisen In This

Case Because The Zoning Ordinance Has

Deprived Iowa Coal Of That Key Bundle Of

Property Rights Necessary To Derive Profit

gS rere 17

TABLE OF CONTENTS - Continued

Page

Ill. The lowa Supreme Court Decided The Regula-

tory Takings Claim Under The Fifth And Four-

teenth Amendments In A Manner That Conflicts

With Applicable Decisions Of The United States

Supreme Court And The Federal Circuit Court

te eee eT Ter ee Peay eee eT Te eee 22

A. The State Court Decision Conflicts With The

Supreme Court’s Lucas And Keystone Deci-

sas sack bee Raaeee ka ea eee oe 22

B. The State Court Decision Conflicts With The

Federal Circuit’s Whitney Benefits Decision... 23

ey ey ee re ee TE et Te Par penn aR 25

TABLE OF AUTHORITIES

Page

Cases

Iowa Coal Mining Company, Inc. v. Monroe County,

Iowa, 494 N.W.2d 664 (Iowa 1993).............. 12, 20

Keystone Bituminous Coal Ass‘n v. DeBenedictis, 480

U.S. 470, 107 S.Ct. 1232, 94 L.Ed.2d 472 (1987) passim

Lucas v. South Carolina C@astal Council, 550 U.S. __,

112 S.Ct. 2866, 120 L.Ed.2d 798 (1992) ........ passim

Penn Central Transp. Co. v. City of New York, 438

U.S. 104, 98 S.Ct. 2646, 57 L.Ed.2d 631 (1978)..... 16

Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 43

oe. Soe ee 8 eer err rrr re 18

Whitney Benefits, Inc. v. United States, 926 F.2d 1169

(Fed. Cir.1991), cert. denied, _._ U.S. __, 112

>.Ct. 406, 116 L.Ed.2d 354 (1991)... .......55: ye

Williamson County Regional Planning Com’n v. Ham-

ilton Bank of Johnson City, 473 U.S. 172, 105 S.Ct.

eg | er ere rere ee 3

CONSTITUTIONAL PROVISIONS

‘ Constitution of the United States, Amendment 5

eo | errr Tree eres err ee TTT eee 2

Constitution of the United States, Amendment 14

we A Fg OTE PETS Tee LTT Tee eLe 2

REFERENCE TO REPORTS OF OPINIONS

DELIVERED BY OTHER COURTS

There are three relevant opinions entered by the lowa

state courts. The first two are unpublished opinions by

the Iowa district court in and for Monroe County. The

case in district court was bifurcated into liability and

damages trials. The liability ruling entered by district

court on December 22, 1989, appears at,pages 69a-91a of

the appendix. The damages ruling entered on June 18,

1991, appears at pages 20a-68a of the appendix. The deci-

sion of the lowa Supreme Court dated January 20, 1993 is

published as Iowa Coal Mining Co., Inc. v. Monroe County,

Iowa, 494 N.W.2d 664 (lowa 1993), and appears at pages

la-17a of the appendix.

GROUNDS ON WHICH JURISDICTION

OF THE COURT IS INVOKED

The decision of the lowa Supreme Court was ren-

dered on January 20, 1993, and is final. Petitioners’ peti-

tion for rehearing was denied by that court on February

18, 1993. (App. 18a-19a.) This Court has jurisdiction to

review the judgment by writ of certiorari under 28 USC

§ 1257(a).

CONSTITUTIONAL AND REGULATORY

PROVISIONS INVOLVED IN THE CASE

The fifth amendment “takings clause” and the four-

teenth amendment “incorporation clause,” excerpted in

pertinent part below, are implicated in this case:

“nor shall private property be taken for public

use, without just compensation”

Constitution of the United States, Amendment 5 (“Tak-

ings Clause”);

“nor shall any State deprive any person of

life, liberty, or property without due protess of

law . 7

Constitution of the United States, Amendment 14 (“Incor-

poration Clause”).

The regulatory zoning ordinance at issue in this case,

Monroe County, lowa, ordinance no. 6, is lengthy. It

appears at pages 92a-195a of the appendix.

STATEMENT OF THE CASE

A. Stages Of Proceedings Where The Federal

Questions Were Raised.

In each division of its three count petition filed with

the lowa district court on May 5, 1988, petitioners alleged

the “enactment of the proposed ordinance deprives [peti-

tioners] of their property without making any provisions

for compensation for the taking of said property in viola-

tion of .. . the United States Constitution.” (App. 198a,

200a, 202a.) In its liability ruling of December 22, 1989,

the Iowa district court ruled that “petitioners are entitled

to proceed on the bifurcated issue of damages. . . based

on the illegal and unconstitutional acts taken by [respon-

dents] in this matter.” (App. 90a.) The lowa Supreme

Court, while finding district court ultimately awarded

damages based on a state statutory violation by respon-

dents, specifically reached and decided petitioners’ regu-

latory takings claim under the fifth and fourteenth

amendments after reversing district court on the state

statutory award. The federal issues have been preserved. !

B. Statement Of Material Facts.

Petitioners are lowa Coal Mining Company, Inc., Star

Coal Mining Company, Inc. and Jim Huyser (collectively,

“lowa Coal”). lowa Coal owns leasehold interests in,

among other properties, two tracts of real estate located

in Monroe County, Iowa: a 120-acre site known as Star 6

and a 340-acre site known as Star 14. lowa Coal held

leasehold rights to strip mine coal at these sites and to

operate the sites as landfills. Its plans were disrupted on

May 10, 1988, when respondents Monroe County, lowa

1 As further noted in the decision of the lowa Supreme

Court, the state high court did not reach the takings claim ona

tract of property leased by petitioners and known as the Star 6

site. The state court ruled the takings claim on that site was

premature. (App. 16a-17a.) Because of this ruling, the takings

claim for the Star 6 site is not before this Court. See Williamson

County Regional Planning Com‘n v. Hamilton Bank of Johnson City,

473 U.S. 172, 186, 105 S.Ct. 3108, 3116, 87 L.Ed.2d 126, 139 (1985)

(“a claim that the application of government regulations effects

a taking of property is not ripe until the government entity

charged with implementing the regulations has reached a final

decision regarding the application of the regulations to the

property at issue”).

The lowa Supreme Court did reach the takings claim on the

larger 340-acre tract of property leased by petitioners and

known as the Star 14 site. (App. 12a-16a.) Accordingly, the

federal takings claim as it relates to the Star 14 site is properly

before this Court. See id.

and the Board of Supervisors of Monroe County, lowa

(collectively, “County”) passed the initial county-wide

zoning ordinance (known as ordinance no. 6) that prohib-

ited landfilling on the Star 14 site and permitted strip coal

mining there as a conditional use only. (App. 127a-128a.)

lowa Coal was organized in 1949 by Art Huyser, who

is Jim Huyser’s father and remained active in the family

business until his death in 1984. The company was origi-

nally established to conduct strip coal mining operations

in southeastern lowa. In 1978, lowa Coal had begun strip

mining operations in Monroe County. On August 18,

1978, lowa Coal acquired leasehold rights to strip mine

for coal on the Star 6 site. From May 30 to December 8,

1986, these same rights were acquired to strip mine for

coai on the Star 14 site.

By 1986, lowa Coal had become the second largest

private employer in Monroe County, employing over 100

workers. Until this time, lowa Coal’s capital-intensive

business was financed largely through profit derived

from operations as opposed to borrowing. For example,

in the 1980s, lowa Coal constructed an innovative coal

wash plant near Lovilia, lowa, and financed the construc-

tion with approximately $2,500,000.00 of its own funds. In

1985, lowa Coal’s financial statements showed a net

income of $351,253.00, sales of $11,484,892.00, retained

earnings of $3,588,968.00 and cash or cash equivalents of

$1,808,621.00.

By the spring of 1987, lowa Coal could no longer rely

on coal mining to remain profitable. The unit costs

incurred in mining the coal from its Monroe County sites

had become approximately equal to or less than the unit

selling price of the coal. Quite simply, strip coal mining

alone could no longer be conducted profitably and lowa

Coal was losing money on its strip coal mine properties.

(App. 24a.) lowa Coal expected this trend not only to

continue, but to worsen - and it did. Utilizing its forty

years of expertise in moving large volumes of earth,

meeting stringent mining safety and environmental stan-

dards and running a capital-intensive business, lowa

Coal determined it could use its existing coal properties,

in particular the Stars 6 and 14 sites, as landfills. lowa

Coal had acquired leasehold rights to landfill 10.3 acres of

the Star 6 site in early 1984. It acquired leasehold rights to

landfill on the Star 14 site on August 14, 1987. Landfilling

on these sites was economically essential to Iowa Coal,

for landfilling was the only property use owned by the

company that would result in a return on its property

investment in Star 14. There was no governmental regula-

tory ordinance in place that prevented this use at the

time, nor was any such ordinance in the planning stage.

The landfills planned for these sites were contem-

plated to be “state of the art.” The sites were designed for

combined strip coal mining and landfilling as explained

below. The sites would meet or exceed all applicable

financial assurance and environmental requirements

imposed by lowa law. lowa Coal retained Larry Crane

and his environmental consulting firm that specializes in

landfill design and operation. Mr. Crane was the third

engineer in the United States to work in governmental

regulations at the predecessor to the federal EPA, and

from 1974-82 was head of the lowa agency that regulates

landfills, the lowa Department of Natural Resources

(DNR). Mr. Crane and his associates found that the geol-

ogy at the Stars 6 and 14 sites ws ideally suited for

sanitary landfilling.

The lowa DNR agreed. It had issued a landfilling

permit for the Star 6 site to lowa Coal in 1984. In January

1988, lowa Coal submitted its landfilling permit to DNR

for the Star 14 site, and DNR issued the permit on May

13, 1988. Thus, lowa Coal had all the necessary property

rights in place and the permit requirements to operate a

landfill in combination with its coal mining business at

the Monroe County, lowa, sites. lowa Coal expended over

$600,000.00 as of May 10, 1988 in acquiring the lease

rights to landfill, preparing the sites for combined coal

mining and landfilling, acquiring the necessary equip-

ment and technical expertise to operate, and receiving the

required state permits. (App. 37a-38a.)

A combination strip coal mine and landfill operation

is conducted differently than coal mining alone. In simple

coal mining, a seam is quickly opened in the surface of

the land and the coal is extracted until the “stripping

ratio” (the ratio of tons of earth dug to tons of coal

recovered) becomes too high for a profit to be made.

When that point is reached, mining is halted, the seam is

filled and the land is reclaimed in accordance with fed-

eral and state environmental regulations.

When landfilling is added to a strip coal mining

operation, income is generated from two sources. The

first is related to the effect on the stripping ratio. A

landfill requires large volumes of “air space” in which to

deposit the solid wastes. Because of this, strip mining for

coal can proceed even when the costs to extract the coal

exceed the sale price of the coal (the stripping ratio) for

the process creates another valuable resource: cells in

which to deposit solid wastes. A combined coal mine and

landfill site must be carefully sequenced in time, so that

the ceils are not opened so prematurely that the air spaces

must be reclaimed by operation of law before there is

solid wastes to deposit in them. Because reclamation

destroys the air pockets needed for landfilling, it is not

economical to first strip mine the coal and later utilize the

property as a landfill after reclamation of the mining

operation. Also, strip mining when combined with land-

filling is done in a deep “straight” cut manner, for this

increases the volume of air space and properly prepares

the air pockets for the deposit of wastes. In coal mining

alone, a shallow “circular” cut method is used that ren-

ders the property unsuitable for subsequent use as a

landfill.

The second source of revenue is generated from “tip-

ping fees” received by the landfill operator. Tipping fees

are the costs per ton of wastes that landfill operators

charge waste depositors for the landfilling service. Exten-

sive evidence was presented at the state trial court level

to establish that 1,000 tons of waste a day at $9.40 a ton

tipping fee would be received at the Star 14 site for its

projected life as a landfill. These numbers are very con-

servative — the evidence in fact showed that average

tipping fees at lowa landfills had tripled from the time the

$9.40 fee was quoted to prospective Star 14 waste deposi-

tors and the time of trial. District court in the damages

opinion made extensive findings om the value of Iowa

Coal’s property interest taken, and conservatively

assessed this value at $15,367,498.00.?

As of 1988, lowa Coal had made the following expen-

ditures to develop the Star 14 landfill site: (1) over

$300,000.00 in development costs for Star 14 in physically

preparing that site for combined coal mining and landfill-

ing; (2) $67,000.00 in advanced royalties to the landfilling

lessors; and (3) hundreds of thousands of dollars in con-

sulting fees, engineering fees, landfilling permit fees and

the like in preparing the Star 14 site for landfilling opera-

tions. (App. 37a-38a.)

By May of 1988, lowa Coal’s landfilling plans were in

place and the company was ready to operate the Stars 6

and 14 sites as a combined coal mining and landfilling

operation. lowa Coal had the personnel, the financial and

equipment resources and oral approval from the lowa

DNR of its permit application for landfilling. In the opin-

ions of lowa Coal’s owner, accountant, consulting geolo-

gist, banker and, ultimately, the trial court as the finder of

fact, lowa Coal had sufficient capacity and resources to

open the Star 14 site as a landfill in 1988, and to be ina

positive cash flow position within the first six months of

operation. A detailed, step-by-step, cash flow analysis

2 Of the total amount awarded for the taking,

$10,319,526.00 was awarded to lowa Coal and Star Coal Mining

Companies for the taking of their leasehold rights to the Stars 6

and 14 sites, and $5,047,972.00 was awarded to Jim Huyser

individually based on a royalty payments agreement he had

with the companies as consideration for his assignment of the

leasehold rights. State trial court found these amounts repre-

sented both the market value of the sites and lowa Coal’s lost

economic opportunity. (App. 68a.)

that presented how this would be accomplished was pre-

pared by lowa Coal, and ultimately adopted by the trial

court in its rulings.

Prior to 1988, County had never before adopted or

even promulgated in draft form any zoning regulations

for Monroe County, lowa. When County was informed of

lowa Coal’s acquisition of leasehold rights to landfill at

the Star 14 site, and of lowa Coal’s extensive and costly

activities in preparing its property for combined coal

mining and landfilling, including preparing and filing its

DNR permit applications, County took action solely

designed to “stop the landfill.” (App. 31a.) County’s

actions initially involved: opposition to the construction

of a mining road to the Star 14 site that County had

earlier supported and approved; coordination by County,

through its attorney, of a “vicious attack” against opera-

tion of the Star 14 landfill at a meeting conducted by lowa

Coal with officials from other lowa counties to receive

their municipal solid waste disposal business; and

attempted disruption by County of a subsequent meeting

coordinated by Iowa Coal with potential users of the

landfill. County’s actions ultimately culminated in the

hiring, on October 27, 1987, of the Area XV Regional

Planning Commission to draft the initial zoning ordi-

nance for Monroe County. A county board member was

then quoted in the press as stating that zoning “was the

only way to stop the landfill.” (App. 31a.) The trial court,

in a specific fact finding, ruled “the actions taken by

[County] [in adopting the zoning ordinance] were

directed toward the specific purpose of preventing the

establishment of the Star 14 landfill site.” (App. 31a.)

When an initial county-wide zoning ordinance is cre-

ated, it typically takes six months to complete the back-

ground research behind the ordinance, and another three

months to complete the drafting process. Ordinance no. 6

was completed in less than one-half that time, and pro-

mulgated in its final form on March 2, 1988, in time for

the first meeting of the Monroe County zoning commis-

sion. At that meeting, County made its single contribution

to the terms of the ordinance: it amended the ordinance

as drafted by the Area XV commission to preclude land-

filling as a conditional use in an A-2 (agricultural) zone.

As originally drafted by the commission, coal mining and

landfilling were listed as “conditional uses in an A-2

zone.” The commission’s draft materials further noted

that landfills were often located in areas that were

planned first to be used for strip coal mining. Stars 6 and

14 were zoned A-2. Trial court made a finding of fact that

County’s actions in the zoning ordinance drafting and

adoption process were taken solely to stop the Star 14 site

from operating as a landfill. (App. 31a-32a.) On May 10,

1988, the ordinance was given its final reading and

passed. County perfunctorily denied Iowa Coal’s subse-

quent application to rezone its property to permit land-

filling.

As a result of the zoning ordinance, lowa Coal could

not operate the Star 14 site in the manner it had intended.

Star 14 could not economically be utilized solely as a strip

coal mining operation. District court made specific fact

findings that coal mining without landfilling on the Star

14 site neither could be done profitably nor feasibly as

that would destroy its use as a landfill. (App. 32a-33a.)

lowa Coal’s coal mining interest in the Star 14 site was

valueless without its landfilling interest in the site. Essen-

tial to lowa Coal’s continued survival as a profitable

business, and to profitably utilize its property rights in

the Star 14 site, was landfilling on that site. County’s

zoning ordinance squarely prohibited this use, and as a

consequence bankrupted the company. Specifically, by

the time of the damages phase of the trial, lowa

Coal’s current liabilities exceeded current assets by

$2,406,422.00, and retained earnings had decreased to a

negative $1,836,122.00. (App. 53a.)

