Title: Ralph Naylor Farms, LLC v. Latah County, Idaho Appeal from district court decision denying Naylor Farms an award for attorney fees and costs

State: idaho

Issuer: Idaho Supreme Court (civil)

Document:

IN THE SUPREME COURT OF THE STATE OF IDAHO 
Docket No. 33422 
 
 
RALPH NAYLOR FARMS, LLC, an Idaho 
limited liability company,    
                                              
         Plaintiff-Appellant,    
                        
 v.                                                       
                                                      
 LATAH COUNTY, IDAHO,  
                                    
          Defendant-Respondent.                          
 
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North Idaho, September 2007 
Term 
 
2007 Opinion No. 113  
 
Filed:  November 21, 2007 
 
Stephen W. Kenyon, Clerk 
 
 
 
Appeal from the District Court of the Second Judicial District of the State of Idaho, Latah 
County.  Hon. Carl B. Kerrick, District Judge. 
 
Decision of the district court denying an award of attorney fees is:  Affirmed. 
 
Creason, Moore & Dokken, PLLC, Lewiston, for appellant; Tod Geidl argued.  
 
William W. Thompson, Jr., Latah County Prosecuting Attorney, Moscow, for respondent; 
James E.M. Craig, deputy prosecuting attorney, argued.  
__________________________________________ 
 
Trout, Justice Pro Tem 
This is an appeal from a decision of the district court denying Ralph Naylor Farms’ 
(Naylor Farms) motion for an award of attorney fees and costs pursuant to Idaho Code section 
12-117 and Idaho Rule of Civil Procedure 54(d).  Because the County did not act without a 
reasonable basis in fact or law in adopting an ordinance creating an overlay zone, we affirm the 
district court’s denial of attorney fees and costs.   
 
I. 
 
FACTUAL AND PROCEDURAL BACKGROUND 
Naylor Farms filed an application with the Idaho Department of Water Resources 
(IDWR) on June 26, 2002, requesting a groundwater right for both irrigated agriculture and an 
industrial use for clay processing.  Latah County (the County) filed a petition to intervene, which 
IDWR granted.  Following a hearing at which the County appeared and gave testimony in 
opposition to Naylor Farms’ application, IDWR entered a preliminary order approving the 
application on December 1, 2004.  The County filed a petition for reconsideration of the 
preliminary order, which was granted and a new hearing was set.  While that was pending, an 
entity, known as Protect Our Water Inc. (POW), also filed a petition and request for hearing in 
the matter, which was denied by IDWR.    
In January of 2005, POW presented the County with a petition requesting that the County 
impose a moratorium prohibiting the acceptance, review or approval of all conditional use 
permits or zoning permits related to mineral resource extraction within Latah County.  The Latah 
County Board of Commissioners (Commissioners) requested input from the Latah County 
Planning Commission, and the Planning Commission concluded that existing zoning ordinances  
were adequate to address the concerns of POW.   Nevertheless, on March 2, 2005, on an 
emergency basis, the Commissioners enacted Ordinance No. 258 (the Ordinance), creating the 
“Moscow Sub-basin Groundwater Management Overlay Zone” within a portion of Latah 
County.  The Ordinance prohibited certain activities within the overlay zone, including natural 
resource mineral extraction and processing.   
On June 27, 2005, Naylor Farms attempted to file an application with the Latah County 
Planning and Building Department for a conditional use permit in order to conduct mineral 
extraction on its property.  The Director of the Planning and Building Department rejected the 
application, finding that the Ordinance prohibited consideration of the application.  Naylor Farms 
resubmitted the application on June 28, 2005, and sent a letter to both the Director and the 
Commissioners requesting an appeal to the extent the conditional use permit application had 
been summarily denied.  The Director responded by letter, informing Naylor Farms that the 
Department was unable to accept applications for uses that are prohibited within the applicable 
zone.   
Naylor Farms filed a complaint in district court seeking invalidation of the Ordinance, as 
well as just compensation for an alleged regulatory taking.  Both Naylor Farms and the County 
filed motions for summary judgment.  After a hearing, the district court granted Naylor Farms’ 
motion, invalidating the Ordinance, and denied the County’s motion.  Naylor Farms then filed a 
motion for award of attorney fees and costs, together with a supporting memorandum pursuant to 
 
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I.R.C.P. 54(d).  After another hearing, the court rendered its decision, denying Naylor Farms’ 
motion on the basis that the court could not conclude the county acted without a reasonable basis 
in fact or law when it enacted the Ordinance.  Naylor Farms filed this timely appeal.       
 
