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In re Schugg

United States District Court, D. Arizona

May 15, 2014

In re Michael Keith Schugg, dba Schuburg Holsteins, Debtor,
Gila River Indian Community, Defendant. In re Debra Schugg, Debtor, G. Grant Lyon in his capacity as Chapter 11 Trustee of the bankruptcy estate of Michael Keith Schugg and Debra Schugg; Wells Fargo Bank, Plaintiffs,


JAMES A. TEILBORG, Senior District Judge.

Pending before the Court are the Trustee's Motion for Summary Judgment Regarding Scope of Implied Easement (Doc. 392) and Gila River Indian Community's Motion to Dismiss or, in the Alternative, for Summary Judgment and Memorandum in Support (Doc. 396). Also pending is the parties' stipulation to permit Gila River Indian Community to file select documents and portions of its briefing under seal (Doc. 394).


This case was filed by G. Grant Lyon acting solely in his capacity as Chapter 11 Trustee of the bankruptcy estate of Michael Keith Schugg and Debra Schugg (the "Trustee"). The Defendant/Counter-Plaintiff Gila River Indian Community ("GRIC") is a federally-recognized Indian Community organized under Section 16 of the Indian Reorganization Act, 25 U.S.C. ยง 461, et seq. GRIC is based on the Gila River Indian Reservation (the "Reservation"), which consists of approximately 372, 000 acres in south-central Arizona, and includes members of the federally-recognized Akmil O'odham ("Pima") and Peeposh ("Maricopa") Tribes.

Between 2001 and 2003, S&T Dairy (the "Dairy") was constructed on land known as Section 16 of Township 4 South, Range 4 East in Pinal County, Arizona, comprising approximately 657 acres ("Section 16"). In or about September 2003, Michael Schugg and Debra Schugg (the "Schuggs") acquired title to Section 16. Section 16 is located wholly within the Reservation and is physically accessible by Smith-Enke Road and Murphy Road. In 2004, the Schuggs made a request to amend the Pinal County land use designation from "Rural" to "Transitional" (allowing a higher-density housing development). The GRIC objected to the amendment to the land use designation and Pinal County ultimately rejected the application.

In 2004, the Schuggs declared bankruptcy and listed Section 16 as their largest asset. During the bankruptcy proceedings, the GRIC filed a proof of claim asserting that it had an exclusive right to use and occupy Section 16, authority to impose zoning and water use restrictions on Section 16, and a right to injunctive and other relief for trespass on reservation land and lands to which it held aboriginal title. The Trustee then initiated an adversary proceeding seeking a declaratory judgment that the Schuggs' estate had legal title and access to Section 16. In 2005, Plaintiffs and Defendants stipulated that the reference should be withdrawn to this Court. (Docs. 29, 30).

In 2007, this Court presided over a bench trial, where the issues to be resolved by the Court were generally as follows: (1) whether there was an easement or right-of-way via Smith-Enke Road or Murphy Road for access and utilities to Section 16; (2) whether Murphy Road was an Indian Reservation Road that must remain open for public use; (3) whether Smith-Enke Road and/or Murphy Road were public rights-of-way under Revised Statute 2477 that must remain open for public use; (4) whether the easement and/or right-of-way access (if any) to Section 16 included the right to improve the easements or install additional utilities thereon; (5) whether GRIC had the power to regulate zoning on Section 16; and (6) whether the Trustee, the Debtors, representatives of the S & T Dairy and/or their respective invitees, employees, assignees, agents, or representatives trespassed on tribal or allotted lands within the Gila River Indian Community's reservation.

At the conclusion of the trial, the Court determined that Plaintiffs were entitled to legal access to Section 16 due to an implied easement over Smith-Enke Road and a right of access over Murphy Road, either because of an implied easement or because the relevant portion of the road was Indian Reservation Road that must remain open for public use, that Defendant is not entitled to exercise zoning authority over Section 16, and that no trespass occurred. The Court also determined that the GRIC's assertion of authority to control the zoning of Section 16 was not ripe for adjudication.