ARGUMENT

I. THE ZONING ORDINANCE’S DRAMATIC EFFECT

ON THE ECONOMIC VALUE OF IOWA COAL’S

PROPERTY RIGHTS ACCOMPLISHED A TAKING

WHICH REQUIRES PAYMENT OF “JUST COM-

PENSATION” UNDER THE FIFTH AND FOUR-

TEENTH AMENDMENTS.

State trial court made specific findings of fact that

landfilling in combination with coal mining is essential to

lowa Coal’s use of its property, and that County knew its

prohibition would have “severe adverse economic conse-

quences” on Iowa Coal. (App. 32a.) Trial court further

found that coal mining alone at the Star 14 site was not an

economical use of the property and would not result in

profit for lowa Coal. (App. 32a-33a; 52a-54a.) That is,

without landfilling, lowa Coal’s property rights were val-

ueless and its business bankrupt. (App. 52a-54a.) These

findings establish a “categorical” regulatory taking under

the standard set forth by this Court in Lucas v. South

Carolina Coastal Council, 550 U.S. __, 112 S.Ct. 2886, 120

L.Ed.2d 798 (1992).

The lowa Supreme Court erroneously reasoned the

zoning ordinance did not effect a Lucas style regulatory

taking for two reasons: (1) lowa Coal can still coal mine

the property; and (2) Iowa Coal merely lost the “most

beneficial use” of its property —- combined coal mining

and landfilling - not the entire use for the ordinance

permits coal mining as a conditional use on the Star 14

site. Iowa Coal Mining Co., Inc. v. Monroe County, 494

N.W.2d 664 (lowa 1993) [hereafter lowa Coal] (App.

12a-16a). The lowa Supreme Court misapplied controlling

federal regulatory takings law, and further ignored trial

court’s specific findings that the zoning ordinance ren-

dered lowa Coal’s property rights valueless. This Court

should grant the writ to correct the decision of the lowa

Supreme Court.

The lowa Supreme Court quoted the following sen-

tence of the Lucas opinion to reverse the just compensa-

tion awarded lowa Coal by the trial court: “when the

owner has been called upon to sacrifice all economically

beneficial uses in the name of the common good, that is,

to leave his property economically idle, he has suffered a

taking.” Lucas v. South Carolina Coastal Council, supra, 550

U.S. at___, 112 S.Ct. at 2895, 120 L.Ed.2d at 815 (emphasis

in original). But then the court ignored the sentence and

considered only whether Star 14 could be put to some

remaining commercial use after County’s adoption of the

zoning ordinance. The court did not stop the analysis

when it agreed the coal mining use was not profitable

and rendered the Star 14 site economically idle. The court

instead opined no Lucas taking occurred because it found

Star 14 was rendered economically idle because of “mar-

ket economics.” (App. 11a.)

This phraseology is a shibboleth. Of course, whether

a commercial use of property is economically viable

depends on market costs and prices. Use of a tract of

property to manufacture horse-drawn carriages is not

“market economical” because Henry Ford designed the

Model T and perfected the assembly line technique. But

what does “market economics” have to do with uses that

have been proscribed by governmental regulation?

Surely, a government body could not avoid its obligation

to pay just compensation if it adopts a zoning ordinance

that proscribes all existing and viable commercial uses of

certain property except for the manufacture of horse-

drawn carriages simply because the property originally

had been put to that use 80 years ago.

This analogy is the situation in the present case. The

lowa Supreme Court wholly failed to properly focus the

takings inquiry on whether all viable economical uses of

the Star 14 site were lost because of the passage of zoning

ordinance no. 6. It was County’s zoning ordinance that

adversely impacted on “market economics” and rendered

Star 14 economically idle. The lowa Supreme Court

engaged in pure question-begging. The state court

avoided the established fact of the zoning ordinance’s

dramatic and severe impact on the “market value” of

lowa Coal’s property rights when it analyzed the “market

value” of those rights as if lowa Coal had never acquired

leasehold rights to landfill at the Star 14 site in the first

place. The problem with this analysis is that lowa Coal

did acquire landfilling rights at Star 14. It was the public

zoning ordinance, not private “market economics,” that

took that right and rendered valueless Iowa Coal’s eco-

nomic interest in Star 14. The lowa Supreme Court should

not be allowed to cavalierly discard the fifth amendment

and dodge the constitutional inquiry set forth in Lucas

through the expediency of a counter-factual assumption.

Under the lowa Supreme Court’s analysis, there can

never be a regulatory taking so long as the effected

property can be put to some prior commercial use after

adoption of a zoning ordinance, even if that use cannot be

economically justified. The United States Supreme Court

rejected this position in Lucas.

Lucas involved a takings claim by property owner

who had acquired beachfront property with the intent to

construct two residential homes there. Before construc-

tion was commenced, the state of South Carolina passed a

statute that made it impossible for property owner to

acquire building permits to construct the homes. Trial

court in that case found the statute rendered the property

essentially “valueless.”

In holding that there was a taking, the Lucas Court

noted there are two “categorical” classes of takings that

do not require a case (i.e. fact) specific inquiry: (1) those

where the government action results in a physical “inva-

sion” (i.e. occupation) of the property; and (2) those types

of “regulatory takings” which destroy all economically

beneficial use of the land. Lucas, supra, 550 U.S. at__, 112

S.Ct. at 2893-94, 120 L.Ed.2d at 812-13. In the latter type

of categorical taking, the key inquiry is whether the gov-

ernment regulation has left the property owner with any

truly economically viable use of his property rights. If so,

there is no categorical taking because property owner

does not bear the full burden of the regulatory action that

purportedly is taken to benefit the public at large. How-

ever, where the effect of the regulation is to render the

property economically idle because a meaningful profit

cannot be generated through subjecting the property to

any remaining lawful use, then there is a categorical

taking that requires payment of just compensation. /d.,

550 U.S. at __, 112 S.Ct. at 2894-95, 120 L.Ed.2d at 815.

The property owner involved in Lucas sustained such a

taking because the state trial court found the South Caro-

lina statute rendered his property “valueless,” that is,

unsuitable for any reasonable alternative economic devel-

opment. The Lucas court held that:

In the case of land, however, we think the

notion pressed by the Council that title is some-

how held subject to the “implied limitation” that

the State may subsequently eliminate all eco-

nomically valuable uses is inconsistent with the

historical compact recorded in the Takings

Clause that has become part of our constitu-

tional culture.

Id., 550 U.S. at __, 112 S.Ct. at 2900, 120 L.Ed.2d at 820.

The state trial court in the lowa Coal case made the

same critical fact finding that was made by the trial court

in the Lucas case. That is, County’s zoning ordinance had

a “dramatic effect” on lowa Coal’s property rights, and

that without combining landfilling with coal mining at

the Star 14 site the company would not remain economi-

cally viable. (App. 32a-33a; 52a-54a.) At the time ordi-

nance no. 6 was passed, Iowa Coal had leasehold rights to

landfill the Star 14 site, had expended hundreds of thou-

sands of dollars to prepare the site for combination coal

mining and landfilling, had a state permit to landfill the

Star 6 site, had submitted a landfill permit application for

the Star 14 site, and received the permit only three days

after the ordinance was passed.

To avoid these facts and the trial court’s specific

findings of economic harm, the lowa Supreme Court

made a second attempt to distinguish the facts of this

case from those in Lucas. The court opined “that the

leases for Star 14 and Star 6 were acquired by lowa Coal

in anticipation of strip mining, not solid waste disposal.”

Iowa Coal, supra, 494 N.W.2d at __ (App. 14a). In truth,

Star 6 had been used as a landfill since 1984 and lowa

Coal acquired its landfilling lease rights to Star 14 over a

full year before County adopted the zoning ordinance

and before County had ever contemplated zoning. As

found by the trial court, County initiated the ordinance

process only after lowa Coal acquired its leasehold rights

and “solely” to “stop the landfill.” (App. 31a.) The lowa

Supreme Court’s attempt to distinguish Lucas on the basis

of original rights acquisition must fail.*

3 The lowa Supreme Court next considered whether a

“noncategorical” taking occurred under the three-part standard

stated by the Court in Penn Central Transp. Co. v. City of New

York, 438 U.S. 104, 124, 98 S.Ct. 2646, 2659, 57 L.Ed.2d 631, 648

(1978), and Keystone Bituminous Coal Ass'n v. DeBenedictis, 480

U.S. 485, 495, 107 S.Ct. 1232, 1241-42, 94 L.Ed.2d 472, 488 (1987).

This is a “reasonableness” test that makes inquiry into: (1) the

economic impact of the regulation on claimant's property rights;

(2) the regulation’s interference with investment-backed expec-

tations; and (3) the character of the governmental action.

For the reasons discussed in the text, the state trial court

made binding fact findings, fully supported by the evidence,

that establish that the ordinance’s effect on Iowa Coal’s eco-

nomic interests and investment-backed expectations was total.

The lowa Supreme Court improperly distinguished

the Lucas case to find no regulatory taking occurred. To

do this, the court ignored the holding of that case and the

fact findings of the state trial court. This Court should

issue the writ to the lowa Supreme Court to correct the

state court’s misappj..s: on of fifth amendment regula-

tory takings juri deace in the state of lowa.

Il. A REGULATCRY TAKING WHICH REQUIRES

PAYMENT OF “JUST COMPENSATION” UNDER

THE FIFTH AND FOURTEENTH AMENDMENTS

HAS ARISEN IN THIS CASE BECAUSE THE ZON-

ING ORDINANCE HAS DEPRIVED IOWA COAL

OF THAT KEY BUNDLE OF PROPERTY RIGHTS

NECESSARY TO DERIVE PROFIT FROM THE

PROPERTY.

The Iowa Supreme Court reasoned that the fifth

amendment does not require payment of just compensa-

tion where property owner retains some commercial use

of his property, even where the use is not economically

viable. Specifically, the lowa Supreme Court held there

was not a regulatory taking in this case because lowa

Coal, as a conditional use, could strip mine for coal on

the Star 14 site, even though strip mining was not an

economically viable use of the property and would

As for the third factor, the “character” of the governmental

regulation, this too supports a taking. The lowa governmental

body with regulatory power over landfilling, the lowa Depart-

ment of Natural Resources, issued landfilling permits for both

the Star 6 and the Star 14 sites. The lowa government entity with

specific authority over landfills approved the Star 14 site as a

landfill.

destroy that property for its viable use —- combined coal

mining and landfilling. The state court’s analysis is

flawed. The court ignored the established fact that lowa

Coal’s key economic bundle of property rights - com-

bined coal mining with landfilling - was taken by

County’s zoning ordinance. This was the only economi-

cally viable use of the property held by lowa Coal. Under

controlling fifth amendment takings cases of this Court, a

taking that requires the payment of just compensation

resulted.

The United States Supreme Court addressed the issue

in Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S.

470, 107 S.Ct. 1232, 94 L.Ed.2d 472 (1987). There, an

association of coal mine operators in western Pennsylva-

nia claimed their property rights were taken by a state

coal subsidence act that required a fixed percentage of

coal located near certain public structures be left

unmined. The regulation effected less than two percent of

the total coal rights owned by the association. /d., 480

U.S. at 498-99, 107 S.Ct. at 1248-49, 94 L.Ed.2d at 496-497.

The association relied on a prior United States Supreme

Court decision, Pennsylvania Coal Co. v. Mahon, 260 U.S.

393, 43 S.Ct. 158, 67 L.Ed. 322 (1922), to urge that their

property rights had been taken. The Mahon court found

an earlier Pennsylvania coal subsidence act had effected a

taking of coal owner’s property. The Keystone court dis-

tinguished the earlier decision on the basis that there had

been no finding by the state trial court in Keystone, unlike

in Mahon, “that the Subsidence Act makes it impossible

for [coal association] to profitably engage in their busi-

ness, or that there has been an undue interference with

their investment-backed expectations” because over 98

percent of the coal could still be mined. Keystone, supra,

480 U.S. at 485, 107 S.Ct. at 1242, 94 L.Ed.2d at 488. The

Keystone court gave great weight to the fact that “[coal

association] have not claimed, at this stage, that the Act

makes it commercially impossible for them to continue

mining their bituminous coal in western Pennsylvania.”

Id., 480 U.S. at 495-96, 107 S.Ct. at 1247, 94 L.Ed.2d at 495.

Precisely this claim has been made and established

by lowa Coal. County’s zoning ordinance proscribed

landfilling at the Star 14 site. Without landfilling, lowa

Coal’s contemplated method to strip mine the site, one

designed to prepare it for landfilling, became uneconomi-

cal. Likewise, the site did not have value for strip mining

use alone. Unlike the statute in Keystone, the ordinance in

this case did render the entire use of lowa Coal’s prop-

erty rights unprofitable. County’s zoning ordinance

directly took that key segment of lowa Coal’s property

rights essential to profitable use of the property. The

ordinance accordingly effected a regulatory taking.

This conclusion is further supported by Chief Justice

Rehnquist’s dissenting opinion, joined by three Justices,

in Keystone. The dissent squarely delineated the issue that

is presented by Iowa Coal’s petition for writ of certiorari:

“we have recognized that regulations — unlike physical

invasions — do not typically extinguish the ‘full bundle’ of

rights in a particular piece of property.” Keystone, supra,

480 U.S. at 516, 107 S.Ct. at 1258, 94 L.Ed.2d at 508

(Rehnquist, J., dissenting). The dissent noted that the

three-part Penn Central analysis, stated at footnote 3 of

this petition, is generally applied when less than the “full

bundle” of the economic “sticks” that comprise a claim-

ant’s property right is taken. Id., 480 U.S. at 516, 107 S.Ct.

at 1258, 94 L.Ed.2d at 508 (Rehnquist, J., dissenting). The

dissent did not apply this test, however, for Keystone

involved a “categorical” regulatory taking even though

less than two percent of the association’s total coal

reserves were effected. That is because there is only one

economic “bundle” of property rights involved in coal

mining, the right to mine the coal. /d., 480 U.S. at 517-18,

107 S.Ct. at 1259, 94 L.Ed.2d at 508-09 (Rehnquist, J.,

dissenting). The state coal subsidence act expropriated

that right, for it prohibited coal association from mining

that portion of the coal it owned that was subject to the

act.

County’s zoning ordinance similarly left lowa Coal

with no economically viable stick remaining in its bundle

of property rights. The ordinance took Iowa Coal’s lease-

hold rights to landfill and engage in combined coal min-

ing and landfilling at the Star 14 site. The only stick left to

lowa Coal by the ordinance was a conditional right to

strip mine for coal alone. But this stick was economically

valueless to lowa Coal, as the state trial court specifically

found. (App. 31la-34a; 52a-54a.) This resulted in a cate-

gorical regulatory taking under both Lucas and Keystone.*

4 In a half-hearted attempt to further distinguish the ordi-

nance involved in this case from those in Lucas and Keystone, the

lowa Supreme Court hinted a categorical regulatory taking

might not be present because landfilling can be a “harmful use”

and is potentially a nuisance. lowa Coal, supra, 494 N.W.2d at __

(App. 14a-15a). But this ignores the fact that the lowa Depart-

ment of Natural Resources, the government expert in this field,

issued a landfilling permit for Star 14. It also ignores the state

trial court’s findings on the issue.

Interestingly, the Lucas Court anticipated this argument

when it observed a public body could not properly label a

The lowa Supreme Court circumvented this result by

engaging in the three part Penn Central regulatory takings

test. But this test was never implicated, given the totality

of the regulatory taking by County’s zoning ordinance.

County specifically was informed that adoption of the

ordinance would bankrupt Iowa Coal, because coal min-

ing alone could not be conducted profitably. (App. 32a;

52a.) Despite this knowledge, County adopted its ordi-

nance that left lowa Coal with (conditionally) that one

economically valueless stick in its prior bundle of prop-

erty rights, coal mining. From a property use standpoint,

County’s zoning ordinance as adopted is no different in

economic substance than had County’s ordinance also

completely prohibited Iowa Coal from strip mining the

Star 14 site. Had County’s zoning ordinance done this,

then (presumably) even the lowa Supreme Court would

have had no difficulty in finding that a categorical regula-

tory taking of lowa Coal’s property occurred. The entire

bundle of lowa Coal’s property rights would have been

taken by that ordinance. The single distinguishing feature

between these cases is the ordinance as adopted left one

landfill as a nuisance for takings purposes where there is no

evidence that the landfill will adversely effect adjoining proper-

ties:

On this analysis [nuisance exception to compensation

for regulatory taking], the owner of a lake bed, for

example, would not be entitled to compensation

when he is denied the requisite permit to erigage ina

landfilling operation that would have the effect of flood

ing others’ land.

Lucas, supra, 550 U.S. at__, 112 S.Ct. at 2900, 120 L.Ed.2d at 821

(emphasis added).

valueless stick in lowa Coal’s bundle of rights (condi-

tionally) untouched, whereas the hypothetical ordinance

took that valueless stick along with the economically

valuable ones taken by the actual ordinance.

