Appeals court upholds sale of FLDS assets, overturns federal ruling

Published: Monday, Nov. 5 2012 6:53 p.m. MST

Attorney Jeff Shields addresses the Utah Supreme Court, which heard arguments in Salt Lake City on Tuesday, April 12, 2011, on cases involving the FLDS Church's United Effort Plan land trust.rn

Trent Nelson

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SALT LAKE CITY — Nearly two years ago, a federal judge determined the state seizure of assets belonging to a Utah-based polygamous sect was not only unconstitutional, but a "virtual takeover."

But Monday, the 10th Circuit Court of Appeals in Denver ruled that U.S. District Judge Dee Benson really shouldn't have looked at the case involving the Fundamentalist LDS Church Association at all.

The Utah Supreme Court had previously ruled that the FLDS waited too long to take legal action. Because of that, the appellate court ruled Monday that the FLDS Association "is precluded from pursuing its claims in federal court."

The ruling clears the way for state authorities to break up the trust and sell vacant land, and sell or distribute homes and businesses in the border towns of Hildale, Utah, and Colorado City, Ariz. Officials hope to distribute the assets to residents without considering their religious affiliation.

Mary Beck Briscoe, chief judge of the 10th Circuit, sent the case back to Benson with instructions to vacate a preliminary injunction that would have returned the trust to the FLDS and dismiss the claim regarding the trust altogether. The ruling ends a deadlock between state and federal courts, allows state-appointed special fiduciary Bruce Wisan to again administer the trust and frees up assets that could pay Wisan — who is owed more than $5.6 million — and others charged with administering the trust.

"It's been very frustrating and this will relieve a lot of the frustration," Wisan said of the ruling Monday.

"We are all very happy with this decision," Wisan's attorney, Jeffrey L. Shields, said, referring to the states of Utah and Arizona, Wisan and other trust administrators, and 3rd District Judge Denise Lindberg, who presides over legal issues involving the trust. "Everybody but the FLDS appealed Judge Benson's preliminary injunction to turn the keys of the trust over to Warren Jeffs and we've won that appeal now."

FLDS attorney Rod Parker did not return calls for comment Monday.

The United Effort Plan was created by the FLDS Church in 1942 on the concept of a "united order," allowing followers to share in its assets. Utah's state courts seized control of the FLDS trust in 2005, amid allegations of mismanagement by church leaders, including Warren Jeffs, the head of the church who is currently in prison in Texas.

Members consider sharing its assets a religious principle and see state intervention in the trust as a violation of their religious rights. They have long been challenging the state takeover of the trust in both state and federal courts.

Valued at more than $110 million, the trust holds most of the property and homes in the two border towns. The church also holds property in Bountiful, British Columbia, and Eldorado, Texas.

In 2009, Lindberg ruled that a liquidity crisis of the UEP trust made selling trust property necessary. The trust has around $3 million in debt and no steady source of revenue. The FLDS Church appealed the ruling to the Utah Supreme Court.

In August 2010, the state's high court found that the pending state lawsuit, which was filed in 2008 and challenged the administration of the trust, came too late.

Meanwhile, in a separate federal court action, Benson issued his ruling finding the state's actions unconstitutional and he implemented an injunction ordering that the church's assets be returned to FLDS leaders and prohibiting any further action by the state-appointed special fiduciary when it came to management of the trust.

The issue was then appealed to the 10th Circuit Court of Appeals, which issued an injunction, freezing all trust assets until the legal issues could be settled. That court asked the Utah Supreme Court to clarify whether its ruling that the UEP lawsuit was too late barred any subsequent lawsuits stemming from the same argument in any court.

On Oct. 2, the Supreme Court ruled that their ruling did preclude any "subsequent action on the same claims between the same parties."

"The point of the ruling out of Denver is that Judge Benson made a mistake of law and he should have dismissed the case when it was filed with him," assistant attorney general Peggy Stone said. "That mistake was that the FLDS Association had already brought claims like these constitutional claims before the Utah Supreme Court in a previous case … and the Utah Supreme Court denied those claims, saying that the FLDS Association had waited too long to bring them."

Neither the Utah Supreme Court nor the 10th Circuit looked at the constitutional claims brought by the FLDS.

"(The 10th Circuit said) we're not going to address the merits of those constitutional claims, because you waited too long — they're just over," Stone explained, adding that a legal principle of res judicata, pointed to by the 10th Circuit, should have seen Benson dismiss the case. "(Res judicata means) once you've had your bite of the apple, you don't get another one."

Briscoe wrote about some of the reasons used by the Utah Supreme Court, which included "a lack of diligence with no adequate explanation from the FLDS Association for its three-year delay in filing its petition … (and) the related injury resulting from the FLDS Association’s lack of diligence to individuals who have relied upon the state district court’s final order."

"It's a longstanding doctrine that if you sit on your rights too long, you could lose your rights," Shields said.

He believes that the reason the FLDS waited so long to file their lawsuit in the first place goes back to Jeffs. He said Jeffs told his followers not to do anything about the state seizure of the trust. Part of that, Shields said, has to do with his belief that the FLDS were planning to abandon Hildale and Colorado City in favor of the Yearning for Zion Ranch in El Dorado, Texas.

"We noticed that as soon as the Texas thing didn't go as planned, (that's) when they came back and started asserting rights here," Shields said, referring to a 2008 law enforcement raid on the YFZ Ranch. "I think it's logical that they were going to leave. You read the writings of Warren Jeffs … and they didn't care what happened to the trust. … But when they lost their plan in Texas, 'Whoa. We better care' — they started to come back and fight."

The 10th Circuit ruling doesn't solve all the trust problems, however. There is still the question of who will pay the more than $5.6 million in fees owed to Wisan, Shields and others hired by the state to administer and represent the trust. The Utah Supreme Court ruled in August that the Utah Attorney General's Office should foot the bill until the trust can pay for itself.

Stone reiterated this Monday, as she said the 10th Circuit ruling means trust assets can be sold and used to generate funds to pay the fees, "which is how it's supposed to be."

Wisan said there are still "over 20 lawsuits outstanding or open" involving the trust, some of which need to be resolved before they start distributing or selling property. Shields said the state should pay them, as ordered, and the trust funds can then repay the state.

Wisan would like some "interim funding" to allow him to get going on his hopes for the trust.

"The genesis of my plan is to authorize a group of community members to make the decisions regarding the distribution and either I or Judge Lindberg, or both, would be an appeal process," Wisan said. "The committee or board of community members would make the distribution process decisions — instead of the fiduciary."

Utah officials plan to hold a town hall-style meeting Nov. 30 in St. George for church leaders and members or ex-members asserting rights of ownership.

E-mail: emorgan@desnews.com, hollenhorst@desnews.com

Twitter: DNewsCrimeTeam

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