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Freeman v. United States Department of Interior

United States District Court, D. Columbia.

April 16, 2014


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For WALTER B. FREEMAN, Plaintiff: Richard M. Stephens, LEAD ATTORNEY, GROEN STEPHENS & KLINGE LLP, Bellevue, WA.


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BERYL A. HOWELL, United States District Judge.

The plaintiff Walter B. Freeman filed this action under the Administrative Procedures Act (" APA" ), 5 U.S.C. § 706(2), against the United States Department of the Interior (" DOI" ) and two of its components, the Interior Board of Land Appeals (" IBLA" ) and the Bureau of Land Management (" BLM" ), seeking to set aside two decisions of the IBLA relating to the plaintiff's mining rights, on the grounds that the decisions were arbitrary, capricious, and lacked substantial evidence. See Compl. at 19 (" Prayer for Relief" ), ECF No. 1. Pending before the Court is the plaintiff's Motion for Partial Summary Judgment on his First Cause of Action,

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challenging the May 7, 2008 IBLA decision in United States v. Freeman, 174 IBLA 290 (2008) (" 2008 IBLA Decision" ),[1] which upheld the jurisdiction of DOI's Office of Hearings and Appeals (" OHA" ) to determine the validity of unpatented mining claims at historical dates when the claims were allegedly subject to a government taking within the meaning of the Fifth Amendment of the Constitution. Pl.'s Mot. Partial Summ. J. & Mem. Supp. (" Pl.'s Mot." ) at 2-3, ECF No. 15.[2] For the reasons explained below, the plaintiff's motion is denied and the 2008 IBLA Decision stands.[3]


The Court first briefly reviews the statutory and regulatory framework for assessing the validity of mining claims under the General Mining Law of 1872 (" Mining Law" ), 30 U.S.C. § § 22-54 (2006), before turning to a summary of the two decades of administrative proceedings that have culminated in this lawsuit.

A. Statutory and Regulatory Framework

" To encourage mining in the western United States, Congress enacted the General Mining Act of 1872." Orion Reserves Ltd. P'ship v. Salazar, 553 F.3d 697, 699, 384 U.S.App.D.C. 268 (D.C. Cir. 2009); see also Watt v. W. Nuclear, 462 U.S. 36, 47-49, 103 S.Ct. 2218, 76 L.Ed.2d 400 (1983) (noting that " [w]ith respect to land deemed mineral in character, the mining laws provided incentives for the discovery and exploitation of minerals" ). As an incentive to explore for valuable mineral deposits, the Mining Law permits citizens " to go onto unappropriated, unreserved public land," United States v. Locke, 471 U.S. 84, 86, 105 S.Ct. 1785, 85 L.Ed.2d 64 (1985), and to " stake, or locate, claims to extract minerals without prior government permission and without paying royalties to the United States." Orion Reserves, 553 F.3d at 699 (citing 30 U.S.C. § 26) (internal quotation marks omitted); see also Kunkes v. United States, 78 F.3d 1549, 1551 (Fed. Cir. 1996); Cook v. United States, 85 Fed.Cl. 820, 823 (2009), aff'd, 368 F.App'x 143 (Fed. Cir. 2010); Freese v. United States, 639 F.2d 754, 757-58, 226 Ct.Cl. 252 (Ct. Cl. 1981).[4] Those who locate " mining locations"

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on public land are expressly granted " the exclusive right of possession and enjoyment" but only " so long as they comply with the laws of the United States, and with State, territorial, and local regulations . . . ." 30 U.S.C. § 26.