This is the very distinctions in regulatory takings

jurisprudence that properly has been rejected by this

Court in Lucas and Keystone (both the majority and dis

senting opinions). The lowa Supreme Court erred in

accepting the distinction as part of federal regulatory

takings law. If the state supreme court’s opinion is

allowed to stand, then the fifth amendment takings

clause is emasculated in the state of lowa. An lowa gov-

ernment body, to avoid its constitutional obligation to

pay just compensation for categorical regulatory takings,

merely would need to adopt a regulation which pro-

scribes all economically viable uses of an owner's prop-

erty rights, but leaves the owner with one or more

potentially remaining uses that are economically value-

less. This result cannot be endorsed under the fifth

amendment. This Court should grant lowa Coal’s petition

and issue the writ to the lowa Supreme Court.

lil. THE IOWA SUPREME COURT DECIDED THE

REGULATORY TAKINGS CLAIM UNDER THE

FIFTH AND FOURTEENTH AMENDMENTS IN A

WAY THAT CONFLICTS WITH APPLICABLE

DECISIONS OF THE UNITED STATES SUPREME

COURT AND THE FEDERAL CIRCUIT COURT

OF APPEALS.

A. The State Court Decision Conflicts With The

Supreme Court's Lucas And Keystone Decisions.

For the reasons stated at divisions | and II of this

petition, the opinion of the lowa Supreme Court dramatically

departs from this Court’s controlling fifth amendment

regulatory takings cases. As a result of the state court’s

decision, owners of property rights in lowa are not pro

tected by the fifth amendment when they are stripped of

all economically valuable uses of their property by gov

ernment regulation. This is now the result in lowa even

when the regulation, such as County’s zoning ordinance,

is adopted with the public body’s knowledge that the

property owner will be bankrupted and suffer the full

burden of the regulation supposedly adopted to benefit

the public as a whole. This result is inconsistent with the

protection accorded by the fifth amendment and _ this

Court’s rulings in Lucas and Keystone. Accordingly, under

Sup. Ct. Rule 10.1(c), there exist “special and important

reasons” for this Court to exercise its discretion and grant

this petition.

B. The State Court Decision Conflicts With The

Federal Circuit’s Whitney Benefits Decision.

In Whitney Benefits, Inc. v. United States, 926 F.2d 1169

(Fed. Cir.1991), cert. dented, U.S ,1125.Ct. 406, 116

L.Ed.2d 354 (1991), the appeals court affirmed a claims

court ruling that awarded a lessee of coal mining rights

over $60 million for a regulatory taking by the United

States. The regulation at issue was the Surface Mining

Control and Reclamation Act. That act “expressly pre-

cluded a permit for surface mining an AVF [alluvial val-

ley floor]... in terms precisely applicable to, and known

to be applicable to, the AVF overlying the Whitney Coal

property.” /d. at 1170. Because of the act, Whitney Bene-

fits could not receive a permit to surface mine the coal

located within the AVF covered by its lease. The govern

ment argued a taking did not occur because Whitney

Benefits retained other uses for the property, specifically,

mining under the AVF surface and farming and ranching

on the surface. The Whitney Benefits court rejected the

government's position and held that a categorical regula

tory taking occurred because the act deprived Whitney

Benefits of that one economical use, surface mining, for

which it had expended funds in acquiring leasehold

rights and preparing, its property for surface mining

Anticipating this Court’s Lucas decision, the Whitney Ben

efits court ruled a taking occurred because the act made it

“impossible for [Whitney Benefits] to engage in their

business profitably,” although other (nonprofitable) uses

could be made of the property as the government had

suggested. Id. at 1179, and 1179 n. 9. The Whitney Benefits

court distinguished its decision from the Keystone opin-

ion, where the majority found no taking of the property

right to mine coal, on the basis that “evidence of value

destruction [was] wanting” in Keystone, unlike Whitney

Benefits. Id. at 1176-77

Like the lessee of coal mining rights in Whitney Bene-

fits, lowa Coal expended thousands of man hours and

hundreds of thousands of dollars in acquiring leasehold

rights and preparing the Star 14 site as a combined coal

mine and landfill operation. This lawful and economi-

cally valuable use was taken by County through its adop-

tion of the zoning ordinance. Like the regulation involved

in Whitney Benefits, County’s zoning ordinance rendered

it “impossible for [lowa Coal] to engage in [its] business

profitably.” Unlike Keystone, evidence of the dramatic and

serious economic effect on lowa Coal’s business was not

wanting. State trial court made detailed findings that the

ordinance rendered the Star 14 site economically value

less and put Iowa Coal out-of-business

The jowa Supreme Court’s opinion is in conflict with

the Whitney Benefits decision. Accordingly, under Sup. Ct

Rule 10.1(b), there exist “special and important reasons”

. . a ,

for this Court to exercise its discretion and grant this

petition

CONCLUSION

[he lowa Supreme Court failed to properly apply

recent and controlling fifth amendment precedent of thi:

Court and the Federal Circuit Court of Appeals when it

reversed substantial damages awarded to lowa Coal for

the regulatory taking effected by County’s adoption of

ordinance no. 6. The state supreme court’s opinion

absolves County from suffering the constitutional pent

tence of paying just compensation for rendering Star 14

ecconomically idle and lowa Coal’s property rights value

less. It further grants lowa governmental bodies immu-

nity from the fifth amendment’s requirement that just

compensation be paid for the taking of valuable property

rights. Because the fifth amendment’s core protection of

these rights is directly and dramatically implicated, the

United States Supreme Court should grant this petiti

and order full briefing of the important issues raise

Respectfully submitted,

S PP DeVorver lames Q. BLOMCREN

(Counsel of Record) POTHOVEN, BLOMCREN &

Ro Jerrkey Lewis S TRAVERS

JosevH G. VAN WinKts 1201 High Avenue, West

(sAMBLE & Davis Oskaloosa, lowa 52577

A Professional ¢ Orporation (515) 673-4438

2600 Ruan Center

Des Moines, lowa 50309-2577

(515) 243-6251

Petition

ral

fed,

TABLE OF CONTENTS

Opinion of the lowa Supreme Court of 01-20-93

j }

Denial of Petition for Rehearing of the lowa

Supreme Court of 02-18-93

Damages Ruling of the State Trial Court of

06-18-91

Liability Ruling of the State Trial C ourt of 12-22-89

County Zoning Ordinance No. 6

lowa Coal Petition of 05-05-88

APPENDIX

IN THE SUPREME COURT OF IOWA

No. 339/91-1237

Filed January 20, 1993

IOWA COAL MINING COMPANY, INC,

STAR COAL MINING COMPANY, INC.,

and JIM HUYSER,

Appellees,

MONROE COUNTY, IOWA,

Appellant

Appeal from the lowa District Court for Monroe

County, James P. Rielly, Judge

County challenges substantial verdict for a coal com-

pany in suit over zoning ordinance. REVERSED AND

REMANDED WITH DIRECTIONS

Lee H. Gaudineer of Austin, Gaudineer, Austin

Salmons & Swanson, Des Moines, and Annette scie-

szinski, Special Assistant County Attorney, Albia, for

appellants.

R. Jeffrey Lewis, Joseph G. Van Winkie, and 5S.P

DeVolder of Gamble & Davis, ?.C., Des Moines, for appe!-

lees lowa Coal Mining Company, Inc. and Star Coal Min-

ing Company, Inc.

James Q. Blomgren and Randall C. Stravers of Pot-

hoven, Blomgren & Stravers, Oskaloosa, for appellee Jim

Huyser.

Considered by Larson, P.J., and Schultz, Carter,

Lavorato, and Neuman, JJ.

NEUMAN, J.

This case concerns a coal company’s attempt to

increase its profitability by merging its strip mining oper-

ation with a solid waste landfill. The company’s zeal in

pursuing the venture was exceeded only by the county’s

speed in enacting a zoning ordinance to restrict it. The

question is whether the county thereby violated statutory

zoning laws or so burdened the coal company with a

regulatory taking that it is entitled to just compensation

under our state and federal constitutions.

Focusing solely on the statutory claim, the district

court invalidated the county’s zoning ordinance and

entered multimillion dollar judgments for the company

and its owner. We now reverse those awards on the

county’s appeal.

I. Background facts and proceedings. Plaintiff lowa

Coal Company, and its wholly owned subsidiary, plaintiff

Star Coal, are corporations having their principal place of

business in Monroe County, lowa. Plaintiff Jim Huyser is

president and sole shareholder of both corporations. He

also owns the leasehold interests in the mining proper-

ties. Those leases have been assigned to Star Coal in

exchange for royalties paid to Huyser on the basis of

tonnage mined and sold. Throughout this opinion these

plaintiffs shall be collectively referred to as “Iowa Coal.”

lowa Coal is engaged in strip mining. This process, in

contrast to underground mining, removes the coal closest

to the surface, proceeding deeper until the cost of remov-

ing the coal (plus the “overburden”) exceeds its value.

Although the company had enjoyed a decade of sizable

profits, by early 1987 the mining operation was only

breaking even; that is, the cost of obtaining the coal

product for sale was roughly equal to the sales achieved.

To counteract the impact of fluctuating coal prices

and to increase its profitability, lowa Coal embarked ona

plan to merge its coal mining with a solid waste disposal

operation. Iowa Coal was already engaged in the landfill

business, to a limited extent, at one of its mines known as

Star 6. Although relatively small (10.3 acres) and never

fully developed, Star 6 held a state permit to accept coal

by-products, such as fly ash. It also had a permit to accept

tires.

lowa Coal identified one of its other and much larger

(350 acres) coal leases, known as Star 14, as a potential

landfill site which would complement strip mining, but

only if the two operations were synchronized. Traditional

strip mining techniques destroy a site’s usefulness for

landfilling because the mine proceeds in a circular fash-

ion around the coal outcrop, removing all the shallow

coal first. To combine strip mining with a landfill, the

operator must make straight cuts and remove both the

shallow and deep coal to create an air space or “physical

cell” where waste may be deposited. The idea is that the

additional cost of excavating the deeper coal will be more

than offset by fees generated upon the creation of a new

resource: the large cell in which to deposit waste. Addi-

tionally, the potential cost of this diversification is mini-

mized by the fact that both processes (mining and

landfiliin,,, employ similar earthmoving equipment and

expertise.

In January 1988, lowa Coal sought a landfill permit

from the lowa Department of Natural Resources for Star

14. Although the proposed landfill was designed to meet

or exceed existing regulatory rules, swift approval of the

permit was desired to avoid compliance with the more

stringent requirements of the lowa Groundwater Act of

1987 to take effect in July 1988. Thus at the time Iowa

Coal submitted its application, leachate collection and

treatment systems were not required to be planned or in

place before the permit could be granted. Nor did the

application need to contain a plan for methane gas collec-

tion. Financial assurance plans were not yet required, nor

were any plans for closure or postclosure maintenance.

lowa Coal’s ability to proceed unburdened by these

restrictions would not only reduce its expenses but also

enhance the landfill’s attractiveness to potential users.

lowa Coal’s plans did not proceed unnoticed by

Monroe County residents and its board of supervisors. In

October 1987, the county hired Alan Heuton, senior plan-

ner for the Area XV Regional Planning Commission, to

upgrade the county land use map. Heuton’s contract

expressed the county’s expectation that the new map and

its accompanying text “when legally adopted in accor-

dance with chapter 358A of the Code of Iowa, shall

become the Monroe County Zoning Ordinance.” Heuton

proceeded to make a physical inspection of Monroe

County and its current land use, and studied documents

previously prepared by the Regional Planning Commis-

sion. He then drafted a sixty-two page ordinance propo-

sing permitted and conditional uses in each district, and

the administration of the zoning scheme. This draft was

considered by the newly appointed zoning commission at

its first meeting in March 1988.

As initially drafted, the ordinance allowed both land-

filling and mining as conditional uses in an A-2 agri-

cultural district. Star 6 and Star 14 are located in an A-2

district. After meeting with Heuton, the zoning commis-

sion revised the draft ordinance to permit landfilling as a

conditional use on I-2 (heavy industrial) land only. The

commission believed that the heavy traffic and equip-

ment associated with a landfill presented environmental,

safety, and road maintenance concerns best accommo-

dated by the I-2 classification.

Several public meetings were held at which Huyser

and others objected to and commented upon the pro-

posed ordinance. Because the proposed ordinance per-

mitted strip mining as a conditional use in both A-2 and

I-2 districts, but confined landfills to I-2, lowa Coal could

continue strip mining but could not combine the opera-

tion with a landfill.

Upon vote of the commission on April 21, 1988, it

forwarded the proposed ordinance to the board of super-

visors for adoption. By May 12, 1988, it had been formally

read by the board at three consecutive meetings and

enacted into law. We shall refer to it in this opinion as

“Ordinance 6.”

aa caaalls

Meanwhile, the Department of Natural Resources

held public hearings on lowa Coal’s landfill permit appli-

cation. The permit was not approved until May 13, 1988.

lowa Coal subsequently applied for rezoning to accom-

modate its planned landfill/mining operations at Star 6

and 14. The Monroe County Board of Supervisors denied

the request and this suit followed.

lowa Coal’s suit against Monroe County, as amended,

sought relief by way of certiorari and declaratory judg-

ment. The petition alleged the illegality of the county’s

enforcement of Ordinance 6, claimed the ordinance

deprived Iowa Coal of the only legitimate use of its

property without providing just compensation, and

sought damages. The court conducted two trials on the

issues raised; the first addressed the county’s alleged

“liability,” and the second covered damages.

Based on the facts outlined above, the district court

concluded that the county violated Iowa Code section

358A.5 because it “failed to develop a Comprehensive

Plan prior to the enactment of a Zoning Ordinance.”

(Emphasis added.) Without this statutory compliance, the

court ruled, the county exceeded its jurisdiction thereby

rendering the ordinance void and unenforceable. The

court then authorized a second trial on the damages

sustained by lowa Coal as a result of the county’s “illegal

and unconstitutional” acts.

In its ruling following a lengthy trial on damages, the

court rested its award on plaintiff’s loss of business

opportunity, measured “by proof of the present value of

lost profits and lost royalties that Plaintiffs would have

received absent the illegal acts of the Defendants.” By this

enemies ieee |

standard, the court calculated Iowa Coal’s loss at

$10,319,526 and Jim Huyser’s loss at $5,047,972, and

entered judgment accordingly. This appeal by Monroe

County followed.

II. Issues on appeal. The thrust of the county’s

appeal is, like the district court opinion, directed solely at

the alleged statutory invalidity of Monroe County’s zon-

ing ordinance. Thus the county claims the court commit-

ted legal error when it found a statutory violation, and

magnified the mistake by sustaining a private cause of

action in damages for its breach. The county also attacks

the size and scope of the award on other grounds, includ-

ing the sufficiency of the evidence to support it and the

measure by which it was calculated. Finally the county

claims the award cannot stand because it violates the

constitutional debt limit imposed on counties.

Iowa Coal responds by urging affirmance on consti-

tutional as well as statutory grounds. We have recognized

that a party for whom a favorable judgment has been

rendered may attempt to save the judgment by urging

any ground asserted in the trial court. Scott v. City of

Sioux City, 432 N.W.2d 144, 147 (lowa 1988); Citizens

Against the Lewis & Clark (Mowery) Landfill v. Pottawat-

tamie County Bd. of Adjustment, 277 N.W.2d 921, 926 (lowa

1979). Thus the controlling issues as we see them are (1)

whether the county violated Iowa Code section 358A.5

and, if not, then (2) whether Ordinance 6, as enacted,

amounted to a taking of lowa Coal’s property entitling it

to just compensation.

Ill. Scope of review. This combined certiorari-

declaratory judgment action was tried at law in the dis-

trict court. Thus our review would ordinarily be limited

to the correction of errors at law. Neuzil v. City of Iowa

City, 451 N.W.2d 159, 163 (lowa 1990). Here we are con-

fronted with both statutory and constitutional claims. On

the statutory claim we are bound by the trial court’s well

supported factual findings, but not its conclusions of law.

Id. The existence of a constitutional issue requires us to

review de novo the evidence bearing on that claim. Mont-

gomery v. Bremer County Bd. of Supervisors, 299 N.W.2d

687, 692 (lowa 1980).

IV. Discussion.

A. Statutory claim. The foundation for the district

court’s sizable award is its finding that Monroe County

did not adopt its zoning ordinance in conformity with

lowa Code section 358A.5. That section, contained in a

chapter empowering county boards of supervisors to reg-

ulate and restrict land use and structures within the

county, provides:

The regulations shall be made in accordance

with a comprehensive plan and designed to pre-

serve the availability of agricultural land; to

consider the protection of soil from wind and

water erosion; to encourage efficient urban

development patterns; to lessen congestion in

the street or highway; to secure safety from fire,

flood, panic, and other dangers; to protect

health and the general welfare; to provide ade-

quate light and air; to prevent the overcrowding

of land; to avoid undue concentration of popula-

tion; to promote the conservation of energy

resources; to promote reasonable access to solar

energy; and to facilitate the adequate provision

of transportation, water, sewerage, schools,

parks and other public requirements... .

Such regulations shall be made with reason-

able consideration, among other things, as to the

character of the area of the district and the pecu-

liar suitability of such area for particular uses,

and with a view to conserving the value of

buildings and encouraging the most appropriate

use of land throughout such county.

lowa Code § 358A.5 (emphasis added).

