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United States v. 400 Acres of Land

United States District Court, D. Nevada

August 29, 2019

UNITED STATES OF AMERICA, Plaintiff,
v.
400 ACRES OF LAND, more or less, situate in Lincoln County, State of Nevada; and JESSIE J. COX, et al., Defendants.

          ORDER

          MIRANDA M. DU UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         In this eminent domain action, the Court has found that the United States' taking of property (“the Property”) for the purpose of operating the Nevada Test and Training Range (“NTTR”), a military test and training facility at Nellis Air Force Base, is for a congressionally authorized public use. (ECF No. 111 at 1.) Accordingly, the only issue that remains is just compensation.

         Before the Court are 18 motions involving evidentiary issues mainly relating to the parties' experts' opinions. (ECF Nos. 385, 386, 390, 391, 395, 396, 397, 398, 399, 400, 401, 402, 403, 404, 406, 407, 408, 409.)

         The Court grants the following motions: the government's combined motion for a property viewing and to appoint a land commission (ECF No. 401); the government's motion to exclude the expert opinion and testimony of Danny and Joe Sheahan (ECF No. 402); the government's motion to exclude the expert opinion and testimony of George Harris (ECF No. 404); the government's motion to exclude evidence of sales to the government (ECF No. 406); the government's partial motion to reconsider excluding all evidence regarding online surveys (ECF No. 407); and the government's motion to exclude use of the income capitalization approach to valuation (ECF No. 408).

         The Court denies the following motions: Landowners' motion regarding the standard of admissibility that applies in this case (ECF No. 385); Landowners' motion to exclude the expert opinion and testimony of Warren Neville (ECF No. 390); Landowners' motion to exclude all evidence of environmental contamination (ECF No. 395); Landowners' motion to confirm uses of unpatented land (ECF No. 396); Landowners' motion to establish condition of the Property related to water rights (ECF No. 397); Landowners' motion to exclude the expert opinion and testimony of Nathan Moeder (ECF No. 398); Landowners' motion to exclude the expert opinion and testimony of Marc Springer (ECF No. 399); and the government's motion to exclude valuation evidence premised on tourism use (ECF No. 409).

         The Court grants in part and denies in part Landowners' motion to exclude the expert opinion and testimony of Dr. Donald Singer (ECF No. 400).

         The Court denies as moot the following motions: Landowners' motion for summary judgment on the range of values for just compensation that can be presented to the factfinder (ECF No. 391); Landowners' motion regarding access to and view from the Property (ECF No. 386); and the government's motion to exclude evidence and argument related to active mining as the highest and best use of the Property (ECF No. 403).

         II. RELEVANT BACKGROUND

         The United States filed a Complaint and Declaration of Taking on September 10, 2015, to acquire 400 acres of property located within the NTTR consisting of a group of patented and unpatented mining claims known as the Groom Mine. (ECF No. 1 (Complaint); ECF No. 1-4 (Legal Description); ECF No. 2 (Declaration of Taking).) The Property is in the Groom Lake Valley about 7 miles from the area popularly known as Area 51. (ECF No. 132 at 5.) The Property is the only privately owned property that has an unobstructed view of Area 51. (Id. at 16.) Landowners' family has owned the Property since about 1885, long before the United States began to use the nearby property. (Id. at 4-5.)

         On September 16, 2015, the Court granted the United States immediate possession of the Property. (ECF No. 14 at 1.) Landowners filed their Answer on November 6, 2015. (ECF No. 53.) The United States deposited the estimated compensation to the Court in the amount of $1, 200, 000 (ECF No. 10 at 1), and the funds were released to Landowners on March 9, 2016 (ECF No. 85 at 1-2). On October 5, 2016, the Court determined that the “taking is for a congressionally authorized public use identified in the United States' Complaint [ECF No. 1-3], and is legally valid.” (ECF No. 111 at 1.)

         The amount of just compensation based on the Property's highest and best use is the sole remaining issue in this case. Landowners have valued the Property based on two highest and best uses: mining and as a commercial tourism site for viewing Area 51. The government has valued the Property based on its existing use.

         The Court begins by rejecting Landowners' request for a relaxed standard of admissibility in this case, then denies the government's motion to exclude all valuation evidence premised on a commercial tourism use. The Court then grants the government's combined motion for a property viewing and to appoint a land commission and grants the government's motion to exclude testimony based on the income capitalization approach to valuation. The Court then denies Landowners' motions to establish certain facts about the Property before considering the parties' motions to exclude certain expert witness testimony. The Court denies the Landowners' motions and grants the government's motions, with the exception of Landowners' motion to exclude the opinion of Dr. Donald Singer, which the Court grants in part and denies in part. Finally, the Court grants the government's two motions for reconsideration of earlier orders and denies the parties' remaining motions as moot.