1. Requirements for Valid Mining Claim

Before a Congressional moratorium was enacted in 1994, claimants could " apply for purchase of a deed, or 'patent,' conveying full legal title to the land on which their claims are located." Orion Reserves, 553 F.3d at 699 (citing 30 U.S.C. § 29).[5] To qualify for a patent, the applicant must establish that the mining claim is valid. United States v. Shumway, 199 F.3d 1093, 1101-02 (9th Cir. 1999) (" [N]o right arose from an invalid claim." ). The D.C. Circuit has pointed out, however, that " [e]ven without a patent, claimants can maintain their mining rights indefinitely so long as they comply with federal, state, and local requirements" for a valid claim. Orion Reserves, 553 F.3d at 699 (citing 30 U.S.C. § § 26, 28). These possessory interests are " unpatented" claims and give the owner equitable title, as opposed to " patented" claims, in which a private owner has been bestowed full legal title. Kunkes v. United States, 32 Fed.Cl. 249, 252 (Fed. Cl. 1994), aff'd, 78 F.3d 1549 (Fed. Cir. 1996) (noting that for an unpatented claim " legal title to the land remains in the United States, [but] the claimant enjoys a valid, equitable title in the claim, possessing all of the incidents of real property" ); Ford v. United States, 101 Fed.Cl. 234, 238 n.6 (Fed. Cl. 2011) (" An unpatented mining claim is an interest in only the minerals in the land and not in the land's surface; the government retains fee title to the land." ).

An unpatented mining claim is valid against the United States only when both a discovery of valuable mineral deposit within the limits of the claim has been made, and the claimant has complied with all statutory and regulatory requirements relating to the location, recordation, and filing of claims. See 30 U.S.C. § § 22, 26, 28, 28e.[6] See also Best v. Humboldt Placer Mining Co., 371 U.S. 334, 336, 83 S.Ct. 379, 9 L.Ed.2d 350 (1963) (unpatented mining claims are " valid against the United States if there has been a discovery of mineral within the limits of the claim, if the lands are still mineral, and if other statutory requirements have been met" ). As the Supreme Court explained almost a century ago, " no right arises from an invalid claim of any kind . . . otherwise they work an unlawful private appropriation in

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derogation of the rights of the public." Cameron v. United States, 252 U.S. 450, 460, 40 S.Ct. 410, 64 L.Ed. 659 (1920).

Thus, although a claimant may explore for mineral deposits before perfecting a mining claim, without a discovery, the claimant has no right to the property against the United States or an intervenor. 30 U.S.C. § 23 (mining claim perfected when there is a " discovery of the vein or lode" ); see also Cole v. Ralph, 252 U.S. 286, 295-96, 40 S.Ct. 321, 64 L.Ed. 567 (1920); Waskey v. Hammer, 223 U.S. 85, 90, 32 S.Ct. 187, 56 L.Ed. 359, 3 Alaska Fed. 740 (1912) (noting that discovery is " a prerequisite to the location of the claim" ); Am. Colloid Co. v. Babbitt, 145 F.3d 1152, 1156 (10th Cir. 1998) (" Before one may obtain any rights in a mining claim, one must 'locate' a valuable deposit of a mineral." ); Mineral Policy Ctr. v. Norton, 292 F.Supp.2d 30, 48 (D.D.C. 2003) (" 'A mining claim does not create any rights against the United States and is not valid unless and until all requirements of the mining laws have been satisfied.'" (quoting Skaw v. United States, 13 Cl.Ct. 7, 28 (1987))).

To satisfy the discovery requirement for a valid claim, the mere physical presence of a mineral is insufficient. Instead, " the discovered deposits must be of such a character that 'a person of ordinary prudence would be justified in the further expenditure of his labor and means, with a reasonable prospect of success, in developing a valuable mine." United States v. Coleman, 390 U.S. 599, 602, 88 S.Ct. 1327, 20 L.Ed.2d 170 (1968) (internal quotations omitted); see also Cameron, 252 U.S. at 459 (" [T]o support a mining location the discovery should be such as would justify a person of ordinary prudence in the further expenditure of his time and means in an effort to develop a paying mine. That is not a novel or mistaken test, but is one which the Land Department long has applied and this court has approved." ); Davis v. Nelson, 329 F.2d 840, 846 (9th Cir. 1964) (" [V]alidity of [ ] title . . . depends upon the resolution of a question of fact, that is, has there been a discovery of valuable mineral within the limits of the claim?" ); Foster v. Seaton, 271 F.2d 836, 838, 106 U.S.App.D.C. 253 (D.C. Cir. 1959). " The obvious intent was to reward and encourage the discovery of minerals that are valuable in an economic sense." Coleman, 390 U.S. at 602. If the discovered deposits fail the " prudent person" test, the Government has the right to clear the title and the right to the possession of its land from a " useless and annoying encumbrance." Davis, 329 F.2d at 846 (quoting Mulkern v. Hammitt, 326 F.2d 896, 897 (9th Cir. 1964)).[7] On the other hand, if the discovered deposits are valuable under the " prudent person" test, the unpatented mining claim " is a property right in the full sense, unaffected by the fact that the paramount title to the land is in the United States." Union Oil Co. of Cal. v. Smith, 249 U.S. 337, 349, 39 S.Ct. 308, 63 L.Ed. 635 (1919). This constitutes a property interest, " which is within the protection of the Fifth Amendment's prohibition against the taking of private property for public use without just compensation." Skaw v. United States, 740 F.2d 932, 936 (Fed. Cir. 1984).

