Reoforce, Inc. v. United States, 031717 FEDFED, 2015-5084

Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit
Attorney:Richard Merritt Stephens, Stephens & Klinge LLP, Bellevue, WA, argued for plaintiffs-appellants. Jeffrey Steven Beelaert, Appellate Section, Environment and Natural Resources Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by John C. ...
Judge Panel:Before NEWMAN, Chen, and Stoll, Circuit Judges.
Opinion Judge:Stoll, Circuit Judge.
Party Name:REOFORCE, INC., THEODORE SIMONSON, RONALD STEHN, Plaintiffs-Appellants v. UNITED STATES, Defendant-Appellee
Case Date:March 17, 2017
Docket Nº:2015-5084
 
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REOFORCE, INC., THEODORE SIMONSON, RONALD STEHN, Plaintiffs-Appellants

v.

UNITED STATES, Defendant-Appellee

No. 2015-5084

United States Court of Appeals, Federal Circuit

March 17, 2017

         Appeal from the United States Court of Federal Claims in No. l:ll-cv-00884-SGB, Judge Susan G. Braden.

          Richard Merritt Stephens, Stephens & Klinge LLP, Bellevue, WA, argued for plaintiffs-appellants.

          Jeffrey Steven Beelaert, Appellate Section, Environment and Natural Resources Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by John C. Cruden.

          Brian T. Hodges, Pacific Legal Foundation, Bellevue, WA, for amici curiae Pacific Legal Foundation, American

          Exploration & Mining Association, Industrial Minerals Association-North America.

          Before NEWMAN, Chen, and Stoll, Circuit Judges.

          Stoll, Circuit Judge.

         In this takings case, we must decide whether the Government prevented appellants Reoforce, Inc., Theodore Simonson, and Ronald Stehn (collectively "Reoforce") from mining on a tract of land in California for over a decade, thus taking Reoforce's property rights in a manner compensable under the Fifth Amendment of the Constitution. Reoforce brought this takings claim in the Court of Federal Claims. After a trial, the Claims Court found that Reoforce did not have standing and that Reoforce had also failed to prove the merits of its claim. Contrary to the finding of the Claims Court, we conclude that Reoforce has standing to bring its claim. We agree, however, with the Claims Court's judgment that the Government's acts did not effect a compensable taking of Reoforce's property. We thus affirm.

         Background

         I.

         In 1872, Congress enacted the General Mining Law, which made "all valuable mineral deposits in lands belonging to the United States . . . free and open to exploration and purchase." 30 U.S.C. § 22. The law "made public lands available to people for the purpose of mining valuable mineral deposits" by "reward[ing] and encourag[ing] the discovery of minerals that are valuable in an economic sense." United States v. Coleman, 390 U.S. 599, 602 (1968).

         Under the General Mining Law, a citizen who discovers valuable minerals on a public land may secure a mining claim. See 30 U.S.C. § 28. To do so, a citizen must "locate" her claim, which includes marking the boundary of the claim, posting a discovery monument and notice, and maintaining adequate records of the location date and boundaries of the claim. See id. Location of a claim, alongside the '"[d]iscovery' of a mineral deposit, . . . gives an individual the right of exclusive possession of the land for mining purposes." United States v. Locke, 471 U.S. 84, 86 (1985) (quoting 30 U.S.C. § 26).

         A locator secures mining rights only by discovering a valuable mineral, and Congress has made clear that "common varieties of sand, stone, gravel, pumice, pumic-ite, or cinders" are not valuable mineral deposits under the Mining Law. 30 U.S.C. § 611. Whether a mineral is valuable is determined by applying a "prudent-man test." Coleman, 390 U.S. at 602. Under this test, the mineral deposit "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." Id. (internal quotations omitted).

         Ordinarily, the Bureau of Land Management ("BLM") makes a "common variety" determination when a claim locator proposes to develop a deposit of an otherwise common material that may have distinct and special value. 43 C.F.R. § 3809.101; see also id. § 3830.12(b) (location requirements for uncommon varieties). "[T]he Secretary of the Interior, as the head of the department, is charged with seeing that this authority is rightly exercised to the end that valid claims may be recognized, invalid ones eliminated and the rights of the public preserved." Best v. Humboldt Placer Min. Co., 371 U.S. 334, 337 (1963).

