Stacey et al v. Jewell et al

Filing 82

MEMORANDUM DECISION. (Jan, Chambers Staff)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ALASKA
J. DENNIS STACEY and PELHAM L.
JACKSON,
Plaintiffs,

Case No. 3:13-cv-00113-RRB
MEMORANDUM DECISION

vs.
S.M.R. JEWELL, in her capacity as
SECRETARY OF THE INTERIOR;
BUREAU OF LAND MANAGEMENT;
and INTERIOR BOARD OF LAND
APPEALS,
Defendants.

Plaintiffs J. Dennis Stacey and Pelham L. Jackson (“Plaintiffs”) appeal from the
decision of the Secretary of the Interior (“Secretary”) holding that stone known as “Spencer
Stone” or “PR 16 graywacke” was not a locatable mineral under 30 U.S.C. §§ 21 – 54 (the
“Mining Law”).1 The matter has been fully briefed by the parties and the Court has
determined that oral argument would not materially assist in reaching a decision in this
matter. Accordingly, the request for oral argument at Docket 60 is DENIED, and the
matter is submitted for decision on the briefs.2

1

United States v. J. Dennis Stacey and Pelham L. Jackson, 171 IBLA 170 (2007).

2

D.Ak. LR 7.2(a)(3)[B].

MEMORANDUM DECISION
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I.

BACKGROUND
The history and background of this action are well known to the parties and are

recited herein only to the extent necessary to an understanding of this decision.
This action arises out of a contest proceeding initiated by the Bureau of Land
Management (“BLM”) contesting the validity of ten placer mining claims Plaintiffs had
located in the Chugach National Forest. While the validity of nine of the claims was
upheld, the Administrative Law Judge (“ALJ”) held that PR 16 graywacke was a common
variety building stone not locatable under the mining laws. On administrative appeal the
Interior Board of Land Appeals (“IBLA”) affirmed the decision of the ALJ. Plaintiffs
challenge the holding that Spencer Stone is a common variety stone in this action.
II.

JURISDICTION/STANDARD OF REVIEW
This Court has jurisdiction over appeals from the final decisions of the Secretary of

the Interior.3 The decision of the IBLA is the final decision of the Secretary for purposes
of judicial review.4
Under the Administrative Procedure Act (“APA”), this Court must “hold unlawful and
set aside agency action, findings, and conclusions of law found to be . . . arbitrary,
capricious, or otherwise not in accordance with law.”5 The scope of review under the
arbitrary and capricious standard is narrow and “a court does not substitute its judgment

3

Doria Min. & Engineering Corp. v. Morton, 608 F.2d 1255, 1257 (9th Cir. 1979).

4

43 C.F.R. §§ 4.1(b)(2), 4.403(a).

5

5 U.S.C. § 706(2)(A).

MEMORANDUM DECISION
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for that of the agency.”6 This standard requires “a rational connection between facts found
and conclusions made” by the Secretary.7
[. . . .] Section 706(2) of the APA provides that an agency action must
be upheld on review unless it is “arbitrary, capricious, an abuse of discretion,
or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). As a
reviewing court, we “must consider whether the decision was based on a
consideration of the relevant factors and whether there has been a clear
error of judgment.” Citizens to Preserve Overton Park, Inc. v. Volpe, 401
U.S. 402, 416, 91 S. Ct. 814, 28 L. Ed.2d 136 (1971), abrogated in part on
other grounds as recognized in Califano v. Sanders, 430 U.S. 99, 105, 97
S. Ct. 980, 51 L. Ed.2d 192 (1977). Although our inquiry must be thorough,
the standard of review is highly deferential; the agency's decision is “entitled
to a presumption of regularity,” and we may not substitute our judgment for
that of the agency. Id. at 415–16, 91 S. Ct. 814. Where the agency has
relied on “relevant evidence [such that] a reasonable mind might accept as
adequate to support a conclusion,” its decision is supported by “substantial
evidence.” Bear Lake Watch, Inc. v. FERC, 324 F.3d 1071, 1076 (9th
Cir.2003). Even “[i]f the evidence is susceptible of more than one rational
interpretation, [the court] must uphold [the agency's] findings.” Id.8
In the interim between time that Plaintiffs filed their application and her final
decision, the Secretary adopted 43 C.F.R. § 3830.12(b) codifying the Ninth Circuit decision
in McClarty.9 This Court has determined that § 3830.12(b) applies to this case.10 Thus,

6

Judulang v. Holder, 132 S. Ct. 476, 483 (2011); Barnes v. U.S. Dep’t of Transp.,
655 F.3d 1124, 1132 (9th Cir. 2011).
7

League of Wilderness Defenders/Blue Mountains Biodiversity Project v.
Connaughton, 752 F.3d 755, 760 (9th Cir. 2014) (citation and internal quotation marks
omitted).
8

San Luis & Delta-Mendoza Water Auth. v. Jewell, 747 F.3d 581, 601 (9th Cir.

2014).
9

McClarty v. Sec’y of Interior, 408 F.2 907 (9th Cir. 1969). In expressly adopting
the McClarty standard in the final rule, the BLM indicated it “modified the language in some
sections from the proposed rule so that they more closely match the language and intent
of applicable case law. For example, to define uncommon varieties of mineral materials,
(continued...)
MEMORANDUM DECISION
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in resolving this appeal the Court must decide whether the Secretary’s decision meets the
parameters of § 3830.12(b), which provides:
(b) Under the Surface Resources Act, certain varieties of mineral materials
are locatable if they are uncommon because they possess a distinct and
special value. As provided in McClarty v. Secretary of the Interior, 408 F.2d
907 (9th Cir. 1969), we determine whether mineral materials have a distinct
and special value by:
(1) Comparing the mineral deposit in question with other deposits of
such minerals generally;
(2) Determining whether the mineral deposit in question has a unique
physical property;
(3) Determining whether the unique property gives the deposit a
distinct and special value;
(4) Determining whether, if the special value is for uses to which
ordinary varieties of the mineral are put, the deposit has some distinct and
special value for such use; and
(5) Determining whether the distinct and special value is reflected by
the higher price that the material commands in the market place.
With respect to the interpretation and application of agency regulations, the Ninth
Circuit stated:
“When Congress has ‘explicitly left a gap for an agency to fill, there is
an express delegation of authority to the agency to elucidate a specific
provision of the statute by regulation,’ and any ensuing regulation is binding
in the courts unless procedurally defective, arbitrary or capricious in
substance, or manifestly contrary to the statute.” United States v. Mead
Corp., 533 U.S. 218, 227, 121 S.t. 2164, 150 L.d.2d 292 (2001) (quoting
Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837,
843–44, 104 S.t. 2778, 81 L.d.2d 694 (1984)). Even if the agency has not
formally interpreted the statute, Chevron deference applies when it has
“promulgated a rule based on an implicit interpretation of the statute.”