2. Administrative Review of Contested Claims

BLM is a subagency within DOI tasked with administering mining claims on federal

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public land. See generally 43 C.F.R. § 3809; Nat'l Wildlife Fed'n v. Burford, 835 F.2d 305, 307-08, 266 U.S.App.D.C. 241 (D.C. Cir. 1987) (BLM is " the subagency of the Department charged with land management responsibilities, with permanent, comprehensive guidelines for carrying out its mandate" ). To determine whether a claim is valid, BLM conducts a mineral examination. If the examination indicates the lack of discovery of a valuable mineral deposit or that the applicant failed to meet other administrative requirements under the Mining Law, the BLM may initiate an administrative mining contest proceeding to challenge the validity of the claim, since either of those examination results, if substantiated, may render the mining claimant ineligible for a patent.

Prior to validity proceedings, unpatented claims amount to a potential property interest, since it is the discovery of a valuable mineral deposit and satisfaction of statutory and regulatory requirements that bestows possessory rights. See Ickes v. Underwood, 141 F.2d 546, 548-49, 78 U.S.App.D.C. 396 (D.C. Cir. 1944) (until there has been a determination that there has been a valuable discovery, claimants had only a gratuity from the United States); Payne v. United States, 31 Fed.Cl. 709, 711 (1994) (rejecting plaintiff's argument that in the absence of a challenge to validity, the court must take at face value their assertion that claims are supported by an adequate mineral discovery). To have a compensable interest in an unpatented mining claim sufficient to bring a taking action, the validity of the mining claim must be established. See Ford, 101 Fed.Cl. at 238 (finding without BLM determination, plaintiff could not establish a valid property interest in his unpatented mining claim).

The BLM has broad authority to initiate contest challenges, and may do so " for any cause affecting the legality or validity of any entry or settlement or mining claim." 43 C.F.R. § 4.451-1. The meaning and scope of this regulation is the gravamen of the dispute at issue in the pending motion. Mining contest challenges are brought before the OHA, which " is an authorized representative of the Secretary for the purpose of hearing, considering, and deciding matters within the jurisdiction of the Department involving hearings, appeals, and other review functions of the Secretary." 43 C.F.R. § 4.1.[8] The OHA provides two levels of review to resolve mining contests: Administrative Law Judges (" ALJs" ) in the Hearing Division have authority to hold evidentiary hearings and issue decisions concerning the validity of mining claims; and the IBLA decides appeals from ALJ rulings. 43 C.F.R. § § 4.452-4-8; 43 C.F.R. § 4.452-9.

In contest proceedings before an OHA ALJ, the BLM bears the initial " burden of going forward with sufficient evidence to establish a prima facie case" that the claim is invalid. Foster, 271 F.2d at 838. " The government presents a prima facie case where a governmental mineral examiner offers expert testimony, based on probative evidence, that the discovery of a valuable mineral deposit has not been made within the boundaries of a contested claim." Ernest K. Lehmann & Assocs. of Montana, Inc. v. Salazar, 602 F.Supp.2d 146, 150 (D.D.C. 2009), aff'd, 377 F.App'x 28 (D.C. Cir. 2010) (citing United States v. Pass Minerals, Inc., 168 IBLA 115, 123 (IBLA 2006)). Once the government has made a prima facie case, the burden shifts to the claimant to establish