II. 
STANDARD OF REVIEW 
 
The appellate court exercises free review over the decision of a district court applying 
I.C. § 12-117.  Fischer v. City of Ketchum, 141 Idaho 349, 356, 109 P.3d 1091, 1098 (2005); 
Homestead Farms, Inc. v. Bd. Of Comm’ers, 141 Idaho 855, 859, 119 P.3d 630, 634 (2005).  An 
award of attorney fees under I.C. § 12-117 has been distilled into a two-part test:  fees must be 
awarded if (1) the Court finds in favor of the person, and (2) the agency acted without a 
reasonable basis in fact or law.  Reardon v. Magic Valley Sand and Gravel, 140 Idaho 115, 118, 
90 P.3d 340, 343 (2004).   
 
III. 
ANALYSIS 
A.    
Attorney fees under Idaho Code § 12-117  
Naylor Farms appeals the district court’s decision denying its request for attorney fees 
pursuant to I.C. § 12-117, arguing that the County acted unreasonably and without authority 
when it enacted the Ordinance.  Idaho Code § 12-117 provides: 
Unless otherwise provided by statute, in any administrative or civil 
judicial proceeding involving as adverse parties a state agency, a 
city, a county or other taxing district and a person, the court shall 
award the prevailing party reasonable attorney’s fees, witness fees 
and reasonable expenses, if the court finds that the party against 
whom the judgment is rendered acted without a reasonable basis in 
fact or law.   
Idaho Code § 12-117 is not discretionary, but rather, provides that a court must award 
attorney fees if the court finds in favor of the person, and the state agency did not act with a 
reasonable basis in fact or law.  Fischer, 141 Idaho at 356, 109 P.3d at 1098.  Where an agency 
acts without authority, it is acting without a reasonable basis in fact or law.  Id.;  Magic Valley 
Sand & Gravel, 140 Idaho at 120, 90 P.3d at 345.   However, if an agency’s actions are based 
upon a “reasonable, but erroneous interpretation of an ambiguous statute,” then attorney fees 
should not be awarded.  Russet Valley Produce, Inc. Idaho Potato Comm’n v. Russet Valley 
 