         III. LANDOWNERS' MOTION REGARDING THE STANDARD OF ADMISSIBILITY THAT APPLIES IN THIS CASE (ECF NO. 385)[1]

         The Court will deny Landowners' motion regarding the standard of admissibility that applies in this case for the following reasons.

         Landowners argue that the Court should apply a “widened special purpose standard of admissibility” to every pretrial motion and evidentiary ruling in this case because the Property is so unique. (ECF No. 385 at 23.) Landowners do not expressly define this standard in their motion, though it seems they are asking the Court to admit all relevant evidence of value, regardless of methodology or reliability. Landowners contend that the Court need not “agree with the expert's data and the method for applying that data before expert testimony is admissible.” (Id. at 4.) Landowners also assert that “[a]ll facts which would influence a person of ordinary prudence, desiring to purchase the property, are admissible.” (Id. (alteration in original) (quoting United States v. 33.5 Acres of Land, 789 F.2d 1396, 1400 (9th Cir. 1986).)

         The Court agrees with the government that Landowners' requested relief would require the Court to abandon its gatekeeping function. (See ECF No. 426 at 3.) The Court also observes that Landowners' request is similar to a request the Court considered and rejected in an earlier order. (See ECF No. 241 at 3-5.) As the Court previously decided, Landowners' requested relief is overbroad and does not reflect the role of the Court in serving its gatekeeping functions.

         Accordingly, Landowners' motion regarding the standard of admissibility that applies in this case is denied.

         IV. GOVERNMENT'S MOTION TO EXCLUDE VALUATION EVIDENCE PREMISED ON TOURISM USE (ECF NO. 409)[2]

         The Court denies the government's motion to exclude valuation evidence premised on tourism use for the following reasons.

         A. LEGAL FRAMEWORK

         Just compensation “includes all elements of value that inhere in the property” but cannot exceed fairly determined market value. Olson v. United States, 292 U.S. 246, 255 (1934). The factfinder may consider both actual and potential uses of the property. See Id. at 255-56. A potential future use may be considered if it is the highest and most profitable use for which the property is adaptable and needed or likely to be needed in the near future. See Id. Olson thus “requires a showing of reasonable probability that the land is both physically adaptable for such use and that there is a need or demand for such use in the reasonably near future.” United States v. 341.45 Acres of Land, 633 F.2d 108, 111 (8th Cir. 1980). The factfinder should consider how the potential future use affects market demand for the property, but the potential future use does not necessarily constitute the measure of value. See Olson, 292 U.S. at 255.

         The factfinder should not consider any elements of value that “depend upon events or combinations of occurrences which, while within the realm of possibility, are not fairly shown to be reasonably probable.” Id. at 257. Consideration of those elements would “allow mere speculation and conjecture to become a guide for the ascertainment of value.” Id.; see also Wash. Water Power Co. v. United States, 135 F.2d 541, 543 (9th Cir. 1943) (citing exclusionary rule from Olson).

         Importantly, if determining reasonable probability of a potential future use requires weighing evidence and evaluating credibility, the evidence should be submitted to the jury. See United States v. 100 Acres of Land, 468 F.2d 1261, 1267-68 (9th Cir. 1972).

         B. DISCUSSION

         The Court will deny the government's motion because Landowners have shown an evidentiary basis from which a rational factfinder could infer that the use of the Property as an Area 51 tourist destination is reasonably probable. The Uniform Appraisal Standards for Federal Land Acquisitions (“UAS” or “Yellow Book”) require that a highest and best use is physically possible, legally permissible, financially feasible, and results in the highest value. Desert Citizens Against Pollution v. Bisson, 231 F.3d 1172, 1181 (9th Cir. 2000). The government has not disputed that Landowners' proposed highest and best use satisfies the first two elements of physically possible and legally permissible. (See ECF No. 447 at 6-7.) And Landowners have introduced evidence that the use is financially feasible-they have identified comparable tours, nearby alien/Area 51-themed hotels and businesses, opinions of nearby business owners and brokers, consumer surveys, and expert opinions. (See Id. at 8-11.) Landowners also have introduced evidence that the use is the most profitable use-appraisals by expert witnesses Richard Roddewig and Tio DiFederico. (See Id. at 11-12.)

         The government presents a strong case for doubting that commercial tourist use is reasonably probable. For example, neither the former owners nor anyone else ever tried to convert the Property to tourist use; Landowners have not identified a tour operator; Landowners' experts assumed away problems related to environmental contamination and permitting; and the remote, isolated location makes large-scale commercial traffic to the Property difficult. (ECF No. 409 at 9-21.) But the Court would be required to weigh evidence and evaluate credibility to determine whether Landowners' proposed use is reasonably probable. The Court cannot. See 100 Acres of Land, 468 F.2d at 1267-68.

