United States of America v. 400 Acres of Land, more or less, situate in Lincoln County, State of Nevada

Filing 497

ORDER denying ECF Nos. 385 , 390 , 398 and 399 Landowners' motions; granting in part and denying in part ECF No. 400 Landowners' motion; granting ECF Nos. 402 and 404 government's motions; denying as moot ECF Nos. 386 , 391 Landowners' motions; denying as moot ECF No. 403 government's motion; denying ECF Nos. 395 , 396 , 397 Landowners' motions; granting ECF Nos. 401 , 406 , 407 , and 408 government's motions; and denying ECF No. 409 government's motion. See order pdf for further details. Signed by Judge Miranda M. Du on 8/29/2019. (Copies have been distributed pursuant to the NEF - LH)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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***

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UNITED STATES OF AMERICA,
Plaintiff,

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Case No. 2:15-cv-01743-MMD-NJK
ORDER

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

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Defendants.
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I.

INTRODUCTION

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In this eminent domain action, the Court has found that the United States’ taking of

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property (“the Property”) for the purpose of operating the Nevada Test and Training Range

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(“NTTR”), a military test and training facility at Nellis Air Force Base, is for a

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congressionally authorized public use. (ECF No. 111 at 1.) Accordingly, the only issue that

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remains is just compensation.

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Before the Court are 18 motions involving evidentiary issues mainly relating to the

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parties’ experts’ opinions. (ECF Nos. 385, 386, 390, 391, 395, 396, 397, 398, 399, 400,

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401, 402, 403, 404, 406, 407, 408, 409.)

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The Court grants the following motions: the government’s combined motion for a

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property viewing and to appoint a land commission (ECF No. 401); the government’s

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motion to exclude the expert opinion and testimony of Danny and Joe Sheahan (ECF No.

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402); the government’s motion to exclude the expert opinion and testimony of George

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Harris (ECF No. 404); the government’s motion to exclude evidence of sales to the

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government (ECF No. 406); the government’s partial motion to reconsider excluding all

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evidence regarding online surveys (ECF No. 407); and the government’s motion to

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exclude use of the income capitalization approach to valuation (ECF No. 408).

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The Court denies the following motions: Landowners’ motion regarding the

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standard of admissibility that applies in this case (ECF No. 385); Landowners’ motion to

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exclude the expert opinion and testimony of Warren Neville (ECF No. 390); Landowners’

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motion to exclude all evidence of environmental contamination (ECF No. 395);

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Landowners’ motion to confirm uses of unpatented land (ECF No. 396); Landowners’

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motion to establish condition of the Property related to water rights (ECF No. 397);

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Landowners’ motion to exclude the expert opinion and testimony of Nathan Moeder (ECF

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No. 398); Landowners’ motion to exclude the expert opinion and testimony of Marc

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Springer (ECF No. 399); and the government’s motion to exclude valuation evidence

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premised on tourism use (ECF No. 409).
The Court grants in part and denies in part Landowners’ motion to exclude the

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expert opinion and testimony of Dr. Donald Singer (ECF No. 400).

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The Court denies as moot the following motions: Landowners’ motion for summary

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judgment on the range of values for just compensation that can be presented to the

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factfinder (ECF No. 391); Landowners’ motion regarding access to and view from the

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Property (ECF No. 386); and the government’s motion to exclude evidence and argument

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related to active mining as the highest and best use of the Property (ECF No. 403).

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II.

RELEVANT BACKGROUND

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The United States filed a Complaint and Declaration of Taking on September 10,

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2015, to acquire 400 acres of property located within the NTTR consisting of a group of

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patented and unpatented mining claims known as the Groom Mine. (ECF No. 1

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(Complaint); ECF No. 1-4 (Legal Description); ECF No. 2 (Declaration of Taking).) The

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Property is in the Groom Lake Valley about 7 miles from the area popularly known as Area

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51. (ECF No. 132 at 5.) The Property is the only privately owned property that has an

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unobstructed view of Area 51. (Id. at 16.) Landowners’ family has owned the Property

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since about 1885, long before the United States began to use the nearby property. (Id. at

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4-5.)

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On September 16, 2015, the Court granted the United States immediate

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possession of the Property. (ECF No. 14 at 1.) Landowners filed their Answer on

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November 6, 2015. (ECF No. 53.) The United States deposited the estimated
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compensation to the Court in the amount of $1,200,000 (ECF No. 10 at 1), and the funds

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were released to Landowners on March 9, 2016 (ECF No. 85 at 1-2). On October 5, 2016,

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the Court determined that the “taking is for a congressionally authorized public use

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identified in the United States’ Complaint [ECF No. 1-3], and is legally valid.” (ECF No.

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111 at 1.)

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The amount of just compensation based on the Property’s highest and best use is

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the sole remaining issue in this case. Landowners have valued the Property based on two

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highest and best uses: mining and as a commercial tourism site for viewing Area 51. The

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government has valued the Property based on its existing use.

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The Court begins by rejecting Landowners’ request for a relaxed standard of

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admissibility in this case, then denies the government’s motion to exclude all valuation

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evidence premised on a commercial tourism use. The Court then grants the government’s

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combined motion for a property viewing and to appoint a land commission and grants the

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government’s motion to exclude testimony based on the income capitalization approach

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to valuation. The Court then denies Landowners’ motions to establish certain facts about

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the Property before considering the parties’ motions to exclude certain expert witness

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testimony. The Court denies the Landowners’ motions and grants the government’s

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motions, with the exception of Landowners’ motion to exclude the opinion of Dr. Donald

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Singer, which the Court grants in part and denies in part. Finally, the Court grants the

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government’s two motions for reconsideration of earlier orders and denies the parties’

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remaining motions as moot.

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III.

LANDOWNERS’ MOTION REGARDING THE STANDARD OF ADMISSIBILITY
THAT APPLIES IN THIS CASE (ECF NO. 385)1

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The Court will deny Landowners’ motion regarding the standard of admissibility that

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applies in this case for the following reasons.

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1The

Court has reviewed the response (ECF No. 426) and reply (ECF No. 469)
related to this motion. The Court also heard oral argument on this motion on July 1, 2019.
(ECF No. 493.)
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Landowners argue that the Court should apply a “widened special purpose

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standard of admissibility” to every pretrial motion and evidentiary ruling in this case

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because the Property is so unique. (ECF No. 385 at 23.) Landowners do not expressly

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define this standard in their motion, though it seems they are asking the Court to admit all

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relevant evidence of value, regardless of methodology or reliability. Landowners contend

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that the Court need not “agree with the expert’s data and the method for applying that data

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before expert testimony is admissible.” (Id. at 4.) Landowners also assert that “[a]ll facts

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which would influence a person of ordinary prudence, desiring to purchase the property,

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are admissible.” (Id. (alteration in original) (quoting United States v. 33.5 Acres of Land,

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789 F.2d 1396, 1400 (9th Cir. 1986).)

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The Court agrees with the government that Landowners’ requested relief would

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require the Court to abandon its gatekeeping function. (See ECF No. 426 at 3.) The Court

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also observes that Landowners’ request is similar to a request the Court considered and

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rejected in an earlier order. (See ECF No. 241 at 3-5.) As the Court previously decided,

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Landowners’ requested relief is overbroad and does not reflect the role of the Court in

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serving its gatekeeping functions.
Accordingly, Landowners’ motion regarding the standard of admissibility that

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applies in this case is denied.

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IV.

GOVERNMENT’S MOTION TO EXCLUDE VALUATION EVIDENCE PREMISED
ON TOURISM USE (ECF NO. 409)2

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The Court denies the government’s motion to exclude valuation evidence premised

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on tourism use for the following reasons.

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A.

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Just compensation “includes all elements of value that inhere in the property” but

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cannot exceed fairly determined market value. Olson v. United States, 292 U.S. 246, 255

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2The

LEGAL FRAMEWORK

Court has reviewed the response (ECF No. 447) and reply (ECF No. 486)
related to this motion. The Court also heard oral argument on this motion on July 1, 2019.
(ECF No. 493.)
4

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(1934). The factfinder may consider both actual and potential uses of the property. See id.

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at 255-56. A potential future use may be considered if it is the highest and most profitable

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use for which the property is adaptable and needed or likely to be needed in the near

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future. See id. Olson thus “requires a showing of reasonable probability that the land is

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both physically adaptable for such use and that there is a need or demand for such use in

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the reasonably near future.” United States v. 341.45 Acres of Land, 633 F.2d 108, 111

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(8th Cir. 1980). The factfinder should consider how the potential future use affects market

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demand for the property, but the potential future use does not necessarily constitute the

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measure of value. See Olson, 292 U.S. at 255.

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The factfinder should not consider any elements of value that “depend upon events

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or combinations of occurrences which, while within the realm of possibility, are not fairly

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shown to be reasonably probable.” Id. at 257. Consideration of those elements would

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“allow mere speculation and conjecture to become a guide for the ascertainment of value.”

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Id.; see also Wash. Water Power Co. v. United States, 135 F.2d 541, 543 (9th Cir. 1943)

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(citing exclusionary rule from Olson).

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Importantly, if determining reasonable probability of a potential future use requires

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weighing evidence and evaluating credibility, the evidence should be submitted to the jury.

