Cook, et al v. Rockwell Intl Corp

Filing 2556

ORDER denying 2542 FRICO's Appeal of Class Counsel's Determination of FRICO's Claim. ORDERED by Judge John L. Kane on 4/9/2019. (cthom, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 90-cv-00181-JLK
MERILYN COOK, et al.,
Plaintiffs,
v.
ROCKWELL INTERNATIONAL CORPORATION and
THE DOW CHEMICAL COMPANY,
Defendants.
______________________________________________________________________________
ORDER DENYING FRICO’S APPEAL OF CLASS COUNSEL’S
DETERMINATION OF FRICO’S CLAIM (ECF NO. 2542)
______________________________________________________________________________
Kane, J.
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

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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

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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

1FRICO’s

argument regarding the existing zoning of its property is not fully developed, and I
find such zoning is not pertinent for how the property should be classified in this case.
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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. 25511.

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.

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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

2The

Plan of Allocation differentiates between how properties are to be valued and how they are
to be categorized. With respect to valuation, it states:
Based on Jefferson County and Broomfield County tax assessment records from
April 1989 and such other sources as the Settlement and Claims Administrator may
reasonably determine to be suitable and reliable, the Settlement and Claims
Administrator shall determine, for each Class Property, the Class Property’s
assessed value, expressed as a fraction of the total assessed value of all Class
Properties within the same category.
Plan of Allocation at 4-5. On the other hand, regarding categorization, it provides:
For each property located in the Property Class Area (“Class Property”), the
Settlement and Claims Administrator shall consult appropriate records and data,
from Jefferson County and Broomfield County, Colorado, and such other sources
as the Settlement and Claims Administrator may reasonably determine to be
suitable and reliable, for the purposes of: . . . assigning the Class Property to one of
the three property categories: commercial, residential, or vacant as of June 7, 1989.
Id. at 4 (footnote omitted). Thus, the Claims Administrator was to base its value of the
properties on the assessed value from the Jefferson County and Broomfield County tax
assessment records, while—as explained above—it was just to consult appropriate records
from Jefferson and Broomfield Counties in categorizing the properties.
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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 of FRICO’s properties would be equivalent to the average of the other
land in the Property Class Area. As Mr. Hunsperger notes, it would be unjustifiable to ignore the
differences in the properties “in terms of zoning, entitlements, location, size, availability of
utilities, and ultimate highest and best use.” 2/5/19 Hunsperger Decl. ¶ 9.

C. Discovery and a Hearing
Since I do not agree that FRICO’s property should be treated as vacant or that it should
be valued using the average assessed values for other land in the Property Class Area, FRICO
alternatively requests that I permit it to engage in limited discovery and hold a two-day hearing
on this matter. I adhere to my previous ruling that FRICO is not entitled to such discovery and
that it is not relevant or necessary for determination of the questions at issue. See Order Class

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Counsel’s Mot. for Protective Order at 1-2, ECF No. 2521. After reviewing the submissions
related to FRICO’s Appeal, I likewise conclude that a two-day evidentiary hearing is not
necessary.

FRICO’s Appeal (ECF No. 2542) is, therefore, DENIED.

DATED this 9th day of April, 2019.

______________________________
JOHN L. KANE
SENIOR U.S. DISTRICT JUDGE

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