9

(...continued)
we rely on the court's decision in McClarty.” 68 Fed. Reg. 61046, 61048 (Oct. 2, 2003).
10

Docket 81. This Court also notes that throughout their appeal to the IBLA
Plaintiffs argument focused on their interpretation of § 3830.12(b) and its application to
their case.
MEMORANDUM DECISION
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Schleining v. Thomas, 642 F.3d 1242, 1246 (9th Cir.2011). An agency's
interpretation of its own regulation is “controlling unless plainly erroneous or
inconsistent with the regulation.” Auer v. Robbins, 519 U.S. 452, 461, 117
S.t. 905, 137 L.d.2d 79 (1997) (internal quotation marks omitted).11
While the government has the burden of proof to establish a prima facie case, once
the government has met its burden, the burden of proof by a preponderance of the
evidence shifts to the claimant. While the claimant does not have to establish all the
elements necessary, it must preponderate on the issues raised.12 This Court must apply
these principles to the case before it.
III.

ISSUES PRESENTED/RELIEF REQUESTED
Plaintiffs present several issues and subissues in somewhat of a “shotgun” manner.
1.

The government did not sustain its prima facie case.

2.

The Secretary improperly compared Spencer Stone to other deposits of

armor stone.
3.

The assumption that the Spencer Stone produced by Plaintiffs had unique

qualities was not rebutted by substantial evidence.
4.

The Secretary failed to make any finding disputing the distinct and special

value for Spencer Stone.
5.

The Secretary erred in finding that Spencer Stone does not have a distinct

and special value in the market.

11

Natural Res. Def. Council, Inc. v. U.S. Dep’t of Transp., 770 F.3d 1260, 1263–64
(9th Cir. 2014).
12

Hjelvik v. Babbitt, 109 F.3d 1072, 1075 (9th Cir. 1999).

MEMORANDUM DECISION
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6.

Supplementation of the record to include certain documents developed by

the Department of Agriculture, U.S. Forest Service, related to the management of the
Spencer Glacier materials.
Plaintiffs request that the decision of the Secretary be reversed with instructions that
the contest complaint be dismissed.13
IV.

DISCUSSION
A.

Supplementation of the Record.

Plaintiffs seek to supplement the record to include the “Stacey Exhibits,”14 and the
Declaration of Pelham L. Jackson.15 The Secretary has accepted augmentation of the
record to include the Declaration of J. P. Tangen and the accompanying exhibits.16 The
record is supplemented to include those documents.
The “Stacey Exhibits” consist of the following documents issued by the U.S. Forest
Service: (1) An issue paper entitled “Spencer Glacier Mineral Materials Management”
(March 2008);17 (2) an issue paper entitle “Spencer Glacier Mineral Materials Management”

13

Although Plaintiffs also presented an argument before the Secretary that Spencer
Stone had a distinct and unique quality used a decorative stone, Plaintiffs do not advance
that argument in their opening brief. Consequently, the Court assumes that Plaintiffs have
abandoned that argument. See United States v. Karma, 394 F.3d 1236, 1238 (9th Cir.
2007) (holding that an issue is waived if it is not specifically and distinctly argued in an
appellant’s opening brief); see also Smith v. Marsh, 194 F.3d 1045, 1052 (9th Cir. 1999)
(“[O]n appeal. arguments not raised by a party in its opening brief are deemed waived.”).
14

Declaration of J. Dennis Stacy, Exhibits E through I, Dockets 23-1 through 23-5.

15

Docket 37-1.

16

Docket 22.

17

Docket 23-1.

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(July 2010);18 (3) Draft Environmental Impact Statement Spencer Mineral Materials Project
(April 2008);19 Spencer Glacier Mineral Material and Recreation Withdrawal Proposal and
Application Environmental Assessment (March 2009);20 and a comparison analysis of the
Forest Service documents to the decision of the Secretary in this case prepared by J.
Dennis Stacey.21
It is undisputed that the supplemental materials Plaintiffs seek to have considered
post-date the decision at issue in this case. It is also indisputable that the supplemental
materials relate to a different decision by a different federal agency. Absent an exception,
review of an agency decision under the APA is limited the administrative record in
existence at the time of the agency decision, not some new record made initially in the
court on appeal.22 “Parties may not use post-decision information as a new rationalization
either for sustaining or attacking the Agency’s decision.”23 As the Secretary has correctly
noted, the Ninth Circuit has recognized but four circumstances in which the court may
consider post-decisional documents: (1) if necessary to determine whether the agency has
considered all relevant factors and explained the decision; (2) when the agency has relied
on documents not on the record; (3) when necessary to explain technical terms or complex

18

Docket 23-2.

19

Docket 23-3.

20

Docket 23-4.

21

Docket 23-5.

22

Camp v. Pitts, 411 U.S. 138, 142 (1973) (per curiam).