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See United States v. 100 Acres of Land, 468 F.2d 1261, 1267-68 (9th Cir. 1972).

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B.

DISCUSSION

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The Court will deny the government’s motion because Landowners have shown an

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evidentiary basis from which a rational factfinder could infer that the use of the Property

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as an Area 51 tourist destination is reasonably probable. The Uniform Appraisal Standards

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for Federal Land Acquisitions (“UAS” or “Yellow Book”) require that a highest and best use

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is physically possible, legally permissible, financially feasible, and results in the highest

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value. Desert Citizens Against Pollution v. Bisson, 231 F.3d 1172, 1181 (9th Cir. 2000).

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The government has not disputed that Landowners’ proposed highest and best use

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satisfies the first two elements of physically possible and legally permissible. (See ECF

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No. 447 at 6-7.) And Landowners have introduced evidence that the use is financially
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feasible—they have identified comparable tours, nearby alien/Area 51-themed hotels and

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businesses, opinions of nearby business owners and brokers, consumer surveys, and

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expert opinions. (See id. at 8-11.) Landowners also have introduced evidence that the use

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is the most profitable use—appraisals by expert witnesses Richard Roddewig and Tio

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DiFederico. (See id. at 11-12.)

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The government presents a strong case for doubting that commercial tourist use is

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reasonably probable. For example, neither the former owners nor anyone else ever tried

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to convert the Property to tourist use; Landowners have not identified a tour operator;

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Landowners’ experts assumed away problems related to environmental contamination

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and permitting; and the remote, isolated location makes large-scale commercial traffic to

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the Property difficult. (ECF No. 409 at 9-21.) But the Court would be required to weigh

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evidence and evaluate credibility to determine whether Landowners’ proposed use is

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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

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evidence premised on tourism use.

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V.

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

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The Court grants the government’s combined motion for a property viewing and to

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appoint a land commission for the following reasons.

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A.

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The government first argues that a property view is necessary to address the

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parties’ disparate positions regarding highest and best use. (ECF No. 401 at 17.) The

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government believes that the highest and best use of the Property is its existing use,

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whereas Landowners believe the highest and best use of the Property is for development

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into a lucrative, large-scale commercial tourist operation centered on seeing Area 51. (Id.)

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PROPERTY VIEW

3The

Court has reviewed the response (ECF No. 430) and reply (ECF No. 484)
related to this motion. The Court also heard oral argument on this motion on July 1, 2019.
(ECF No. 493.)
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The government contends that the factfinder will need to assess the view of Area 51 from

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the Property as well as the Property’s physical characteristics (e.g., remoteness,

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topography, shape) in order to evaluate these differing opinions. (Id. at 18.) The

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government also argues that a property view will help to ensure a fair and transparent trial

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by enhancing the factfinder’s ability to assess whether the proposed highest and best use

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of the Property as an Area 51 attraction is credible. (Id. at 20.)

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Landowners “do not oppose a site visit under fair and accurate conditions.” (ECF

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No. 430 at 1 (emphasis omitted).) Nevertheless, Landowners express concern that the

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government may attempt ex parte communications with the factfinder and assert that the

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factfinder could evaluate the view of Area 51 “through a few photographs.” (Id. at 2-4.)

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Landowners also suggest that an instruction to the factfinder that the Property has a clear

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and unobstructed view of Area 51 would suffice. (Id. at 3.)

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The Court agrees with the government that a property view would be helpful to the

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factfinder in this case. Given that Landowners’ proposed highest and best use truly hinges

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on “the view,” the Court agrees that it is essential for the factfinder to personally evaluate

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that view. And while the Court is sensitive to concerns about any party engaging in ex

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parte communication with the factfinder,4 the Court need not address such concerns until

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they are substantiated. There is no suggestion in the record that the government’s counsel

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would engage in such conduct.

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

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B.

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Federal Rule of Civil Procedure 71.1(h)(2)(A) provides that where a party has

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demanded a jury to determine compensation, “the court may instead appoint a three-

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person commission to determine compensation because of the character, location, or

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quantity of the property to be condemned or for other just reasons.” The Ninth Circuit has

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LAND COMMISSION

4Landowners

raise numerous logistical considerations (see, e.g., ECF No. 430 at
19) that the parties likely will be able to resolve through the meet and confer process,
though the Court will help to resolve any persistent concerns.
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not required a showing of “extraordinary or unusual” circumstances to justify the

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appointment of a land commission. See United States v. Hall, 274 F.2d 856, 859 (9th Cir.

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1960).

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The government argues that a land commission is necessary in this case due to

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the Property’s location, character, and the necessity of a property view. (ECF No. 401 at

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20.) Regarding location, the government points out that the nearest federal courthouse is

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150 miles away, the nearest town is more than 30 miles away, and the nearest hospital is

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about an hour away. (Id. at 21.) Regarding character, the government notes that the

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Property is not served by potable water or electricity and that portions of the Property have

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rocky, uneven terrain with poor accessibility. (Id.) The government also notes that there

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are open mine shafts, tunnels, pits, mill tailings, waste dumps, and sweating dynamite on

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the Property. (Id.) Regarding the property view, the government asserts that it will be

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easier to coordinate the visit with a land commission than a lay jury. (Id.) In particular, the

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commission could view the Property outside of peak hours (perhaps on weekends) and

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might be more amenable than a lay jury to the background check necessary to visit the

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NTTR. (Id.)

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At the hearing, Landowners primarily objected to the appointment of a land

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commission based on their concern about delay. (ECF No. 496 at 50.) However, the

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government “shares the landowners’ desire for a just and speedy determination of just

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compensation.” (ECF No. 484 at 13.) The government also explained at the hearing that

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the process could take several months, rather than decades as Landowners’ counsel

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feared. (ECF No. 496 at 56-57.)

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Given that a site visit is crucial in this case due in particular to the parties’ disparate

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positions on highest and best use, and in light of the remote location and backcountry

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character of the Property, the Court agrees with the government that it is appropriate to

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appoint a land commission.

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

GOVERNMENT’S MOTION TO EXCLUDE
CAPITALIZATION APPROACH (ECF NO. 408)5

USE

OF

THE

INCOME

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The Court grants the government’s motion to exclude use of the income

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capitalization approach for the following reasons.

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A.

BACKGROUND

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The government seeks to exclude testimony of Landowners’ experts based on the

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“income capitalization approach” to valuation. (ECF No. 408 at 3.) Capitalization in this

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context refers to the conversion of future income to present value. “[T]he income approach

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can indicate what a buyer would pay at the present time for the anticipated future benefits,

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discounted for risk and other variables, of owning a property.” (ECF No. 410-2 at 8

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(Interagency Land Acquisition Conference, Uniform Appraisal Standards for Federal Land

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Acquisitions (“Yellow Book”) 136 (6th ed. 2016)).) “The income capitalization approach

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may refer to either direct capitalization or yield capitalization techniques.” (Id. at 10 (Yellow

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Book at 138).) “Direct capitalization techniques are used to derive an indication of the

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market value of a stabilized income-producing property by applying an overall

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capitalization rate to a property’s single-year net income.” (Id.) “Yield capitalization

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techniques are used to derive an indication of the market value of an income-producing

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property with varying forecasted income or expenses, typically using discounted cash-flow

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(DCF) analysis” (Id.) “Forecasts of net income, expenses, cash flow and other factors over

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a holding or projection period are required.” (Id.)

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Landowners’ experts DiFederico and Clauretie both used the direct capitalization

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technique to estimate the present value of a single annual income stream. (ECF No. 408

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at 6.) Roddewig used a variation of the technique to estimate the present value of multiple

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annual income streams. (Id.) DiFederico also used yield capitalization techniques,

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specifically a discounted cash-flow analysis and a subdivision development method, which

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5The

Court has reviewed the response (ECF No. 443) and reply (ECF No. 481)
related to the motion.
9

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converted multiple years’ projected income streams and expenses into a present value.

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(Id.)

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B.

DISCUSSION

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The Ninth Circuit “generally recognizes three appraisal methodologies in

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ascertaining fair market value: ‘(1) Comparable sales; (2) the income or capitalization of

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income; and (3) the reproduction cost at the time of taking, less depreciation.’” United

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States v. 99.66 Acres of Land, 970 F.2d 651, 655 (9th Cir. 1992) (quoting 100 Acres of

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Land, 468 F.2d at 1265). “Ordinarily, if there are sales of comparable property at or near

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the time the condemned property is taken, evidence in regard to such sales would be more

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appropriate than any other method in determining the market value of the property taken.”

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100 Acres of Land, 468 F.2d at 1265. “However, if there are no comparable sales, then

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other methods must be resorted to in order to ascertain market value.” Id. The court is “not

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restricted to a particular method in arriving at the fair market value for the condemned

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material.” United States v. 22.80 Acres of Land, 839 F.2d 1362, 1365 (9th Cir. 1988). The

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court’s goal “is to assure that the landowners are restored to the pecuniary position they

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would have occupied had the property not been taken.” Id. (citing 100 Acres of Land, 468

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F.2d at 1265).

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The government argues that the income capitalization approach is inappropriate in

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this case because the Property was not generating any income on the date of taking and

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had not generated any income for 60 years. (See ECF No. 408 at 14-17.) The Court

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agrees. The Yellow Book—which Landowners’ expert referred to as the appraiser’s “Bible”

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(ECF No. 410-5 at 5)—expressly states that “[d]irect capitalization techniques cannot be

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used to value property that is not generating income as of the date of value.” (ECF No.