         Accordingly, the Court denies the government's motion to exclude valuation evidence premised on tourism use.

         V. GOVERNMENT'S COMBINED MOTION FOR A PROPERTY VIEWING AND TO APPOINT A LAND COMMISSION (ECF NO. 401)[3]

         The Court grants the government's combined motion for a property viewing and to appoint a land commission for the following reasons.

         A. PROPERTY VIEW

         The government first argues that a property view is necessary to address the parties' disparate positions regarding highest and best use. (ECF No. 401 at 17.) The government believes that the highest and best use of the Property is its existing use, whereas Landowners believe the highest and best use of the Property is for development into a lucrative, large-scale commercial tourist operation centered on seeing Area 51. (Id.)

         The government contends that the factfinder will need to assess the view of Area 51 from the Property as well as the Property's physical characteristics (e.g., remoteness, topography, shape) in order to evaluate these differing opinions. (Id. at 18.) The government also argues that a property view will help to ensure a fair and transparent trial by enhancing the factfinder's ability to assess whether the proposed highest and best use of the Property as an Area 51 attraction is credible. (Id. at 20.)

         Landowners “do not oppose a site visit under fair and accurate conditions.” (ECF No. 430 at 1 (emphasis omitted).) Nevertheless, Landowners express concern that the government may attempt ex parte communications with the factfinder and assert that the factfinder could evaluate the view of Area 51 “through a few photographs.” (Id. at 2-4.) Landowners also suggest that an instruction to the factfinder that the Property has a clear and unobstructed view of Area 51 would suffice. (Id. at 3.)

         The Court agrees with the government that a property view would be helpful to the factfinder in this case. Given that Landowners' proposed highest and best use truly hinges on “the view, ” the Court agrees that it is essential for the factfinder to personally evaluate that view. And while the Court is sensitive to concerns about any party engaging in ex parte communication with the factfinder, [4] the Court need not address such concerns until they are substantiated. There is no suggestion in the record that the government's counsel would engage in such conduct.

         Accordingly, the Court grants the government's request for a property view.

         B. LAND COMMISSION

         Federal Rule of Civil Procedure 71.1(h)(2)(A) provides that where a party has demanded a jury to determine compensation, “the court may instead appoint a three-person commission to determine compensation because of the character, location, or quantity of the property to be condemned or for other just reasons.” The Ninth Circuit has not required a showing of “extraordinary or unusual” circumstances to justify the appointment of a land commission. See United States v. Hall, 274 F.2d 856, 859 (9th Cir. 1960).

         The government argues that a land commission is necessary in this case due to the Property's location, character, and the necessity of a property view. (ECF No. 401 at 20.) Regarding location, the government points out that the nearest federal courthouse is 150 miles away, the nearest town is more than 30 miles away, and the nearest hospital is about an hour away. (Id. at 21.) Regarding character, the government notes that the Property is not served by potable water or electricity and that portions of the Property have rocky, uneven terrain with poor accessibility. (Id.) The government also notes that there are open mine shafts, tunnels, pits, mill tailings, waste dumps, and sweating dynamite on the Property. (Id.) Regarding the property view, the government asserts that it will be easier to coordinate the visit with a land commission than a lay jury. (Id.) In particular, the commission could view the Property outside of peak hours (perhaps on weekends) and might be more amenable than a lay jury to the background check necessary to visit the NTTR. (Id.)

         At the hearing, Landowners primarily objected to the appointment of a land commission based on their concern about delay. (ECF No. 496 at 50.) However, the government “shares the landowners' desire for a just and speedy determination of just compensation.” (ECF No. 484 at 13.) The government also explained at the hearing that the process could take several months, rather than decades as Landowners' counsel feared. (ECF No. 496 at 56-57.)

         Given that a site visit is crucial in this case due in particular to the parties' disparate positions on highest and best use, and in light of the remote location and backcountry character of the Property, the Court agrees with the government that it is appropriate to appoint a land commission.

         Accordingly, the Court grants the government's combined motion for a property viewing and to appoint a land commission.

         VI. GOVERNMENT'S MOTION TO EXCLUDE USE OF THE INCOME CAPITALIZATION APPROACH (ECF NO. 408)[5]

         The Court grants the government's motion to exclude use of the income capitalization approach for the following reasons.