Focusing on the statute’s mandate that such regula-

tions proceed only “in accordance with a comprehensive

plan,” the district court found — as a factual matter — that

no planning document existed apart from the county’s

sixty-two page zoning ordinance. It then concluded - as a

matter of law —- that without such a planning document,

adopted prior to and independent of the zoning ordi-

nance itself, the county was without legal authority to

enact a zoning ordinance. It is this legal conclusion, not

the court’s factual finding, that the county challenges on

appeal. We agree that the district court’s narrow con-

struction of the statute is not in keeping with the great

weight of authority.

This court has not previously ruled whether a county

must demonstrate written evidence of a plan as well as a

zoning ordinance when it initiates countywide zoning.

But in the context of rezoning, this court has held that

compliance with the comprehensive plan requirement

merely means that zoning authorities have given “full

consideration to the problem presented, including the

;

10a

needs of the public, changing conditions, and the sim-

ilarity of other land in the same area.” Montgomery, 299

N.W.2d at 695. Noting the flexibility of this standard, the

lowa Court of Appeals recently observed that “nothing in

chapter 358A requires a county to reduce a comprehen-

sive plan to written form.” Webb v. Giltner, 468 N.W.2d

838, 840 (lowa App. 1991). It then ruled that once a plan

is adopted officials are not free to ignore it in favor of

some other “comprehensive” plan of their choice. Id. The

court reasoned that fidelity to “the” comprehensive plan,

“whether inherent in the zoning ordinance or a separate

written document,” reduces the risk of arbitrary decision

making, lending stability and predictability to the zoning

process. Id. at 840-41.

These comments from Webb and Montgomery, though

dicta and not controlling in the case before us, reflect the

widely-held views of commentators in the field. Zoning

“in accordance with a comprehensive plan” does not

require that there be a planning document separate from

the zoning ordinance itself. Vestal, Iowa Land Use and

Zoning Law § 3.01(d) at 67 (1980). To the contrary, a

comprehensive plan is traditionally evidenced by a zon-

ing ordinance which is “precise in its terms, gives notice

of its restrictions and is geographically complete.” 6 P.

Rohan, Zoning and Land Use Controls § 37.01[1][b] at 37-7

(1991). Thus the planning necessary to implement a com-

prehensive zoning scheme need not be reduced to writ-

ing; it may be found in the ordinance itself. McQuillin,

Municipal Corporations § 25.78 at 287 (3d ed. 1991); 83 Am.

Jur. 2d Zoning and Planning § 17 at 48 (1992). The statu-

tory validity of such a “self-contained” zoning ordinance

must ultimately be tested, not by the existence of some

lla

freestanding planning document, but by whether the

ordinance advances the community’s interest rather than

that of private owners. Zoning and Land Use Controls

§ 37.02[1] at 37-25.

We deem it significant that apart from the lack of an

independent plan, and a generalized criticism of the

speed with which Monroe County enacted its zoning

ordinance, the district court found no fault with the sub-

stance of Ordinance 6. It would unduly lengthen this

opinion to detail, item by item, the ways in which the

zoning classifications within Ordinance 6’s sixty-two

Pages correspond to the essential considerations listed in

section 358A.5. Because the merits of the Ordinance itself

are not being challenged, we believe it sufficient to say

that it is comprehensive in its scope, uniform in its appli-

cation to properties having similar qualities and location,

and advances community needs ahead of private con-

cerns.

We hold that it was erroneous for the court to invali-

date Ordinance 6 on the ground no independent planning

document preceded it. Iowa Code section 358A.5, in

keeping with similar statutes adopted nationwide, does

not mandate such procedure. Cf. Wolf v. City of Ely,

N.W.2d __ (Iowa 1992) (reaching same conclusion

regarding lowa Code section 414.3, governing municipal

zoning). It is sufficient — particularly when dealing with a

predominantly rural area ihe size and population of Mon-

roe County - that planning merely be evidenced by the

ordinance itself. The district court’s contrary ruling on

this point, and the judgment for damages premised on its

conclusions, must be reversed.

12a

B. Regulatory taking claim. Left unaddressed by the

district court was lowa Coal’s inverse condemnation

claim. The company asserted that the enactment of Ordi-

nance 6, and the county’s subsequent refusal to rezone

lowa Coal’s property to I-2 in order to permit combined

coal mining and waste disposal, denied plaintiffs “the

only legitimate use of their property.” As a result, lowa

Coal claimed, it was forced to shut down its operation

completely, causing substantial and irreparable damage.

In its most recent analysis of a takings claim, the

United States Supreme Court equated the impact of con-

fiscatory regulation — that is, “regulation that prohibits all

economically beneficial use of land” — with the “perma-

nent physical occupation” that typifies the sort of taking

that has, without exception, given rise to a right of just

compensation. Lucas v. South Carolina Coastal Council, 505

U.S. __, __, 112 S. Ct. 2886, 2900, 120 L. Ed. 2d 798, 821

(1992) (emphasis added); see also Fitzgarrald v. City of lowa

City, __ N.W.2d __, __ (lowa 1992) (if some physical

invasion is demonstrated there is no de minimis rule).

When such a complete deprivation occurs, the fact that

the regulation advances a substantial state interest, or

otherwise protects the general welfare by preventing a

harmful use, becomes irrelevant. The regulatory author-

ity can only avoid compensation if it can be shown that

the property owner’s “bundle of rights” never included

the right to use the land in the way the regulation forbids.

Lucas, 505 U.S. at __, 112 S. Ct. at 2899, 120 L. Ed. 2d at

820.

Short of a physical invasion by the government, or

the “total taking” conceived in Lucas, this court has also

recognized that regulatory schemes which substantially

13a

deprive a landowner of the use and enjoyment of prop-

erty may be compensable. E.g., Fitzgarrald, N.W.2d at

___; Easter Lake Estates, Inc. v. Polk County, 444 N.W.2d 72,

75 (lowa 1989); Phelps v. Board of Supervisors, 211 N.W.2d

274, 276 (lowa 1973). Finding the point at which this

exercise of police power becomes a taking requires a case-

by-case examination. Woodbury County Soil Conservation

Dist. v. Ortner, 279 N.W.2d 276, 278 (lowa 1979).

This ad hoc approach calls for a test that “is essen-

tially one of reasonableness.” Stone v. City of Wilton, 331

N.W.2d 398, 404 (lowa 1983). Three factors generally

guide the inquiry: (1) the economic impact of the regula-

tion of the claimant’s property; (2) the regulation’s inter-

ference with investment-backed expectations; and (3) the

character of the governmental action. Penn Cent. Transp.

Co. v. New York City, 438 U.S. 104, 124, 98 S. Ct. 2646, 2659,

57 L. Ed. 2d 631, 648 (1978); Ortner, 279 N.W.2d at 278; see

also Keystone Bituminous Coal Ass’n v. DeBenedictis, 480

U.S. 470, 485, 107 S. Ct. 1232, 1241-42, 94 L. Ed. 2d 472,

488 (1987).

Despite Iowa Coal’s claim to the contrary, this is not,

like Lucas, a “total taking” case. Lucas involved the claim

of a developer who purchased two lots on a barrier island

off the coast of South Carolina specifically for the pur-

pose of building single family dwellings consistent with

the zoning then in place. Two years later the state passed

a beachfront management act which barred the construc-

tion of any permanent habitable structures on the lots,

thereby rendering the property valueless to the devel-

oper. Lucas, 505 U.S. at __, 112 S. Ct. at 2889, 120 L. Ed.

2d at 807. Remanding the case for further proceedings on

whether the proposed development would violate the

a ae ae

14a

state’s common law of nuisance, the Court ruled that

when “a regulation that declares ‘off-limits’ all economi-

cally productive or beneficial uses of land goes beyond

what [state nuisance law] would dictate, compensation

must be paid to sustain it.” Id. at ___, 112 S. Ct. at 2901,

120 L. Ed. 2d at 822.

Here the evidence is quite clear that the leases for

Star 14 and Star 6 were acquired by Iowa Coal in anticipa-

tion of strip mining, not solid waste disposal. More

importantly, the economic viability of mining, at least at

Star 14, is only diminished by Ordinance 6’s restriction on

landfilling, not destroyed by it. The record reveals that

Star 14’s shallow coal reserves have not yet been mined

and are, therefore, not yet burdened by the unfavorable

“stripping ratios” that had made Iowa Coal’s older sites

unprofitable. lowa Coal insists that to mine Star 14 in the

traditional way would destroy the potential for ever

developing the site for combined mining-landfill opera-

tion, the most economically beneficial use of the land. But

deprivation of the most beneficial use of property does

not render an otherwise valid exercise of police power a

taking. Stone, 331 N.W.2d at 404. See also Goldblatt v. Town

of Hempstead, 369 U.S. 590, 592, 82 S. Ct. 987, 989, 8 L. Ed.

2d 130, 133 (1962); Penn Central, 438 U.S. at 131, 98 S. Ct.

at 2662, 57 L. Ed. 2d at 652-53.

Nor do we believe the evidence demonstrates entitle-

ment to compensation under the three-factor substantial

deprivation test of Penn Central and Ortner. Taking the

factors in reverse order, we note that the nature of the

government action involved — zoning to regulate, among

other things, the siting of sanitary landfills — is peculiarly

within the government’s power to regulate the health and

EE eo

15a

welfare of the community. See Keystone, 480 U.S. at 485,

107 S. Ct. at 1242, 94 L. Ed. 2d at 488 (state’s action in

enforcing subsidence act to preserve structural support

for surface estates above coal mines directed at signifi-

cant treat to common welfare and thus “leans heavily

against finding a taking”); Stone, 331 N.W.2d at 403 (zon-

ing to control population density rationally furthers pub-

lic welfare).

As for any claim of interference with Iowa Coal’s

investment-backed expectations, we have already noted

in our rejection of the “total taking” claim that Iowa

Coal’s initial investment in Star 14 was not for the pur-

pose of developing a solid waste disposal site. Thus the

majority of its resources were already invested in expec-

tation of strip mining. In fact, lowa Coal’s own proof

suggests that its capital investment in any landfill opera-

tion would be minimized because of the similarity in

equipment and essential personnel involved in both

industries. See Stone, 331 N.W.2d at 404 (where no mate-

rial is placed on site and no construction work begun,

plaintiff’s efforts and expenditures prior to rezoning not

so substantial as to create vested right in particular land

use). It also appears that the cost expended in planning

and promoting this proposed landfill project paralleled,

rather than predated, the county’s action, further weak-

ening lowa Coal’s claim.

Finally, we do not believe that the ordinance’s pro-

jected impact on Iowa Coal’s profitability outweighs the

county’s undisputed right to reasonably regulate land use

within the county. Unlike the Whitney case, upon which

Iowa Coal heavily relies, the regulation at issue here is no

l6a

way prevents lowa Coal from mining as before. In

Whitney, the enactment of legislation to prohibit surface

mining on the alluvial valley floor overlying plaintiff's

mines effectively barred plaintiff's access to its coal

reserves, thereby entitling it to compensation for a total

taking of a specific coal deposit. Whitney Benefits, Inc. v.

United States, 926 F.2d 1169, 1172 (Fed. Cir.), cert. denied,

__ U.S. __, 112 S. Ct. 406, 116 L. Ed. 2d 354 (1991). Here,

lowa Coal’s reserves are still accessible. The profitability

of their recovery turns as much, if not more, on market

economics than any regulation imposed by the county.

In summary, we conclude that Monroe County has

not substantially deprived lowa Coal of its use and enjoy-

ment of the Star 14 mine. Hence we find no taking upon

which to sustain lowa Coal’s claim of compensation.

Iowa Coal’s claim for the Star 6 site fails for a differ-

ent reason. As noted earlier in his opinion, lowa Coal

held a valid state permit to accept certain wastes at Star 6,

and was using the mine as a landfill on a limited basis

before the enactment of Ordinance 6. The ordinance

expressly allows existing nonconforming uses to con-

tinue. The record reveals, however, that lowa Coal never

sought to take advantage of this section of the ordinance.

Unless a claimant exhausts available state remedies, a

court is without jurisdiction to entertain a claim that the

economic viability of the property has been substantially

impaired by the zoning ordinance. Bakken v. City of Coun-

cil Bluffs, 470 N.W.2d 34, 37 (lowa 1991). Iowa Coal’s

claim as it pertains to Star 6 was not ripe for adjudication.

17a

Accordingly, we reverse and remand this claim for dis-

missal as premature. See id. at 38.

REVERSED AND REMANDED WITH DIREC-

TIONS.

ial i

18a

IN THE SUPREME COURT OF IOWA

No. 91-1237

ORDER

(Filed FEB 18 1993)

IOWA COAL MINING COMPANY, INC.,

STAR COAL MINING COMPANY, INC.,

and JIM HUYSER,

Appellees,

VS.

MONROE COUNTY, IOWA,

Appellant.

After consideration by the court, en banc, appellees’

Petition for Rehearing in the above-captioned case is

hereby overruled and denied.

Dated this 18th day of February, 1993.

THE SUPREME COURT OF IOWA

/s/ Arthur A. McGiverin

Arthur A. McGiverin

Chief Justice

Copies to:

James Q. Blomgren

1201 High Avenue West

P.O. Box 1066

Oskaloosa, IA 52577

es’

19a

R. Jeffrey Lewis

Joseph G. Van Winkle

S. P. DeVolder

2600 Ruan Center

Des Moines, IA 50309-2577

Lee H. Gaudineer

900 Des Moines Building

Des Moines, IA 50309

Annette J. Scieszinski

13 South Clinton

Albia, IA 52531

John G. Fletcher

1100 Two Ruan Center

Des Moines, IA 50309

Marsha Ternus

801 Grand Avenue

Suite 3700

Des Moines, IA 50309

20a

IN THE IOWA DISTRICT COURT

FOR MONROE COUNTY

IOWA COAL MINING _ )

COMPANY, INC., STAR _ )

COAL MINING )No. CL 54-0588

COMPANY, INC., and JIM) CL 1-54

HUYSER, ) CL 72-1088

Plaintiffs, CL 1-72

x | FINDINGS OF FACT,

CONCLUSIONS OF LAW

BILLY K. MYERS, | AND JUDGMENT ENTRY

preterit heap

oan <a ae sth ) (Filed June 19, 1991)

BOARD OF

SUPERVISORS OF

MONROE COUNTY, |

IOWA, and MONROE

COUNTY, IOWA,

_ ~— — ~~ —

Defendants,

and

IDF ACQUISITION |

CORP.,

Intervenor

Plaintitts, on May 5, 1988, tiled herein their Petition

tor Writ of Certiorari, Declaratory Reliet and Temporary

Injunction in case No. CL 54-0588, and on October 25,

1988, Plaintiffs also filed a Petition for Writ of Certiorari

and Declaratory Relief in case No. CL 72-1088. These

cases were Consolidated for trial and, based upon agree-

ment of the parties, the issues of liability and damages

were bifurcated for the purposes of trial. The Court filed

its Findings of Fact, Conclusions of Law and Decree on

ion

ary

fn A

rari

ese

ee-

yes

led

i. ’

21a

liability issues on December 27, 1989. In its Decree the

Court ordered that the Plaintiffs were entitled to proceed

on the bifurcated issue of damages

Upon the issues as tendered by the pleadings and the

Court’s Findings of Fact, Conclusions of Law and Decree

of December 27, 1989, these cases were tried at law to the

Court commencing on March 12, 1991, and trial was

adjourned on March 22, 1991. Trial recommenced on

April 6, 1991, and concluded on April 15, 1991. At that

time the Plaintiffs and Defendants requested leave of

Court to file proposed Findings of Fact, Conclusions of

Law and Decree and Post-Trial Briefs, and the Court set a

deadline of May 17, 1991 within which to file such mat-

ters. The Court has now received the post-trial filings on

behalf of all Plaintiffs and Defendants and the (© our!

considers these matters fully submitted for a ruling.

From the evidence received at trial, the Court makes

the following

FINDINGS OF FACT

Star Coal Mining Company, Inc., hereinafter reterred

to as “Star Coal,” and lowa Coal Mining Company, inc

hereinafter referred to as “lowa Coal” are lowa corpora-

tions that have been in operation in lowa since 1947 and

1978, respectively. Star Coal has mined coal and operated

a coal washing plant in Monroe County, and lowa Coal

has functioned as the marketing arm of the original star

Coal. Star Coal is the wholly owned subsidiary of |owa

Coal, and all of the shares of stock in lowa Coal are

owned by Jim Huyser, Plaintiff in this action. Star Coal

22a

and lowa Coal have operated profitably during the years

of their existence through 1987.

In the early 1980’s Star Coal was the first coal mining

company to open a wash plant in lowa to wash lowa coal

so it would burn cleaner. The wash plant was constructed

in approximately 1980 at a cost of over $2 million. This

project was paid for from the cash flow of the operations

of the coal mining operation. The essential purpose of the

wash plant was to wash certain impurities that existed

naturally in the coal. Washing lowa coal allows it to burn

cleaner and more efficiently and made it a more salable

product for the consumers of Iowa Coal. Annual saies of

the Star Coal operations exceeded $10 million on a regu-

lar basis until 1988.

In addition to being the shareholder of lowa Coal,

lim Huyser has been President of Star Coal and lowa

Coal Corporation for over ten years. The coal mining

business was founded by Art Huyser, Jim Huyser’s

father, who remained active in the business until his

death in 1984.