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410-2 at 11 (Yellow Book at 139).) The Yellow Book explains:

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[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.

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10

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Any other rule would permit a valuation, speculative ab initio, to be seriously
compounded.

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(Id. (first quoting United States v. 15.00 Acres of Land in Miss. Cty., 468 F. Supp. 310, 315

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(D. Ark. 1979); then citing United States v. 25.202 Acres, 860 F. Supp. 2d 165, 175-81 &

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n.20 (N.D.N.Y. 2010); then citing Foster v. United States, 2 Cl. Ct. 426, 448 (1983), aff’d,

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746 F.2d 1491 (Fed. Cir. 1984).) Landowners do not expressly address this argument.

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The Court also finds persuasive the reasoning of 25.202 Acres. There, the

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landowner’s appraiser valued the property based on its hypothetical use as a site for a

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duty-free store and other uses. 860 F. Supp. 2d at 175. Using an income capitalization

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approach, the appraiser found that the income would consist of rents paid by an entity

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operating a duty-free store on the site. Id. The court rejected this approach:

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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.

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18

860 F. Supp. 2d at 177. Similarly here, while Landowners may advance that the highest

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and best use of the Property is commercial tourism, the income capitalization approach is

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not a reliable appraisal methodology when the Property has not generated income.

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The government has identified additional persuasive authority for rejecting the

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income capitalization approach here. See 4 Nichols on Eminent Domain Ch. 12B.08[3]

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(“Valuation based on an estimate of the potential income which might be realized from

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utilization by the property owner in a manner of which it is capable (but of which the owner

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has not as yet availed himself or herself) has been rejected on the ground that this income

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is too uncertain and conjectural to be acceptable.”); id. at Ch. 12B.09[3] (“The

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capitalization of hypothetical income method of valuation has generally been rejected by

28

the courts.”); see also Welch v. Tenn. Valley Auth., 108 F.2d 95, 100 (6th Cir. 1939)
11

1

(“Anticipated profits from any business, especially farming, are too uncertain and

2

speculative in character to be of much weight in determining farm values. Their realization

3

depends more upon general business conditions, trading, skill and business acumen of

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the proprietors and weather changes than upon location.”).

5

Landowners rely on California v. Kinder Morgan Energy Partners LP, 613 F. App’x

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561, 564-65 (9th Cir. 2015). (ECF No. 443 at 5.) There, the court held that damages for

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trespass/nuisance actions under California Civil Code § 3334 “can be proved through

8

estimates of a property's rental value based on hypothetical assumptions rather than its

9

actual use.” California, 613 F. App’x at 564. The case is inapplicable because it concerns

10

damages for tort actions under state tort law—not eminent domain. And the government

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notes that California does not extend this tort-damages rule to eminent domain

12

proceedings. (ECF No. 481 at 8 (citing several cases).)

13

Landowners also rely on U.S. v. Waterhouse, 132 F.2d 699 (9th Cir. 1943). (ECF

14

No. 443 at 5.) The land at issue in Waterhouse consisted of several lots that were leased

15

for growing sugar cane and that belonged to an entity known as the Damon Estate.

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Waterhouse, 132 F.2d at 700. The Damon Estate encompassed additional land that had

17

been subdivided and leased. Id. The government’s witnesses testified that the highest and

18

best use to which most of the land at issue was adapted was for growing sugar cane. Id.

19

at 701. These witnesses testified that the remainder of the land was more valuable

20

because of its potential uses, with one witness testifying that those potential uses included

21

house and farm lots. Id. The landowners’ witnesses testified that the land had outgrown

22

its use as cane lands, and that its highest and best use was for residences, business, and

23

truck gardening. Id. The landowners’ witnesses valued the land based on that use by

24

capitalizing hypothetical rents that could be obtained by subdividing the property and

25

leasing the resultant lots. See id. The government argued that the capitalization evidence

26

was inadmissible because it was based on some future value of the property rather than

27

the value of the property at the time of taking. Id. at 702. The court rejected the argument,

28

reasoning that the landowners’ witnesses had properly estimated the present value of the
12

1

land based on what a willing buyer would pay in light of the land’s potential future use. Id.

2

The court then considered whether the landowners’ capitalization evidence was

3

admissible. Id. The court synthesized from Olson, 292 U.S. 246, the following rule: “if there

4

is substantial evidence to show that the adaptability of the lands in question for the uses

5

testified to was reasonably probable, then the evidence was admissible, and it was for the

6

jury to say whether such adaptability affected the market value of the lands.” Id. (internal

7

quotation marks omitted). Based on this rule, the court found the landowners’

8

capitalization evidence admissible. Id.

9

At first blush, it may seem as though Waterhouse requires the admission of all

10

valuation evidence related to a prospective use once the proponent has adduced

11

substantial evidence to show that prospective use is reasonably probable. But such a

12

reading of Waterhouse is implausibly broad, particularly when the Federal Rules of

13

Evidence impose a gatekeeping role on the court. Moreover, admitting all expert valuation

14

evidence regardless of methodology or reliability would “allow mere speculation and

15

conjecture to become a guide for the ascertainment of value—a thing to be condemned in

16

business transactions as well as in judicial ascertainment of truth.” Olson, 292 U.S. at 257.

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The Court also rejects a broad reading of Waterhouse because the question of

18

whether evidence of a prospective use is admissible to establish the property’s highest

19

and best use is analytically distinct from the question of whether expert valuation evidence

20

based on that prospective use is admissible. Regarding the first question, evidence of a

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prospective use is admissible if that use is “fairly shown to be reasonably probable.” Id.

22

But expert valuation evidence, by contrast, is only admissible if it complies with Federal

23

Rule of Evidence 702 and Daubert.

24

Finally, Waterhouse does not speak to situations in which the property at issue is

25

not producing any income. The land in Waterhouse had produced rental income for many

26

years. Some of the land was leased for growing sugar cane, while other land in the Damon

27

///

28

///
13

1

Estate was subdivided and leased. 132 F.2d at 700. Thus, Waterhouse has no bearing on

2

this case, in which the Property has not produced any rental income for the past 60 years.6

3

Accordingly, the Court grants the government’s motion to exclude use of the income

4

capitalization approach.

5

VII.

LANDOWNERS’
MOTION
TO
EXCLUDE
ALL
ENVIRONMENTAL CONTAMINATION (ECF NO. 395)7

EVIDENCE

OF

6
The Court denies Landowners’ motion to exclude all evidence of environmental

7
8

contamination for the following reasons.
A.

9

BACKGROUND

10

The Property intermittently operated as a lead mine from the late 1800s through

11

the mid-1950s. (ECF No. 437 at 8.) Unremediated waste rock dumps and tailings piles as

12

well as “appreciable quantities” of lead and arsenic remain at the Property. (Id. (quoting

13

ECF No. 130-1 at 18).)

14

Landowners hired experts—among them, Richard Roddewig and Tio DiFederico—

15

to appraise the Property based on its highest and best use. (See id.) One of the

16

government’s

17

DiFederico’s reports. (Id.) Both Roddewig and DiFederico made “extraordinary

18

assumptions” that any environmental conditions on the Property did not affect its value.

19

(Id. at 8-9.) An extraordinary assumption is a term of art in the appraisal context meaning

20

“an assumption, directly related to a specific assignment, as of the effective date of the

21

assignment results, which, if found to be false, could alter the appraiser’s opinions or

22

///

23
24
25
26
27
28

expert

witnesses—Dr.

Graham

Davis—reviewed

Roddewig

and

6Additional

facts distinguish Waterhouse from this case: the parties here are sharply
divided on the issue of whether the Property is adaptable for any purpose other than its
current use and there is no evidence that Landowners historically have held a plan for
tourist commercial development. See Waterhouse, 132 F.2d at 702 (“[A]ll valuation
witnesses . . . agreed that the frontages were adaptable for purposes other than caneland”), 700 (“There was also evidence that the Damon Estate had had a plan of subdivision
for some time.”).
7The

Court has reviewed the response (ECF No. 437) and reply (ECF No. 474)
related to this motion.
14

1

conclusions.” (ECF No. 395-9 at 4.) Under the Uniform Standards of Professional

2

Appraisal Practice (“USPAP”), an appraiser may only use an extraordinary assumption if

3

the following conditions are satisfied: (1) the extraordinary assumption is required to

4

properly develop credible opinions and conclusions; (2) the appraiser has a reasonable

5

basis for the extraordinary assumption; (3) use of the extraordinary assumption results in

6

a credible analysis; and (4) the appraiser complies with the disclosure requirements set

7

forth in USPAP for extraordinary assumptions. (ECF No. 437 at 9 (citing ECF No. 437-3

8

at 5).)

9

Dr. Davis opined that the extraordinary assumptions made by Roddewig and

10

DiFederico were unreasonable. (See ECF No. 395-1 at 4.8) Additional experts retained by

11

the government—Beverly Weissenborn, Maurice Robinson, Stephen Roach, and Nathan

12

Moeder—offered similar criticism from various perspectives on the Landowners’ use of an

13

extraordinary assumption that the Property is not environmentally contaminated. (Id. at

14

12.)