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Produce, Inc., 127 Idaho 654, 661, 904 P.3d 566, 573 (1995) citing Cox v. Dep’t. of Ins., State of 
Idaho, 121 Idaho 143, 148, 823 P.2d 177, 182 (Ct.App. 1991).  Idaho Code  § 12-117 serves dual 
purposes: “(1) to serve as a deterrent to groundless or arbitrary agency action; and (2) to provide 
a remedy for persons who have borne an unfair and unjustified financial burden attempting to 
correct mistakes agencies should never have made.”  Rincover v. State of Idaho, Dep’t. of 
Finance, 132 Idaho 547, 549, 976 P.2d 473 (1999).   
Typically, in analyzing an award of fees under I.C. § 12-117, this Court has looked to 
determine whether there was no authority at all for the agency’s actions or whether, on the other 
hand, the law was not clear or unsettled as to whether the agency had the ability to act.  In 
University of Utah Hosp. v. Ada County Bd. Of Com’rs.,  143 Idaho 808, 153 P.3d 1154 (2007),  
this Court awarded attorney fees against the County when there were clear statutory procedures 
which the County had failed to follow in denying an application for medical indigency.  There 
were no facts indicating a good faith attempt to interpret the applicable statutes or reasonable 
confusion about the County’s duties.  In Fischer v. City of Ketchum, 141 Idaho 349, 109 P.3d 
1091 (2005),  the Court awarded attorney fees against the City of Ketchum because it had 
granted a conditional use permit without requiring certification from a licensed engineer.  The 
Ketchum Zoning Code specifically required such certification before a conditional use permit 
could issue and this Court found that the City had “ignored the plain language of the ordinance 
that a certification … is required before granting a CUP.”  141 Idaho at 356, 109 P.3d at 1098. 
  On the other hand, in Magic Valley Sand and Gravel, supra, the Court did not award 
attorney fees against the City of Burley, even though we found the City acted in violation of the 
constitutional limits on its power and in violation of the LLUPA by adopting a zoning ordinance 
affecting an impact area lying outside the City’s limits.   The Court noted there was case 
precedent dating “as far back as 1949 that a city’s exercise of jurisdiction in an impact area lying 
beyond a city’s limits is inconsistent with the constitutional limitations placed on a city’s powers 
by Article XII, § 2 of the Idaho Constitution.”  140 Idaho at 120, 90 P.3d at 345.   Nevertheless, 
because the City was making a reasonable attempt to interpret the LLUPA, no fees were 
awarded.   
In Karel v. Department of Finance, ____Idaho ____, 162 P.3d 758 (2007),  this Court 
declined to award fees even though we determined the Department had no authority to request 
documents from a securities agent when there was no statutory obligation to maintain the 
 
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requested documents.  There were statutory recordkeeping provisions, but the Department 
admitted it was not requesting any of those documents from the securities agent.  However, 
because this was a matter of first impression in determining how the recordkeeping requirements 
should be applied, we denied an award of fees under I.C. § 12-117.   
The question presented by this appeal is whether the County acted without authority in 
the face of clear provisions and thus, without a reasonable basis in fact or law when it enacted 
the Ordinance; or alternatively, whether the County’s actions were based upon a reasonable 
interpretation of an ambiguous or unclear law.  Naylor Farms argues there was no ambiguity in 
the law and the County did not act fairly or reasonably in enacting an ordinance which limited 
Naylor Farms’ use of a water right decreed by IDWR.  Naylor Farms points out that the district 
court invalidated the Ordinance and the County has not appealed that decision.  The County 
argues that attorney fees should not be awarded because there is little, if any, legal authority 
addressing the relationship between the Local Land Use Planning Act (LLUPA), which directs 
counties to consider water quantity and quality, and other provisions of Idaho law putting the 
State in charge of water permits.   
While the issue presented by this appeal relates only to the decision denying an award of 
attorney fees, it necessarily involves some consideration of the underlying issue presented to the 
district court:  the validity of the Ordinance.  The district court concluded that the enactment of 
the Ordinance was not arbitrary, as it bore a reasonable relation to the advancement of its stated 
purpose and it was based on a consideration of the evidence.  Nevertheless, the trial court 
determined that the ordinance was invalid because of an implicit conflict with state law.1  Naylor 
Farms asserted, and the district court agreed, that the Ordinance implicitly conflicted with state 
statutes regulating water appropriation and quality.  Idaho Code § 42-101 provides in pertinent 
part:  “Water being essential to the industrial prosperity of the state, … its control shall be in the 
state….  All the waters of the state … are declared to be the property of the state, whose duty it 
shall be to supervise their appropriation and allotment ….”   The district court concluded that the 
effect of the Ordinance was to control access to water within the Groundwater Management 
                                                 
1 Idaho has adopted the doctrine of implied preemption, which provides:  “Where it can be inferred from a state 
statute that the state has intended to fully occupy or preempt a particular area, … a [local] ordinance in that area will 
be held to be in conflict with a state law, even if the state law does not so specifically state.” Envirosafe Services of 
Idaho, Inc. v. County of Owyhee, 112 Idaho 687, 689, 735 P.2d 998, 1000 (1987). 
 