The coal mining entities obtained the properties upon

which coal was mined through leases with the land-

owners. The leases were obtained by Jim Huyser in his

own name and then assigned to Star Coal in consider-

ation of a royalty payment to be paid to Jim Huyser. The

royalties were paid to him upon the basis of coal tonnage

mined and sold from the properties that were leased. Jim

Hluyser’s tax returns (Defendant's Exhibits U and V)

retlect that over the years he received substantial roy-

alties for Coal mined and sold, which royalties at times

exceeded $295,000 per year.

23a

The evidence shows that the market for lowa coal has

traditionally been a cyclical market with prices that var-

ied from year to year. The coal prices received by any

entity selling coal varied depending upon the quality of

the coal mined and other energy supplies available. Star

Coal was actively marketing its coal and was involved

with coal customers throughout the State of Iowa during

the time that it was in operation. [t had bid upon and

obtained ten year contracts to supply coal to various coal

consumers in the state. In the mid 1980's, Star Coal com-

menced the Superior Coal operation, which was a com-

pletely separate company and which was operated on its

own. Superior Coal was an entirely underground mine as

opposed to Star Coal which operated only surface mines.

Star Coal and Superior Coal operations were interrelated

as a result of financing arrangements and the efforts to

support Superior Coal financially from internal sources.

Superior Coal, however, ran into geological problems in

its mining operation and in the maintenance of the under-

ground mine. The particular problem involved geological

formations known as a “buried valley” which made min-

ing unsafe and at times made it impossible to actually

mine and process coal from the underground mine.

In July of 1987, the Superior Coal mine was closed

and its debt to Star Coal was written off. The debt that

was written off was that which remained after Superior

Coal paid a portion of the debt and transferred a portion

of its equipment to Star Coal in satisfaction for that

portion of the debt equal to the value of the equipment

transferred. The various companies had over the

approximately ten year period prior to May 1988

acquired extensive leases and option rights, and had

24a

received 15 surface mining permits and two underground

mining permits.

The economics of coal mining in southern Iowa is

controlled to a large degree by the amount of “over-

burden” over the coal seams, the coal sulfur content,

available coal supplies, and fluctuating coal prices. His-

torically, lowa Coal would mine a permitted site (desig-

nated for company and regulatory purposes as Star sites,

consecutively numbered) until the amount of overburden

or soil and other material over the coal seam made it

uneconomical to mine the site further. When the “strip-

ping ratios” became unfavorable, a new site would be

mined. After the wash plant was installed by lowa Coal

in 1980, the company was in a position to sell either

“washed coal” or “raw coal” depending upon the coal

customer’s needs. As of the spring of 1988, “raw coal”

was sold for about $18 a ton. Subsequent to 1988, the use

of “fluidized beds” in coal burning boilers enabied coal

customers to utilize coal with a higher sulfur content.

Prior to May, 1988, lowa Coal/Star Coal customers

included lowa Electric Light & Power, lowa State Univer-

sity, the University of Northern lowa, and the City of

Pella, lowa.

By 1987, notwithstanding the fact that there had been

significant profits in prior years, the mining operation

was essentially breaking even. That is, the cost of obtain-

ing the coal product for sale was roughly equal to the

sales achieved in the mining of the coal.

At that time, it was apparent to the management of

Star Coal that it would be appropriate for them to

diversify their operation and become involved in the

25a

landfilling business. Therefore, in the spring of 1987,

when Star Coal determined that it could not rely upon

fluctuating coal prices to remain profitable, it set out

upon a venture that would merge the coal mining opera-

tion with a solid waste disposal operation. This was a

natural extension of their coal mining work, since many

of the activities of the coal mining operation fit well with

the activities that would be required to maintain a suc-

cessful landfill. The equipment that would be needed

such as scrapers, front-end loaders, bulldozers, hauling

trucks and scales, could be utilized both in the coal

mining operation and in the landfill.

In addition, the technology utilized in the mining

operation with regard to the geology of sites, the environ-

mental impact of the operation and the general configura-

tion of handling the materials was similar Prior to May,

1988, lowa Coal and Star Coal employed about 100 peo-

ple, and in the fiscal year ending June, 1988, had a payroll

of $1,019,477, not including administrative salaries.

(Exhibit CC). Key employees included James Huyser

(president), LaDonna Fechtling (bookkeeping /account-

ing), Kenny Rennells (purchasing /equipment/mainte-

nance), Dan Toll (permitting /equipment/mining

operations) and Randy Luwe (permitting /geology/mar-

keting). These employees as well as others had experi-

ence in marketing and leasing and the companies had

established a transportation network. Further, the com-

pany had a long and successful history of dealing with

the regulatory agencies that regulate coal mining. Coal

mining is a highly regulated industry, and the expertise

required for obtaining permits and for ongoing dealings

with the regulatory agencies would also be required in

26a

the landfill operation and would have been provided by

these employees of the Star and lowa Coal Companies

that were already on staff.

Prior to May, 1988, the management of lowa C oal/

Star Coal had historically demonstrated an ability to

operate profitably in the business of producing and sell

ing their coal in lowa. The earliest financial statements

tor the Companies in evidence is for the fiscal year ending

June 30, 1984 (Exhibit Y). At the end of that fiscal year,

the company, for accounting purposes, had retained earn

ings of $3,237,715, reflecting substantial profits in prior

years, and cash and cash equivalents of $1,133,167. In

tiscal vear ending June 30, 1985 (Exhibit Y), the com

panies had a net income of $351,253, cash and cash equiv

alents of $1,808,261. [sic] and retained earnings of

33,558,968. Exhibit Y shows that total sales for that year

amounted to the sum of $11,484,892. Some fluctuation

trom sales and income trom coal sales is, based upon

testimony of an accountant for the companies, to be

expected in the coal business. This tluction [sic] can be

seen in comparing three years of sales: 1984, $7,429,873;

1985, $11,484,892; 1986, $10,908,456. (Exhibits Y and 7).

Coal mining in the State of lowa is subject to both

state and federal regulatory schemes. The state regula-

tions are promulgated and entorced by the lowa Depart-

ment of Agriculture, the Division of Soil Conservation.

ihe federal regulations are administered by the Office ot

Surtace Mining, which has an office in Kansas City. The

Des Moines state office also assists in the administration

! the tederal regulations in addition to their own state

regulations. A monthly inspection was required by the

revulatory authorities pursuant to their rules. This

HES

27a

included specific analysis of the operating equipment at

the site of the mines

Star Coal had previously obtained a landfilling per

mit from the State of lowa. In 1984, the mining operation

known as Star 6 received a permit from the State of lowa

as a landfill site. Construction was never finalized at that

site, although there was waste deposited there from the

Star Coal wash plant. The wash plant generated waste

products, including dirt, shale, rock, coal fines and

pyrites from the washing process, which wastes were

then deposited in Star 6. In addition, at a subsequent time

a Special Waste Authorization was obtained from the

State of lowa to allow the depositing of vires into the site

at Star 6

As indicated above, the profitability of mining coal

may depend a great deal upon the overburden or dirt

above the coal seam that is to be removed before the

actual coal can be taken from the ground. Generally, the

coal mining operation commences where the coal seams

are easily reachable, and, consequently, where the extrac

tion of coal is more profitable As the coal operations

proceed, the coal seams would be deeper into the ground

and the amount of overburden that is needed to be

removed would be greater. Therefore, the cost of remov

ing the coal is higher near the end of the operation tor

each productive coal seam. At the time it ceased opera-

tions, Star Coal was at the end of the coal seam at Star 10

and Star 11A. Star Coal was then mining in an area in

which the cost of production was the highest ot those

particular coal seams. Since the coal seams at Star 14 were

much closer to the surtace than those mined in Star [0

28a

and Star 11, the cost of production at Star 14 when mining

began would have been relatively low.

As a result of the management decision to diversify

operations from coal mining to avoid the cyclical nature

of the income for the operations, Star Coal embarked ona

course of preparing for a landfill operation. This was a

particularly advantageous time to market a landfill oper-

ation because of the enactment of the 1987 Ground Water

Protection Act by the lowa Legislature. This legislation as

well as similar legislation passed in other states recog-

nized the increasing importance of protecting the envi-

ronment in dealing with the problem of municipal solid

waste. Randy Luwe, a geologist and long-time employee

of Star Coal, was very familiar with the permitting pro-

cess required by the State of lowa as well as the geologi-

cal characteristics of the sites that had been permitted for

Star Coal. Star Coal at that time had completed and

submitted its application for a coal mining permit at the

Star 14 site. Because many of the requirements for the

permitting process for a coal mine were the same as for a

disposal site, it made sense for the company to permit

Star 14 as a disposal site as well. Star Coal was able to

utilize much of the information that was obtained in the

coal permitting process for its efforts to obtain a landfill

permit.

In addition to examining the geology of the site, the

company began its marketing efforts. Larry Crane had

extensive contact with markets that were availabie and

Randy Luwe handled many of the preliminary contacts

for the marketing of the landfill site. Luwe was speci-

tically responsible for contacting Counties that were seek-

ing alternatives for their own landfills due to the

29a

y increased cost of state regulations and the recently

enacted groundwater legislation. Preliminary proposals

were prepared and forwarded to various municipalities

and contacts were made with various utilities that would

. also dispose of ash. A few of the representatives of the

. counties as well as private individuals, including a repre

sentative of Waste Systems Corporation, visited the land

» fill site and indicated an interest in disposing of waste in

. this site. At that time, it was apparent that the Iowa

regulatory agencies dealing with environmental controls

2 as well as landfill permitting were publicly attempting to

{ reduce the number of landfill sites in the State of lowa,

> and they were encouraging a regional landfill concept

' Also in 1987 and early 1988, Waste Systems Corporation, E

. a company with its headquarters at Lake Mills and Albert

- Lee, Minnesota, was interested in becoming a partner

{ with Star Coal in the operation of the landfill. Waste

p Systems operated its own landfill and had significant

> contacts in the waste disposal industry because it hauls a

i large volume of solid waste. This interest was significant

t because the haulers are people who control where the

) waste is deposited, and since Waste Systems was heavily

> involved in hauling waste, it would be able to use the

Star 14 site extensively. In addition, it was going to be

necessary as of July 1, 1988, for the Star Coal landfill

' operation to be managed by a certified landfill operator

David Bergan, an employee of Waste Systems Corpora-

l tion, testified that he was certified by both the national

and state organizations as a landfill operator and would

have had the ability to operate the landfill and compiy

with any statutory requirements that the operator be

certified.

30a

As the process continued for the permitting of Star

14, additional information was obtained. Randy Luwe

worked with Star Coal until November of 1987 when he

left to join Hickok & Associates in Des Moines, lowa.

Hickok & Associates was a consulting firm that dealt

with engineering projects and had significant expertise in

the regulatory area as well as in the design of landfill

operations. After he joined Hickok & Associates, Randy

Luwe continued to work almost exclusively on the Star 14

project, and in the spring of 1988 he returned to Star Coal

to finish the permitting process and to begin the opera-

tion of the landfill at the Star 14 site. While Luwe was at

Hickok & Associates, the Star 14 landfill permit applica-

tion was submitted to the lowa Department of Natural

Resources on January 19, 1988. At the time the permit

was submitted, the significant portions of the Ground

Water Act of 1987 had not yet taken effect. No compre-

hensive plan was required, nor were leachate collection

and treatment systems required to be planned, and it was

not necessary for a leachate collection system to be in

place for the landfill to be permitted. It was also not

necessary for the application to contain a plan for a

methane gas collection system. Financial assurance plans

were not required, nor were any plans for closure or post-

closure maintenance.

The evidence shows that the plan submitted by Star

Coal in its permit application, was a “state of the art”

proposal and did contain responses to requirements that

were well beyond the regulatory rules at that time. A

number of the requirements which were imposed upon

Star Coal were at least in part requested specifically of

3la

Dr. Burton Kross, who was a consultant that was

employed by Monroe County.

After Monroe County discovered Star Coal had

begun its planning for solid waste disposal, the County

began its campaign to restrict land use in Monroe County.

The County hired Dr. Kross as a consultant to review the

permit application and the agencies of Monroe County

involved specifically stressed their opposition to the dis-

posal site in Monroe County. In October of 1987, a Peti-

tion was signed by various members of the Board of

Supervisors, the Solid Waste Advisory Commission of

Monroe County, and the County Attorney of Monroe

County stating specifically that they were opposed to the

Star 14 disposal site (Plaintiff’s Exhibit 50).

Also in the fall of 1987, Raymond Vance, who is now

deceased, but who was a member of the Board of Super-

visors at that time, stated that the adoption of county

zoning would stop the landfill that was being proposed.

There were also letters sent to customers and regulatory

agencies in the State of lowa opposing this landfill (Plain-

tiff’s 40, 62, 63).

It appears that the actions taken by the Defendants

from the time they originally determined that the pro-

posed landfill was to be located in Monroe County were

directed toward the specific purpose of preventing the

establishment of the Star 14 landfill site. The Defendants

became aware early in the process that if the Star landfill

operation was not established, it would have a significant

economic impact on Star Coal and lowa Coal. The evi-

dence shows that Jim Huyser in numerous meetings that

occurred prior to the passage of Ordinance 6, indicated

32a

this fact to the Defendants. According to Plaintiff’s

Exhibit 63, being a letter from the Chairman of the Mon-

roe County Board of Supervisors to Mr. Ken Tow of the

Mines and Minerals Division of the lowa Department of

Agriculture, the Chairman of the Board stated that James

Huyser had said that “without the landfill portion of our

business, we will cease operation of the coal stripping

business.” Notwithstanding this knowledge that denial of

a landfill permit would have severe adverse economic

consequences so far as the Plaintiffs are concerned, the

Board of Supervisors of Monroe County did proceed to

pass Ordinance No. 6 which became effective on May 10,

1988.

There were no specific requirements in the statutory

or regulatory provisions which required a public meeting

with regard to the permitting process of a landfill, nor

were there any requirements that the landfill prepare and

submit a comprehensive plan or financial information

that was required in this case. The comprehensive plan

was ultimately prepared in April of 1988 as a result of

efforts of Monroe County and became a part of the permit

application. It appears the request and requirement for a

comprehensive plan was specifically generated by efforts

on behalf of the Defendants through the County officials

and through its consultant, Burton Kross. This was true

even though the statutory requirements did not provide

for a comprehensive plan until July 1, 1988.

Ordinance 6 became effective on May 10, 1988, and

the sanitary landfill permit was issued to Star Coal on the

Star 14 site on May 13, 1988.

33a

The operations of Star Coal and lowa Coal then

ceased near the end of June of 1988 because of the pas-

sage of Ordinance 6. Ordinance 6 specifically prohibited

landfilling and coal mining in combination on lands in

Monroe County, even though the Defendants in this case

were fully and completely aware of the plans and the

project of lowa Coal and Star Coal and of the impact of

the passage of Ordinance 6.

The companies, being confronted with Ordinance 6

and being unable to operate as a landfill/coal mine, made

a reasonable management decision to cease the opera-

tions and pursue their administrative and legal remedies.

On July 22, 1988, Star Coal made application for the

rezoning of its property with the Monroe County Admin-

istrator. Star Coal requested at that time that their prop-

erty be rezoned to allow the property to be utilized for

both coal mining and sanitary waste disposal. The

Administrator presented the Petition of Star Coal to the

Monroe County Zoning Commission, and the Commis-

sion recommended to the Board of Supervisors that Star

Coal’s application for rezoning be disallowed. This appli-

cation was disallowed on September 26, 1988 by the

Monroe County Board of Supervisors.

The evidence shows that the normal progression of

the coal mining operation would require initial stripping

of those areas where the coal was closest to the surface,

thereby maximizing the income and profits from the coal

mining operation. This occurs because the cost of strip-

ping the shallowest seams is less than the cost of the

deeper seams, and if the mining process continues at the

shallowest seams first, then profits are maximized and

costs are minimized. However, mining the coal in that

ee!

34a

fashion would have destroyed the Star 14 site for the

permitted landfilling operating since the permitted land-

filling operation required air space, and in order to create

air space, not only the shallow coal needed to be mined,

but the deep coal as well. In addition, for this site to be

utilized for the permitted landfilling operation, the cells

needed to be straight cut. If landfilling was not involved,

the cuts or mining would have occurred in a circular

fashion around the coal outcropping. The idea at Star 14,

however, was to recover the shallow coal as well as the

deep coal, and when the air space created by recovering

coal from the deeper seams became available, it would be

refilled with waste material. Since the design called for

the waste cells to be deep and straight cut, it was not

possible to mine in the regular fashion since to do so

would have destroyed the potential of the site for the

landfilling operation.

Approximately 100 employees were laid off as a

result of the closure of Star Coal and Iowa Coal. This step

had to be taken since without the ability to mine coal on

Star 14, Star Coal had nowhere to go to mine coal profita-

bly.

At the time Star Coal closed its operation in June of

1988, it had less of $30,000 of bank debt, and it had coal

contracts in effect at that time. After the company ceased

active coal mining in June, 1988, reclamation was contin-

ued as long as economically possible and some 200 acres

were reclaimed after that date. By the time of trial, recla-

mation problems had placed the company’s mining per-

mits in jeopardy.