23

Ctr. for Biological Diversity v. U.S. Fish and Wildlife Serv., 450 F.3d 930, 943 (9th
Cir. 2006) (internal quotation marks and citation omitted).
MEMORANDUM DECISION
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subject matter; or (4) there is a showing of bad faith by the agency.24 In deferring ruling
on the motion to supplement, this Court held that the Stacy Exhibits would be disregarded
unless the Court found bad faith on the part of the Secretary.25
The decision to expand the record is within the broad discretion of this Court.26
Plaintiffs bear the heavy burden of showing “bad faith” on the part of the Agency.27
Furthermore, the Ninth Circuit has limited the enumerated exceptions to identify and plug
holes in the record.28 Plaintiffs have failed to show any such gaps or holes. In their
opening brief Plaintiffs discuss the effect of “Stacey Exhibits” and the Pelham declaration
if they are considered.29 However, with respect to the “bad faith” argument, Plaintiffs
simply rely on the prior arguments presented. 30
In their motion to augment at Docket 21 Plaintiffs rely on dicta in Overton Park31 to
establish bad faith. Unfortunately, unlike the situation in Overton Park, in which the record

24

San Luis & Delta-Mendoza Water Auth., 747 F.3d at 601 (9th Cir. 2014) (quoting
Fence Creek Cattle Co. v. U.S. Forest Serv., 602 F.3d 1125, 1131 (9th Cir. 2010); Sw. Ctr.
for Biological Diversity v. U.S. Forest Service, 100 F.3d 443, 1447 (9th Cir. 1996).
25

Dockets 44, 49.

26

See Fence Creek Cattle Co., 602 F.3d at 1131.

27

Id.

28

Id.

29

Docket 54, pp. 44–53.

30

Referring to Dockets 21 (Plaintiffs Memorandum in Support of Plaintiffs’ Motion
to Augment the Administrative Record), 31 (Defendants’ Motion for Partial Reconsideration
of the Court’s December 16, 2013 Order Granting Plaintiffs’ Motion to Augment), 37 (Reply
in Support of Plaintiffs’ Motion to Augment the Administrative Record).
31

Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402 (1971).

MEMORANDUM DECISION
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before the agency was incomplete, the record before the Secretary in reaching her
decision in this case is, in fact, complete. In their reply at Docket 37 Plaintiffs argue that
the inconsistency between the decision reached in this case and the decision of the Forest
Service establish bad faith. Omitted from their argument is the citation to any authority that
supports the proposition that a later inconsistent decision by a different government agency
necessarily renders the first as having been decided in bad faith. Nor has independent
research by this Court uncovered any such authority. Indeed, the Ninth Circuit has
indicated that, even inconsistent decisions by the same agency would not necessarily
demonstrate bad faith in a specific later case.32 How the reverse, i.e., a later inconsistent
decision by a different agency, would demonstrate bad faith in an earlier decision, is
inexplicable. Accordingly, except to the extent permitted herein above, the request to
augment the record at Docket 21 is DENIED.
B.

Merits
1. Prima Facie Case.

Plaintiffs argue that the contest proceedings should have been dismissed for a
failure to present a prima facie case. Plaintiffs contend that: (1) the contest proceeding
should have been dismissed because the minerals examiner’s testimony contradicted the
mineral report; (2) an incorrect application of the McClarty factors; and (3) the common
occurrence of graywacke is an improper basis for comparison with Spencer Stone. The
Secretary disagreed, holding:

32

See Fence Creek Cattle Co., 602 F.3d at 1131.

MEMORANDUM DECISION
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Judge Sweitzer correctly ruled that the Government had presented a
prima facie case that the Spencer stone, or graywacke, is common variety
stone. The Mineral Report concluded that graywacke is common variety rock
and not subject to location under the mining laws based upon a number of
factors, “including that graywacke is extremely common and widespread, that
a number of other common variety rock types may meet engineering
specifications for armor stone and riprap, and that Spencer Stone does not
command a higher price in the market place than other common varieties
used for armor stone.” (ALJ Decision at 11; Ex. 1 at 2, 47-50.) Baer also
testified that appellants had not identified the discovery of any other stone,
such as decorative boulders, before or during his field examination of these
claims. (Tr. 84.) Judge Sweitzer accordingly ruled: “This evidence from a
Government examiner, who has had sufficient training and experience to
qualify as an expert witness, establishes a prima facie case of the claim’s
invalidity.” (ALJ Decision at 16, citing United States v. Gillette, 104 IBLA 269,
274-75 (1988), and United States v. Mansfield, 35 IBLA 95, 96-99 (1978).)
On these facts, Judge Sweitzer could hardly have ruled other than that the
Government had established a prima facie case that appellants’ stone was
common variety, whether in blocks (i.e., armor stone) or as boulders.
Accordingly, the burden then shifted to appellants to demonstrate by a
preponderance of the evidence that their deposit is uncommon variety and
locatable under the mining laws. LeFaivre, 138 IBLA at 68. 33
The concurrence noted:
Judge Sweitzer correctly ruled that the Government had presented a
prima facie case that the Spencer Stone, or graywacke, was common
variety. In his mineral report, Baer concluded that graywacke rock is common
variety rock and not subject to location under the mining laws. (Ex. 1 at 2.)
His conclusion was based upon a number of factors, “including that
graywacke is extremely common and widespread, that a number of other
common variety rock types may meet engineering specifications for armor
stone and riprap, and that Spencer Stone does not command a higher price
in the market place than other common varieties used for armor stone.”
(Decision at 11; Ex. 1 at 47-50.) 19/ He concluded that the Spencer Stone
“doe [sic] not have any unique intrinsic property that gives it a distinct or
special value and is therefore a common variety mineral which is not
locatable.” (Decision at 16.) Judge Sweitzer ruled: “This evidence from a
Government examiner, who has had sufficient training and experience to
qualify as an expert witness, establishes a prima facie case of the claim’s
33

171 IBLA at 175.

MEMORANDUM DECISION
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validity.” Id., citing United States v. Gillette, 104 IBLA 269, 274-75 (1988);
United States v. Mansfield, 35 IBLA 95, 96-99 (1978). 20/
19/

Judge Sweitzer noted that, during rebuttal, expert testimony from two employees
of the Alaska District Corps of Engineers (ADCE) supported Baer’s conclusion that
graywacke or Spencer Stone was common variety rock, testifying that “there are
many sources for armor stone meeting the USACE’s minimum specifications and
the Spencer Stone derives no distinct and special value from any attributes that
exceed those specifications or from the large size of the rocks that the deposit is
capable of producing (see, e.g., Tr. 1061-68, 1081-82).” (Decision at 11.)
20/
This ruling is consistent with the rule, followed by the Board, that the threshold
burden on the Government to go forward is limited. See United States v.
Dresselhaus, 81 IBLA 252, 257 (1984). The Government need only show that the
mineral deposit does not possess a unique property giving it a distinct and special
value to meet its burden. Contestees contend that there was no basis for Judge
Sweitzer’s conclusion that the Government had presented a prima facie case, given
that Baer failed to present evidence “comparing the price of Spencer stone to the
price of stone typically put to a common variety use * * *.” (SOR at 13.) This
contention is clearly erroneous, given that the Government showed that the Spencer
stone “was used for armor stone, toe stone, filter stone, ballast, and other rip rap,
in other words, common variety uses.” (Answer at 6.) As the Government points
out, “Stacey himself confirmed that he paid the same royalty price for the rock
regardless of the rock’s ultimate usage” (Tr. 810), that “the contractor, Spencer
Rock Products, paid him one price for the rock, regardless of the size of the blasted
pieces or the use to which they were to be put” (Tr. 811), and that “the Spencer
quarry rock did not command a higher [price] in the marketplace” (Tr. 94, 95).34

