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A federal appeals court ruled Monday that a polygamous sect's property trust should remain under state control, overturning an order returning the trust to the Warren Jeffs-led group and marking a major turning point in the long-running case.

"We're pleased. It allows us to get busy, get the stay lifted, sell property to pay the debts," said Utah Attorney General Mark Shurtleff, adding that he hopes to begin settlement talks with former and current members of the Fundamentalist Church of Jesus Christ of Latter-Day Saints. A town hall meeting has tentatively been scheduled for Nov. 30 at the Dixie Convention Center in St. George.

The 10th U.S. Circuit Court of Appeals in Denver fell in line with an earlier ruling by the Utah Supreme Court: The FLDS waited too long, three years, to begin challenging the 2005 state takeover of the trust.

FLDS attorney Rod Parker called Monday's decision a setback for his side, but said he would also be interested in talking to the state. Thousands of sect members still live and work on property belonging to the communal trust, formally known as the United Effort Plan, which includes nearly all the land and homes in the twin towns of Hildale, Utah, and Colorado City, Ariz.

"We've got plenty of life left in us if we want to pursue it, that's for sure," Parker said, but "I don't see it ever being resolved by litigation ... I think it needs to be resolved by settlement in some form."

Mediation plans are complicated, though: During the past two years, sect leaders along with hundreds of other men and women have been expelled from the sect by Jeffs from his Texas prison cell. Combined with the group's distrust of government, the splintering could complicate efforts to find trust beneficiaries and bring them to the table.

"Right now, the community is in such disarray of who's in [the sect] and who's out that in order to protect everyone's interests we need to subdivide," said Willie Jessop, a former spokesman for the sect who split from the leadership more than a year ago. He is part of a group of people who decided to stay in the community and follow a former church elder turned rival prophet, William E. Jessop.

Meanwhile, trust administrator Bruce Wisan said the ruling frees him up to distribute property to individual people for the first time since the trust was created in the 1940s.

He's been working with the followers of the rival FLDS prophet to craft a new plan. A board of former FLDS members and Jessop followers would make decisions about who gets what, with Wisan or a judge hearing appeals.

"People living in the community will be making the decision as to distribution," he said. They "know who built what houses, they know what the needs are."

It remains to be seen exactly how Monday's ruling would affect a court order requiring the state to pay $5.6 million to help cover four years of debts owed to Wisan, his attorneys and employees. Wisan was supposed to have been paid through the sale of trust property, but has been barred by court order from selling anything since the FLDS began fighting the state takeover in 2008. Monday's ruling doesn't directly affect other lawsuits involving specific pieces of property, which will likely bar him from selling anything yet.

The Utah Legislature would have to allocate the $5.6 million. The money is supposed to be repaid when Wisan can sell property and Monday's ruling should end fears that the money wouldn't be repaid because the trust is in sect hands.

But even after a state allocation, the money wouldn't be available until the new fiscal year in July. Even considering the other lawsuits, it may be faster to sell property.

Still, state "funding is an absolute necessity," Wisan said, both to combat the lawsuits still pending — he estimates there are some 20 suits related to the trust — and finish the engineering work required to subdivide the property.

The state takeover came in 2005 as FLDS leaders ignored lawsuits filed by former members like the so-called Lost Boys, young men who said they were summarily kicked out of the sect and their homes for minor offenses to reduce competition for wives. Amid concerns that summary judgments against the trust could have forced the sale of people's homes, Shurtleff moved to assume control of the trust.

The FLDS initially ignored the action, but in 2008 sued to regain control. Attorneys for the sect filed suit in both federal and state court, but U.S. District Judge Dee Benson initially delayed action in the case. After the Utah Supreme Court dismissed the case in 2010, the FLDS renewed their federal claim, and Benson ruled in their favor. He decided early last year the state violated the constitutional separation of church and state when it assumed control and ordered the approximately $114 million trust returned to the FLDS.

The state appealed the decision, and the 10th U.S. Circuit Court of Appeals in Denver put Benson's order on hold. Monday, it ruled that Benson should not have considered that case because the Utah Supreme Court had already dismissed it.

"We conclude that the district court erred ... the FLDS association is precluded from pursuing its claims in federal court," according to the ruling.

Meanwhile, the 56-year-old Jeffs is said to retain control of the FLDS even though he was sentenced to life in prison last year after he was convicted of sexually assaulting two girls, ages 12 and 15, whom he took as polygamous wives at the group's remote Texas ranch.

Twitter: @lwhitehurst