         A. BACKGROUND

         The government seeks to exclude testimony of Landowners' experts based on the “income capitalization approach” to valuation. (ECF No. 408 at 3.) Capitalization in this context refers to the conversion of future income to present value. “[T]he income approach can indicate what a buyer would pay at the present time for the anticipated future benefits, discounted for risk and other variables, of owning a property.” (ECF No. 410-2 at 8 (Interagency Land Acquisition Conference, Uniform Appraisal Standards for Federal Land Acquisitions (“Yellow Book”) 136 (6th ed. 2016)).) “The income capitalization approach may refer to either direct capitalization or yield capitalization techniques.” (Id. at 10 (Yellow Book at 138).) “Direct capitalization techniques are used to derive an indication of the market value of a stabilized income-producing property by applying an overall capitalization rate to a property's single-year net income.” (Id.) “Yield capitalization techniques are used to derive an indication of the market value of an income-producing property with varying forecasted income or expenses, typically using discounted cash-flow (DCF) analysis” (Id.) “Forecasts of net income, expenses, cash flow and other factors over a holding or projection period are required.” (Id.)

         Landowners' experts DiFederico and Clauretie both used the direct capitalization technique to estimate the present value of a single annual income stream. (ECF No. 408 at 6.) Roddewig used a variation of the technique to estimate the present value of multiple annual income streams. (Id.) DiFederico also used yield capitalization techniques, specifically a discounted cash-flow analysis and a subdivision development method, which converted multiple years' projected income streams and expenses into a present value. (Id.)

         B. DISCUSSION

         The Ninth Circuit “generally recognizes three appraisal methodologies in ascertaining fair market value: ‘(1) Comparable sales; (2) the income or capitalization of income; and (3) the reproduction cost at the time of taking, less depreciation.'” United States v. 99.66 Acres of Land, 970 F.2d 651, 655 (9th Cir. 1992) (quoting 100 Acres of Land, 468 F.2d at 1265). “Ordinarily, if there are sales of comparable property at or near the time the condemned property is taken, evidence in regard to such sales would be more appropriate than any other method in determining the market value of the property taken.” 100 Acres of Land, 468 F.2d at 1265. “However, if there are no comparable sales, then other methods must be resorted to in order to ascertain market value.” Id. The court is “not restricted to a particular method in arriving at the fair market value for the condemned material.” United States v. 22.80 Acres of Land, 839 F.2d 1362, 1365 (9th Cir. 1988). The court's goal “is to assure that the landowners are restored to the pecuniary position they would have occupied had the property not been taken.” Id. (citing 100 Acres of Land, 468 F.2d at 1265).

         The government argues that the income capitalization approach is inappropriate in this case because the Property was not generating any income on the date of taking and had not generated any income for 60 years. (See ECF No. 408 at 14-17.) The Court agrees. The Yellow Book-which Landowners' expert referred to as the appraiser's “Bible” (ECF No. 410-5 at 5)-expressly states that “[d]irect capitalization techniques cannot be used to value property that is not generating income as of the date of value.” (ECF No. 410-2 at 11 (Yellow Book at 139).) The Yellow Book explains:

[D]irect capitalization of net income is an appropriate method of valuation only when the landowner can establish actual income, application of the capitalization approach is thus necessarily limited to those situations where eminent domain proceedings impinge an established, on-going business' opportunity for continued as opposed to prospective profit. There can be no capitalization of income unless the fact of income is itself first established. Any other rule would permit a valuation, speculative ab initio, to be seriously compounded.

(Id. (first quoting United States v. 15.00 Acres of Land in Miss. Cty., 468 F.Supp. 310, 315 (D. Ark. 1979); then citing United States v. 25.202 Acres, 860 F.Supp.2d 165, 175-81 & n.20 (N.D.N.Y. 2010); then citing Foster v. United States, 2 Cl. Ct. 426, 448 (1983), aff'd, 746 F.2d 1491 (Fed. Cir. 1984).) Landowners do not expressly address this argument.

         The Court also finds persuasive the reasoning of 25.202 Acres. There, the landowner's appraiser valued the property based on its hypothetical use as a site for a duty-free store and other uses. 860 F.Supp.2d at 175. Using an income capitalization approach, the appraiser found that the income would consist of rents paid by an entity operating a duty-free store on the site. Id. The court rejected this approach:

The highest and best use of a property may increase the value of vacant land because a buyer may pay more for property that is capable of being developed into a profitable operation. However, if there is no currently operating business, it would be “improper to value the property as if it were actually being used for the more valuable purpose.” United States v. Meadow Brook Club, 259 F.2d at 45 (quoting Olson, 292 U.S. at 255, 54 S.Ct. 704) (emphasis added). Thus, even though the highest and best use may include a duty-free store, if there is no currently operating store on the property, an income approach should not be used, and is not a reliable method of appraising the land.

860 F.Supp.2d at 177. Similarly here, while Landowners may advance that the highest and best use of the Property is commercial tourism, the income capitalization approach is not a reliable appraisal methodology when the Property has not generated income.