Initially, this Court notes that Plaintiffs have not cited any authority for the
proposition that the decision of the Secretary must specifically address all issues or points
raised by a party in a mineral location contest proceeding. Nor has independent research
by this Court discovered any such authority.

Indeed, controlling authority is to the

contrary.35 Plaintiffs’ somewhat cursory argument on this point fails to demonstrate how

34

171 IBLA at 192–93 (Roberts, ALJ, concurring).

35

See INS v. Bagamasbad, 429 U.S. 24, 25 (1976) (“As a general rule courts and
agencies are not required to make findings on issues the decision of which is unnecessary
to the results they reach.”); Simeonov v. Ashcroft, 371 F.3d 532, 538 (9th Cir. 2004)
(quoting Bagamasbad).
MEMORANDUM DECISION
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and to what extent those points were sufficiently relevant or necessary to the decision the
Secretary rendered in this case.
To the extent that Plaintiffs contend that the Secretary did not apply the McClarty
factors in finding a prima facie case, the Court agrees with the Secretary that the case
Plaintiffs rely upon, Pitkin Iron Corp. v. Kempthorne,36 is neither controlling nor persuasive.
The court in Pitkin Iron specifically declined to reach McClarty, instead it addressed the
decision of the IBLA under a three-prong test: (1) the mineral material question is sand,
stone, gravel, pumice, pumicite, or cinders; (2) the material’s price is similar to that paid for
such material typically put to common variety use; and (3) the government’s witnesses
have been unable to identify any special use for the mineral material that would justify
commanding a price higher than the price paid for the common variety.37
Plaintiffs also rely in significant part on perceived discrepancies between the Mineral
Report and the testimony of the geologist who prepared it with respect to the nature of the
stone in question to which the comparison should have been made: armor stone or any
other stone. Even accepting on its face Plaintiffs’ analysis of the alleged discrepancies
does not produce the result Plaintiffs seek. That is not the issue before this Court. The
issue before this Court is the decision of the Secretary, which on its face meets the
requirements of a prima facie case.

36

554 F. Supp.2d 1208 (D. Colo. 2008).

37

Id. at 1212 (citing and applying United States v. LaFaivre, 130 IBLA 60 (1997) and
United States v. Multiple Use, Inc., 120 IBLA 63 (1991)).
MEMORANDUM DECISION
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Plaintiffs’ argument that the common occurrence of graywacke is an improper basis
for comparison with Spencer Stone falls far short. First, as noted above, the McClarty/CFR
factors are inapposite in the context of establishing a prima facie case. Second, Plaintiffs’
reliance on their excerpt from Multiple Use, in addition being partial and out of context, is
misplaced. In context, that footnote follows the sentence that reads: “The comparison
must be with other deposits generally.” Also omitted from the quotation are the first three
sentences in the footnote: “Congress had good cause for designating pumice as a
common variety mineral. Pumice deposits can be found in almost all western states and
are found in many places in Arizona and its surrounding sites. It should be obvious,
therefore, that the further afield one must go to find a comparable deposit the more
unusual the particular deposit must be.”38 Plaintiffs’ quoted excerpt immediately follows
that part of the statement. In short, taken in its entirety and in context the quoted excerpt
does not support Plaintiffs’ position.
2. Comparison of Spencer Stone to Other Stone.
Plaintiffs contend that Spencer Stone has distinct, unique qualities giving it special
value in the market. In her decision the Secretary noted:
Rather than deciding whether the ability to produce large armor stone
or this deposit’s high yield of large armor stone is “unique,” Judge Sweitzer
focused on the third Departmental guideline, 43 CFR 3830.12(b)(3), stating
that even assuming these are unique properties, appellants failed to show
that they imparted a distinct and special value to their deposit. (ALJ Decision
at 32, 33.) Also assuming, as did Judge Sweitzer, that these properties
render appellants’ deposit unique, we proceed similarly to determine whether
these properties impart a distinct and special value to appellants’ deposit that
38

Multiple Use, 120 IBLA at 77, n.12.

MEMORANDUM DECISION
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is reflected either by higher prices which their large armor stone commands
in the market place or by reduced cost of production resulting in substantially
greater profits to the appellants. 39
Plaintiffs argue that in rendering her decision the Secretary: (1) improperly compared
Spencer Stone to other deposits of armor stone, instead of comparing it to common
varieties; (2) the deposit comparison and findings on market price are not supported by
substantial evidence; (3) precedent that geographic location is a permissible criterion in
determining market value is arbitrary; (4) the finding that distinct and reduced value due
to reduced overhead are not supported by substantial evidence; and (5) the finding of
marketability of Spencer Stone was unsupported by the evidence.
At the outset this Court reiterates the underlying principle regarding the burden of
proof, i.e., that, once the agency has established a prima facie case, the burden of proof
to establish the validity of a mining claim shifts to the claimants.40 The Secretary’s decision
recognized this principle.41 Plaintiffs have failed to meet their burden.
Comparison Test
The Secretary held:
The parties agree that appellants’ rock has been and can be used as
armor stone. Appellants contend, however, that Judge Sweitzer misapplied
the first Departmental guideline, 43 CFR 3830.12(b)(1), by comparing their
deposit to other armor stone quarries, rather than to stone quarries generally.
(SOR at 18-22.)
39