15

B.

DISCUSSION

16

Landowners first argue that evidence of contamination is only admissible if both the

17

fact of contamination as well as remediation costs are known. (ECF No. 395 at 8-13.) The

18

government counters that Landowners rely solely on state law and that federal law

19

supports the admissibility of contamination evidence. (ECF No. 437 at 12-15.)

20

The Court agrees with the government. Federal law requires this Court to consider

21

“all the facts and circumstances that would reasonably go into the making of a bargain of

22

purchase and sale.” United States v. 429.59 Acres (Imperial Beach), 612 F.2d 459, 462

23

(9th Cir. 1980). It is reasonable to assume that the presence of “appreciable quantities” of

24

lead and arsenic on a property would affect that property’s sale—particularly if the buyer

25

planned to invite the general public to the property as part of a commercial tourist use—

26

///

27
28

8While

the portion of Dr. Davis’s report that the government cites does not expressly
discuss DiFederico’s opinion, it is obvious that the portion applicable to Roddewig’s report
(referred to as the “Clarion Report”) would also apply to DiFederico. (See ECF No. 395-1
at 4.)
15

1

because lead and arsenic are commonly known to be harmful to human health. The cases

2

Landowners cite from the New Jersey Supreme Court, the Florida Supreme Court, and a

3

Tennessee mid-level appellate court are not binding on this Court. (See ECF No. 395 at

4

8-10.) Nor do they persuade the Court to exclude contamination evidence here. In Housing

5

Authority of City of New Brunswick v. Suydam Investors, LLC, the New Jersey Supreme

6

Court expressed concern about potential double liability for the existence of

7

contamination: “once as a reduction in calculating fair market value and again in a

8

subsequent action for recovery of remediation costs.” 826 A.2d 673, 680 (N.J. 2003). But

9

Landowners have identified no legal theory under which they could be held liable to the

10

government for the costs of remediation, or how the potential for double liability applies

11

here.

12

Next, Landowners assert that the government’s rebuttal expert reports are improper

13

because they are actually initial expert opinions disguised as rebuttal opinions. (See ECF

14

No. 395 at 13-14.) The government persuasively explains that its experts’ opinions

15

constitute proper rebuttal because they point out omissions in Landowners’ experts’

16

reports and directly contradict and rebut Landowners’ experts’ opinions. (ECF No. 437 at

17

15.) The Court agrees with the government and rejects Landowners’ argument.

18

Landowners further argue that the rebuttal reports are not reliable because Dr.

19

Davis’s conclusions constitute “mere surmise.” (ECF No. 395 at 16-17.) The Court

20

disagrees. Upon reviewing the excerpts of Dr. Davis’s expert report and deposition

21

testimony, the Court agrees with the government that Dr. Davis based this opinion on his

22

education, experience, sampling results showing “appreciable quantities” of lead and

23

arsenic, and the EPA ranking of lead and arsenic as the number 1 and 2 (out of 275)

24

“contaminants of concern,” among other things. (See, e.g., ECF No. 395-1 at 4 (“A 1986

25

survey by Quade and Tingley found high concentrations of lead and mercury in stream

26

sediments south of the Groom Mine workings.”) (footnotes omitted); id. (noting that

27

samples used by Nexus Geos (“NGL”)—one of Landowners’ experts—“contained

28

‘appreciable quantities’ of lead, silver, zinc, copper, and arsenic); ECF No. 395-13 at 11
16

1

(“I also suspect, given the historic mining and the uncontained nature of the tailings pile

2

and the high grades of ore, in particular lead that were extracted in the ‘40s and ‘50s, that

3

there is higher-than-normal concentrations of lead in and around the property.”).)

4

Landowners further argue that the government should not be permitted to discuss

5

environmental contamination when no case-in-chief expert in this case—including the

6

government’s—adjusted their appraisals for environmental contamination. (ECF No. 474

7

at 8-9.) Landowners’ argument is non sequitur. Environmental contamination is relevant

8

in considering whether the highest and best use of the Property is commercial tourism as

9

explained supra. Accordingly, the Court rejects Landowners’ argument.

10

Landowners further argue that the Ninth Circuit requires the exclusion of evidence

11

not tied to market value. (ECF No. 474 at 7 (first citing United States v. 760.807 Acres,

12

731 F.2d 1443 (9th Cir. 1984); then citing United States v. 87.98 Acres, 530 F.3d 899 (9th

13

Cir. 2008).) The Court finds this argument irrelevant. Dr. Davis’s opinion properly rebuts

14

Landowners’ experts’ opinions by pointing out that their extraordinary assumption is

15

allegedly unwarranted and incorrect. Consequently, it is relevant and admissible.
Accordingly, the Court denies Landowners’ motion to exclude all evidence of

16
17

environmental contamination.

18

VIII.

LANDOWNERS’ MOTION TO ESTABLISH CONDITION OF THE PROPERTY AS
TO WATER RIGHTS (ECF NO. 397)9

19
The Court denies Landowners’ motion to establish the condition of the Property as

20
21

to water rights for the following reasons.

22

A.

23

The Property is located in the Groom Lake Basin. (ECF No. 397 at 2.) Landowners

24

contend that they possessed vested surface water and groundwater rights and that they

25

possessed the right to appropriate even more water from the Groom Lake Basin. (Id. at

26

3.)

27

///

28

9The

BACKGROUND

Court has reviewed the response (ECF No. 446) and reply (ECF No. 477)
related to this motion.
17

1

Landowners retained an expert—Thomas Driggs—for the following purposes

2

related to water rights. (Id.) First, Driggs was to identify the vested water right claims that

3

the Property owners possessed as a result of the early stakeholder’s water use in

4

connection with their historical mining activities. (Id.) Second, Driggs was to identify the

5

water rights available for appropriation in the Groom Lake prior to the date of taking. (Id.)

6

In his report, Driggs discusses Nevada water law and concludes that Landowners

7

possessed 362 acre feet annually (a.f.a.) of vested surface water rights and 868 a.f.a. of

8

vested groundwater rights on the date of taking. (Id. at 6.) Driggs also concluded that a

9

tourist operation would require 40 to 120 a.f.a. (ECF No. 397-1 at 13.)

10

B.

DISCUSSION

11

Landowners seek a ruling that the Property included the water rights necessary to

12

operate a commercial tourist site on the Property. (ECF No. 397 at 13.) In essence,

13

Landowners ask the Court to declare a particular fact as incontrovertible. But as the

14

government points out (see, e.g., ECF No. 446 at 6-10), Landowners have not adduced

15

evidence to support such drastic relief. They have not shown clear chain of title, the

16

amount of prior beneficial use, and various other proof necessary for the Court to make

17

such a determination. For example, Driggs stated “[a] complete and clear chain of title is

18

necessary to confirm that no interest in any appurtenant water rights was ever reserved

19

by a grantor in the conveyancing deed.” (ECF No. 397-1 at 4.) However, Driggs simply

20

assumes that this is the case without explanation. (See id. (“This Report assumes that

21

there is a clear chain of title for Groom Mine, and there are no reservations in any of the

22

deeds in the chain of title.”).) In the absence of these important factual predicates, the

23

Court cannot conclude that the Property categorically included the water rights necessary

24

to operate a tourist commercial use on the Property. Nevertheless, Landowners may still

25

present evidence of the reasonable probability of sufficient water to the factfinder.
Accordingly, the Court denies Landowners’ motion to establish the condition of the

26
27

Property as to water rights.

28

///
18

1

IX.

LANDOWNERS’ MOTION TO CONFIRM USES OF UNPATENTED LAND (ECF
NO. 396)10

2
The Court denies Landowners’ motion to confirm uses of unpatented land for the

3
4

following reasons.

5

A.

BACKGROUND

6

The Property consists of patented and unpatented mining claims. (ECF No. 438 at

7

4.) Patented mining claims are usually equivalent to full fee title ownership. See United

8

States v. Curtis-Nevada Mines, Inc., 611 F.2d 1277, 1281 (9th Cir. 1980). Unpatented

9

mining claims, however, are a “unique form of property” to which the government retains

10

certain rights: “Although owners of unpatented mining claims hold fully recognized

11

possessory interests in their claims . . . [t]he United States, as owner of the underlying fee

12

title to the public domain, maintains broad powers over the terms and conditions upon

13

which the public lands can be used, leased, and acquired.” United States v. Locke, 471

14

U.S. 84, 104 (1985). The parties seem to agree that the holder of an unpatented mining

15

claim has exclusive rights to mine and conduct mining-related activities. (See ECF No.

16

438 at 5.)

17

Landowners primarily seek a ruling that the public, once invited to the Property,

18

could use the unpatented land for recreation, such as hiking, camping, rock collecting, and

19

sightseeing. (ECF No. 396 at 15.) Landowners seek to exclude contrary testimony on this

20

point by government experts Neville, Weissenborn, Roach, and Dr. Davis. (Id.)

21

B.

22

Landowners have not demonstrated that they are entitled to the relief they seek.