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by a preponderance of the evidence sufficient proof of validity. Id. The claimant bears the ultimate burden of persuasion and must produce evidence to rebut the government's case and establish the validity of the mining claim. Lara v. Sec'y of Interior, 820 F.2d 1535, 1542 (9th Cir. 1987); see also Ernest K. Lehmann & Assocs., Inc., 602 F.Supp.2d at 150 (citing United States v. Rannells, 175 IBLA 363, 380 (IBLA 2008))); Reoforce, Inc. v. United States, 119 Fed.Cl. 1,(Fed. Cl. Apr. 4, 2013); United States v. Everett Foster, 65 Interior Dec. 1, 11 (1958) (" Although the Government initiated the charges and had the initial burden of sustaining at least the first charge--that there had been no discovery--if it were to prevail in the contests, once the Government had produced evidence to show that no discovery had been made, it was up to the contestees to overcome that evidence." ).

Either party may appeal the ALJ determination to the IBLA, see 43 C.F.R. § 4.410(a), which serves as DOI's " review authority charged with deciding, on behalf of the Secretary, matters relating to the use and disposition of public lands and their resources." Aera Energy LLC v. Salazar, 642 F.3d 212, 216, 395 U.S.App.D.C. 213 (D.C. Cir. 2011) (internal quotations and citations omitted). Decisions of the IBLA constitute final agency action, 43 C.F.R. § 4.403, and, therefore, no further administrative appeal is authorized within DOI, 43 C.F.R. § 4.21(d). See also Hoyl v. Babbitt, 129 F.3d 1377, 1382 (10th Cir. 1997) (" The IBLA's decision represents the final agency action . . . ." ); Doria Mining & Eng'g Corp. v. Morton, 608 F.2d 1255, 1257 (9th Cir. 1979) (" A decision of the IBLA is not subject to further appeal before either the Director or any Appeals Board... [and] constitute[s] the Secretary of the Interior's final decision" )

B. Factual and Procedural Background

The instant dispute stems from the plaintiff's original 161 unpatented mining claims,[9] located by his predecessors-in-interest between 1940 and the early 1970s, on approximately 4,968 acres of Federal land administered by BLM and the United States Forest Service (" USFS" ), mostly located in the Siskiyou National Forest in Southern Oregon. Freeman, 174 IBLA at 291; AR at 1183. Litigation over the validity of the plaintiff's claims has been ongoing for over two decades before the United States Court of Federal Claims (" CFC" ), in DOI administrative proceedings, and, now, before this Court.

1. Effect of Moratorium on Plaintiff's Patent Application

On September 9, 1992, the plaintiff filed an application seeking to patent 151 of the 161 mining claims. Freeman, 174 IBLA at 291-92; AR 1183-84. Before the application was acted on by BLM, the congressional moratorium took effect on October 1, 1994, halting the processing of patent applications for unpatented mining claims. See Department of the Interior and Related Agencies Appropriations Act of 1995 § 112. Due to this moratorium, " BLM has since refused to process [the plaintiff's] application." Freeman, 174 IBLA at 292; AR 1184. On December 17, 1992, the plaintiff filed a " plan of operations" (" POO" ) with the USFS, proposing to sample and mine his claims. Id. " After several delays by the USFS and intervening administrative appeals by [the plaintiff], the

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USFS denied his POO, rejecting his last appeal on October 11, 2000." Id.