171 IBLA at 180.

40

See Rodgers v. Watt, 726 F.2d 1376, 1380 (9th Cir. 1984); Humboldt Placer
Mining Co. v. Secretary of Dept. of Interior, 549 F.2d 622, 624 (9th Cir. 1977); United
States v. Springer, 491 F.2d 239, 242 (9th Cir. 1974).
41

171 IBLA 175; 171 IBLA 193 (Roberts, ALJ concurring).

MEMORANDUM DECISION
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Judge Sweitzer considered “a key issue in determining whether the
armor stone is common or uncommon variety is whether the [appellants’]
deposit should be compared to similar deposits of stone or common variety
deposits of stone generally.” (ALJ Decision at 29.) Relying upon United
States v. Kaycee Bentonite Corp., 64 IBLA 183, 89 I.D. 262 (1982), he
determined that “Spencer stone should be compared to similar deposits of
stone rather than common variety deposits generally * * *.” (ALJ Decision at
32.)42
Plaintiffs contend that the Secretary erred in comparing Spencer Stone to other
varieties of armor stone instead of common variety materials. Plaintiffs’ argument on this
point in their Opening Brief is somewhat confusing, i.e., it is unclear whether Plaintiffs are
arguing that the proper comparison is between common variety stone or other armor
stone.43 In their Reply Brief, however, Plaintiffs make clear their position is that the error

42

171 IBLA 177.

43

For example, Plaintiffs argue “[i]f a unique property is recognized for the subject
deposit, then the comparison test to the McClarty factors is to other uses of mineral
material which lack the unique property.” In the next breath, however, Plaintiffs contend:
[. . . .] Therefore, the first McClarty test should be a comparison of
Spencer stone used as “large armor stone,” meaning material weighing more
than two tons, versus other rock materials not applied to such use.53 Also,
the Spencer quarry should be compared with other quarries in terms of yield
of armor stone generally. Thus the McClarty comparison should be to other
uses of rock material that are not large armor stone and quarries that do not
generate a high yield of large armor stone.
Notwithstanding the IBLA’s recognition that Spencer stone possess
unique properties, it nonetheless affirmed the ALJ’s decision that the deposit
comparison with similar deposits of armor stone rather than common variety
materials. [. . . .]
53
The Board found “the parties understood and generally agreed that
armor stone varies by size: large armor stones weigh over 2 tons . . . .”
The heart of Plaintiffs’ position on this point appears to be:
The ALJ’s analysis which the IBLA sustained disregards the Board’s
precedent that the presence or absence of a unique property is the proper
basis for differential application of the first McClarty factor between similar
(continued...)
MEMORANDUM DECISION
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is that Secretary erred in comparing Spencer Stone to other varieties of armor stone, i.e.,
that the proper comparison should be to common varieties of stone.44
Plaintiffs position appears to rest on a perceived inconsistencies among various
decisions on this point by the Secretary rendering the decision in this case arbitrary and
capricious. Suffice it to say that, while there may be some modicum of merit to Plaintiffs’
argument, as the Secretary points out, the comparison test utilized in this case, to other
armor stone, is consistent with the decisions of the Ninth Circuit,45 by which this Court is
bound.46 Whether or not there may exist inconsistencies in various decisions rendered by
the Secretary, the application of the law of this circuit as in this case cannot be deemed
arbitrary, capricious, or not supported by substantial evidence, or contrary to law.
Finally, on this point, Plaintiffs argue that the Secretary’s comparison of the Spencer
Glacier quarry with other quarries was deficient and unsupported by substantial evidence:
specifically that the evidence does not support a finding that the stone produced from the
Spencer quarry is comparable to the stone produced from other quarries. The Court
disagrees.

43

(...continued)
deposits versus common varieties generally. Accordingly, the Board’s
disregard of its precedential authority without reasoned explanation amounts
to arbitrary and capricious agency decision-making as a matter of law.
Opening Brief, Docket 54 at 18-20 (citations omitted).
44

Reply Brief, Docket 59 at 5–8.

45

See, e.g., Boyle v. Morton, 519 F.2d 551, 552 (9th Cir. 1991) (citing Brubaker v.
Morton, 500 F.2d 200, 202 (9th Cir. 1974) (applying the predecessor to § 3830.12(b), §
3711.1(b)).
46

See Miller v. Gammie, 335 F.3d 889, 900 (2003) (en banc).

MEMORANDUM DECISION
Stacey v. Jewell, 3:13-cv-00113-RRB – 16

Appellants countered in their rebuttal case that virtually no other
quarry could produce acceptable armor stone because each had “fatal
flaws.” 8/ (Ex. B, Table 2-4; Tr. 774-75, 784, 818-19.) On appeal, appellants
assert that stone meeting USACE specifications for armor stone is “limited
and rare” (SOR at 18), but this assertion is not supported by the record.
Many of the same “fatally flawed” quarries identified by Stacey were shown
to produce armor stone acceptable to USACE. (Ex. 1, Att. 20; Tr. 92-93, 34147, 1081-82.) Moreover, Judge Sweitzer noted that “rock from eight other
Alaskan quarries meet all of the USACE specifications * * *. Mr. Baer
presented data showing that rock from 12 of the quarries for which Stacey
lacked information or a ‘fatal flaw’ was identified actually was determined by
the USACE to be suitable for armor stone or had been successfully used as
armor stone * * * (compare Ex. K, Table 2 with Ex. 1, Att. 20; see also Tr.
820-21, 930-31).” (ALJ Decision at 31.) In fact, Kenneth J. Eissis (USACE),
testified that the Corps of Engineers “only rarely adjusts ADCE’s standard
specifications for armor rock to allow for use of a local rock because there
usually is no problem finding a source of rock which will meet the
specifications (Tr. 1087-89, 1110-11).” (ALJ Decision at 31.)
8/

The principal “fatal flaw” identified by appellants involved petrographic test results
involving microscopic analysis to identify minute rock flaws. (Tr. 782; Ex. B, Att. 8
at 3-4.) Government experts testified that the most important specification for armor
stone is size and that other specifications, including petrographic test results, could
be adjusted depending on armor stone availability. (Tr. 1061, 1086-88, 1110-11.)
Judge Sweitzer noted that, during rebuttal, expert testimony from two employees
of the Alaska District Corps of Engineers (ADCE) supported Baer’s conclusion that
graywacke or Spencer stone was common variety rock, testifying that “there are
many sources for armor stone meeting the USACE’s [U.S. Army Corps of
Engineers’] minimum specifications and the Spencer Stone derives no distinct and
special value from any attributes that exceed those specifications or from the large
size of the rocks that the deposit is capable of producing (see, e.g., Tr. 1061-68,
1081-82).” (ALJ Decision at 11.)

Whether a particular deposit is uncommon variety under the first
element of the Departmental guidelines requires a comparison of claimant’s
deposit “with other deposits of such mineral generally.” 43 CFR
3830.12(b)(1). Judge Sweitzer compared appellants’ deposit of graywacke,
which had been used as armor stone, with other armor stone deposits, as
well as with other graywacke deposits. (ALJ Decision at 32.) Appellants
contended in their rebuttal case and argue on appeal that these comparisons
were improper because they were not to ordinary, common variety stone
deposits. We find no error in Judge Sweitzer’s rejecting appellants’ proffered
comparisons and comparing their deposit with other armor stone deposits.
See United States v. Pitkin Iron Corp., 170 IBLA 352, 388-89 (2006); Knipe,
170 IBLA at 178-79. Moreover and in any event, we find the Government
MEMORANDUM DECISION
Stacey v. Jewell, 3:13-cv-00113-RRB – 17

demonstrated that rock used as armor stone is common variety building
stone by showing that many types of stone are usable as armor stone (e.g.,
graywacke, basalt, granite, quartzite, and gneiss) and that a large number of
quarries (20+) produce rock acceptable for use as armor stone in Alaska.47
As stated by the concurrence:
In fact, Gregory A. Beischer, contestees’ expert, a certified
professional geologist with 15 years of experience in construction material
deposits (Tr. 856-57), testified that “lots of quarries can produce two-ton
stones” (Tr. 906-07). Beischer and Baer “identified in exhibit tables
approximately 3 dozen quarries in Alaska that produce armor stone (Ex. 1,
Att. 20; Ex. K. Table 2).” (Decision at 30.) Moreover, “11 out of the 34
Alaskan armor stone quarries for which a rock type was identified by Mr.
Beischer or Mr. Baer produce graywacke rock (see Ex. K, Table 2; Ex. 1, Att.
20).” Id. Judge Sweitzer observed that this data belies Beischer’s “testimony
that it is fairly uncommon to use graywacke as armor stone (Tr. 822-23, 87).”
Id. He summarized the evidence on the nature and use of graywacke as
follows:
That data also shows that the rock from the other six
listed Alaskan graywacke quarries is generally similar to the
Spencer Stone. The rock from two of them, like the Spencer
Stone, meets all the USACE’s typical specifications for armor
stone (Ex. K, Table 2). Three more meet all of the
specifications tests but have unspecified “petrographic
problem(s)” or “access/workability problems,” according to a
table prepared by Mr. Stacey and copied by Mr. Beischer (Ex.
B, Table 2-4; Ex. K, Table 2; Ex. K, Table 2; Tr. 817-19, 899,
907-08). Mr. Baer gathered data showing that the rock from
the two quarries with alleged petrographic problems (Rocky
Point and Crown Point) was found suitable for armor stone by
the USACE (Ex. 1, Att. 20). Only one of the six failed to meet
a typical USACE specification.
Id. at 31. Again, Judge Sweitzer concluded that this data supported the
conclusion that graywacke from the PR 16 claim is similar to other
graywacke, common in both southern Alaska and worldwide. He added that

47

171 IBLA at 178–79.

MEMORANDUM DECISION
Stacey v. Jewell, 3:13-cv-00113-RRB – 18

“there is little other evidence comparing the Spencer Stone to other
graywacke.” Id.; United States v. Knipe, 170 IBLA 161, 165 (2006). 48
The problem underlying Plaintiffs’ position is that it attempts to shift the burden of
proof to the Government. The proper standard is whether Plaintiffs established by a
preponderance of the evidence that the Spencer Stone was not similar to other graywacke,
commonly available. Even accepting at face value their contentions and the evidence they
rely upon, Plaintiffs have demonstrably failed to establish by a preponderance of the
evidence that the Spencer Stone at issue was substantially dissimilar.
Distinct/Special Value
With respect to Plaintiffs’ argument that the Spencer Stone had a distinct and
special value, the Secretary found:
Considering whether appellants’ large armor stone commands a
higher price in the market, 43 CFR 3830.12(b)(5), the record shows that the
government (e.g., ADCE) typically pays more for large armor stone than
smaller stone, inclusive of transportation, handling, and placement costs.
(Ex. I at 4; Tr. 393; Ex. B, Att. 8.) Judge Sweitzer held that general testimony
concerning higher prices paid by the government was insufficient to establish
distinct and special value because those prices might be attributable to
higher quarrying, transportation, and placement costs. (ALJ Decision at 33.)
10/
Based upon our review of the record, we agree with Judge Sweitzer that
appellants failed to demonstrate that their large armor stone commands a
higher price in the market place than smaller, common variety armor stone.
10/

The record, however, suggests that appellants’ cost to quarry, transport, and
place armor stone is the same or similar for all sizes of armor stone they produce:
quarrying costs for large stone appear to be less than or comparable to the
quarrying costs for smaller stone (Tr. 403, 811-12, 972-73); transportation costs for
the same rock from the same quarry should be the same regardless of stone size
(Ex. B, Item 8, Government Specifications at 2); and the cost to place large armor
stone may be less. (Ex. B, Item 8, Project Specifications at 7; Tr. 896.) Of these,

48

171 IBLA at 195–96 (Roberts, ALJ, concurring).

MEMORANDUM DECISION
Stacey v. Jewell, 3:13-cv-00113-RRB – 19

only potentially lower quarrying costs for the production of large armor stone would
be intrinsic to appellants’ deposit. See discussion, infra.