23

They rely primarily on Curtis-Nevada Mines, 611 F.2d 1277. (ECF No. 396 at 11.) There,

24

the court considered the meaning of “other surface resources” in 30 U.S.C. § 612(b), a

25

statute that allows the United States to manage vegetative and “other surface resources”

26

on unpatented mining claims. Curtis-Nevada Mines, 611 F.2d at 1280; see 30 U.S.C. §

27

///

28

10The

DISCUSSION

Court has reviewed the response (ECF No. 438) and reply (ECF No. 476)
related to this motion.
19

1

612(b) (“Rights under any mining claim hereafter located under the mining laws of the

2

United States shall be subject, prior to issuance of patent therefor, to the right of the United

3

States to manage and dispose of the vegetative surface resources thereof and to manage

4

other surface resources thereof (except mineral deposits subject to location under the

5

mining laws of the United States).”) The court found that “the phrase ‘other surface

6

resources’ was clearly intended to include recreational uses.” Id. at 1283. The practical

7

consequence of this holding was that the owners of the unpatented mining claims at issue

8

in the case could no longer bar the general public from using the land for recreation and

9

entrance to adjacent National Forest lands. See id. at 1286.

10

Curtis-Nevada Mines is not relevant here, or if it is, it supports the government’s

11

position. The government contends that the land underlying the unpatented claims was

12

withdrawn from public use in 1984. (ECF No. 438 at 3.) The land in Curtis-Nevada Mines

13

had not been withdrawn from public use. Plus, the holding of Curtis-Nevada Mines is that

14

the United States has statutory authority to manage “other surface resources” in

15

connection with an unpatented claim that includes recreational uses. Thus, it seems that

16

Curtis-Nevada Mines supports the government’s contention that it can restrict recreational

17

use of unpatented land. (See ECF No. 438 at 12.) Accordingly, the Court rejects

18

Landowners’ argument based on Curtis-Nevada Mines.

19

Landowners also rely on 43 C.F.R. § 3715.0-1(c), which provides that “[t]his subpart

20

does not impair the right of any person to engage in recreational activities or any other

21

authorized activity on public lands BLM administers.” (ECF No. 396 at 3.) The government

22

argues that this regulation probably does not apply to the Property because the Property

23

is not part of the “public lands BLM administers.” (ECF No. 438 at 13 (quoting 43 C.F.R. §

24

3715.0-1(c)).) The government also argues that any recreational activities must be

25

authorized and notes that recreational activities have not been authorized on any federal

26

land within the NTTR, including the Property’s unpatented land, since the land was

27

withdrawn in 1984. (Id.) In response, Landowners press an argument that the land

28

///
20

1

underlying the unpatented claims was not subject to the 1984 withdrawal. (See ECF No.

2

476 at 7-8.) The Court addresses that argument next.

3

Landowners argue that the land underlying the unpatented mining claims was not

4

subject to the 1984 withdrawal. (See ECF No. 476 at 3-5.) The government concedes that

5

the Air Force guaranteed Landowners conditional access to the Property following the

6

1984 withdrawal but notes that the Air Force did not change the permissible use of the

7

unpatented land from mining purposes to non-mining purposes. (ECF No. 438 at 11.) The

8

Court finds the government’s position more persuasive. Landowners rely on various

9

assurances from the Air Force during the 1984 withdrawal that Landowners would retain

10

their access and property rights, but none of those assurances show that Landowners

11

ever possessed a right to use the unpatented land for recreation. (See ECF No. 470 at 8-

12

10; see also ECF No. 476 at 4 (incorporating ECF No. 470 by reference).) Rather, the

13

assurances Landowners cite confirm the government’s position that the Air Force simply

14

guaranteed Landowners conditional access to the Property. (See, e.g., ECF No. 388-4 at

15

68 (“And in Mr. Sheahan's case . . . they have had access; there has been no change to

16

that.”).)

17

Landowners also argue that the government conceded the unpatented land was

18

not subject to the 1984 withdrawal in their legal instructions to their expert witnesses. (ECF

19

No. 396 at 9.) The relevant portion of the legal instruction provides that “the Groom Mine

20

property was not within the scope of the 1984 withdrawal” and that “the Groom Mine

21

property was surrounded by the withdrawn area, but the owners retained access to the

22

Groom Mine property for personal and business purposes.” (ECF No. 396-11 at 2.) The

23

government argues that the legal instruction is irrelevant. (ECF No. 438 at 9-10.) The

24

government contends that the instruction “does not say whether the unpatented claims

25

could or could not be used for non-mining purposes” and that it merely instructed the

26

government’s appraiser to “assume for valuation purposes that a hypothetical buyer of the

27

Groom Mine could have conditional access to the property from the surrounding federal

28

land” despite the 1984 withdrawal. (Id.) The Court agrees with the government. The legal
21

1

instruction does not amount to a concession that Landowners could use the unpatented

2

land for recreational purposes.
Landowners have not demonstrated that they are entitled to the relief they seek.

3
4

Accordingly, the Court denies Landowners’ motion to confirm uses of unpatented land.

5

X.

MOTIONS RELATED TO EXPERT WITNESSES

6

A.

LEGAL FRAMEWORK

7

“A witness who is qualified as an expert by knowledge, skill, experience, training,

8

or education may testify in the form of an opinion or otherwise if: (a) the expert’s scientific,

9

technical, or other specialized knowledge will help the trier of fact to understand the

10

evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or

11

data; (c) the testimony is the product of reliable principles and methods; and (d) the expert

12

has reliably applied the principles and methods to the facts of the case.” Fed. R. Evid. 702.

13

The Supreme Court provided additional guidance on Rule 702 and its application

14

in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and Kumho Tire

15

Co., Ltd. v. Carmichael, 526 U.S. 137 (1999). In Daubert, the Court held that scientific

16

testimony must be reliable and relevant to be admissible. Daubert, 509 U.S. at 589. Kumho

17

Tire clarified that Daubert’s principles also apply to technical and specialized knowledge.

18

See Kumho, 526 U.S. at 141. The trial court has “considerable leeway” in deciding how to

19

determine the reliability of an expert’s testimony and whether the testimony is in fact

20

reliable. Id. at 152. The “test of reliability is ‘flexible,’ and Daubert’s list of specific factors

21

neither necessarily nor exclusively applies to all experts or in every case.” Id. at 141.

22

The Ninth Circuit has emphasized that “Rule 702 is applied consistent with the

23

liberal thrust of the Federal Rules and their general approach of relaxing the traditional

24

barriers to opinion testimony.” Jinro Am. Inc. v. Secure Invs., Inc., 266 F.3d 993, 1004 (9th

25

Cir.), opinion amended on denial of reh’g, 272 F.3d 1289 (9th Cir. 2001) (citations and

26

internal quotation marks omitted). “An expert witness—unlike other witnesses—is

27

permitted wide latitude to offer opinions, including those that are not based on firsthand

28

knowledge or observation, so long as the expert’s opinion has a reliable basis in the
22

1

knowledge and experience of his discipline.” Id. (citations and internal quotation marks

2

omitted). Shaky but admissible evidence should not be excluded but instead attacked by

3

cross-examination, contrary evidence, and attention to the burden of proof. Primiano v.

4

Cook, 598 F.3d 558, 564 (9th Cir.), as amended (Apr. 27, 2010).
B.

5

LANDOWNERS’ MOTION TO EXCLUDE OPINION AND TESTIMONY OF
GOVERNMENT EXPERT WARREN NEVILLE (ECF NO. 390)11

6
7

The Court denies Landowners’ motion to exclude the opinion and testimony of

8

Warren Neville—an expert hired by the government to appraise the Property—for the

9

following reasons.
1.

10

Background

11

Neville valued the Property at $333,300. (ECF No. 390-2 at 4.) Landowners argue

12

that Neville’s opinion and testimony should be excluded because he does not possess the

13

relevant expertise to appraise the Property and because his methodology is unreliable.

14

(See ECF No. 390 at 14-24.) The Court disagrees.
2.

15

Qualifications

16

Landowners argue that Neville lacks the relevant expertise to appraise the

17

Property, but the Court finds that Neville is qualified to testify as an expert appraiser

18

because he possesses relevant professional qualifications; has appraised land similar to

19

the Property for many years; and has associated with a local appraiser. Regarding

20

qualifications, Neville holds a professional appraiser designation known as an MAI

21

designation that requires, among other things, a bachelor’s degree, good moral character,

22

status as a Certified General Real Property Appraiser, and rigorous education

23

requirements. (ECF No. 445-1 at 2; ECF No. 445-5 at 2.) Neville holds a Bachelor of

24

Science from the University of California, Riverside as well as a real estate license he

25

obtained in the late 1970s and a broker’s license he obtained in the 1980s. (ECF No. 390-

26

1 at 8.) Neville’s appraisal practice—which spans more than two decades—has centered

27

///

28

11The

Court has reviewed the response (ECF No. 445) and reply (ECF No. 471)
related to this motion.
23

1

on the valuation of vacant land, including land in Nevada. (ECF No. 390-2 at 10; ECF No.

2

390-1 at 10.) For example, Neville appraised a property known as the Fuch Nuclear Mine

3

that—like this Property—was used for mining and located within the NTTR. (ECF No. 390-

4

1 at 10.) Neville also has appraised mineral properties in Clark County and the Lake Mead

5

recreation area. (Id.) Neville’s curriculum vitae lists his experience appraising desert land,

6

special purpose facilities, commercial and industrial land, and partial takings for

7

condemnation. (ECF No. 445-1 at 2.) In addition, Neville consulted with Chris Mathews,

8

MAI, who grew up in Lincoln County, Nevada and whose appraisal practice encompasses

9

the valuation of property in rural Nevada including Lincoln, Nye, White Pine, and

10

Esmerelda Counties (the Property is located within Lincoln County). (ECF No. 390-2 at

11

10.) Mathews “provided valuable insight into . . . the local real estate market.” (Id.)

12

Landowners make several unpersuasive arguments that are based on Neville’s

13

alleged lack of relevant experience. First, Landowners argue that Neville has “zero

14

experience appraising tourist commercial properties,” (ECF No. 390 at 8), but that

15

contradicts Neville’s deposition testimony. Neville testified that he has “appraised a lot of

16

commercial property that could be developed with tourist related uses.” (ECF No. 390-1

17

at 34.) Landowners further argue that Neville has never actually concluded that the highest

18

and best use for a property is commercial tourism (id.), but this is a potential basis for

19

cross-examination, not exclusion. Neville has the experience of considering whether a

20

property is suited for commercial tourism, regardless of whether he ultimately has found

21

that use to be the highest and best use.

22

Similarly, Landowners argue that Neville has not appraised “special purpose

23

facilities” because Neville has never concluded that a property was a special purpose

24

facility. (See ECF No. 471 at 3.) However, Neville identified and produced an appraisal

25

report in which the opposing appraiser asserted that a property was a special purpose

26

property, while Neville concluded it was not. (ECF No. 390-1 at 77-78.) He has experience

27

considering whether a property was a special purpose facility, regardless of his ultimate

28

conclusion.
24

1

assistance. (ECF No. 390 at 15-16.) Landowners rely on the Yellow Book,12 which

2

prohibits appraisers from adopting “unauthorized, unreasonable, or unsupported

3

assumptions in making an appraisal in lieu of obtaining specialized consultant assistance.”

4

(Id. at 15 (quoting ECF No. 390-18 at 113).) Landowners also base their argument on their

5

assertion that Neville has no experience appraising special purpose and commercial

6

tourism properties. (See id.) The Court rejects Landowners’ argument because Neville has

7

relevant experience and because Landowners have not produced evidence to show that

8

extensive studies or specialized consultant assistance are necessary in this case. The

9

Yellow Book only requires consultants when necessary. (See ECF No. 390-18 at 113 (“If

10

the appraiser finds that an appraisal cannot be completed with a consultant’s assistance,

11

the appraiser should notify the agency involved immediately. The appraiser may not adopt

12

unauthorized, unreasonable, or unsupported assumptions in making an appraisal in lieu

13

of obtaining specialized consultant assistance.”).) While Landowners presumably believe

14

that the Property is so unique as to require extensive studies and specialized expertise,

15

reasonable minds could differ. Plus, Neville has specialized expertise given that he has

16

appraised property within the NTTR. Again, Landowners have identified a basis for cross-

17

examination, not a basis for exclusion.

18

Defendants further argue that Neville’s report and testimony should be excluded

19

because Neville failed to connect his conclusion that a commercial tourism use was not

20

financially feasible to any supporting data. (ECF No. 390 at 17.) The Court rejects this

21

argument. Landowners do not identify a “massive analytical gap” (id. at 18) so much as a

22

subjective opinion that Neville had an insufficient basis for concluding that a commercial

23

tourism use was not financially feasible. (See id. at 17-18.) Landowners express incredulity

24

that Neville could conclude—based on one visit to the Property and conversations with

25

four locals who did not think a campground use was suitable—that the Property was not

26

///

27
28

12The

Court notes that Landowners cited the 2000 edition of the Yellow Book. It is
not clear whether the instructions Landowners cite exist in the 2016 edition of the Yellow
Book cited elsewhere in this order.
26

1

suited for a commercial tourism use. (See id.) But Neville relied on more than that. In his

2

report, he discussed physical constraints that would negatively impact development costs

3

as well as the challenge of finding employees to operate similar tourist-oriented

4

businesses such as the Little A’Le’Inn. (ECF No. 390-2 at 40.) Landowners are free to

5

argue that Neville’s opinion is based on insufficient data, but they have not demonstrated

6

an analytical gap requiring exclusion of the opinion altogether.

7

Landowners further argue that Neville’s report and testimony should be excluded

8

because his financial feasibility conclusion does not require any specialized insight. (ECF

9

No. 390 at 18.) Again, Landowners essentially argue that the Neville based his conclusions

10

on insufficient evidence. (See id. (“Neville wants to testify that a tourist commercial use is

11

not financially feasible on the Landowners’ Property because: 1) he visited the property

12

once and saw that there could be development constraints; and, 2) four people told him

13

they did not think a tourist use would succeed on the Landowners’ Property (which turned

14

out to be inaccurate).”).) They may attack the credibility of his report, but they have not

15

demonstrated a basis for excluding the report or testimony.

16

Landowners also argue that Neville’s report and testimony should be excluded

17

because the financial feasibility element of Neville’s highest and best use analysis does

18

not meet the standard set forth in Desert Citizens, 231 F.3d 1172. (ECF No. 390 at 16-

19

17.) Landowners’ argument is conclusory, however. Landowners simply state that the

20

“financial feasibility element of [Neville’s] highest and most profitable use analysis does

21

not even come close to meeting this Ninth Circuit standard” and that Neville “clearly has

22

not provided the ‘level of detail’ necessary to support his financial feasibility finding.” (Id.

23

at 17.) The Court rejects Landowners’ argument as conclusory but nevertheless considers

24

the applicability of Desert Citizens.

25

In Desert Citizens, three environmental organizations (collectively, “Desert

26

Citizens”) challenged a decision by the BLM to enter into a land exchange with certain

27

corporations. 231 F.3d at 1174. Desert Citizens alleged that BLM violated certain

28

provisions of federal law by relying on an outdated appraisal that undervalued the federal
27

1

lands involved in the exchange. See id. The district court found that BLM’s reliance on the

2

allegedly outdated appraisal (“1994 Appraisal”) was proper. Id. at 1180. The Ninth Circuit

3

found that the district court clearly erred because the 1994 Appraisal did not consider a

4

potential future use of the land for landfill purposes. See id. at 1181 & n.10.

5

Neville did not fail to consider the potential future use of the Property for commercial

6

tourism—he considered and rejected the idea. (See ECF No. 390-2 at 37-43.) Neville

7

found that a commercial tourist use was legally permissible and physically possible but

8

not financially feasible. (See id. at 37-40.) Neville opined that “given the physical and

9

locational constraints of the subject, it is unlikely that a potential buyer . . . would consider

10

developing the property as a commercial resort or recreational vehicle park.” (Id. at 40.)

11

While Landowners may test the rigor of Neville’s consideration of commercial tourist use

12

on cross-examination, they have not adduced a basis for excluding Neville’s testimony

13

altogether.

14

Landowners further argue that Neville’s report and testimony should be excluded

15

because the report constitutes a summation appraisal in violation of the unit rule, also

16

known as the undivided fee rule. (ECF No. 390 at 22; see also United States v. 6.45 Acres

17

of Land, 409 F.3d 139, 146 (3d Cir. 2005) (using “unit rule” and “undivided feel rule”

18

interchangeably).) “The ‘undivided fee rule’ essentially operates by permitting the

19

governmental authority to condemn property by providing just compensation, then

20

allowing the respective interest holders to apportion the award among themselves, either

21

by contract or judicial intervention.” United States v. 1.377 Acres of Land, 352 F.3d 1259,

22

1269 (9th Cir. 2003). The gist of the rule is that courts or contracts—not the condemnor—

23

should determine how compensation is allocated. See id.

24

The undivided fee rule has no applicability here. Neville has not sought to opine

25

about how compensation should be apportioned among holders of various legal interests

26

in the Property. Rather, Neville found that the unpatented mining claims had one highest

27

and best use while the patented mining claims had another. This is reasonable given that

28

///
28

1

the legally permissible uses of the claims vary depending on whether they are patented or

2

unpatented. See supra Section IX.
Accordingly, the Court denies Landowners’ motion to exclude the opinion and

3
4

testimony of Warren Neville.
C.

5

LANDOWNERS’ MOTION TO EXCLUDE OPINION AND TESTIMONY OF
GOVERNMENT EXPERT NATHAN MOEDER (ECF NO. 398)13

6
The Court denies Landowners’ motion to exclude the opinion and testimony of

7
8

Nathan Moeder—one of the government’s rebuttal experts—for the following reasons.
1.

9

Background

10

The government hired Moeder as an expert in real estate development, investment,

11

and economics to review and analyze some of Landowners’ experts’ reports. (ECF No.

12

427 at 3; see also ECF No. 398-2 at 3.) Moeder concluded that use of the Property for

13

commercial tourism was “at the highest end of the risk spectrum for real estate

14

investments.” (ECF No. 398-2 at 4.) Landowners do not dispute Moeder’s qualifications

15

but argue that Moeder’s opinion should be excluded because it is unreliable. (See ECF

16

No. 398 at 5 (“Moeder’s theories [related to “highest and best use” and “fair market value”]

17

are incorrect, improper, [and] unreliable . . . .”).) Landowners also argue that Moeder’s

18

opinion is not adequately supported. (See id. at 8 (“Moeder has not done the necessary

19

work to make the criticisms contained in his report.”).)
2.

20

Discussion

21

Landowners first argue that Moeder’s opinion should be excluded because he

22

believes the highest and best use of a property depends on the identity of that property’s

23

owner, contrary to appraisal standards. (See ECF No. 398 at 5-7.) The Court rejects this

24

argument because it rests on mischaracterization of Moeder’s deposition testimony.

25

Moeder understands that an appraiser—which he is not—determines “highest and best

26

use” based on “criteria of legally permissible, physically possible, and financially feasible.”

27

///

28

13The

Court has reviewed the response (ECF No. 427) and reply (ECF No. 478)
related to this motion.
29

1

(ECF No. 398-1 at 9; see also id. at 10 (“I’m not an appraiser, so I don’t know exactly all

2

the things they consider.”).) Moeder explained that his perspective as an expert in real

3

estate development is different. (Id. at 9.) He conceives of “highest and best use” as the

4

answer to the following question: “What should we put on that property that is supported

5

by the market.” (Id.) And when advising developers about their real estate investments,

6

he considers their areas of expertise. For example, he might recommend that use of a

7

property for business offices is not the highest and best of that property for a developer

8

who lacks experience in office property. (Id. at 10.) While Moeder’s testimony would not

9

be reliable if it were intended to show how an appraiser determines highest and best use,

10

Moeder intends to show something else—that a real estate developer would not consider

11

the tourist commercial use of the Property to be the use most supported by the market.

12

This testimony is relevant because Landowners have proposed that the highest and best

13

use of the Property is for a commercial tourism use and that someone—“likely . . . a

14

regional or even international investor” (ECF No. 427-1 at 6)—would theoretically buy it

15

for that purpose.

16

Landowners next argue that Moeder’s opinion is unreliable because he

17

misunderstands the concept of “fair market value.” (ECF No. 398 at 7-8.) Landowners

18

again mischaracterize Moeder’s testimony. Moeder understands that appraisers define

19

“fair market value” as “what a willing buyer would be willing to pay a willing seller at an

20

arm’s length transaction as an all cash transaction.” (ECF No. 398-1 at 49.) Moeder is

21

testifying about something different—how developers, investors, and lenders use rates of

22

return and development costs to evaluate prospective developments on vacant land. (ECF

23

No. 427 at 16.) Moeder conducts investment analysis—considering for example rates of

24

return, cost of financing, and development costs—when advising clients. (See ECF No.

25

398-1 at 24.) Moeder’s opinion is relevant because DiFederico predicated his analysis at

26

least in part on the possibility of a regional or international investor purchasing the

27

Property. (ECF No. 427-1 at 6 (“[T]he likely buyer of this property is a regional or even

28

international investor that would have purchased the property to operate or lease the
30

1

property to an operator of a tourist commercial development. . . .”). And while DiFederico

2

testified that an owner-operator could purchase the Property, he also testified that the

3

“most probable buyer” would be “[a]n investor that would look to lease it to a[n] operator.”

4

(ECF No. 478-1 at 4.)

5

Landowners further argue that Moeder’s opinion is unreliable because he criticized

6

Landowners’ experts for failing to calculate demand, pricing, and financial feasibility of the

7

tourist commercial use without making these calculations himself. (See ECF No. 398 at 8-

8

9.) The government argues that Moeder’s opinions are proper rebuttal and that

9

Landowners are shifting their burden of proof to Moeder. (ECF No. 427 at 12-15.)

10

The Court agrees with the government. Moeder’s opinions constitute proper

11

rebuttal because he questioned the methodologies, assumptions, and data used by

12

Landowners’ experts, and he investigated, analyzed, and opined on methods and facts

13

they did not consider. For example, Moeder found that Landowners’ experts failed to

14

account for various types of risk that real estate investors consider when advising clients.

15

(See, e.g., ECF No. 398-2 at 4 (discussing business risk, financial risk, liquidity risk,

16

inflation risk, management risk, interest rate risk, legislative risk, and environmental risk);

17

ECF No. 398-3 at 9 (noting that Clauretie failed “to acknowledge and analyze the

18

significant risks that are associated with any real estate project”); id. at 19 (noting that

19

DiFederico failed “to acknowledge and analyze the significant risks that are associated

20

with any real estate project”).) Moeder also opined that Clauretie failed to conduct an

21

adequate feasibility analysis. (ECF No. 398-3 at 6-7.) And Moeder need not calculate

22

demand, pricing, and financial feasibility himself in order to criticize others’ work. It is

23

Landowners who bear the burden of proof in supporting their position on highest and best

24

use. United States v. 4.0 Acres of Land, 175 F.3d 1133, 1140 (9th Cir. 1999) (citing US ex

25

rel. TVA v. Powelson, 319 U.S. 266, 273 (1943)). Landowners contend that Moeder lacks

26

the foundational knowledge to make these determinations and calculations himself (see

27

ECF No. 478 at 6-7), but Moeder’s testimony does not support such an extreme

28

conclusion. While Moeder testified that he did not calculate demand, pricing, and financial
31

1

feasibility, he had a reasonable explanation—no one asked him. (See ECF No. 398-1 at

2

11.) Accordingly, the Court rejects this argument.

3

The government has suggested that Moeder’s testimony is related to investment

4

value rather than market value. (See ECF No. 427 at 16.) Landowners argue that Moeder

5

should not be permitted to testify about investment value when the relevant legal

6

consideration is market value. (ECF No. 478 at 6.) The Court rejects this argument

7

because Landowners’ proposed market value depends on investment. (ECF No. 427-1 at

8

6 (“[T]he likely buyer of this property is a regional or even international investor that would

9

have purchased the property to operate or lease the property to an operator of a tourist

10

commercial development. . . .”).) Investment value is therefore relevant to the factfinder.

11

Landowners also argue that Moeder should be excluded based on Prall v. Ford

12

Motor Co., No. 2:14-cv-01313-MMD-GWF, 2017 WL 361545 (D. Nev. Jan. 24, 2017). The

13

plaintiff in that case sued Ford Motor Company in connection with a car accident that she

14

alleged was caused by a mechanical failure in the vehicle. Id. at *1. The plaintiff designated

15

an expert witness who was a seasoned auto-body repairman with decades of experience

16

conducting and inspecting collision repairs. Id. at *2. The expert concluded that the

17

plaintiff’s accident was caused by a defective speed control cable based on the following

18

circumstantial evidence: a conversation with the plaintiff and her son, the existence of a

19

parts replacement program, and similar complaints from other Ford vehicle owners that

20

the expert read online. Id. The Court found that the expert’s testimony was inadmissible

21

because it was based on circumstantial evidence that a lay person could understand rather

22

than the knowledge and experience of his discipline. Id. at *3.

23

Moeder does not seek to testify about circumstantial evidence a lay person could

24

understand. Rather, Moeder plans to testify about how sophisticated investors and

25

developers make informed business decisions. Moeder also will testify that Landowners’

26

experts failed to consider factors that investors and developers would consider. This

27

testimony is relevant and based on Moeder’s specialized knowledge.

28

///
32

Accordingly, the Court denies Landowners’ motion to exclude the opinion and

1
2

testimony of Nathan Moeder.
D.

3

LANDOWNERS’ MOTION TO EXCLUDE OPINION AND TESTIMONY OF
GOVERNMENT EXPERT MARC SPRINGER (ECF NO. 399)14

4
5

The Court denies Landowners’ motion to exclude the opinion and testimony of Marc

6

Springer—an expert the government retained to estimate and appraise the mineral

7

resources at the Property—for the following reasons.
1.

8

Background

9

Landowners and the government hired experts to determine whether mineralization

10

on the Property improves its value. (ECF No. 428 at 5-6.) The experts first estimated the

11

amount and quality of mineral resources on the Property and then appraised their value.

12

(Id.) Landowners hired one expert for each purpose (with NGL providing the estimate and

13

Mineral Valuation Specialists (“MVS”) providing the appraisal), while the government hired

14

Springer for both. (Id.)

15

Springer is a geologist with more than 40 years of experience. (ECF No. 428 at 6;

16

ECF No. 428-1 at 8.) He is a registered professional geologist, a certified general real

17

estate appraiser, a certified mineral appraiser, and a BLM-certified mineral examiner.

18

(ECF No. 428-1 at 8.) Landowners do not seem to dispute his qualifications.

19

For his mineral resource estimate, Springer found that there were 352,400 tons of

20

indicated resources and 647,600 tons of inferred resources.15 (ECF No. 399-1 at 45.)

21

Springer determined that the highest and best use for the Property’s mineral interest is to

22

hold it for future mineral resources exploration. (Id. at 48.)

23

///

24

///

25
26
27
28

14The

Court has reviewed the response (ECF No. 428) and reply (ECF No. 479)
related to this motion.
15Mineral

resources are divided into inferred, indicated, and measured categories.
(ECF No. 246 at 25.) Indicated mineral resources have a confidence level somewhere in
between inferred (lowest level of confidence) and measured (highest level of confidence)
mineral resources. (Id.)
33

1

To arrive at a mineral resource estimate, Springer “analyzed two mineral

2

reserve/resource estimates from 1986 appraisals.” (Id. at 42.) The Court will refer to these

3

as the Hulse Estimate and the McClung Estimate. Springer also analyzed and accepted a

4

review of the appraisals, which he found reasonable and which the Court will refer to as

5

the Godbe Review. (Id.) The Hulse Estimate assumed that 34,000 tons of ore remained

6

on the Property—Springer rejected this assumption based on “the geology; mineralization

7

control characteristics; and the exploration, development, and production history.” (Id. at

8

43.) Springer accepted the McClung Estimate that 1,000,000 tons of ore remain on the

9

Property. (See id.) Springer then used drill hole data, maps, cross-sections, and other

10

information to estimate the relative amounts of indicated and inferred resources,

11

concluding that 352,400 tons were indicated and 647,600 tons were inferred. (Id. at 44-

12

45.) Springer noted that the maps and cross-sections available to him were missing some

13

information because they had been improperly reduced from 11”x17” originals. (Id. at 44.)

14

Springer also noted that “data are incomplete for some of the drill holes, and some drill

15

holes appear to be missing.” (Id.) Nevertheless, Springer proceeded, noting that “enough

16

information is provided for me to estimate indicated and inferred resources.” (Id.)

17

Springer later supplemented his report after receiving missing information related

18

to the drill holes, maps, and cross-sections. Springer clarified that the additional

19

information did not cause him to change his opinions and in fact provided added support

20

for his opinions. (ECF No. 428-1 at 3.) Springer also stated that the missing data from the

21

cross-sections and plan views would have caused him to reduce his estimate of the

22

amount of mineral resources remaining on the Property. (Id. at 5.)

23
24
25

NGL—Landowners’ expert—estimated 1 million tons of indicated resources and 9
million tons of inferred resources. (ECF No. 428 at 9.)
2.

Discussion

26

Landowners make several arguments that Springer’s mineral resource estimate is

27

unreliable because it is based on incomplete facts and data. (ECF No. 399 at 13-17.) The

28

government responds that Springer considered exploratory drill hole information that was
34

1

missing initially and explained that information in the missing maps would have caused

2

him to reduce his mineral resource estimate, not increase it. (ECF No. 428 at 3.) The Court

3

finds that Springer’s supplement and affidavit resolve any concerns about missing data.

4

In addition, while Landowners argue that Springer’s “sole basis for his mineral resource

5

conclusion was [the McClung Estimate],” Springer relied on more than that. He considered

6

the Hulse Estimate as well as the Godbe Review. Accordingly, the Court rejects

7

Landowners’ first argument for excluding Springer’s report.

8

Landowners next argue that Springer failed to reliably classify the mineralization

9

into inferred and indicated categories because he did not rely on geological sampling. (See

10

ECF No. 479 at 6.) This does not seem to be correct. (See ECF No. 399-1 at 44 (estimating

11

indicated and inferred resources based on drill hole data).) Accordingly, the Court rejects

12

this argument.

13

Landowners further argue that Springer’s mineral resource estimate should be

14

excluded under Federal Rule of Evidence 403 or the doctrine of judicial estoppel because

15

the government’s experts have taken inconsistent positions about the existence of a

16

mineral resource on the property. (ECF No. 399 at 18.) According to Landowners, Springer

17

found that a mineral resource existed on the Property while Dr. Graham Davis, another of

18

the government’s experts, did not. (Id. at 18-20.) The government essentially argues that

19

Landowners have oversimplified Dr. Davis’s testimony to create the appearance of a

20

contradiction that does not in fact exist. (ECF No. 428 at 16-17.) Whatever contradiction

21

exists between the governments’ experts goes to the weight of their testimony rather than

22

admissibility. Dr. Davis found that mineralization at the Property did not constitute a

23

“resource” under industry criteria because the mineralization “was not currently or

24

eventually economically profitable to extract as of the [date of taking].” (ECF No. 399-12

25

at 26-27.) While Springer concluded that mineral resources existed at the Property, it does

26

not seem that he expressly considered whether the mineralization was economically

27

profitable to extract. (See generally ECF No. 399-1.) While there may be some

28

disagreement between Springer and Dr. Davis as to the prospects for economic extraction
35

1

of the mineralization at the Property, they both seem to agree that mineralization exists.

2

Any differences between their opinions are subjects for cross-examination rather than

3

grounds for exclusion.

4

Landowners’ next argument relates to another purported inconsistency between

5

Springer’s testimony and Dr. Davis’s testimony. (See ECF No. 399 at 20-21.) Dr. Davis

6

criticized NGL for failing to prepare a block model or evaluate prospects for eventual

7

economic extraction. (ECF No. 428 at 18.) Landowners argue that Springer also failed to

8

do these things. (ECF No. 399 at 20-21.) The government counters that Dr. Davis did not

9

state that block models were required in every instance and that Springer’s failure to

10

evaluate prospects for eventual economic extraction goes to weight rather than

11

admissibility. (ECF No. 428 at 18-19.) The Court agrees with the government. Dr. Davis

12

only testified that block models were “normally” used, and omissions in Springer’s

13

testimony bear on its weight. Moreover, Springer seems to have at least implicitly

14

considered prospects for eventual economic extraction. In his deposition, Springer

15

affirmed that he was “basically saying that there’s some reasonable prospect of eventual

16

minimal extraction sometime in the future.” (ECF No. 399-2 at 63.)

17

Landowners argue that Springer’s failure to specifically analyze the factors of

18

highest and best use renders his opinion unreliable. (ECF No. 399 at 21.) The government

19

responds that Springer implicitly considered these factors. (ECF No. 428 at 4.) The Court

20

agrees with the government that Springer adequately considered the four factors of

21

highest and best use in his opinion. (See ECF No. 174 at 11-13 (explaining how Springer

22

considered the factors of highest and best use); see also ECF No. 399-2 at 63 (Springer’s

23

deposition testimony that he considered the factors).)

24

Landowners argue that Springer’s highest and best use conclusion (holding for

25

future mineral resource exploration) is invalid because Dr. Davis opined that mineralization

26

at the Property was not currently or eventually economically profitable to extract as of the

27

date of taking. (ECF No. 399 at 23-24.) The government argues that Dr. Davis’s opinion

28

is “just a commentary . . . on [NGL’s] failure to consider the prospects for eventual
36

1

economic extraction of the mineralization at the Groom Mine.” (ECF No. 428 at 22.) The

2

government also argues that holding the Property for future mineral resource exploration

3

is obviously financially feasible because that is how the Property was used for about 60

4

years. (Id.) Again, disagreement among the government’s experts affects the weight of

5

their testimony, not the admissibility of their testimony.
Accordingly, the Court denies Landowners’ motion to exclude the opinion and

6
7

testimony of Marc Springer.
E.

8

LANDOWNERS’ MOTION TO EXCLUDE OPINION AND TESTIMONY OF
GOVERNMENT EXPERT DR. DONALD SINGER (ECF NO. 400)16

9
10

The Court grants in part and denies in part Landowners’ motion to exclude the

11

expert opinion and testimony of Dr. Singer—one of the government’s rebuttal experts—as

12

explained herein.
1.

13

Background

14

NGL prepared an expert report for Landowners concluding that there are 1 million

15

tons of indicated resources and 9 million tons of inferred resources remaining on the

16

Property. (ECF No. 246 at 23.) NGL used a computer program called EMINERS to develop

17

its estimate. (See id. at 29-31.) The EMINERS program was developed by the U.S.

18

Geological Survey (“USGS”) “to allow geologists to ‘estimate the number of undiscovered

19

deposits at different levels of probability.’” (Id.; see also ECF No. 432 at 2.)

20

The government hired Dr. Donald Singer as a rebuttal expert to, among other

21

things, review NGL’s use of the EMINERS program. (ECF No. 432 at 2.) Dr. Singer worked

22

for USGS from 1973 to 2009 and played a large role in the development of EMINERS.

23

(Id.) Dr. Singer has opined that NGL made several mistakes in using EMINERS, including:

24

(1) misrepresenting what EMINERS does and how it works; (2) misidentifying the type of

25

mineral deposit at the Property; (3) using the wrong USGS grade and tonnage model; and

26

///

27

///

28

16The

Court has reviewed the response (ECF No. 432) and reply (ECF No. 480)
related to this motion.
37

1

(4) failing to follow EMINERS’ two-kilometer spatial rule. (Id. (citing ECF No. 400-1 (Dr.

2

Singer’s expert report)).)
2.

3

Discussion

4

Landowners argue that Dr. Singer’s expert report should be excluded in its entirety

5

and, alternatively, that particular statements should be excluded. The Court rejects

6

Landowners’ arguments for excluding Dr. Singer’s report in its entirety before addressing

7

the admissibility of individual statements in the report.

8

Landowners first argue that Dr. Singer’s entire opinion should be excluded because

9

it requires application of the 2014 SME/CIM Standards.17 (ECF No. 480 at 2.) The

10

government acknowledges that application of the 2014 SME/CIM Standards lies outside

11

the scope of expertise Dr. Singer will provide in this particular case. (ECF No. 432 at 9.)

12

Given that some of the statements Landowners challenge do not require application of the

13

2014 SME/CIM Standards as discussed herein, the Court rejects Landowners’ first

14

argument.

15

Landowners also argue that Dr. Singer’s entire opinion should be excluded

16

because Dr. