Judge denies motions in Spearfish vs. firefighters’ association lawsuits

February 23, 2019

SPEARFISH — After months of considering various motions from the parties enmeshed in the civil lawsuits related to the city of Spearfish and Spearfish Volunteer Firefighters’ Association, 4th Circuit Court Judge Eric Strawn denied them all.

After hearing arguments Nov. 15 from the association, with a motion for summary judgment in the city’s declaratory judgment; the city, with a motion for partial summary judgment; Spearfish Fire Chief Mark Sachara, with a motion for summary judgment; and the South Dakota Community Foundation, with a motion to dismiss, Strawn rendered his decision Feb. 13.

“Throughout the proceedings and within the numerous documents submitted to the respective parties, this Court finds there are genuine issues of material fact in each of the respective claims and defenses made by the parties,” the court document denying each of the motions states.

A motion for summary judgment allows a party to try to prove, by sworn statements, documents, and other evidence, that there are no genuine issues of material fact remaining to go to trial, and that the parties are entitled to a judgment as a matter of law with a trial.

With the denial of the motions, the lawsuits continue, with the parties continuing with discovery, the civil procedure during the parties involved obtain evidence.

The lawsuits involve funds acquired over the decades for the purposes of fire protection services in the Spearfish Fire District and the question of who legally can determine how those funds, formerly and currently in the association’s possession, should be used.

The city asked the court in January 2018 to provide a determination of the legal relationship between the parties, as well as the rights as to the assets involved, after the association created two endowments totaling $1,050,000 through the South Dakota Community Foundation. The city contends that it has a duty to ensure the funds are used in a manner permitted by law, and to prevent the association from making any other transfers before the court decided the legal rights of the parties, the city also filed a temporary restraining order and injunction, which were granted.

The association denied the claims and cause of action in the city’s suit, describing that the association is a separate, legally-recognized entity from the city, compliant with state law, with its own property and the freedom to make decisions on how to manage its assets.

The South Dakota Community Foundation asked the court to dismiss the suit in regards to the foundation, as it should not be subject to the litigation since it doesn’t involve the foundation.

The city argues that the endowments created through the foundation by the association could include funds unlawfully transferred, so therefore, the foundation is a party to the declaratory action sought by the city.

The association countersued the city in February 2018, claiming that assets currently in possession of the Spearfish Fire Department were taken without just compensation or due process, arguing that the city has deprived the association of its interest in the property, and it is seeking damages.

The city contends that said assets, including fire trucks and equipment, were paid by for jointly by the city and association through funds provided by the public — whether through donations or taxes — and that the apparatus are being used for the same purpose – fire protection, housed in the same places — the city’s fire stations, by the same volunteer firefighters, as it always has been. The city is asking the court to rule that the association has no basis for the countersuit, arguing that the association reports itself as a tax-exempt organization so is either an affiliate or supporting organization of the city and that the money donated must be used for the specific purposes for which the donations were sought.

In turn, the association filed a similar motion asking the court to rule that the funds that have always been held by the association are private funds and that the city has no claim to them.

In his findings, Strawn writes, “Prior to issuing its order on the varying motions before it, this Court points out two clarifications regarding arguments it heard by council.” The first it mentions has to do with a 1977 opinion from then-South Dakota Attorney General Bill Janklow and whether said opinion is binding. “This Court acknowledges the cases regarding the use of Attorney General Opinions and fully understands that such opinions, although not binding, may be instructive, as well as other opinions from other state (or) federal agencies,” the documents states.

“Understanding this Court may consider opinions from state and federal agencies, there is nothing preventing Spearfish Volunteer Firefighters’ Association from seeking an opinion from the Department of the Treasury Internal Revenue Service Exempt Organizations regard whether it its not required to file annual information returns on Form 990 because of: 1. its status pursuant to Rev. Proc. 95-48 (which describes tax-exemptions for corporations, certain trusts, etc., as well as tax returns by exempt organizations); or 2. its status as being a support organization.”

When asked the parties’ reactions to the judge’s decision and what that means going forward, Thomas Brady, of Lynn, Jackson, Shultz & Lebrun, representing the city, said, “The court has determined that there exists questions of fact that need to first be resolved before a decision can be made. The discovery is proceeding and, at a later date, the court will revisit the motions or, after trial, make a determination of the controlling facts and make a decision.”

Eric Nies, of Nies and Karras, representing the Spearfish Volunteer Firefighters’ Association, said that the volunteers acknowledge the court’s decision.

“The volunteers intend to continue concurrently prosecuting their case and seeking a negotiated solution with the city. They have made several attempts to settle or mediate the matter and will continue to do so,” he said. “Meanwhile, the volunteers will continue to serve the community as they have for the last 138 years.”

Legal counsel for the South Dakota Community Foundation did not respond to a request for comment by press time.

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