The record includes information on the prices paid appellants for their
large armor stone and for their other, smaller stone, but is limited to only two
projects where their stone was used:
Whittier (1991) - Appellants provided more than 750 tons of
medium armor stone (1,600-4,000 pounds per stone), nearly
750 tons of large armor stone (over 2 tons per stone), and
almost 200 tons of quarry spalls (i.e., stone chips) to Strand,
Inc., for the repair of the Delong Dock under Strand’s contract
with the Corps of Engineers. (Ex. B, Item 7.) Although armor
stone and spalls were separately identified on Strand’s invoice
and while differently sized stone was required for this project,
appellants received one unit price ($54.80 per ton) for their
large armor stone, medium armor stone, and quarry spalls. Id.
Homer Spit (1996) - Appellants provided stone for the repair of
the Homer Spit under Nugget Construction’s contract with the
Corps of Engineers. Nugget’s successful bid identified that
large armor stone was priced nearly 20% less than
considerably smaller filter stone (less than 400 pounds per
stone). (Ex. B, Item 8, Bidding Abstract.)
Since appellants’ own evidence indicates that large armor stone was sold for
no more than their smaller, common variety stone (i.e., medium armor stone,
filter stone, and quarry spalls), see also Tr. 94, 95, 810, 811, we find that
they clearly failed to demonstrate that their large armor stone commands a
higher price in the market place.49
With respect to profitability, the Secretary further noted that:
Assuming that appellants’ deposit is unique in its ability to produce a
high yield of large armor stone, as did Judge Sweitzer, we agree with his
conclusion that high yield, standing alone, is insufficient to impart a distinct
and special value to this deposit. (ALJ Decision at 32.) High yield can
reduce production costs and may result in increased profits. See e.g., United
States v. McClarty, 17 IBLA at 45. Nonetheless, to demonstrate that high
yield is a unique, intrinsic property that imparts a distinct and special value
to this deposit, it was appellants’ burden to establish (not merely assert or
assume) that high yield reduced their production costs and that these
reduced costs resulted in substantially increased profits. 11/ Moreover, any
such unique property must also be intrinsic to the deposit. See e.g., Knipe,
49

171 IBLA at 180–81.

MEMORANDUM DECISION
Stacey v. Jewell, 3:13-cv-00113-RRB – 20

170 IBLA at 165 (“the linchpin of profitability must be some intrinsic property
of the mineral deposit”). 12/
11/

Judge Sweitzer held that appellants “failed to show the difference, if any,
between the costs of mining armor stone from the Spencer quarry and the costs of
other quarries.” (ALJ Decision at 32.) Even if appellants had demonstrated that
they were the low cost producer of large armor stone, this still would have been
insufficient to establish that high yield imparts a distinct and special value to this
deposit. Whatever cost advantage appellants may have is wholly irrelevant unless
they show that their resulting profits are substantially higher than those for other
large armor stone quarries.
12/
In this vein and as to profits generally, we note that appellants suffered a net loss
from selling 14,275 tons of rock in 1991, including 1,500 tons of armor stone for the
Whittier Project (Ex. 1, Conf. App. 6), suggesting that the large armor stone market
may not be particularly profitable (if it is profitable at all).50

Plaintiffs challenge the finding regarding the number of quarries that can produce
an acceptable yield of large armor stone, i.e., stone weighing more than two tons. The
Secretary found:
The record indicates that rock suitable for use as armor stone is
ubiquitous and that, while a large number of quarries (20+) can produce
armor stone, only three have an “acceptable” yield of large armor stone. (Tr.
890-93, 907, 939; Ex. K at 6, 9; Ex. J.) 13/ Each of these three quarries is
roughly 600 miles from the others (Ex. J at 2), and appellants introduced
evidence that their quarry’s market area is relatively large due to its proximity
to low cost rail and water transportation systems (Ex. K at 9; Tr. 878-80).
Since the market areas for each of these quarries tend not to overlap and
since proximity between a quarry and the location where its rock will be used
“is what really counts” (ALJ Decision at 32, quoting Tr. 879), each quarry
effectively dominates a limited market area for its large armor stone: Nome
Quarry (Western Alaska); Dome Quarry (the Alaskan Peninsula); and
Appellants’ Quarry (South-central Alaska). See Ex. J at 2. See also Tr. 880,
900-01, 922, 925, 974, 975, 978, 992. 14/
13/

Since the costs for an engineered marine structure are driven largely by the cost
to acquire and transport armor stone (Tr. 94, 812-13) and since a project does not
go forward if its costs exceed anticipated benefits (Tr. 928-30), it may be that lower
yield quarries with higher production costs simply do not compete in the rather
limited market for large armor stone.

50

171 IBLA at 181–82.

MEMORANDUM DECISION
Stacey v. Jewell, 3:13-cv-00113-RRB – 21

14/

Based upon these geographically-based market areas and the limited market for
large armor stone in Alaska, see discussion infra, it would appear that any reduced
costs to produce large armor stone would logically and more likely result in a quarry
expanding its market area than substantially increasing profits.

Judge Sweitzer discussed the “criticality of location,” finding it
significant that contestees’ own witness, Beischer, testified that
the closest quarry to a breakwater project is generally used
and that it is “smart” to design a breakwater to use a local
armor stone source if possible (Tr. 880, 900-01; see also Tr.
992). This is so because armor stone is the most expensive
part of a breakwater project and that the farther the source of
suitable armor stone, the more likely a project will not go
forward because the costs will outweigh the benefits (Tr. 92829; see also Tr. 972-73). This fact highlights the importance
of an armor stone quarry’s location. [Footnote omitted.]
(ALJ Decision at 32.) Appellants’ other witnesses, Orson Pratt Smith III and
Dennis Nottingham, likewise emphasized “the importance of location and the
availability of transportation modes that minimize handling of the rock or
other transportation cost factors (see, e.g., Tr. 922, 925, 974, 976, 978; Ex.
1, p. 3; Ex. K, p. 9).” (ALJ Decision at 32.)
In addition and in consideration of the relatively few projects likely to
require large armor stone (Tr. 415, 980, 989, 1062, 1066-70), Judge
Sweitzer noted:
[I]t is not at all clear that there is a market for any large armor
stone produced by the Spencer Quarry. Generally, a quarry’s
market extends only several hundred miles (Tr. 924-25).
Given the transportation costs, Mr. Beischer identified the
market for Spencer Stone as being south-central Alaska,
extending anywhere along the Alaska Railway line, to the
Kenai Peninsula, out into the Cook Inlet to Kodiak and beyond,
and across Prince William Sound (Tr. 879). Mr. Nottingham,
whose company works on 75% of the marine projects in
Alaska, could identify only one small project in south-central
Alaska that will definitely need armor rock in the future and that
project does not require large armor stone (Tr. 980-82, 1062,
1064-65).
He mentioned several other possible projects, but those
projects were either on hold or in the planning stages with
feasibility still to be determined (id.). Further, Mr. Eissis
credibly testified that none of those projects would require rock
over 2 tons (Tr. 1062, 1064-65), and Mr. Nottingham confirmed
that the maximum rock size for a good portion of those projects
is 2 tons (Tr. 989). Mr. Eissis did identify four projects which
MEMORANDUM DECISION
Stacey v. Jewell, 3:13-cv-00113-RRB – 22