         The government has identified additional persuasive authority for rejecting the income capitalization approach here. See 4 Nichols on Eminent Domain Ch. 12B.08[3] (“Valuation based on an estimate of the potential income which might be realized from utilization by the property owner in a manner of which it is capable (but of which the owner has not as yet availed himself or herself) has been rejected on the ground that this income is too uncertain and conjectural to be acceptable.”); id. at Ch. 12B.09[3] (“The capitalization of hypothetical income method of valuation has generally been rejected by the courts.”); see also Welch v. Tenn. Valley Auth., 108 F.2d 95, 100 (6th Cir. 1939) (“Anticipated profits from any business, especially farming, are too uncertain and speculative in character to be of much weight in determining farm values. Their realization depends more upon general business conditions, trading, skill and business acumen of the proprietors and weather changes than upon location.”).

         Landowners rely on California v. Kinder Morgan Energy Partners LP, 613 Fed.Appx. 561, 564-65 (9th Cir. 2015). (ECF No. 443 at 5.) There, the court held that damages for trespass/nuisance actions under California Civil Code § 3334 “can be proved through estimates of a property's rental value based on hypothetical assumptions rather than its actual use.” California, 613 Fed.Appx. at 564. The case is inapplicable because it concerns damages for tort actions under state tort law-not eminent domain. And the government notes that California does not extend this tort-damages rule to eminent domain proceedings. (ECF No. 481 at 8 (citing several cases).)

         Landowners also rely on U.S. v. Waterhouse, 132 F.2d 699 (9th Cir. 1943). (ECF No. 443 at 5.) The land at issue in Waterhouse consisted of several lots that were leased for growing sugar cane and that belonged to an entity known as the Damon Estate. Waterhouse, 132 F.2d at 700. The Damon Estate encompassed additional land that had been subdivided and leased. Id. The government's witnesses testified that the highest and best use to which most of the land at issue was adapted was for growing sugar cane. Id. at 701. These witnesses testified that the remainder of the land was more valuable because of its potential uses, with one witness testifying that those potential uses included house and farm lots. Id. The landowners' witnesses testified that the land had outgrown its use as cane lands, and that its highest and best use was for residences, business, and truck gardening. Id. The landowners' witnesses valued the land based on that use by capitalizing hypothetical rents that could be obtained by subdividing the property and leasing the resultant lots. See Id. The government argued that the capitalization evidence was inadmissible because it was based on some future value of the property rather than the value of the property at the time of taking. Id. at 702. The court rejected the argument, reasoning that the landowners' witnesses had properly estimated the present value of the land based on what a willing buyer would pay in light of the land's potential future use. Id. The court then considered whether the landowners' capitalization evidence was admissible. Id. The court synthesized from Olson, 292 U.S. 246, the following rule: “if there is substantial evidence to show that the adaptability of the lands in question for the uses testified to was reasonably probable, then the evidence was admissible, and it was for the jury to say whether such adaptability affected the market value of the lands.” Id. (internal quotation marks omitted). Based on this rule, the court found the landowners' capitalization evidence admissible. Id.

         At first blush, it may seem as though Waterhouse requires the admission of all valuation evidence related to a prospective use once the proponent has adduced substantial evidence to show that prospective use is reasonably probable. But such a reading of Waterhouse is implausibly broad, particularly when the Federal Rules of Evidence impose a gatekeeping role on the court. Moreover, admitting all expert valuation evidence regardless of methodology or reliability would “allow mere speculation and conjecture to become a guide for the ascertainment of value-a thing to be condemned in business transactions as well as in judicial ascertainment of truth.” Olson, 292 U.S. at 257.

         The Court also rejects a broad reading of Waterhouse because the question of whether evidence of a prospective use is admissible to establish the property's highest and best use is analytically distinct from the question of whether expert valuation evidence based on that prospective use is admissible. Regarding the first question, evidence of a prospective use is admissible if that use is “fairly shown to be reasonably probable.” Id. But expert valuation evidence, by contrast, is only admissible if it complies with Federal Rule of Evidence 702 and Daubert.

         Finally, Waterhouse does not speak to situations in which the property at issue is not producing any income. The land in Waterhouse had produced rental income for many years. Some of the land was leased for growing sugar cane, while other land in the Damon Estate was subdivided and leased. 132 F.2d at 700. Thus, Waterhouse has no bearing on this case, in which the Property has not produced any rental income for the past 60 years.[6]

         Accordingly, the Court grants the government's motion to exclude use of the income capitalization approach.