2. Proceedings Before the U.S. Court of Federal Claims

On January 22, 2001, the plaintiff filed suit in the CFC, alleging that the defendants had, " by refusing to approve his patent application and by effectively denying approval of his POO, engaged in a taking of his property rights," in violation of the Fifth Amendment. Freeman, 174 IBLA at 292; AR 1184; see also AR 10699-712 (CFC Complaint). The plaintiff's claim before the CFC turns on whether he possessed a compensable property right against the United States. To facilitate making this determination, the CFC stayed proceedings in the case and remanded the matter to the DOI " for determination of validity of plaintiff's mining claims." AR 10728 (CFC Order at 1, Freeman v. United States, No. 01-39L (Oct. 10, 2001)).[10]

Following the stay of CFC proceedings, the parties successfully reached agreement regarding both the dates when the plaintiff claimed the alleged taking occurred and the appropriateness of the use of those dates for a validity determination. The plaintiff's counsel emphasized that " we believe this process should try to determine the validity of [the plaintiff's] claims as of the date of the taking," reiterating that " the critical date should be the date the claims were taken." AR 10877, Ex. 101 at 5 (Letter, dated September 5, 2003, from Richard M. Stephens, plaintiff's counsel, to Otto Schumacher, Western Mine Engineering, Inc. & Terry Maley, BLM). Indeed, the plaintiff's counsel cautioned that " [w]e hope this case does not follow the path used in Skaw v. United States, 740 F.2d 932 (Fed. Cir. 1984), where BLM determined that claims were not valid as of a date well after the alleged taking." Id. at 6. As to the applicable dates, the plaintiff suggested two possible dates for the validity determination: " the first date is 1993 when the Forest Supervisor publicly stated in no uncertain terms that there was 'no way in hell' that the Forest Service would allow [the plaintiff] to mine his claims; " and " the second potential date of taking is the date the Forest Service's formal process [on the plaintiff's POO] was completed . . . in 2000." Id.

In response to the plaintiff's proposal about using the years 1993 or 2000 as the dates when the alleged taking occurred, DOI sought more precise dates than entire years. AR 10887-89, Ex. 105 (Letter, dated November 12, 2003, from Bradley Grenham, Regional Solicitor DOI to Richard M. Stephens, plaintiff's counsel). At the outset, DOI rejected the plaintiff's suggestion that the date when a Forest Service employee allegedly made the " no way in hell" statement could constitute the date of a taking since, even if that statement were made, such an oral statement would not constitute a final agency action necessary for the validity determination. Id. at 10888. At the same time, DOI suggested the date of October 6, 2000, for the validity determination, since this was the date of the denial of the POO, which was cited in the plaintiff's complaint before the CFC as a taking. Id. at 10887-88. In addition, DOI proposed October 1, 1994, the effective date of the congressionally imposed moratorium on the processing of mineral patents, as another possible date to use for the validity determination. Id. at 10888. The agency requested that the plaintiff provide notice, in writing, by December 1, 2003, of any disagreement about the use of

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either October 6, 2000, or October 1, 1994, as the dates of the alleged taking for the validity determination. Id.

The plaintiff's response did not dispute the appropriateness of these two dates--October 1, 1994 and October 6, 2000--as the alleged taking dates. Rather, the plaintiff agreed that " October 6, 2000 is one possible appropriate date." AR 10892, Ex. 106 (Letter, dated November 19, 2003, from Richard M. Stephens, plaintiff's counsel, to Bradley Grenham, Regional Solicitor DOI). The plaintiff reiterated that 1993 was another possible date, but acknowledged that, since this date was close to the 1994 moratorium date offered by the agency, the plaintiff agreed that " October 4, 1994 is the appropriate date for the temporary taking of Mr. Freeman's rights to a patent." Id.

With this agreement on the alleged " taking" dates, the BLM reviewed the plaintiff's mining claims to determine whether the requisite discovery had occurred by either of those dates. After extensive examination, the mineral team assigned to determine the validity of the mining claims as of the two alleged " taking" dates, determined that there was a lack of discovery and recommended that the BLM issue a mining contest. AR 7751-52, Ex. 1 (DOI-BLM Mineral Report, dated January 31, 2005, stating " no discovery . . . exists on any of the Claimant's 161 mining claims . . . It is recommended that the BLM initiate contest proceedings . . . . Minerals have not been found on any of the 161 mining claims . . . in sufficient qualities or quantities to constitute a discovery. The minerals could not have been marketed at a profit as of either the 1994 or 2000 marketability dates." ).