required large armor stone, but three were already completed
(Tr. 1068-70). The fourth is the Nome harbor project, which
will require large armor stone in the future to complete an
expansion phase (id.) but Mr. Beischer testified that project is
outside the Spencer Quarry’s market area and that the quarry
could not compete with the Nome Quarry for that project (Tr.
821).
(ALJ Decision at 33.) Based upon our review of the record, appellants
simply failed to demonstrate that high yield imparted a distinct and special
value to this stone deposit which was reflected in lower costs that
substantially increased their profits. Before concluding our consideration of
armor stone, we emphasize that a deposit’s special and distinct value must
be based upon an intrinsic, unique property (not an extrinsic factor) and that
location is clearly an extrinsic consideration. See e.g., Knipe, 170 IBLA at
165-66; United States v. Foley, 142 IBLA at 188 (“Price affected by proximity,
however, can never be used to evaluate the intrinsic quality of mineral in an
uncommon variety determination”); United States v. Henri (On Judicial
Remand), 104 IBLA 93, 99 (1994), aff'd, Henri v. Lujan, No. A90-237 (D.
Alaska July 31, 1993), appeal dismissed, No. 93-35102 (9th Cir. Aug. 25,
1993). Since neither higher prices nor reduced costs resulting in increased
profits were established by appellants, we conclude that they failed to carry
their burden of establishing that their deposit has a unique property for use
as armor stone which imparts a distinct and special value to that deposit
under either the Departmental guidelines or the McClarty test. 15/
15/ We note in passing that even if higher prices or reduced costs and increased
profits had been established, they must also be attributable to an intrinsic property
and not be a function of the deposit’s favorable location or other extrinsic factor.51

The concurrence noted:
Moreover, Judge Sweitzer rejected appellants’ contention that the
ability to produce large armor stone results in reduced production costs so
that the stone receives a higher price in the marketplace, rendering the stone
an uncommon variety. The record supports his reasoning that such reduced
costs must be considered against the fact that availability of the armor stone
is widespread; that much of the cost of using large armor stone is in
transporting and not producing it; and that the financial realities of whether
a project will be undertaken depends upon proximity of a stone source. In
sum, the record is clear that there is next to no market for large armor stone.
See Decision at 32-33.

51

171 IBLA at 182–84.

MEMORANDUM DECISION
Stacey v. Jewell, 3:13-cv-00113-RRB – 23

Judge Sweitzer assumed, arguendo, that the cost of mining large
armor stone is reduced, but he demonstrated, nevertheless, through the
testimony of Eissis and Jerome Raychel of ADCE, that “there are many
sources for armor stone meeting the USACE’s minimum specifications and
the Spencer Stone derives no distinct and special value from any attributes
that exceed those specifications or from the large size of the rocks that the
deposit is capable of producing (see, e.g., Tr. 1061-68, 1081-82).” (Decision
at 11.) As observed by counsel for the USFS: “What appellants have tried
to argue throughout this case is that the Spencer graywacke is good stone,
that it is well-suited for armor stone. This much is true. It is good stone. It
is not however, uncommon.” (Opposition of Appellants’ Appeal at 14, citing
United States v. Verdugo & Miller, 37 IBLA at 280.)
As discussed, once the Government met its threshold burden of
presenting a prima facie case with respect to the common variety nature of
graywacke or Spencer Stone, the burden then shifted to the contestees to
overcome this showing by a preponderance of the evidence. As noted in
United States v. LeFaivre, “it is the mining claimant who is the actual
proponent of the rule that the claim is valid, and, therefore, it is the mining
claimant who bears the ultimate burden of persuasion (burden of proof).”
138 IBLA at 67, citing United States v. Knoblock, 131 IBLA at 81, 101 I.D. at
140-41, and cases cited. The contestees “completely failed to overcome
BLM’s prima facie case,” LeFaivre, 138 IBLA at 68, regarding both armor
stone and decorative boulders.52
While this Court agrees that, as Plaintiffs argue, there is contrary evidence in the
record, Plaintiffs’ arguments are for the most part predicated upon the erroneous
assumption that the government did not bear its burden of proof. Quite to the contrary, as
noted above, once the government established a prima facie case, as proponents,
Plaintiffs bore the burden of proof by a preponderance of the evidence on all the elements
of a locatable mining claim to the extent they were addressed by the Secretary. This Court

52

171 IBLA at 199 (Roberts, ALJ, concurring).

MEMORANDUM DECISION
Stacey v. Jewell, 3:13-cv-00113-RRB – 24

cannot say that the Secretary erred in determining that Plaintiffs had failed to meet their
burden.53
V.

CONCLUSION/ORDER
Based upon the record before it and applying the proper standard of review and

burden of proof, the Court finds that Plaintiffs have failed to show that the Decision of the
Secretary of the Interior was arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with law. Accordingly, the decision of the Secretary of the Interior in United
States v. J. Dennis Stacey and Pelham L. Jackson, IBLA 2004-204, 171 IBLA 170 (2007)
is hereby AFFIRMED.
The Clerk of the Court is directed to enter final judgment accordingly.
IT IS ORDERED this 3rd day of March, 2015.
S/ RALPH R. BEISTLINE
UNITED STATES DISTRICT JUDGE

53

To the extent not expressly addressed in this decision, this Court has considered
all other arguments raised by Plaintiffs and finds them to be duplicative, inapposite, or
unpersuasive.
MEMORANDUM DECISION
Stacey v. Jewell, 3:13-cv-00113-RRB – 25