         VII. LANDOWNERS' MOTION TO EXCLUDE ALL EVIDENCE OF ENVIRONMENTAL CONTAMINATION (ECF NO. 395)[7]

         The Court denies Landowners' motion to exclude all evidence of environmental contamination for the following reasons.

         A. BACKGROUND

         The Property intermittently operated as a lead mine from the late 1800s through the mid-1950s. (ECF No. 437 at 8.) Unremediated waste rock dumps and tailings piles as well as “appreciable quantities” of lead and arsenic remain at the Property. (Id. (quoting ECF No. 130-1 at 18).)

         Landowners hired experts-among them, Richard Roddewig and Tio DiFederico- to appraise the Property based on its highest and best use. (See id.) One of the government's expert witnesses-Dr. Graham Davis-reviewed Roddewig and DiFederico's reports. (Id.) Both Roddewig and DiFederico made “extraordinary assumptions” that any environmental conditions on the Property did not affect its value. (Id. at 8-9.) An extraordinary assumption is a term of art in the appraisal context meaning “an assumption, directly related to a specific assignment, as of the effective date of the assignment results, which, if found to be false, could alter the appraiser's opinions or conclusions.” (ECF No. 395-9 at 4.) Under the Uniform Standards of Professional Appraisal Practice (“USPAP”), an appraiser may only use an extraordinary assumption if the following conditions are satisfied: (1) the extraordinary assumption is required to properly develop credible opinions and conclusions; (2) the appraiser has a reasonable basis for the extraordinary assumption; (3) use of the extraordinary assumption results in a credible analysis; and (4) the appraiser complies with the disclosure requirements set forth in USPAP for extraordinary assumptions. (ECF No. 437 at 9 (citing ECF No. 437-3 at 5).)

         Dr. Davis opined that the extraordinary assumptions made by Roddewig and DiFederico were unreasonable. (See ECF No. 395-1 at 4.[8]) Additional experts retained by the government-Beverly Weissenborn, Maurice Robinson, Stephen Roach, and Nathan Moeder-offered similar criticism from various perspectives on the Landowners' use of an extraordinary assumption that the Property is not environmentally contaminated. (Id. at 12.)

         B. DISCUSSION

         Landowners first argue that evidence of contamination is only admissible if both the fact of contamination as well as remediation costs are known. (ECF No. 395 at 8-13.) The government counters that Landowners rely solely on state law and that federal law supports the admissibility of contamination evidence. (ECF No. 437 at 12-15.)

         The Court agrees with the government. Federal law requires this Court to consider “all the facts and circumstances that would reasonably go into the making of a bargain of purchase and sale.” United States v. 429.59 Acres (Imperial Beach), 612 F.2d 459, 462 (9th Cir. 1980). It is reasonable to assume that the presence of “appreciable quantities” of lead and arsenic on a property would affect that property's sale-particularly if the buyer planned to invite the general public to the property as part of a commercial tourist use- because lead and arsenic are commonly known to be harmful to human health. The cases Landowners cite from the New Jersey Supreme Court, the Florida Supreme Court, and a Tennessee mid-level appellate court are not binding on this Court. (See ECF No. 395 at 8-10.) Nor do they persuade the Court to exclude contamination evidence here. In Housing Authority of City of New Brunswick v. Suydam Investors, LLC, the New Jersey Supreme Court expressed concern about potential double liability for the existence of contamination: “once as a reduction in calculating fair market value and again in a subsequent action for recovery of remediation costs.” 826 A.2d 673, 680 (N.J. 2003). But Landowners have identified no legal theory under which they could be held liable to the government for the costs of remediation, or how the potential for double liability applies here.

         Next, Landowners assert that the government's rebuttal expert reports are improper because they are actually initial expert opinions disguised as rebuttal opinions. (See ECF No. 395 at 13-14.) The government persuasively explains that its experts' opinions constitute proper rebuttal because they point out omissions in Landowners' experts' reports and directly contradict and rebut Landowners' experts' opinions. (ECF No. 437 at 15.) The Court agrees with the government and rejects Landowners' argument.

         Landowners further argue that the rebuttal reports are not reliable because Dr. Davis's conclusions constitute “mere surmise.” (ECF No. 395 at 16-17.) The Court disagrees. Upon reviewing the excerpts of Dr. Davis's expert report and deposition testimony, the Court agrees with the government that Dr. Davis based this opinion on his education, experience, sampling results showing “appreciable quantities” of lead and arsenic, and the EPA ranking of lead and arsenic as the number 1 and 2 (out of 275) “contaminants of concern, ” among other things. (See, e.g., ECF No. 395-1 at 4 (“A 1986 survey by Quade and Tingley found high concentrations of lead and mercury in stream sediments south of the Groom Mine workings.”) (footnotes omitted); id. (noting that samples used by Nexus Geos (“NGL”)-one of Landowners' experts-“contained ‘appreciable quantities' of lead, silver, zinc, copper, and arsenic); ECF No. 395-13 at 11 (“I also suspect, given the historic mining and the uncontained nature of the tailings pile and the high grades of ore, in particular lead that were extracted in the ‘40s and ‘50s, that there is higher-than-normal concentrations of lead in and around the property.”).)

