United States District Court, D. Colorado
ORDER DENYING FRICO'S APPEAL OF CLASS
COUNSEL'S DETERMINATION OF FRICO'S CLAIM (ECF NO.
2542)
JOHN
L. KANE SENIOR U.S. DISTRICT JUDGE
In June
2018, The Farmers Reservoir and Irrigation Company (FRICO)
sought review of the Settlement and Claims
Administrator's denial of the claims it submitted to
obtain a distribution from the Settlement Fund in this case.
Finding that FRICO was a member of the Settlement Class but
that the Claims Administrator had yet to make a final
determination with respect to valuation of its claims, I
directed the Claims Administrator to process the claims and
advised FRICO it could refile any objections it had after
that review was complete. Order on Remainder of FRICO's
Mot. for Review at 3-4, ECF No. 2528. FRICO now appeals the
Claims Administrator's final determination of its claims.
I have
reviewed the Appeal (ECF No. 2542) and supporting documents,
Class Counsel's Opposition to the Appeal (ECF No. 2548)
including the Declaration of Wayne Hunsperger (ECF No. 2549),
FRICO's Reply (ECF No. 2550), the Supplemental
Declaration of Mr. Hunsperger (ECF No. 2551-1), and
FRICO's Response to Additional Declaration of Mr.
Hunsperger (ECF No. 2555). Seeing no error in the process
employed or the conclusions reached by the Claims
Administrator, I affirm its valuation of FRICO's claims
based on classification of FRICO's properties as
commercial and using Jefferson County's 1989 assessed
values.
A.
Classification of FRICO's Properties as Commercial It is
appropriate for FRICO's properties to be treated as
commercial for the purposes of valuing its claims under the
Settlement Agreement. As I previously observed, FRICO's
properties are “held for the benefit they impart to its
shareholders via the commercial product they store and
deliver-water.” Order on Remainder of FRICO's Mot.
for Review at 4. FRICO argues that its properties cannot be
categorized as commercial because: (a) it does not sell
anything or make a profit, (b) the Jefferson County Assessor
classifies its parcels as vacant, (c) commercial use of the
parcels is not allowed under existing zoning, and (d) 415.02
acres of its property was not used for the storage or
delivery of water in 1989. None of these circumstances,
however, precludes my inclination-or the Claims
Administrator's determination-that the holding of
property for the benefit of stockholders and allocating water
to them are commercial purposes, even when no profit is
earned.
The
issue here, as FRICO acknowledges, is not what kind of entity
it is but whether its properties should be classified as
commercial. As such, I find the fact that FRICO itself does
not turn a profit to be irrelevant. While it may technically
be true that FRICO does not sell anything or make a profit,
its properties have still served business purposes. FRICO has
managed its properties for the benefit of its stockholders,
providing them with a product. FRICO has at times even been
able to generate sufficient income to cover its operating
costs so that it did not need to collect an annual assessment
on its stock. See Reply in Support of Appeal at 7,
ECF No. 2550. In effect, then, it has passed any income or
profit from its properties and business directly to its
stockholders.
Moreover,
FRICO's properties contain numerous
improvements-including the canals, dam, lake, lake
tender's house and associated outbuildings, etc.-and so
cannot properly fall within the definition of vacant for the
purposes of the Settlement in this case. Much of its land has
also been used to operate a lake park, charging fees for
visitors. Consequently, it is more properly classified as
commercial than vacant.
FRICO
contends that, under the Plan of Allocation of the Settlement
Fund and the Class Member Notice in this case, its properties
should be treated as vacant because the Jefferson County
Assessor labeled them that way. The Plan of Allocation does
not, however, require the Claims Administrator to simply
accept the County's designation for the property. The
Plan directs the Claims Administrator in categorizing each
property as residential, commercial, or vacant to
“consult appropriate records and data” from
Jefferson County “and such other sources as [it] may
reasonably determine to be suitable and reliable.” Plan
of Allocation at 4, ECF No. 2407-2 (footnote omitted). FRICO
argues that the Class Member Notice goes even further and
only permits property assessed by the tax authorities as
commercial to be classified as such. Reply in Support of
Appeal at 5 (quoting Class Member Notice at 15, ECF No.