35a

An examination of the financial statements of Star

Coal and Iowa Coal, being Defendant’s Exhibits AA, BB,

CC and DD, show that there has been a significant deteri-

oration in the financial situation of both companies since

the passage of Ordinance No. 6. After passage of the

Ordinance, Star Coal was unable to operate and could

not, in fact, generate any cash flow after they were

required to close their operations.

In June of 1989, an offer was made to purchase the

company by Moreland Minerals, a Delaware corporation

(Defendant’s Exhibit JJ). This proposed agreement speci-

fically required the existing problems with the County to

be resolved before the agreement could be effective. This

clearly indicates that the problems which had been cre

ated by the County, including the passage of Ordinance

No. 6, and its general efforts to prevent the implementa

tion of the landfill operation, continued to destroy the

viability of Star Coal.

In addition to the Moreland Minerals agreement, an

offer was made by George Ide and Associates. This offer

was in June of 1990 and was a proposal to purchase the

stock of Star Coal. This offer, as did the offer from More-

land Minerals, recognized Jim Huyser’s right to royalties

for coal and landfilling. This agreement was never closed

as a result of the inability of George Ide and Associates to

obtain appropriate financing for the purchase. It appears

that the financing would be impossible to get so long as

there is ongoing litigation regarding the viability of the

operation.

It further appears that Jim Huyser would not have

entered into an agreement with either Moreland Minerals

ee iti :

36a

or George Ide and Associates had it not been for the

passage of Ordinance No. 6 and its effects.

Since November of 1990 when the final employees

left Star Coal, there has been no operation of the coal

mining or landfilling portions of this business. In addi-

tion, the reclamation has ceased and there has been no

additional maintenance on the equipment since that time.

The project involving Star Coal and lowa Coal as a

coal mining/landfilling company began to take shape in

1986 when the management of the companies first began

to believe alternative income sources would be appropri-

ate to smooth the fluctuations in the coal mining income.

The concept of combining landfilling with surface coal

mining was a reasonable expansion of the business both

in terms of operations and economics. As a coal mining

company, management and employees already had expe-

rience in leasing, drilling, testing, permitting, groundwa-

ter and geological surveys, reclamation and sediment

control. Excavation and construction equipment in which

the company had over the years already invested over $6

million (Exhibit AA) was already available and experi-

enced equipment operators were employed by the com-

pany. Key employees such as Dan Toll and Kenny

Reynolds had years of experience in excavation, control-

ling excavation costs and construction equipment mainte-

nance. The companies had been for many years been

involved in planning depth, yardage, and cost of excava-

tion on a year-round basis and in controlling potentially

harmful waste and water. Both landfilling and coal min-

ing required excavation, reclamation and construction

equipment. Coal mining and landfilling require the same

type of equipment such as scrapers, front end loaders,

ie ieee aaa

37a

| bulldozers, trucks and scales. Existing and potential coal

customers could provide coal ash and residue for coal

trucks to haul back to the project site. This would provide

not only a convenient customer base but also transporta-

x tion savings on backhauls. Coal mining at Star 10 and

> Star 11A was becoming uneconomical due to increasing

. stripping ratios, and coal operations were just breaking

| even in terms of revenues and mining expenses. A new

: | site was needed, and the future of coal mining in lowa

was uncertain. The expansion into landfilling was in a

“i very practical sense not a new business from the view-

: point of lowa Coal, but represented an expansion in

1 which the company could utilize existing resources to

h increase profit. With landfilling the removal of over-

burden, formerly only a coal mining cost, would create

. valuable “air space” for solid waste disposal (one ton of

a coal removed would create 10 tons of air space; at $9.40 a

t ton, this would produce revenue of $112 instead of only

h $18 for the coal alone). Since the decision was made to

6 expand into the landfilling business, the companies

"s devoted substantial resources and money to make the

— concept a reality. Larry Crane, former head of the lowa

y Department of Environmental Quality, a leading author-

1- ity on sanitary landfills in the midwest and the founder

~~ of the lowa office of James M. Montgomery (then Eugene

n Hickok and Associates), an international engineering

a- firm, was employed as a consultant to design the site,

ly estimate costs and fees, to survey the market, to imple-

n- ment the complicated permitting process for both mining

yn and landfilling. Randy Luwe, the lowa Coal geologist,

ve and later with James M. Montgomery Consulting Firm,

_¥ became involved in all aspects of the expansion including

Se J

38a

preliminary marketing, permitting, site selection, excava-

tion design and costing. Over 15,000 feet of exploration

wells and test drillings were done by the company at an

internal cost of $20 a foot drilled for a total of over

$300,000 in drilling costs. Consultants were paid $186,824

for engineering and permitting services. (Exhibit 43).

Advance royalties were paid in the amount of $67,000 on

coal leases which were amended to allow landfilling.

(Exhibits 7 and 8). Substantial overhead and man hours,

including $72,418 in salary expense attributed to the site

for Randy Luwe and Dan Toll, and other company

resources were devoted to the project as well. The permit-

ting process involved extensive hydrological studies, site

engineering plans, and drilling tests results which are

shown in detail in the permit application for Star 14

(Exhibit 7) and a sample of the engineering site drawings

in evidence (Exhibit 6 (a)-(f)). DNR permit application for

Star 14 (Exhibit 7), which was submitted on January 19,

1988, contains voluminous information submitted to the

agency, which was later supplemented by further data.

Randy Luwe, who was employed by Star Coal from

June, 1983 to November, 1987, and from March, 1988 to

August, 1988, who is now a consulting hydrogeologist for

numerous Client operated sanitary landfills, provided the

Court with detailed testimony concerning the geologic

and engineering aspects of the Star 14 coal mining/land-

filling site. Due to the presence of “fireclay” below the

coal seam to be mined, a natural impermeable zone

would exist under the landfilled material and the walls of

the cells would be clay-lined. The DNR in the permitting

process accepted the fireclay in lieu of an artificial liner

because its natural properties are more impermeable than

39a

DNR requirereents. The presence of fireclay and the

absence of underground aquifers in tive areas to be used

make the site uniquely suited for solid waste landfilling

both in terms of environmental safety and operation of

the site. Larry Crane testified that this was a state of the

art landfill and the best site for a landfill he had encoun

tered. Star 14 was designed by the consulting engineers

so that it would be mined and landfilled in specific stages

and new cells would. be excavated and the coal removed

in sequence to allow for backfilling of deposited waste in

compliance with engineering plans. (See Exhibit 37).

While the Star 14 site had favorable stripping ratios for

the Carruthers and Beviers coal seams to be mined, the

operations plan differed completely from traditional sur

face coal mining which involves mining outcrops of coal

or around a hill to reduce overburden removal. Star 14

after it was designed, could not be coa! mined in the

traditional manner without destroying the usefulness of

the site for landfilling and the usefulness of the engineer

ing design for the creation of air space in cells for waste

disposal.

The business plan of the company was to obtain

mining and landfilling permits for Star 14 and to com

mence coal mining/landfilling operations at that site

Since stripping ratios for coal at this site were generally

favorable, the coal mining itself could be expected to

break even financially. Landfilling, particularly given the

cost sharing between mining and landfilling, would pro-

vide the operating profits for the site. Star 6 had been

permitted by the DNR as a landfill in 1984 (Exhibit 9), but

was never fully developed as a commercial landfill. It had

been used to deposit coal residue from the wash plant

40a

coal washing process. The deposited waste was from

washing both Star Coal and the coal from other com-

panies. Star 6, while accepting this waste, was considered

an inspectable sanitary landfill site and was regularly

inspected by the DNR. After Star 14 was operating and

accepting landfill materials, Star 6 was to be used for coal

combustion residue and ash, diatomaceous earth, special

wastes and overflow needed for Star 14 landfilling con-

tracts. Star 6 had the potential for providing customers

with individual, identifiable cells for their waste which

was an attractive option for certain major commercial and

industrial customers. Star 14 and Star 6 were to be mar-

keted together and ultimately operated on an integrated

basis depending upon customer needs. Star 6 was a rela-

tively small site of 10.3 acres. Star 14 was a larger site of

340 acres. The companies were also developing and per-

mitting a much larger site at Star 15 of about 1,000 acres

and the DNR permit application for this site was submit-

ted to the DNR during April, 1988. While Star 15 was a

part of the long range business plan of the company fora

combination of coal mining and landfilling, the Plaintiffs

in presenting damage issues to the Court have focused

only on Star 6 and Star 14. With the exception of a

bulldozer and a compactor, lowa Coal/Star Coal had

sufficient operational equipment in the spring of 1988 to

open and commence operations at Star 14 upon issuance

of a DNR permit and then to open and commence opera-

tions at Star 6. The coal mining permit for Star 14 was

issued on May 6, 1988 and some clearing and subcontrac-

tor work was actually performed at the Star 14 site under

this permit. Thereafter, a bond was posted for the mining

permit.

4la

In spite of the fact that the companies were some-

what financially stressed by the spring of 1988, the evi-

dence shows that they had sufficient resources to make

the opening and commencement of the Star 14 site eco-

nomically feasible. A “start up” cash flow plan or projec-

tion was presented in detail and endorsed by serveral

[sic] knowledgeable witnesses at trial (Luwe, Huyser,

Pothoven, Toll and Crane). (Exhibits 44 and 45). Under

| the start up cash flow analysis, which is based in large

| part on the estimated design requirements and costs by

| Larry Crane and Randy Luwe, Phase 1 of the project

| would involve excavating in the first six (6) months, due

to design of the project, sufficient “air space” to last the

company for the first twelve (12) months of operation.

This excavation would cost, at a contractor rate of $1.50 a

cubic yard, $444,000. The evidence supports a finding

that this figure is conservative because internal costs of

excavation based on historical cost with company equip-

ment was a maximum of 75 cents a cubic yard. The

contractor price, if used, would involve no company

equipment since the work would be done by an indepen-

dent contractor. The leachate collection system proposed

by the consulting engineers, but not at that time required

by regulating agencies, would cost $2,830 an acre for the

Phase 1 (4.46 acres), $13,000 for the first six (6) months of

Phase 1. Operation of the site would, according to the

consulting engineers, require a bulldozer at a cost of

$250,000 and a compactor at a cost of $350,000. The

compactor, however, would not be needed until the initial

four (4) month excavation period was ended. The esti-

? mate of four (4) months is itself conservative and this

work, including building sedimentation ponds, could be

42a

done in as little as 90 days. In the cash flow analysis

(Exhibit 44), costs are attributed to dozer purchase for six

(6) months and the compactor for two (2) months. The

companies had a historical tradition of purchasing equip-

ment with either cash or by using a purchase money,

dealer financing method common in the construction

industry. (See Exhibit AA). While there is a dispute in the

record as to whether two compactors would be needed at

some point, the evidence supports the fact that the projec-

tion of one compactor is reasonable. (See Exhibit 48).

Additionally, the 12 percent interest rate utilized is con-

servative. New equipment costs are calculated to be a

total of $74,068 for the first six (6) months of Phase 1.

Testimony that allocating $70,000 to road, well and fenc-

ing expense in Exhibit 44 is conservative. Operating

expenses are based upon the operating cost estimates of

the engineers of $52,000 a month at 500 tons of waste a

day. (Exhibit 17). Royalties and post-closure fund pay-

ments (proposed by the engineers but not required at that

time) bring the total cost for the first six (6) months to

$754,668. On the revenue side, excavation of Phase 1

would produce coal revenues of $434,700 at $18 a ton for

raw coal. The 24,150 tons of coal being removed would

not have been a problem for the companies which histori-

cally could mine 20,000 to 25,000 tons a month. Addi-

tional coal reserves existed on portions of Star 14 which

could be mined if desired. Solid waste tipping fees of

$207,000 would be received based upon $9.40 a ton at 500

tons a day. The solid waste business is based upon cash

transactions and the coal would be excavated and sold

during the first three to four months of operation, with 30

day terms, so it is reasonable to assume that the revenues

43a

projected would in fact be received in the first six month

period. While the company had only $25,000 in bank debt

as of June 30, 1988, it was required, commencing in 1988,

to borrow $375,000 from the Pella National Bank (Exhibits

26 and 27). Ray Pothoven, a bank official handling the

account, testified that he loaned the company $375,000

even after it had ceased active mining operations based

upon the value of the construction equipment as collat-

eral and the character and guarantee of James Huyser.

The companies could have borrowed this amount or more

if they had been able to operate. At the end of the first six

(6) months based upon reasonable and conservative

assumptions, operations would generate a positive cash

flow of $262,032. During the second six months of opera-

tion no excavation would be involved. (Exhibit 45). Also,

no leachate control or road/well costs would be neces-

sary because it would be paid in the first six (6) months of

Phase 1. Operating expenses for the full second six (6)

months would be $432,000 based upon operating costs at

1,000 tons a day. Equipment costs would be $119,568 for

the second six months and royalty and trust fund pay-

ments would be an additional $303,600. Waste stream

revenues would be $1,241,000. Positive cash flow for the

full 12 months of Phase 1 would be $647,864, or $869,864

if in-house equipment and personnel were used for exca-

vation. At this point, lowa Coal could pay off the Pella

National Bank or continue to borrow money. (See Exhibits

26 and 27). If the companies achieved their projections of

minimum tonnage of 1,000 tons a day of waste during

both of the six-month periods, positive cash flow would

be considerably higher and any bank debt would become

44a

optional. There was no operational or financial impedi-

ment to the company going forward with this project,

except the necessity of obtaining a DNR permit.

The company was also involved in advance or pre-

liminary marketing of Star 14 and Star 6 for landfilling

purposes, both in terms of municipal solid waste and

return coal ash trips from coal customers. While no actual

contracts could be executed for landfilling until a DNR

permit was received, extensive contacts and market

research were done by Randy Luwe, Jim Huyser and

Larry Crane before May 13, 1988. With respect to munici-,

palities and counties and others with their landfills, this

marketing was timely due to the passage of the 1987 lowa

Groundwater Act which was to become effective on July

1, 1988 and would impose new, expensive requirements

to operate landfills in lowa. The DNR was attempting to

reduce the number of small landfills and it was under-

stood in the industry that the DNR would allow closure

without full compliance with new rules. Engineering

studies such as the Clapsaddle study in 1987 (Exhibit 20)

were recommending regionalization of landfills at envi-

ronmentally sound sites. Star Coal sent proposals and

letters to various potential customers (see Exhibit 12) and

numerous city and county officials were called at trial to

comment on their recollections of the proposals and their

landfilling activities since the fall of 1987/spring of 1988.

All of this testimony must be viewed from the standpoint

that the Monroe County Ordinance No. 6 was enacted

before the DNR permit was issued preventing Star Coal

from going further with potential customers. Nonethe-

less, even three years later at trial, several county and

local officials testified that they actually visited the Star

45a

sites, considered the site a viable option for them in view

of the new legislation and would have pursued the possi-

bility further absent the Monroe County zoning dispute.

A number of these witnesses are receiving requests for

disposal of “special wastes” and some of them are bur-

dened with special waste disposal. The Des Moines Metro

Landfill receives wastes which consist of 70 percent

industrial, commercial and special wastes which are han-

dled by private haulers. Before Ordinance 6, Des Moines

Metro was interested in putting tires in the Star sites.

After charging a $50 surcharge for disposal of tires, Des

Moines Metro will forbid the disposal of tires at all after

January, 1992. Many of the counties ended up executing

agreements with other counties to perform landfilling.

They have found that tipping fees for waste under these

arrangements are accelerating due to the necessity of

complying with new DNR rules. The tipping fees greatly

exceed the $9.40 a ton tipping fee quoted by Star Coal

which included compliance with anticipated rules.

At trial the Defendants presented the testimony of

several witnesses who were involved in the governing of

solid waste landfills throughout south central lowa.

Many of these witnesses testified that they do not believe

that they would have executed agreements with the

Plaintiffs, however, it appears that at least some of these

witnesses were influenced by their knowledge of the

zoning dispute between Monroe County and the Plain-

tiffs. The Court notes that the Defendants did not present

private haulers of waste within these counties to testify

for the Defendants.

Based upon the testimony at trial, it is reasonable to

assume that if Star Coal had received a DNR permit

46a

before it was prevented from opening the landfill by

Ordinance No. 6, that it would have received some but

not all of the local municipal solid waste business. Star

Coal did not, however, limit its business plan to munici-

pal waste. Two potential coal ash/residue customers have

testified that they were very interested in utilizing the

Star 14/6 sites and would have pursued negotiations if

Star had, in fact, opened a landfill. (Exhibits 40, deposi-

tion of Thomas Ramlet; Exhibit 41, Deposition of Mike

Thomes). The Metro Waste Control Commission in Min-

neapolis had 125,000 tons of ash on hand in early 1988

and was willing to pay Star Coal $12.50 a ton to dispose

of it. Northern States power had 70,000 tons of incinera-.

tor ash in storage which needed to be landfilled and had

35,000 tons more of this material on an ongoing annual

basis. They were also generating substantial coal ash.