         Landowners further argue that the government should not be permitted to discuss environmental contamination when no case-in-chief expert in this case-including the government's-adjusted their appraisals for environmental contamination. (ECF No. 474 at 8-9.) Landowners' argument is non sequitur. Environmental contamination is relevant in considering whether the highest and best use of the Property is commercial tourism as explained supra. Accordingly, the Court rejects Landowners' argument.

         Landowners further argue that the Ninth Circuit requires the exclusion of evidence not tied to market value. (ECF No. 474 at 7 (first citing United States v. 760.807 Acres, 731 F.2d 1443 (9th Cir. 1984); then citing United States v. 87.98 Acres, 530 F.3d 899 (9th Cir. 2008).) The Court finds this argument irrelevant. Dr. Davis's opinion properly rebuts Landowners' experts' opinions by pointing out that their extraordinary assumption is allegedly unwarranted and incorrect. Consequently, it is relevant and admissible.

         Accordingly, the Court denies Landowners' motion to exclude all evidence of environmental contamination.

         VIII. LANDOWNERS' MOTION TO ESTABLISH CONDITION OF THE PROPERTY AS TO WATER RIGHTS (ECF NO. 397)[9]

         The Court denies Landowners' motion to establish the condition of the Property as to water rights for the following reasons.

         A. BACKGROUND

         The Property is located in the Groom Lake Basin. (ECF No. 397 at 2.) Landowners contend that they possessed vested surface water and groundwater rights and that they possessed the right to appropriate even more water from the Groom Lake Basin. (Id. at 3.)

         Landowners retained an expert-Thomas Driggs-for the following purposes related to water rights. (Id.) First, Driggs was to identify the vested water right claims that the Property owners possessed as a result of the early stakeholder's water use in connection with their historical mining activities. (Id.) Second, Driggs was to identify the water rights available for appropriation in the Groom Lake prior to the date of taking. (Id.)

         In his report, Driggs discusses Nevada water law and concludes that Landowners possessed 362 acre feet annually (a.f.a.) of vested surface water rights and 868 a.f.a. of vested groundwater rights on the date of taking. (Id. at 6.) Driggs also concluded that a tourist operation would require 40 to 120 a.f.a. (ECF No. 397-1 at 13.)

         B. DISCUSSION

         Landowners seek a ruling that the Property included the water rights necessary to operate a commercial tourist site on the Property. (ECF No. 397 at 13.) In essence, Landowners ask the Court to declare a particular fact as incontrovertible. But as the government points out (see, e.g., ECF No. 446 at 6-10), Landowners have not adduced evidence to support such drastic relief. They have not shown clear chain of title, the amount of prior beneficial use, and various other proof necessary for the Court to make such a determination. For example, Driggs stated “[a] complete and clear chain of title is necessary to confirm that no interest in any appurtenant water rights was ever reserved by a grantor in the conveyancing deed.” (ECF No. 397-1 at 4.) However, Driggs simply assumes that this is the case without explanation. (See Id. (“This Report assumes that there is a clear chain of title for Groom Mine, and there are no reservations in any of the deeds in the chain of title.”).) In the absence of these important factual predicates, the Court cannot conclude that the Property categorically included the water rights necessary to operate a tourist commercial use on the Property. Nevertheless, Landowners may still present evidence of the reasonable probability of sufficient water to the factfinder.

         Accordingly, the Court denies Landowners' motion to establish the condition of the Property as to water rights.

         IX. LANDOWNERS' MOTION TO CONFIRM USES OF UNPATENTED LAND (ECF NO. 396)[10]

         The Court denies Landowners' motion to confirm uses of unpatented land for the following reasons.

         A. BACKGROUND

         The Property consists of patented and unpatented mining claims. (ECF No. 438 at 4.) Patented mining claims are usually equivalent to full fee title ownership. See United States v. Curtis-Nevada Mines, Inc., 611 F.2d 1277, 1281 (9th Cir. 1980). Unpatented mining claims, however, are a “unique form of property” to which the government retains certain rights: “Although owners of unpatented mining claims hold fully recognized possessory interests in their claims . . . [t]he United States, as owner of the underlying fee title to the public domain, maintains broad powers over the terms and conditions upon which the public lands can be used, leased, and acquired.” United States v. Locke, 471 U.S. 84, 104 (1985). The parties seem to agree that the holder of an unpatented mining claim has exclusive rights to mine and conduct mining-related activities. (See ECF No. 438 at 5.)