3. 2007 OHA ALJ Ruling

An OHA ALJ conducted a 25-day contest claim hearing initiated by BLM, and received over 400 exhibits and over 3,400 transcript pages of testimony elicited by the parties. See Freeman, 174 IBLA at 293; AR 1186. At the conclusion of the hearing, the ALJ raised sua sponte the concern that he lacked " jurisdiction or authority to resolve the allegation of the [contest] Complaint that discovery of a valuable mineral deposit did not exist on any of the contested claims as of 1994 and 2000." AR 1264 (OHA ALJ Order, dated August 10, 2007, on " Ruling on Jurisdictional Issue and Certification for Interlocutory Appeal; Claim Validity As of the Date of Hearing Is Not At Issue" ) (" 2007 ALJ Ruling" ). Both parties expressed disagreement with the jurisdictional concern expressed by the ALJ and took the position that OHA " has jurisdiction to determine the validity of the claims as of the alleged takings dates in 1994 and 2000." Id. at 1265.[11] Nevertheless, contrary to the views of both parties, the ALJ ruled that the OHA lacked jurisdiction to review the validity of mining claims at the critical historical dates when the alleged takings occurred. Id. at 1262, 1265.[12]

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The 2007 ALJ Ruling acknowledged the lack of " any controlling precedent directly addressing the jurisdictional issue," as well as the lack of clear direction as to what constitutes the " critical date for determining validity when a patent application has been filed." AR 1266. Due to this perceived dearth of controlling authority, the 2007 ALJ Ruling relied heavily on dicta in two other ALJ decisions, " which concluded that this office had no authority to determine whether contested mining claims were valid as of the date of alleged takings which were subject to a federal lawsuit." Id. at 1265 (citing United States v. Aloisi, CACA 41272 (May 2, 2007) and United States v. Story, Idaho 15974 (Nov. 19, 1981)).

Three inter-related reasons are set out in the 2007 ALJ Ruling to reach this conclusion about the OHA ALJ's lack of authority to decide the validity of mining claims as of the alleged takings dates. First, the ALJ construed the authority of the government to initiate claim contests under the DOI regulation codified at 43 C.F.R. 4.451-1, and found that although this regulation grants " broad" power to DOI to initiate a contest, it also limits the charge or contest that may be brought to " a cause affecting the legality or validity of a mining claim." Id. at 1268. The ALJ listed such causes as including " the failure to discover a valuable mineral deposit within the claim, the failure to properly locate the claim, or the failure to pay any required annual maintenance fee." Id. at 1274. By contrast, the ALJ characterized " the alleged taking of a mining claim" as a " motivating reason[] for filing a contest but . . . not [a] cause[] affecting the legality or validity of a claim." Id. In short, the ALJ determined that the regulation " has conditioned" the Secretary's authority regarding mining claims to causes " affecting the legality or validity of a mining claim" and such causes " do not include an alleged taking of the mining claim." Id.

Second, and relatedly, since a validating discovery of valuable minerals " may be made even after a contest proceeding has been initiated," id. at 1268 (citing United States v. Foster, 65 Interior Dec. 1, 5-6 (1958), aff'd, Foster v. Seaton, 271 F.2d 836, 106 U.S.App.D.C. 253 (D.C. Cir. 1959)), the ALJ determined that the " law does not appear to contemplate making a discovery determination as of the dates of alleged takings, unless such a date coincidentally coincides with the applicable critical date: the date of the hearing or, if Contestee complied with all the patent requirements, the date of compliance," id. at 1269. In the plaintiff's case, the 1994 and 2000 dates did not correspond with the hearing date, and because " it seems unlikely that [the plaintiff] complied" with the requisite patent requirements by the alleged taking dates, those takings dates failed to correspond with either critical date. Id. at 1270-71.

Finally, the ALJ concluded that the purpose of the Mining Law is " better served by restricting" validity determinations to the critical dates of the contest hearing or compliance with patent requirements, rather than " based upon facts existing as of the dates of the alleged takings or some other non-critical dates in the past." Id. at 1270. Indeed, the ALJ called it " nonsensical to encourage and reward through a determination of validity the development and discovery of deposits not presently valuable," or to find " a deposit which is presently ...

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