County expert: Law caused no damage to dairy facility

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YANKTON — A witness for Aurora County told jurors Thursday that Thompson Farms suffered no damage as a result of a controversial county ordinance that capped cow numbers.

Thompson Farms has requested $2.6 million in damages from Aurora County, claiming a 1998 county ordinance limiting animal-feeding operations to 1,050 animals damaged the value of the operation and forced the multimillion-dollar dairy to close. The Thompsons had already invested a significant amount of money into expanding the dairy before the ordinance was enacted.

The trial, which was in its sixth day Thursday, is expected to be in the hands of jurors today.

The trial is the latest in a 14-year legal battle between the dairy and the county. It comes after a 2009 court ruling found Aurora County’s ordinance was to blame for the failure of Thompson Farms, and a Davison County jury’s decision in January making the county, not its insurance provider, liable to pay any damages awarded in the case.

Ron Zitzow, of St. Cloud, Minn., took the stand Thursday morning. Zitzow, a real estate appraiser, testified as an expert witness for the county. Unlike the Thompsons’ expert, Sioux Falls-based real estate appraiser James Dunlap, Zitzow accounted for the management and financial situation when doing his appraisal of Thompson Farms.

“Basically, you take a snapshot of the entire operation,” he said, explaining his methods.

With the ordinance in place, Zitzow found the actual value of Thompson Farms to be nearly $5.4 million. Without the ordinance he found the value to be only about $5.2 million, because of the cost a potential buyer would incur expanding the dairy to a 2,000-head operation.

“He would pay a little less if he were going to do an expansion,” Zitzow said.

Roger Tellinghuisen, an attorney for Aurora County, asked Zitzow if he believed the Thompsons suffered any damage as a result of the ordinance.

“I believe they were not damaged,” he responded.

“So in your opinion, their damages are what?” asked Tellinghuisen.

“Zero,” Zitzow said.

Contrary to Zitzow’s testimony, Dunlap testified Tuesday that the restriction put on the dairy by the county’s ordinance devalued the dairy by $2.6 million. That’s the basis of the Thompsons’ request for $2.6 million in damages. Both appraisals were based on what a willing buyer and willing seller might have agreed upon.

Shawn Fox, a forensic accounting specialist, was called by the county to testify Wednesday afternoon. Fox was asked to review financial documents relating to Thompson Farms and its expansion plan prior to the trial. He found the company was already losing significant amounts of money in 1997 when the expansion of the dairy began.

“It was on its financial deathbed and was insolvent at the time,” he said.

Fox’s report was partially published to jurors and showed Thompson Farms sustained taxable losses exceeding $2.1 million between 1995 and 2000. “As the dairy got bigger, the losses increased each year,” he said. Thompson Farms would not have been able to finance its planned $3.3 million expansion, Fox said, and would not have succeeded in increasing its size from 1,200 head of cattle to 2,000. “There was no probability of success of the expansion,” Fox said. Fox also attacked Dunlap’s appraisal of Thompson Farms.

“Mr. Dunlap failed to consider a lot of important things in his evaluation analysis,” he said, listing the dairy’s financial situation, management problems and declining milk prices among the factors he claimed Dunlap missed.

After testimony ended late Thursday afternoon, Aurora County rested its case and court adjourned for the day. Jury instructions will be read and closing arguments will be heard this morning.

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