         If BLM determines that the mineral is a common variety, the mining claimant may either voluntarily relinquish its claim or BLM may institute a contest proceeding against the claimant. 43 C.F.R. § 3809.101(c). A contest proceeding is an administrative proceeding used to determine the legality or validity of mining claims. Id. at §4.451-1.

         Once established, a mining claimant receives "a 'patent, ' that is, an official document issued by the United States attesting that fee title to the land is in the private owner." Kunkes v. United States, 78 F.3d 1549, 1551 (Fed. Cir. 1996). A patented mining claim is "a property right in the full sense." Union Oil Co. v. Smith, 249 U.S. 337, 349 (1919).

         Until a patent issues, the mining claimant has an "unpatented" mining claim, a "unique form of property." Best, 371 U.S. at 335-36. An unpatented claim entitles a claim holder to "extract and sell minerals without paying royalties to the Government, " even though "[t]itle to the underlying fee simple estate in the land remains in the United States." Kunkes, 78 F.3d at 1551. But these claims are conditional property interests in a highly regulated industry. Id. at 1553. This is because the Government has "plenary authority over the administration of public lands, including mineral lands; and it has been given broad authority to issue regulations concerning them." Best, 371 U.S. at 336. Holders of unpatented mining claims "take their claims with the knowledge that the Government, as owner of the underlying fee title, maintains broad regulatory powers over the use of the public lands on which unpatented mining claims are located." Kunkes, 78 F.3d at 1553. But "[e]ven though title to the fee estate remains in the United States, these unpatented mining claims are themselves property protected by the Fifth Amendment against uncompensated takings." Id. at 1551.

         II.

         In the early 1980s, Theodore Simonson began exploring southern California for pumicite deposits. Reoforce, Inc. v. United States, 118 Fed. CI. 632, 641 (2014) (Claims Court Op.); J.A. 487. Pumicite is similar in composition to pumice, a porous volcanic rock. The composition of both pumice and pumicite includes a high amount of volcanic glass. But unlike hardened pumice, pumicite is a finely divided dust or powder consisting of finely divided particles of volcanic glass. It was the glass content of pumicite that piqued Mr. Simonson's interest in the mineral. Because pumicite's glass has an amorphous structure-it forms in various shapes, including fine beads and shards-Mr. Simonson thought that pumicite had many potential commercial applications. J.A. 122-24.

         Mr. Simonson found high quality pumicite deposits in Kern County, California. In 1983, he located twenty-one mining claims in his name. Claims Court Op., 118 Fed. CI. at 641. In 1984 and 1985, he located two more claims. Id. Although the claims were in his name, Mr. Simonson and his wife did business as Rheoforce or the Rheoforce Filler Company. J.A. 12. The company's name was later changed to Reoforce, Inc., and Mr. Simonson called the pumicite in his located mining claims "Rheolite, " or "Reoforce pumicite." J.A. 487-88.

         A.

         For the next two decades, Mr. Simonson investigated the material properties of Reoforce pumicite to find commercial applications. He commissioned chemical and physical analyses as well as scientific testing. For example, Mr. Simonson contacted a Professor of Plastics Engineering to determine whether Reoforce pumicite could be used as a filler and extender in paints and plastics. Claims Court Op., 118 Fed. CI. at 641. The professor believed that Reoforce pumicite showed promise. He prepared and presented a conference report concluding that: Reoforce pumicite offers some very attractive advantages, including: (1) use as a filler in polypropylene, as it led to comparable tensile properties and flexural strength, improved flexural modulus, and improved hardness/scratch resistance and improved handling and processability; and (2) use as a filler in ABS, where it led to improved tensile strength, tensile modulus, flexural strength, flexural modulus, impact strength, and improved hardness/scratch resistance and improved handling and processability.

Id. at 642 (internal quotations omitted).

         This report was not alone. In the first two decades after his discovery of Reoforce pumicite, Mr. Simonson received several technical studies indicating the promise of Reoforce pumicite in commercial applications. For example, in September 1987, Mr. Simonson received preliminary test results conducted by an international supplier of high-performance plastic compounds and resins, finding Reoforce pumicite to be "a high quality specialty silicate" useful as an additive in plastic films. Suntec Paint Inc. ("Suntec")...

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