         Landowners primarily seek a ruling that the public, once invited to the Property, could use the unpatented land for recreation, such as hiking, camping, rock collecting, and sightseeing. (ECF No. 396 at 15.) Landowners seek to exclude contrary testimony on this point by government experts Neville, Weissenborn, Roach, and Dr. Davis. (Id.)

         B. DISCUSSION

         Landowners have not demonstrated that they are entitled to the relief they seek. They rely primarily on Curtis-Nevada Mines, 611 F.2d 1277. (ECF No. 396 at 11.) There, the court considered the meaning of “other surface resources” in 30 U.S.C. § 612(b), a statute that allows the United States to manage vegetative and “other surface resources” on unpatented mining claims. Curtis-Nevada Mines, 611 F.2d at 1280; see 30 U.S.C. § 612(b) (“Rights under any mining claim hereafter located under the mining laws of the United States shall be subject, prior to issuance of patent therefor, to the right of the United States to manage and dispose of the vegetative surface resources thereof and to manage other surface resources thereof (except mineral deposits subject to location under the mining laws of the United States).”) The court found that “the phrase ‘other surface resources' was clearly intended to include recreational uses.” Id. at 1283. The practical consequence of this holding was that the owners of the unpatented mining claims at issue in the case could no longer bar the general public from using the land for recreation and entrance to adjacent National Forest lands. See Id. at 1286.

         Curtis-Nevada Mines is not relevant here, or if it is, it supports the government's position. The government contends that the land underlying the unpatented claims was withdrawn from public use in 1984. (ECF No. 438 at 3.) The land in Curtis-Nevada Mines had not been withdrawn from public use. Plus, the holding of Curtis-Nevada Mines is that the United States has statutory authority to manage “other surface resources” in connection with an unpatented claim that includes recreational uses. Thus, it seems that Curtis-Nevada Mines supports the government's contention that it can restrict recreational use of unpatented land. (See ECF No. 438 at 12.) Accordingly, the Court rejects Landowners' argument based on Curtis-Nevada Mines.

         Landowners also rely on 43 C.F.R. § 3715.0-1(c), which provides that “[t]his subpart does not impair the right of any person to engage in recreational activities or any other authorized activity on public lands BLM administers.” (ECF No. 396 at 3.) The government argues that this regulation probably does not apply to the Property because the Property is not part of the “public lands BLM administers.” (ECF No. 438 at 13 (quoting 43 C.F.R. § 3715.0-1(c)).) The government also argues that any recreational activities must be authorized and notes that recreational activities have not been authorized on any federal land within the NTTR, including the Property's unpatented land, since the land was withdrawn in 1984. (Id.) In response, Landowners press an argument that the land underlying the unpatented claims was not subject to the 1984 withdrawal. (See ECF No. 476 at 7-8.) The Court addresses that argument next.

         Landowners argue that the land underlying the unpatented mining claims was not subject to the 1984 withdrawal. (See ECF No. 476 at 3-5.) The government concedes that the Air Force guaranteed Landowners conditional access to the Property following the 1984 withdrawal but notes that the Air Force did not change the permissible use of the unpatented land from mining purposes to non-mining purposes. (ECF No. 438 at 11.) The Court finds the government's position more persuasive. Landowners rely on various assurances from the Air Force during the 1984 withdrawal that Landowners would retain their access and property rights, but none of those assurances show that Landowners ever possessed a right to use the unpatented land for recreation. (See ECF No. 470 at 8-10; see also ECF No. 476 at 4 (incorporating ECF No. 470 by reference).) Rather, the assurances Landowners cite confirm the government's position that the Air Force simply guaranteed Landowners conditional access to the Property. (See, e.g., ECF No. 388-4 at 68 (“And in Mr. Sheahan's case . . . they have had access; there has been no change to that.”).)

         Landowners also argue that the government conceded the unpatented land was not subject to the 1984 withdrawal in their legal instructions to their expert witnesses. (ECF No. 396 at 9.) The relevant portion of the legal instruction provides that “the Groom Mine property was not within the scope of the 1984 withdrawal” and that “the Groom Mine property was surrounded by the withdrawn area, but the owners retained access to the Groom Mine property for personal and business purposes.” (ECF No. 396-11 at 2.) The government argues that the legal instruction is irrelevant. (ECF No. 438 at 9-10.) The government contends that the instruction “does not say whether the unpatented claims could or could not be used for non-mining purposes” and that it merely instructed the government's appraiser to “assume for valuation purposes that a hypothetical buyer of the Groom Mine could have conditional access to the ...


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