Swallow Tail, LLC v. Missouri Department of Conservation

Citations: 522 S.W.3d 309; 2017 Mo. App. LEXIS 118; 2017 WL 892549Docket: WD 79560

Court: Missouri Court of Appeals; March 6, 2017; Missouri; State Appellate Court

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Swallow Tail, LLC filed a Petition for Damages and Injunctive Relief in the Circuit Court of Cole County against the Missouri Department of Conservation and the Missouri Conservation Heritage Foundation, claiming issues related to the Stream Stewardship Trust Fund's compensatory mitigation program. The trial court dismissed all claims against the Heritage Foundation and ruled in favor of the Conservation Department on the remaining claims after a bench trial. Swallow Tail's appeal includes two main points: first, that the trial court misapplied article III, section 38(a) of the Missouri Constitution regarding the public purpose of the Conservation Department’s activities; and second, that the trial court misapplied article IV, section 43(b) of the Missouri Constitution, contradicting decades of case law. The court affirmed the trial court's judgment, finding no error.

The excerpt also details the permitting process under section 404 of the Clean Water Act, where projects causing environmental damage to waterways must purchase mitigation credits from banks or in-lieu fee programs as compensation. It explains that these credits must typically be sourced from the same ecological drainage unit as the project. Mitigation banks and in-lieu fee programs operate differently: mitigation banks earn credits by meeting ecological performance goals, while in-lieu fee programs can receive advanced credits for future projects and earn additional credits upon completion of certain ecological goals. The U.S. Army Corps of Engineers oversees this process but does not regulate credit prices or restrict how funds from credit sales are used.

Credit prices established by in-lieu fee programs and the Corps reflect the actual costs of projects, with full cost accounting mandated. Unlike mitigation banks, funds from in-lieu fee programs are federally regulated and primarily allocated for future mitigation projects, with limited exceptions for administrative fees. The Heritage Foundation, a non-profit supporting Missouri's Conservation Commission and the Department of Conservation, sponsors the Stream Stewardship Trust Fund, which is an in-lieu fee program approved by the Corps for stream mitigation. 

Permittees can purchase credits from any in-lieu fee program or mitigation bank within an ecological drainage unit, creating competition between the Stream Stewardship Trust Fund and Swallow Tail for credit sales. The Conservation Department, a subdivision of Missouri's state government, oversees the management and conservation of wildlife resources and aims to enhance natural resources through partnerships. Specific guidelines direct Conservation Department staff in project selection within priority watersheds, developed to optimize resource allocation.

When a landowner seeks assistance, staff utilize a decision tree to determine if the issue is in a high-priority watershed. They help landowners identify funding sources for priority projects, including the Heritage Foundation and various government programs. The Conservation Department generally collaborates with non-profit entities and does not typically engage for-profit organizations. If a landowner's project aligns with the Stream Stewardship Trust Fund criteria—such as preservation, stream bank stabilization, or ecological bridge projects—staff prepare a grant application for the director's approval before submission to the Heritage Foundation. The Conservation Department may also undertake administrative tasks for the Heritage Foundation, provided those costs are reimbursed.

Swallow Tail raises two points on appeal regarding the trial court's application of the Missouri Constitution. First, it contends that the trial court misapplied article III, section 38(a), which prohibits the Conservation Department from using public resources primarily for the benefit of a private entity. The trial court found that the department's activities served a primary public purpose related to the preservation of natural resources. 

Second, Swallow Tail claims the trial court misapplied article IV, section 43(b), asserting that all resources from the Conservation Commission Fund must be used for conservation purposes. It argues that credits received by the Heritage Foundation, derived from the Conservation Department's activities, should be deposited into this fund. The trial court rejected this broad interpretation, noting a lack of legal precedent over the past forty years.

The standard of review indicates that the trial court's judgment will be upheld unless unsupported by substantial evidence, against the weight of evidence, or erroneous in law application. Specifically, for article III, section 38(a), Swallow Tail argues that the Conservation Department's work on mitigation projects funded by the Stream Stewardship Trust Fund primarily benefits the Heritage Foundation, resulting in a significant financial advantage for the foundation without serving a public purpose. Article III, section 38(a) permits grants of public money if they serve a public purpose, a notion that has evolved to include a broader range of activities as publicly beneficial. If the primary purpose is public, incidental private benefits do not negate this purpose, placing the burden of proof on Swallow Tail to demonstrate that the Conservation Department's stated public purpose is arbitrary or unreasonable.

The Missouri Supreme Court affirms that preserving the state's natural resources qualifies as a public purpose, allowing for public funding to support private entities. In this case, the Heritage Foundation's grants to the Conservation Department for high-priority projects do not constitute a transfer of public funds to a private entity. The Conservation Department's construction and maintenance of these projects align with its constitutional mission. Swallow Tail's claim that public funds are improperly granted to the Heritage Foundation through incidental benefits from mitigation credits is dismissed as overly tenuous. These credits, generated by the Conservation Department's projects, do not negate the public purpose of the projects. Furthermore, the Heritage Foundation’s agreement with the Corps stipulates that proceeds from credit sales fund future projects that benefit streams, reinforcing the public purpose. Swallow Tail's argument that projects must yield a net environmental benefit to qualify as serving a public purpose lacks legal support. The court concludes that the public purpose of the Conservation Department’s projects stands independently of any negative impacts from other developments. Thus, Swallow Tail's objections are rejected.

Swallow Tail contends that the Conservation Department misapplied Article IV, Section 43(b) of the Missouri Constitution by allegedly using the Conservation Commission Fund for purposes outside bona fide conservation. Specifically, it claims that funds were used to generate credits controlled by the Heritage Foundation and that any proceeds from their sale should revert to the Conservation Commission Fund. The Fund, derived from a voter-approved tax and federal payments, must solely support conservation efforts related to wildlife and resource management. The trial court found that Swallow Tail's claims were unfounded, noting that the Conservation Department primarily uses grants from the Heritage Foundation for mitigation projects, which align with permissible conservation purposes. Furthermore, the court rejected Swallow Tail's broad interpretation of Section 43(b), which would mandate that any benefits from the Department's operations be returned to the Fund. The credits in question were determined to be incidental benefits to the Heritage Foundation, not resulting from the Department’s operations in a manner that would invoke Section 43(b). Consequently, the trial court's judgment is affirmed, with the court denying the motion to strike Swallow Tail’s statement of facts while highlighting the need for compliance with procedural rules.

The statement of facts aims to provide an immediate, accurate, complete, and unbiased understanding of the case's facts. In civil cases tried in court, evidence is assessed favorably towards the trial court's judgment, with any unaddressed fact issues deemed resolved in accordance with the judgment reached. The Conservation Department's mission entails protecting and managing the state’s fish, forest, and wildlife resources while providing opportunities for public engagement and education regarding these resources. The Missouri Constitution grants the Conservation Commission and Department authority over the control, management, restoration, conservation, and regulation of the state’s wildlife resources. Since Swallow Tail did not demonstrate a violation of section 38(a), it is unnecessary to determine whether this section, applicable to the General Assembly, extends to state departments like the Conservation Department. Additionally, the Heritage Foundation, as part of an in-lieu fee program, may only utilize proceeds from additional credit sales for future mitigation projects that serve a primary public purpose.