2416-1). FRICO is incorrect. The Notice does not limit
commercial classification to those properties assessed as
commercial. It merely advises that those assessed as such
will be classified as commercial; other properties could be
as well. Thus, contrary to FRICO's protestations, the
fact that the Jefferson County Assessor designated its
parcels as vacant is not determinative.[1]
If I
find that any of its property is rightly categorized as
commercial-as I have, FRICO insists that 415.02 acres of the
property it owned in 1989 should nevertheless be classified
as vacant because they played no part in the storage and
delivery of water and had no structures or improvements of
any kind. But this land still does not fit within the
definition of vacant for the purposes of the Settlement
Agreement. It was acquired and held and portions of it sold
to advance the purposes of the company and for the benefit of
its stockholders. I agree with Mr. Hunsperger that the
purchase of much of the land by the City of Westminster
additionally supports the conclusion that the property
furthered the business purposes of the lake park and was not
vacant land subject to development. See 2/15/19
Hunsperger Decl. ¶ 6-7, ECF No. 2551-1.
B.
Valuation of FRICO's Property
As for
valuation of FRICO's property, several reasons justify
calculating its claim based on Jefferson County's 1989
assessed values for its property. First, FRICO and the other
Class Members received notice that allocation of the
Settlement would “be calculated on a pro rata
basis based on the assessed value of the property [they]
owned . . . as of June 7, 1989 located within the Property
Class Area.” Class Member Notice at 4. The Notice
further explained that:
These calculations will be done using property and appraisal
data obtained by the Settlement and Claims Administrator from
Jefferson County Colorado Assessor's Office, Property
Records Division in connection with the administration of
this Settlement. The information obtained from Jefferson
County relates to property assessments completed by the
County in April 1989, which is closest in time to June 7,
1989, along with property code type data from 1992, the
earliest date on which such property type data is available.
Id. at 15. The Plan of Allocation, to which there
were no objections by FRICO or any other Class Member,
expressly allows for this procedure to be used. See
Plan of Allocation at 4-5.[2] I approved the Plan of Allocation on
April 28, 2017, Order Granting Final Approval at 2, ECF No.
2470, and no appeal was taken from that Order. As a result, I
find FRICO had notice of the procedure to be
followed-calculation of the claim amounts based on the
Jefferson County assessed property values-and waived any
objection to it.
Second,
FRICO is now improperly proposing to have its claim value
calculated in a different manner than those for other Class
Members. In accordance with the Plan of Allocation, the 1989
assessed values were used to calculate the claim value for
every other claimant. See 2/5/19 Hunsperger Decl.
¶ 10-11, ECF No. 2549. The purported arbitrary valuation
of FRICO's properties by Jefferson County is not a
sufficient reason to make an exception for FRICO.
Lastly,
neither of FRICO's alternative valuation proposals are
acceptable. With the first of its proposals, FRICO suggests
that the Claims Administrator: “(1) determine the fair
market value (“FMV”) of land within and nearby
the Property Class Area on a per-acre basis in 2018; (2)
multiply the per-acre 2018 FMV by the number of acres in
FRICO's claim to calculate the FMV of FRICO's
property in 2018; (3) multiply the FMV of FRICO's
property in 2018 by 29% to reach a 2018 assessed valuation of
FRICO's Property; and (4) discount the 2018 assessed
valuation to 1989 dollars to determine the 1989 assessed
valuation.” Appeal at 11, ECF No. 2542. Obtaining
current appraisals for land “within and nearby the
Property Class Area” would be unnecessarily expensive
and would not provide any more reliable information on the
value of FRICO's properties in 1989. Such a procedure was
not contemplated by the Settlement Agreement or Plan of
Allocation. FRICO's second proposal is to
“determine the average assessed value per acre or
square foot of all of the eligible vacant and commercial land
in the Property Class Area for which claims were timely
submitted, and to pay FRICO based on those average
values.” Id. This approach is even more of a
stretch than the first. There is no basis for assuming that
the value ...