Hennepin County, Minnesota in 1989 started shipping

100,000 tons of ash per year to Illinois at higher tipping

fees (See Exhibits 40 and 41). In connection with this type

of marketing and with “special wastes” Star Coal had a

distinct advantage by having two separate sites with

individual cells. Star 6 was specifically permitted for coal

combustion residue, coal ash, diatomaceous earth and, by

August, 1988, tires from Minnesota (by letter amend-

ment). There was considerable testimony from operators

of landfills that “special waste authorizations” are rou-

tinely granted for disposal of “special wastes” in iowa

landfills and that such disposal commands very high

tipping fees. Bob Huber of Washington County even

stated that he kept a book of such “SWA’s.” The DNR

permit itself, on its face, contemplates changes in cus-

tomers, wastes and business operations by providing for

47a

amendments. The amendment for Star 6 to take tires was

done by an exchange of letters in a few weeks. DNR

officials testified that changes are necessary and would

not be withheld if there is compliance with DNR rules.

Asbestos and demolition and construction wastes are

commonly received in Iowa landfills from sources both

within and outside the state. In many instances it is the

companies collecting and hauling the solid waste making

actual decisions on which landfills to use and these deci-

sions are based largely on prices and profit margins. Mr.

Bergan’s company at the time of trial was hauling

asbestos waste from Iowa Power in Des Moines to a

landfill in Knoxville. Mr. Bergan also testified that there

are waste brokers in this country who make it their

business to deal in the disposal of solid waste to landfills.

Four expert witnesses testified at trial concerning the

reasonableness of Star Coal’s ability to obtain 1,000 tons a

day at Star 14 and 500 tons a day at Star 6 at prices shown

by the evidence. Randy Luwe, based upon his familiarity

with his own customer contacts, the lanfilling [sic] indus-

try, and Star Coal, supported the figures as reasonable.

Larry Crane testified with definite opinions concerning

expected tonnages. Mr. Crane was the most knowledge-

able witness testifying concerning the landfill industry

and the economics of landfills. He has a master’s degree

in engineering with an emphasis in solid waste manage-

ment. He worked for a time with the U. S. Department of

Health administering EPA regulations. From 1973 to 1982

he was the Director of the lowa Department of Environ-

mental quality, now the DNR, and supervised the entire

lowa regulatory scheme for solid waste projects. He has

48a

lectured, done training and published concerning land-

fills, both in areas of planning and economics. He is

licensed to apply specialty in three different states and

has co-authored a training manual in use by landfill

operators. In 1982 he founded the Des Moines office of

Eugene Hickok & Associates, an office which now has

merged with James M. Montgomery and has 36

employees with a myriad of professional specialties. He

has regularly, on a daily basis, been involved in estimat-

ing costs, planning, analyzing rates of return and eco-

nomic factors, designing, permitting, marketing surveys

and direct marketing of numerous midwest landfills. He

is familiar with waste streams available to landfills in|

lowa, including types of waste and tonnages, and in

eliminating waste streams for particular landfills. Mr.

Crane testified that the following daily tonnages were

reasonable and conservative to expect for Star sites: (a)

500 tons a day for the first six months at Star 14; (b)

1,0000 [sic] tons a day for the second six months and

thereafter for Star 14; and (c) 500 tons a day for Star 6

commencing August 1, 1991 and thereafter. David Bergan

is the president and manager of a major collection and

hauling firm in the midwest which also operates a landfill

near Lake Mills, lowa. Mr. Bergan has extensive experi-

ence in the solid waste industry and in supervising both

residential and commercial waste collection and disposal.

Mr. Bergan was the only witness called at trial with direct

experience in making decisions about which landfill

would receive waste from the collection and hauling

viewpoint. He expressed the opinion that with the inclu-

sion of waste such as construction and demolition debris

and asbestos the Star 14 site could easily attract 1,000 tons

——<—

49a

a day and the Star sites could ultimately receive 3,000

tons a day at the prices projected. Defendants’ own

expert on landfilling, Leslie Wolfe, testified on cross-

examination based on his prior deposition, that the Larry

Crane estimates were reasonable and Star 14 could proba-

bly achieve 1,000 tons a day of solid waste. The Plaintiffs

have shown by a preponderance of the evidence that

their economic assumptions relative to price and waste

streams are reasonable and conservative.

Plaintiff’s Exhibit 62, being a letter dated April 11,

1988, from Billy K. Myers, Chairman of the Board of

Supervisors of Monroe County, to Pete Hamlin of the

DNR and Ken Tow of the lowa Department of Agricul-

ture, indicates a concern by Mr. Myers that Jim Huyser

had predicted that the landfill would receive “2,000 tons

of refuse per day.” It appears to the Court that the Defen-

dants fully believed that the Plaintiffs had the capability

of attracting waste streams in that volume, and that was

the motivating factor in causing the Defendants to rush

through the adoption of Ordinance 6, without taking the

necessary time to develop a comprehensive plan, as

required by Section 358A.5 of the Code of lowa.

The evidence further shows that in September of 1987

Mr. Gary Pryor, who was then head of Planning and

Zoning for Polk County, was called by a female super-

visor from Monroe County and she asked for advice on

an ordinance to prevent or impede a landfill project. Mr.

Pryor suggested a “public health” ordinance, later to

become Ordinance 4, which requires approval of the :

Board of Supervisors to operate a sanitary landfill in

50a

Monroe County. (Exhibit F). The first reading of Ordi-

nance 4 was on September 11, 1987 and it was adopted on

September 17, 1987.

Gary Pryor, who is now City Planner for the City of

Omaha, Nebraska and contiguous areas, testified con-

cerning both Ordinance 4 and Ordinance 6. Mr. Pryor has

extensive experience as a zoning administrator in daily

interpretation and application of ordinances. He testified

that Ordinance 4 is not a zoning ordinance but is gener-

ally in the category of a public health ordinance. In

general, it requires, if applicable, a county permit to

operate a landfill and compliance with enumerated gen-

eral standards and a bond. No specific standards are

listed. At the time Ordinance 4 was enacted, two other

landfills were operating in Monroe County: Cargill at

Eddyville and the Monroe County Landfill near Chariton.

Ordinance No. 4 in paragraph 9, at page 7, contains the

following language (under “EFFECTIVE DATE”): “Any

disposal facility that has accepted the dumping and dis-

posal of solid wastes at its location of operation prior to

the date of this ordinance becomes effective is expressly

exempted.” (Exhibit F). Star 6 had received solid waste

disposal before September 24, 1987. In the opinion of Mr.

Pryor, Star 6 and 14 were exempt under this ordinance

and no permit or permit application was required of Star

Coal. No permit or permit application was ever required

by the other two existing landfills in Monroe County. Mr.

Pryor considered that Star 6 and Star 14 were part of an

integrated operation, permitting process and marketing

plan and were to be operated together and should be

considered together under the exemption language. This

testimony of Mr. Pryor appears to be uncontradicted and

5la

is accepted by the Court. There appears to be no evidence

that Monroe County attempted to enforce Ordinance No.

4 at any time. Even if Ordinance No. 4 did apply, the

county, directly and through Burton Kross, requested and

received review by the DNR of matters referenceed [sic]

in the ordinance and the evidence is uncontradicted that

the DNR, at the request of Monroe County, required

information and compliance by Star Coal with rules and

regulations which did not yet exist. By seeking review of

the “public health” matters in the ordinance and subse-

quent issuance of a permit by the DNR, the county

appears to have delegated review and approval to the

DNR.

Ordinance 6 in final form forbids coal mining and

landfilling in combination. Landfilling can only take

place in I-2 districts. (Exhibit 2). Star Coal sites 6 and 14

are zoned agricultural and neither under the ordinance

could be utilized for landfilling without amendment to

the ordinance itself. The ordinance further makes coal

mining a conditional use in A-1 and A-2 districts which

as a practical matter required lowa Coal/Star Coal to

seek permission from the county to mine coal. A rezoning

of the Star 6 and 14 sites to I-2, under the language of the

ordinance, would not allow coal mining so a combination

of coal mining /landfilling still would not be allowed. Mr.

Pryor testified that zoning and zoning administration

depends upon citizens such as Star Coal using the legal

process to challenge zoning and zoning decisions and

that it could be expected that Star Coal would challenge

the ordinance in the courts as opposed to simply starting

its project. If the proper staiuiorv procedure for Ordi-

nance No. 6 had been utilized by the Defendants it would

52a

have taken six (6) months to develop a comprehensive

plan and three (3) months to implement a proper zoning

ordinance. The DNR permit was issued three days after

the enactment of the invalid ordinance and the company

planned to commence excavation immediately upon per-

mitting with solid waste being accepted at the latest by

August 1, 1988. If Ordinance No. 6 had not prevented the

project, under the view of all experts testifying on this

subject at trial, Star 6 and 14 would have, based upon

physical use, have been a legal non-conforming use

under any zoning ordinance. Based upon the uncon-

tradicted testimony of Mr. Pryor, if Phase 1 of Star 14 was

in physical use at the adoption of a valid ordinance, the

entire Star 6 and 14 sites would have constituted a

“grandfathered” use and the zoning would not have

affected the project.

Ordinance No. 7 (Exhibit 15) was enacted in August,

1990, and had to the time of trial not been legally chal-

lenged. Ordinance 7 and its zoning map (Exhibit 14) are

virtually identical to Ordinance 6 and its map (there are

some minor changes). The Court does not need to address

the impact of this ordinance on the project because the

damage‘to Star Coal by Ordinance 6 was already ongoing

and irreversible by the time it was enacted. If Star 6 and

14 had been able to operate before this ordinance they

would have constituted legal, non-conforming uses under

the ordinance.

The enactment of Ordinance 6 had a real and devas-

tating economic impact on the Plaintiffs. Prior to the

passage of the ordinance, Jim Huyser announced publicly

that he would have to cease operations if the county

proceeded with it in its proposed form. By June 20, 1988

53a

he had laid off all employees except a few key employees

and a mining reclamation crew. (Exhibit 3). While opera-

tions ceased, expenses were still ongoing for reclamation

and to keep the company intact as possible during the

legal challenge to the ordinance. Reclamation continued

into November, 1989. By June 30, 1990 (there was no

financial statement done for 1989), current liabilities

exceeded current assets by $2,406,422 and retained earn-

ings had dropped to a negative $1,836,122. (Exhibit DD).

The June 30, 1990 financial statement, based on inquiry

and research by the auditors, specifically cites “new

zoning laws prohibiting the company from operating a

landfill” as a reason the company had to suspend opera-

tions in June, 1988. (Exhibit DD, note on page 9). Negotia-

tions with Waste Systems, Inc. to potentially operate the

landfill were terminated based on Ordinance 6 and

related issues. The initial Petition challenging the ordi-

nance was filed on May 5, 1988, after the second reading

of the ordinance, but due to the legal process involved,

the Court’s decision was not filed until Decembder 27,

1989. By that time, there was no ongoing marketing, no

transportation and contract trucks available, no labor

force and finances had deteriorated. By this point in time,

unlike in May, 1988, Star Coal was unable to pursue the

project on its own. Star Coal was confronted with appeals

pursued after the Court’s ruling and with potential future

appeals. (See Exhibit 67). Potential customers had pur-

sued other options. Coal and ash customers had ended

up with a competing coal company. The trial on the issue

of damages did not conclude until April 25, 1991 and the

Plaintiffs after decision is rendered on these issues will

still be confronted with the potential possibility of further

54a

appeals. The uncontradicted testimony of Jim Huyser is

that these proceedings, while made necessary by ordi-

nance No. 6, put a “cloud” on the viability of his project

and business. Even if the county had given permission to

mine coal, coal mining alone could not take place on the

new site without destroying its intended use as a landfill

(Exhibit 37) and waiving the economic benefits and

investment in that use. George Haines testified that had

the project been allowed to go forward as projected and

using the numbers of Dr. Mattila, Defendant’s economist,

(Exhibit 46 and 47), the financial results of the company

would have shown a 100 percent turnaround from those

shown in the 1990 financial statement and the company

would. have been a viable business.

Subsequent to cessation of active mining operations,

lowa Coal did engage in negotiations with Moreland

Minerals and George Ide and Associates as stated above.

The purchase price of $5 million is reflected in the George

Ide transaction which was not consummated and con-

trasts sharply with the minimum value of $20 million that

Jim Huyser testified that he would have taken for his

company before passage of Ordinance No. 6. It was his

testimony that he would not have negotiated with either

Moreland or George Ide and Associates had it not been

for the ordinance and attendant litigation. The George Ide

transaction was never consummated because financing

was never obtained. It was understood that it was depen-

dent upon the cooperation of the county and the agree-

ment was terminated in January, 1991. The primary asset

being purchased was the leases permitted for landfilling

and George Ide considered the project to have great profit |

potential if it were allowed to proceed. (Exhibit 65).

| aa ee

55a

Star Coal and Iowa Coal have presented their dam-

ages for loss of business opportunity in terms of the

discounted value of lost profits based upon certain

assumptions. Cost assumptions were done by Randy

Luwe and Larry Crane as a part of their financial analysis

of the proposed landfilling project without reference or

knowledge that there would later be a lawsuit. (Exhibits

17 and 18). These figures were utilized by Star Coal to

calculate initial “tipping fees” to be quoted to potential

customers and include costs for items not required by the

DNR rules. The costs are for a “state of the art” operation

and actuaily contemplate rules and regulations to be

adopted by the DNR in response to the 1987 Groundwa-

ter Act. Most of the requirements contained in the Mont-

gomery model have now become a reality and other

landfills are incurring substantial expenses, with atten-

dant increases in tipping fees, to comply. At least two

landfills, one being the Marion County landfill, are cur-

rently operating in lowa without a valid permit while

they attempt to comply with new requirements which

were designed into the Star 6 and Star 14 sites. The Court

notes that the Marion County site, which is ultimately to

be designated as the landfill for the counties included in

the Clapsaddle study, had been the site of an abandoned

coal mine. There is testimony in the record that aban-

doned coal mine sites do not lend themselves to be envi-

ronmentally suitable for the operation of sanitary

landfills. These types of landfills will be required to incur

costs which include leachate control, financial assurances

and post-closure trust funds. The costs and other assump-

tions developed by Luwe and Crane were given to Dr.

Tom Pogue and Dr. Joel Horowitz, economists with the

56a

University of lowa for analysis and projection. (Exhibit 29

and 30 (a)-(k)). Dr. Pogue presented these numbers at

trial. The information and materials supplied to him were

of the type normally used by economists in projecting lost

value in terms of discounted lost profits. In connection

with his analysis, he consulted with Jim Huyser, Randy

Luwe and Larry Crane. He was able to determine an

income stream for Star 6 and Star 14 and then discount

them to present value, using a conservative discount rate

for the life of the landfills. He testified that in his opinion

the lost profits for Star 14 in terms of 1988 dollars is

$11,873,256 and in terms of 1990 dollars is $13,350,289.

For Star 6, the loss of profits is $1,894,000 in 1988 dollars

and $2,129,000 in 1990 dollars. The income projections for

Star 14 were based on the assumtion [sic] that Star 14

would receive 1,000 tons a day of solid waste at $9.40 a

ton commencing on August 1, 1988 for 260 days of opera-

tion a year and that these figures would remain constant.

For Star 6, he assumed 500 tons a day commencing on -

August 1, 1990 at $11.52 a ton. Costs for Star 6 were

calculated somewhat higher by Larry Crane due to

greater expense of overburden removal. The assumptions

of 1,000 and 500 tons a day are reasonable and in fact

conservative based on the evidence, particularly for years

after initial start up. The tipping fees are also reasonable

and conservative for the life of the landfills and there is

considerable evidence in the record that tipping fees,

especially for special wastes, have already more than

tripled in the industry since 1988. If a $15 tipping fee

were assumed, Star 14 at the same tonnage would pro-

duce $32,283,000 in lost profits under the Pogue economic

model. A two year delay in receiving any tonnage for Star

57a

14 would only reduce loss of profits to $12,625,000. The

assumptions also include a projected savings of 80 cents

per ton from coal mining savings for Star 14 and this cost

savings is uncontradicted by any other evidence. For Star

6 cost savings represent one-half of the costs. Since the

economic model is a function of combining tonnage and

tipping fees, an actual average tipping fee of $19 for Star

Coal would mean that only 500 tons a day would be

needed to achieve the same profit levels. (This would

have been better for lowa Coal because costs would be

reduced and the life of the project would be extended).

The economic projections by Dr. Pogue are based on

assumptions supported by the record as feasible and his

analysis includes all significant factors in projecting a loss

to Star Coal due to Ordinance No. 6 and the wrongful

actions of the Defendants. The effect of receiving these

dollars at the present as opposed to over the life of the

project has been included. Defendants’ own economic

expert, even after assuming additional costs and deduc-

tions, projected lost profits of $7,908,682 for Star 14 and

$1,459,082 for Star 6 on an undiscounted basis. (Exhibit

47).

Dr. Pogue also testified regarding his calculation of

the loss to Jim Huyser for coal royalties and for solid

waste royalties. Jim Huyser’s agreement with Plaintiff

corporations provided that he would assign to them the

leases that gave him mineral rights and landfilling rights

to certain property in exchange for payment to him of a

royalty on solid waste deposited in the landfill sites and

coal mined and sold from the coal mining sites.