The GRIC then appealed to the Ninth Circuit Court of Appeals ("Court of Appeals"). The GRIC appealed the Court's judgment that the United States was not an indispensable party to the action, the Trustee's rights of access to Section 16, and the rejection of the Community's assertions of aboriginal title and zoning authority over Section 16. The Trustee cross-appealed the District Court's finding that Smith-Enke Road and Murphy Road were not public roads under Revised Statute 2477. The Court of Appeals affirmed in part, but remanded for further consideration of whether Murphy Road was a public Road in light of ongoing proceedings before the Bureau of Indian Affairs regarding the issue of whether Murphy Road was an Indian Reservation Road open to the public.

After remand, the Parties filed a Joint Status Report (Doc. 314) informing the Court that the Trustee had withdrawn his appeal to the Bureau of Indian Affairs regarding the status of Murphy Road as a public road. The Parties agreed that, in light of this dismissal, the question of whether Murphy Road was an Indian Reservation Road open to the public was no longer subject to dispute in this case. In the Joint Status Report, the Parties represented, "the parties agree that there are no longer any issues to be decided by this Court on remand." (Doc. 314 at 2).

The Court then directed the Parties to jointly submit a proposed form of judgment that "will close this case." (Doc. 315). When the Parties represented to the Court that they were unable to agree on a proposed form of judgment, the Court ordered that each party should separately file a proposed form of judgment or "motions as to why judgment should not be entered at this time." (Doc. 319). Thereafter, the GRIC filed its Motion for Entry of Final Judgment with a proposed form of judgment (Doc. 321) and the Trustee filed a Motion to Set Rule 16 Hearing and Postpone Entry of Judgment (Doc. 320).

In the Motion to Set Rule 16 Hearing, the Trustee argued that entry of final judgment was no longer appropriate in this case because the issue regarding the scope of the easements, which this Court and the Court of Appeals previously ruled was not ripe for adjudication, had recently become ripe for adjudication. (Doc. 320). The Court determined that the issue regarding the scope of the easements was now ripe because the Trustee intended to improve the easements pursuant to a specific development plan and the GRIC had denied the Trustee permission to make those improvements. (Doc. 332). Accordingly, the Court postponed the entry of judgment and set a Rule 16 hearing on the issue of easement scope. The parties have now fully briefed the issue for the Court's determination.


Before reaching the merits, the Court first addresses the GRIC's stipulation to file certain documents under seal. See (Doc. 394). In the course of this lawsuit, the Schuggs disclosed documents to the GRIC that contained the Schuggs' personal financial relationships, namely an agreement between MARAZ-2006, LLC and Michael K. Schugg. The parties have stipulated to seal the terms of this agreement and all derivative documents in support of the GRIC's dispositive motion referencing those terms, including the motion itself. (Doc. 394 at 1).

"[T]he courts of this country recognize a general right to inspect and copy public records and documents, including judicial records and documents." Nixon v. Warner Commc'ns, Inc., 435 U.S. 589, 597 (1978). "Unless a particular court record is one traditionally kept secret, ' a strong presumption in favor of access' is the starting point." Kamakana v. City & Cnty. of Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006). A party "seeking to seal a judicial record" bears the burden of articulating compelling reasons supported by specific factual findings in favor of sealing that "outweigh the general history of access and... public policies favoring disclosure." Id. at 1178-79. "In general, compelling reasons' sufficient to outweigh the public's interest in disclosure and justify sealing court records exist when such court files might have become a vehicle for improper purposes, ' such as the use of records to gratify private spite, promote public scandal, circulate libelous statements, or release trade secrets." Id. at 1179. "The mere fact that the production of records may lead to a litigant's embarrassment... or exposure to further litigation will not, without more, compel the court to seal its records." Id. This compelling reasons standard is properly applied to dispositive motions "and related attachments" because "the resolution of a dispute on the merits, whether by trial or summary judgment, is at the heart of the interest in ensuring the public's understanding of the judicial process and of significant public events.'" Id. (citation omitted).

Here, the parties have not demonstrated compelling reasons for sealing the terms of the agreement between MARAZ-2006, LLC and Michael K. Schugg. Although one does not ordinarily publicize the details of one's own personal financial transactions, "mere embarrassment" is insufficient to compel the Court to seal such records. See id. Neither party offers specific factual findings in favor of sealing; the parties' sole basis for sealing is that the agreement is a personal financial relationship and that the Trustee's counsel has designated evidence relating to that agreement as "confidential." Although the parties have stipulated to filing under seal, the Court is not bound by a stipulation of law "regardless of what the parties say the law might be." U.S. Aluminum Corp./Texas v. Alumax, Inc., 831 F.2d 878, 880 (9th Cir. 1987).