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Overlay Zone by controlling certain uses within that zone and therefore, there was an implicit 
conflict between the Ordinance and the general laws of the State.     
Although Naylor Farms was the prevailing party below, the district court declined to 
award fees because the conflict between the Ordinance and state law “was by no means 
obvious.”  In explanation, the court noted that Latah County was empowered through the 
LLUPA to consider the effects of land use regulations on water.  Although the court concluded 
that the Ordinance went beyond considering the effects on water and, in effect, was an attempt to 
manage water in Idaho, the court also concluded that the County’s interpretation of its duties 
under LLUPA was not unreasonable.   
In considering whether Naylor Farms is entitled to an award of attorney fees, we must 
determine whether the County was faced with an ambiguous or unclear statute that would excuse 
a reasonable but erroneous interpretation, in the absence of applicable case law.   While I.C. § 
42-101 provides that control over the appropriation of water is vested in the State,  there are also 
Idaho Code provisions which mandate that a local governing board consider the effect any 
proposed amendments to the comprehensive plan “would have on the source, quantity and 
quality of ground water in the area.”  I.C. § 67-6537.   Idaho Code § 39-126, likewise, instructs 
any agency issuing a license which deals with the environment that it “shall take into account the 
effect the permitted or licensed activity will have on the ground water quality of the state….”   
In creating the Sub-basin Groundwater Management Overlay Zone, the Ordinance 
contains a number of opening clauses which reflect the County’s recognition of its duties under 
the LLUPA and under the Groundwater Management Plan adopted by the Palouse Basin 
Advisory Committee, specifically a need to “regulate developments which could jeopardize 
water quality and water quantity.”  The Ordinance then creates the parameters for the Overlay 
Zone and states in Section 2: 
Certain Land Uses Prohibited 
Within the Zone, the following land use activities shall be prohibited: 
• Natural resource mineral extraction and processing 
• Confined animal feedlot operations exceeding 200 animal units as 
defined by Idaho Code Section 67-6529C 
• Golf courses 
 
While we respect the district court’s analysis of the Ordinance and preemption by State law, it 
appears that the major thrust of this Ordinance is to regulate land use, a power clearly reserved to 
 
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the local governing boards in the LLUPA.  It further appears the County made this land use 
decision by considering, in part, the effects of these types of activities on water quality and 
quantity in the County. 
 In making its argument that the County was acting without any reasonable basis in fact 
or law, Naylor Farms points to several statements or actions taken by the Commissioners, which 
reflect a less than deliberative approach in adopting the Ordinance.  Prior to enacting the 
Ordinance, Paul Kimmell, a Commissioner, testified that while the Commissioners had control 
over land use planning and management, “ultimately the State has the right to issue water 
rights.”  Further, in email correspondence with Bruce Livingston, a member of the Moscow 
Civic Association, Kimmell acknowledges:  “I anticipate the State (through IDWR) may 
challenge our proposed ordinance as a preemptive move by a local jurisdiction to manage the 
State’s water.”  Despite that, Kimmell later acknowledges:  “I’m a risk taker and I want to help 
in deciding what Latah County should look like – not leaving it to someone in Boise.  Should be 
fun.”  Furthermore, the County did not wait for legal advice.  When contacted by the 
Commissioners about the legality of the Ordinance, the County’s attorney asked for some time to 
give them a legal opinion.  In spite of that request, the Commissioners proceeded to adopt the 
Ordinance without waiting for any guidance from their attorney.  One of the Commissioners 
suggested they could “un-adopt it” if their attorney advised them that it was illegal: “… if 
something happens … it can be changed, too, or we could un-adopt it.”   While the 
Commissioners may have been motivated by desires to limit mining in Latah County and could 
have been more circumspect, nevertheless, the County acted to adopt an ordinance which 
regulated land use, which is something the County has the authority to do.   
We also note in its ruling on the underlying issue, the district court found that “in general, 
the purposes set forth in Ordinance 258 are legitimate bases for regulation.”  The district court 
also found “that there is a basis for a reasonable difference of opinion regarding the necessity of 
Ordinance 258” and “the Court cannot conclude that the Board of Commissioners acted in an 
arbitrary manner.”  Although this Court reviews the determination of whether to award attorney 
fees pursuant to I.C. § 12-117 de novo, the question of whether the County was acting 
unreasonably in adopting the Ordinance is related to whether an award of attorney fees is 
appropriate. Even though the district court ruled against the County and set aside the Ordinance, 
 
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it did so on the basis that the County’s actions were preempted by State law and not because the 
County acted wrongfully or without any authority. 
Because there was a legitimate question about the validity of the County’s actions in 
adopting the Ordinance, the County did not act without a reasonable basis in fact or law and, 
therefore, we affirm the district court’s decision denying an award of attorney fees under I.C. § 
12-117.  
     
B.  
Costs as a matter of right 
 
Naylor Farms argues that pursuant to I.R.C.P. 54(d), it should have been awarded certain 
costs as a matter of right, because the district court concluded that it was the prevailing party.  
I.R.C.P. 54(d)(1)(A) provides: “Except when otherwise limited by these rules, costs shall be 
allowed as a matter of right to the prevailing party or parties, unless otherwise ordered by the 
court.”  An award of costs under I.R.C.P. 54(d)(1), as the rule itself provides, is committed to the 
sound discretion of the trial court.  Zimmerman v. Volkswagen of America, Inc., 128 Idaho 851, 
857, 920 P.2d 67, 73(1996) (citations omitted). The district court denied costs for the reasons set 
forth in its written decision denying attorney fees.  On appeal, Naylor Farms did not present any 
argument that the district court abused its discretion and simply argued it should be awarded its 
costs.  In the absence of some argument indicating an abuse of discretion, we affirm the district 
court.  
 
 
C. 
Attorney fees on appeal    
 
Naylor Farms and the County both seek attorney fees and costs on appeal.  The two-part 
test of I.C. § 12-117 applies on appeal.  Magic Valley Sand and Gravel, 140 Idaho at 120, 90 
P.3d at 346.  Because we have concluded the district court did not err in finding the County did 
not act without a reasonable basis in fact or law,  Naylor Farms is not the prevailing party and we 
do not award attorney fees to it.  Likewise, while the County prevailed on appeal, there was 
nothing unreasonable about Naylor Farms’ challenge to the district court’s decision.  We, 
therefore, deny an award of attorney fees to either party on appeal.  
 
 
 
 
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IV. 
CONCLUSION 
Because the County did not act without a reasonable basis in fact or law in adopting 
Ordinance No. 258, we affirm the district court’s decision denying an award of attorney fees 
under I.C. § 12-117.  We award costs on appeal to the County.   
 
Chief Justice Eismann, Justices Burdick and W. Jones CONCUR. 
 
 
 
J. JONES, J., dissenting. 
 
I respectfully dissent.  It is my view that Naylor Farms was entitled to recover its attorney 
fees under I.C. § 12-117.   
 
The district court correctly noted that Latah County adopted Ordinance No. 258 for the 
purpose of regulating water.  As the court noted: 
Although Ordinance 258 is enacted as a zoning ordinance, it purports to establish 
a ‘Groundwater Management Overlay Zone.’  In other words, by its own terms, 
the ordinance purports to manage groundwater.  Additionally, the purposes set 
forth in the ordinance all relate to issues of groundwater quantity and quality.  
Consequently, the Court concludes that Ordinance 258 does attempt to regulate 
water.   
 
This conclusion is supported by the following colloquy in the County’s 30(b)(6) deposition: 
Q. 
[Counsel for Naylor Farms] Handing you what’s been marked as Exhibit 
25.  I don’t have copies for everybody because we just marked it.   
 