58a

In dealing with the lost coal mining revenues of Jim

Huyser, it is apparent that his claim is made very conser-

vatively. His claim for coal royalties lost is based upon

coal mined from the landfilling site only. It is clear from

the evidence, however, that coal mining would have

occurred on portions of the permitted site other than the

area where the landfilling was to take place. No claim,

however, has been made for the lost coal revenues for any

coal mined other than at the site of the landfilling opera-

tion.

The evidence shows that it would take one ton of coal

removed to provide space for 10 tons of solid waste, and,

therefore, in order to generate sufficient air space for

260,000 tons per year of solid waste, it would be neces-

sary to mine 26,000 tons of coal. This amount of coal

would be quite low for Star Coal since they had mined in

the past 20,000 to 25,000 tons of coal per month.

Jim Huyser’s agreement makes it clear his coal roy-

alties would be $1.50 per ton from coal mined and sold.

The evidence showed that 26,000 tons of coal would be

mined each year to create space for 260,000 tons of solid

waste. Based upon the mining and selling of 26,000 tons

of coal, Jim Huyser’s royalty would have been in 1989

$39,000. The annual coal royalties for each year would

then be the same and were assumed not to be adjusted for

inflation. Therefore, in making the calculations, the value

of the royalty payment is reduced in each year after 1988,

both because of inflation assumed to be 5 percent per

year and because of the real discount rate of 3 percent,

which reflects the assumption that dollars can be invested

to yield a real return of 3 percent. This assumption is

based upon historical evidence that the long run average

59a

real return on investments such as common stock has

been about 3 percent.

The total loss to Jim Huyser in coal royalties from

Star 14 is then determined to be $371,070 based on 1990

dollars.

Making the same calculations with regard to coal

royalties on Star 6, it was assumed that 13,000 tons of coal

per year would be mined at Star 6. At $1.50 per ton, the

annual coal royalties on Star 6 would then be $19,500.

Royalties, however, were assumed not to be adjusted for

inflation, and, therefore, the royalty payment is reduced

in each year both because of inflation assumed to be 5

percent per year and because of the real discount rate of 3

percent which again reflects the assumption that dollars

invested can yield a real return of 3 percent. This assump-

tion is, in turn, based upon historical evidence that the

long range average real return on investments such as

common stock is 3 percent. Adjusted to November 1990

then, the loss for the life of the site at Star 6 estimated to

be 6.4 years is $97,472.

Estimates with regard to Star 6 also reflect the same

conservative nature of the calculations and, in addition

with Star 6 as well as Star 14, since adjustment was made

only to the price level of November of 1990, the loss is

still conservative. If the loss were calculated to May of

1991, it would be even higher. Therefore, the lost coal

royalties that Jim Huyser sustained as a result of the

passage of Ordinance No. 6 and the inability to continue

to mine coal at Star 14 and Star 6 landfill sites totals

$468,542.

HOA

With regard to the lost solid waste royalties on Star

14, the calculations made by Dr Pogue were based upon

the life of the site and utilization of that site at 260,000

tons per year or 1,000 tons per day for 260 days. The

tipping fee was calculated to be $9 40 per ton for the life

of the site. This figure has turned out to be extremely

conservative in light of the rapidly accelerating tipping

fees for solid municipal waste disposal. In providing the

lost solid waste royalties, the tipping fee was multiplied

by 18 percent, which is the amount that Jim Huyser was

to be paid based on his royalty agreement with the com

pany. The loss is based upon 1988 dollars and if adjusted

for inflation from August of 1988 to November of 19990,

the loss sustained by Jim Huyser on Star 14 for lost solid

waste royalties 1s $5,418,354. Using the same calculation

for Star 6, the lost royalties sustained by Jim Huyser on

Star 6 for the life of the site adjusted to November of 1990

are $1,685,062. The total loss to Jim Huyser for the lost

coal royalties on Star 6 and Star 14 and the lost waste

royalties on Star 6 and Star 14 throughout the life of each

project totals, therefore, $7,571,958

The Court notes that Jim Huyser’s tax return for 1985

on Form 4797 reflects that in that year he received

$286,684 in coal royalties only, and on his 1986 Form 4797

filed with the income tax return showed that he received

coal royalties in the amount of $296,896. His 1989 tax

return shows coal royalty income on Form 4797 in the

amount of $15,779.

With regard to the calculations presented by Dr

Pogue both with regard to lost profits of the corporation

and lost royalties for Jim Huyser did not include any

deduction or calculation with regard to the income tax

hla

ramifications of these ijiternse Th jc anticipated that any

award that may be made by the € ourt with repard to lost

royalties or lost profits Will be taxable, therefore, no

calculation has heen made with repard to these matters

The Court further finds that loss of profit figures of

Mr Popue as to the loss of business value OF Opportunity

damages for the corporate Plaintiffs as well as the loss of

royalties to Jim Huyser should be reduced to take inte,

account various contingencies which possibly might have

occurred during the projected coal mine /landéil! opera

tions of Star 6 and Star 14 It is possible that the waste

Streams of solid waste may have heen slower in de velop

ing and the corporate plaintiffs may have had to incur

additional expense by ¢ ontributing to the cost of transfer

Stations at various communities to make the plan for the

flow of solid waste more workable There jc also the

possibility that the volume of solid waste near the er |

the cycle on Star 14 may have been reduced b y the waste

reduction provisions of the Ground Water Protection Act

Also adverse weather conditions from time to, time ma

have affected Plaintiffs’ mining and landfilling opera

tions

The Court notes that Defendant’s expert witness Dr

Peter Mattila on cross-examination after assumin

“Pho Pep tm

r .

tional costs and deductions projected the lost

Star 14 to be $7,908,682 and for Star 6 to be $1439 08? >

an undiscounted basis. According to Exhibit 47. Dr \fa:

tila testified that the total loss for the two < rporate

Plaintiffs totaled $9,367,662 in 1988 figures and when

inflated to 1990 value the total would amount:

$10,278,667 in undiscounted Profits

62a

Ihe Court finds that the damages to the corporate

Miamntitfs should be set at $10,319,526 and the damages

tor Clamntiff lim Huyser should be set at $5,047,972?

lhe Court also finds that the affirmative defense of

lack of mitigation by Defendants, raised in their Amend

ment to Answer, has not been shown by the evidence

From the foregoing findings of fact, the Court reaches

the tollowing

CONCLUSIONS OF LAW

Ihe Court in its December 27, 1989 Decree deter

mined that the Defendants acted illegally and outside the

scope of their authority in enacting Zoning Ordinance

No. 6 The Court in its previous ruling declared the

Zoning ordinance void, and the issue of damages is based

upon damages arising from the illegal actions of the

Detendants. These damages are the consequential dam

ages arising from such illegal actions of the Defendants

lhe general purpose of damage awards is to place

the damaged party in as favorable position as if no

wrongtul act had occurred. RET Corp. v. Frank Paxton Co.,

Inc., 329 N.W.2d 416 (lowa 1983). The Court in its Find

ings of Fact has found that the Plaintiffs have sustained

their burden of proving damages by showing loss of

business opportunity by proof of the present value of lost

protits and lost royalties that Plaintiffs would have

received absent the illegal acts of the Defendants. Lost

profits are an appropriate manner in which to measure

jamages from business interruption. Mills County v. Gut-

unty Rural Electric, 454 N.W.2d 846 (lowa 1990);

Ala

Rushman ow Cuekler Ruilding Systems, 421 NWA dA,

(lowa €4 App V98R) Nachazel » Mirace Manufacturing,

AX? NW 2d 158 (lowa 19RR) kKempfo City of lama ¢ thy, AD?

NM) W 2 39% 3OR (lnwa 1OR7) Pvidlenre of loct profits will

only he rejected if proof of such profits is speculative,

Contingent, conjectural, remote or uncertain Shinrone. Ine

”» Tasco, Ine, 2R% NWI PRO Clowa 1979) The mere

Aifficulty in ace ertaining the amount of damages is not

grounds far denying recovery Shinrone. supra, Orkin

Pyterminating € 0, Ine Kurnett, 160 MWId APT owe

1968) In Harsha » State Savings Bank, 3446 NW2d 79)

(lowa 1984) the lowa Supreme Court considered these

principles and the application of the lowa “new business”

rule to a claim lost profits (arising from tortious interfer

ence with husiness relationship and breach of contract)

In that case the plaintiff proved lost business as lost

profits he would have reaped if the tortious conduct had

not occurred The Court noted that under the lowa “new

business” rule potential profits can be too speculative to

recover for an “untried business.” At the same time. the

Court held that the “new business” rule is not absolute. [f

factual data 1s presented which furnishes a basis for

compilation of probable loss of profits, evidence of future

profits should be accepted. The Court specifically

describes expert testimony proving lost profits with rea

sonable certainty based upon experience, expert consider

ation of relevant factors, expert experience. tt

willingness of management to put in the time and ettort

to succeed and prior sales experience The Court als.

makes reference tc the fact the defendant caused

ments of the loss number. The Court con. ided

64a

although plaintiff was opening and operating a new live-

stock feed sales business, the lost profits had been proven

with reasonable certainty and were submissible to the

jury.

In the present case, the evidence does not support the

fact that landfilling was a new business with untried

business assumptions and experience. The principle of

the “new business” rule, that proof of lost profits should

not be overly conjectural, would, however, apply as a

measure of proof. The Court concludes that the “new

business” rule does not apply factually or as a matter of

law and that proof of damages has been sufficiently cer-

tain to justify an award of damages. The experts testify-

ing in this action for the Plaintiffs have considerable

experience in their areas of specialty, addressed all rele-

vant factors relating to the landfilling project, and have

credibility. Management had prior experience in many

aspects of the proposed venture and had exhibited a real

motivation to devote the necessary time and resources to

the project to realize profits. The Defendants themselves

created a situation in which the loss occurred and directly

and indirectly caused claimed uncertainties upon which

they now rely for a defense. The fact that factual issues

exist which must be resolved by the finder of fact does

not as a legal matter preclude an award of lost profits.

Orkin Exterminating Co., Inc. v. Burnett, supra. The record

supports the conclusion that it was clearly forseeable by

Defendants that Plaintiffs would sustain business dam-

ages and that damages were, in fact, sustained. The proof

of lost profits is, according to expert testimony in this

action, equivalent to proof of the value of lost business

opportunity to the corporate Plaintiffs. The same is true

65a

with respect to the issue of lost royalties to the individual

Plaintiff Jim Huyser. The amount of damages is under the

law to be determined by the Court as finder of fact and

sufficient, definite evidence and opinions were provided

and exist in the record upon which to base a damage

award decision.

The extent to which Defendants rely upon the exis-

tence or application of Ordinance 4 as a defense to Plain-

tiffs’ damage claim is unclear. The Court, in its Findings

of Fact, has found that, based upon the evidence, Star 14

and 6 were exempt under the language of the ordinance.

.The evidence also supports the fact of delegation of

review of environmental and other issues by the Defen-

dants to the DNR. The DNR is charged with the respon-

sibility pursuant to statute to regulate solid waste activity

in the state and has specific expertise in the area of

environmental safety. See Code of lowa Chapter 455A and

455B (1991). In other states conflict between comprehen-

Sive state environmental protection schemes and local

ordinances have limited the ability of local governments

to regulate landfilling and mining and in some jurisdic-

tions courts have found preemption by state law and

permitting. Shelton v. Commissioner of Department of Enut-

ronmental Protection, 479 A.2d 208, 214-215 (Conn. 1984)

(local zoning ordinance prohibiting regional landfill pre-

empted); American Smelting & Refining Co. v. County of

Knox, 60 Ill.2d 133, 139, 324 N.E.2d 398, 401 (1974) (local

‘zoning could not prohibit surface mining allowed under a

State permit); Carlson v. Village of Worth, 62 Hl.2d 406, 343

N.E.2d 493, 496 (1975) (local ordinance licensing landfills

preempted by sttate [sic] law.); Colchester v. Reduction

Associates, Inc., 34 Conn. Sup. 177, 382 A.2d 1333,

66a

1334-1335 (Conn. C. P. 1977) (local regulation barring

disposal of baled waste preempted by state permit);

Southern Ocean Landfill, Inc. v. Mayor and Council of the

Township of Ocean, 64 N.J. 190, 314 A.2d 65, 67 (1973)

(local landfilling regulation preempted by state permit);

Connor v. City of Rockford, 52 I.2d 360, 288 N.E.2d 432,

436 (1972) (County zoning could not prohibit sanitary

landfill operating under state permit).

The lowa DNR issued a permit based in part upon

the environmental and other matters submitted by Defen

dants and their consultant to the DNR. Even if the landfill!

sites were not exempt under Ordinance 4, the ability of

Monroe County to review and restrict such matters is

limited or preempted.

The Court has found in its Findings of Fact that the

defense of lack of mitigation by Defendants was not

proven at trial. The Court notes that the lowa Supreme

Court has further held that a lack of sufficient funds

would excuse an absence of further efforts to lessen dam-

ages. RET Corp. v. Frank Paxton Co., Inc., supra, at page

422.

With regard to the issue of whether the individual

Defendants, being Billie K. Myers, Raymond Vance, and

Helen Sinclair, members of the Board of Supervisors of

Monroe County, should be held personally liable for

damages, the Court concludes that these individual

Defendants in adopting Ordinance No. 6 were acting ina

legislative capacity. Zoning is a legislative function. Peter-

son v. City of Decorah, 259 N.W.2d 553, 555 (lowa App.

1977). In the case of Lough v. City of Estherville, 122 lowa

79, 98 N.W. 308 (lowa 1904), the lowa Supreme Court

67a

held that City Council members acting either in a judicial

or legislative capacity cannot be held liable on damages

on account of acts done by the members in their official

capacity. In the case of Gorman Towers, Inc. v Bogoslavsky,

626 Fed.2d 607 (8th Cir, 1980), the Court held that (¢ ity

Council members are legislatively immune from a civil

rights action where the Plaintiff claimed that the Council

passed an invalid zoning amendment. In the case of Heiar

0 Crawford County, Wisconsin, 558 Fed Supp. 1175, (N.D

Wisconsin, 1983), the Court held that the members of a

county board are legislatively immune from a civil rights

action wherein the Plaintiff alleged that the board intro

duced, debated, and adopted an unconstitutional resolu

tion regarding mandatory retirement

The Court further notes that individual Defendant

Raymond Vance died on December 18, 1988. There has

been no showing that the personal representative of the

Raymond Vance estate was substituted as successor

defendant within this case within two years from his

death as required by R.C.P. 15. The Court therefore con.

cludes that judgment for damages should not be rendered

against Billy K. Myers, Raymond Vance, and Helen Sin-

Clair, as individuals.

From the foregoing Findings of Fact and Conclusions

of Law, the Court makes the following

JUDGMENT ENTRY

It is hereby ORDERED, ADJUDGED AND DECREED

that the Plaintiffs, lowa Coal Mining Company, Inc. and

Star Coal Mining Company, Inc. are entitled to and are

hereby awarded judgment for compensatory damages in

the sum of $10,319,526. against Monroe County, lowa,

with interest thereon at the rate of 10 percent per annum

from and after May 5, 1988

It is further ORDERED, ADJUDGED AND DECREED

that the Plaintiff Jim Huyser, is entitled to and is hereby

awarded judgment for compensatory damages in the sum

of $5,047,972. against Monroe County, lowa, with interest

thereon at the rate of 10 percent per annum from and

after the 5th day of May, 1988

It is further ORDERED that the costs of this action in

the sum of $(Costs to be determined at a later date) (to be

computed by the Clerk) are hereby assessed against said

Defendant and judgment is hereby rendered against the

Defendant for the payment of said costs

It is further ORDERED that Raymond Vance, now

deceased, Billy K. Myers, and Helen Sinclair, as individ

uals, are dismissed as Defendants in this action and that

IDF Acquisition Corp., as Intervenor, should be and it is

also dismissed from this action

Dated this 18th day of June, 1991

/s/ James -. Riell

JUDGE, 8TH hpi IAL

DISTRICT OF IOWA

Illegible

19th day of June, 1991.

7s7 Rhonda L. Rardin

Copy to: R. Jeffrey Lewis & Joseph G. VanWinkle

James Blomgren

Lee H. Gaudineer

Annette Scieszinski

John G. Fletcher

ADA

IN THR JOWA DISTRICT COURT

FOR MONRORF COLINTY

MKOWA COAL MINING,

COMPANY, INC., STAR

(OAL MIINING, [sic]

COMPANY, INC... and

IYS

[IM HUYSER, FINDINGS OF PACT.

CONCLUSIONS OF

LAW AND DECREE

Plaintiffs,

BILLY K. MYERS, (Filed Dec 27, 1989)

RAYMOND VANCE,

HELEN SINCLAIR. THE

BOARD OF SUPERVISORS

OF MONROE COUNTY,

IOWA and MONRO}

}

)

}

Vs )

)

}

)

COUNTY, IOWA,

}

Defendants )

}

On May 5, 1988, the Plaintiffs filed herein their Pet

tion for Writ of Certiorari, Dealaratory Relief and Tempo

rary Injunction, which case is captioned as CL 54-0585

Thereafter, on the 25th of October, 1988, the Plaintiffs also

filed a Petition for Writ of Certiorari and Declarator

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.