Accordingly, the Court finds the parties have not demonstrated compelling reasons for filing under seal sufficient to overcome the strong presumption in favor of public access to judicial records. The Court will deny the stipulation to file under seal.


The GRIC moves to dismiss the Trustee's complaint pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(1) for lack of subject-matter jurisdiction. (Doc. 396). The GRIC argues that despite the Court's prior Order determining that the scope of the implied easement was ripe for adjudication, it remains unripe and therefore the Court lacks subject-matter jurisdiction over this issue. ( Id. at 3-4).

In its previous Order on ripeness, the Court determined that the issue of the scope of the implied easement had become ripe because the Trustee had since created a plan for developing Section 16 that required improving the existing easements. (Doc. 332 at 13-14). The GRIC refused (and refuses) to permit the Trustee to pave the implied easements and use them to support the traffic necessary to use the developed Section 16. ( Id. at 10). Accordingly, the Court noted that "short of beginning to pave the easements or install the utility lines on the easements, the Court can ascertain no next step that the Owners could take before an actual case or controversy exists without potentially infringing the GRIC's rights to the easements." ( Id. at 11-12).

"Under the law of the case' doctrine, a court is generally precluded from reconsidering an issue that has already been decided by the same court, or a higher court in the identical case.'" United States v. Alexander, 106 F.3d 874, 876 (9th Cir. 1997) (quoting Thomas v. Bible, 983 F.2d 152, 154 (9th Cir. 1993)). "A court may have discretion to depart from the law of the case where: 1) the first decision was clearly erroneous; 2) an intervening change in the law has occurred; 3) the evidence on remand is substantially different; 4) other changed circumstances exist; or 5) a manifest injustice would otherwise result." Id.

The GRIC does not contend that the Court's prior Order was clearly erroneous or that the law regarding ripeness has changed; rather, the GRIC argues that three factual assertions that the Trustee previously made to the Court have since been proven to be inaccurate. (Doc. 396 at 6). The GRIC alleges that because the Court's prior Order depended upon these representations, the Court should conclude the scope of the easement issue remains unripe. ( Id. at 3, 7).

First, the GRIC argues that contrary to the Trustee's prior statement that he had obtained an agreement from Johnson Utilities to provide water and sewer service to Section 16, the Trustee has since admitted that there is no such written agreement. ( Id. at 7). Second, the GRIC contends that a preliminary lotting diagram for Section 16 prepared by a planning firm at the Trustee's direction inaccurately depicted access points to Section 16 and continued to inaccurately depict access points even after a subsequent revision. ( Id. ) Third, the GRIC alleges that discovery has now revealed numerous steps in the development process that the Trustee could undertake to develop Section 16 before resolving the issue of the scope of the easement, including completing the steps necessary for a tentative plat application to Pinal County. ( Id. at 7-8).

None of these three points, however, show changed circumstances justifying a readjudication of ripeness. As the Court explained in its prior Order, the Trustee cannot obtain a development permit and a subdivision plat from Pinal County unless the subdivision has paved access and additional utility lines installed along the implied easements. (Doc. 332 at 9-10). Similarly, the Trustee also cannot submit even a tentative plat application to Pinal County unless there are established paved access rights and adequate utility lines to the proposed subdivision. (Doc. 402-1 at 3). The GRIC's arguments concern additional steps in the development process that are necessary to obtain final approval for the planned development; however, the GRIC ignores that expanding the existing easement into paved access is also necessary to obtain Pinal County approval. The GRIC has unequivocally refused to permit the Trustee to pave the existing easements, (Doc. 332 at 13), and offers no new evidence that they are now willing to permit improvement of the easements.

Therefore, although the GRIC is correct that a resolution of the scope of the implied easements is not itself sufficient to permit development of Section 16, the Trustee aptly points out that under the GRIC's argument, the Trustee could never obtain an adjudication on the scope of the easements because completing the subdivision approval process requires the Trustee to establish paved access and utilities.[1] (Doc. 401 at 6). Accordingly, the GRIC has not shown changed circumstances such that the issue of the scope of the easements is no longer ripe. The GRIC's extensive arguments to the contrary are in ...

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