A. 
[Commissioner Kimmell]  Okay. 
 
Q. 
That is a March 23rd, 2005, article from the Lewiston Morning Tribune. 
 
A. 
Yes. 
 
Q. 
It says down towards the middle of the article there that, ‘Likewise, Latah 
County Commissioners Paul Kimmell and Tom Stroschein let everyone 
know that they had passed an emergency ordinance that limits certain 
 
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water-depleting land uses in a newly designated Moscow sub-based area.’  
And there’s a quote, ‘Since we can’t manage water directly,’ said 
Kimmell, ‘we’ll do it indirectly.’  First of all, is that what you said to the 
Tribune? 
 
A. 
I don’t recollect my exact words, but based on the accuracy of the 
newspaper. 
 
Q. 
What did you mean there when you said, ‘Since we can’t manage water 
directly, we will do it indirectly’? 
 
A. 
I believe what I meant there was land use ordinances have the ability to 
consider water resources within – as part of the land use itself.  Water, 
land, air quality are all part of our authority under the Local Land Use 
Planning Act. 
 
* * * 
 
Q. 
Okay.  So I take it then that the purpose of these particular land uses that – 
the purpose behind choosing these particular land uses that are listed down 
here that are prohibited under Section 2 was to essentially eliminate those 
uses that could potentially require a large quantity of water? 
 
A. 
That’s correct. 
 
* * * 
 
Q. 
Commissioner Kimmell, is it fair to say that Ordinance 258 was a way for 
the Commission to control who in Latah County gets the water through 
land-use planning? 
 
A. 
I wouldn’t agree with how you have stated that.  I would say that 258 
helps us better manage the water resources in Latah County. 
 
Q. 
By prohibiting some uses – use of water for certain land uses outright? 
 
A. 
Correct. 
 
 
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As noted by the district court, the ordinance, itself, makes a number of references in its 
statement of purpose that pertain to groundwater management (“maintain sustainable 
groundwater resources”, “policies for groundwater management”, “regulate developments which 
could jeopardize . . . water quantity,” and the like).  While the Court is correct that counties may, 
pursuant to I.C. § 39-126, participate with regard to water “quality” management, there is no 
legislative or other authority for counties to manage water “quantity.”  Section 39-126 provides 
that counties and other political subdivisions of the State are “authorized and encouraged to 
implement ground water quality protection policies within their respective jurisdictions, provided 
that the implementation is consistent with and not preempted by the laws of the state  . . .”  The 
code section repeatedly refers to water “quality”, but the word “quantity” appears nowhere in the 
section.  Nothing in the Local Land Use Planning Act (I.C. §§ 67-6501, et. seq.) provides 
counties or cities the authority to regulate water quantity issues.2 
It should be kept in mind that the ordinance was adopted after the county was 
unsuccessful in opposing Naylor Farms’ water right application with the Idaho Department of 
Water Resources.  After failing to stop Naylor Farms’ project by trying to shoot down the water 
rights application, the county turned to Plan B, which was an attempt to shoot down the project 
by utilizing a power – management of groundwater – that the county did not possess.   
The Commissioners were well aware that they were treading on thin ice in adopting the 
ordinance.  It appears rather apparent that their effort was to stymie Naylor Farms by attempting 
to employ groundwater management authority, which they understood they lacked.  Thus, it 
appears to me that they subjected themselves to the imposition of Section 12-117 fees.  Naylor 
Farms has borne an unfair and unjustified financial burden attempting to correct a misstep that 
Latah County should never have taken.  Ater v. Idaho Bureau of Occupational Licenses, 
_______ Idaho ________, 160 P.3d 438, 443 (2007).   
                                                 
2 I.C. § 67-6502(k) says a purpose of the Act is to “avoid undue water and air pollution.”  Again, 
the purpose is limited to water quality, not quantity.  While I.C. § 67-6537, which is designed to 
encourage the use of surface water (as opposed to ground water) for irrigation purposes, requires 
local governing boards to consider the effect of a comprehensive plan (or amendment thereto) on 
source, quantity and quality of ground water (subsection 4), it provides no authority for local 
governing boards to regulate or prohibit the usage of either surface or ground water and 
specifically preserves the state’s authority in such matters (subsection 3).   
 
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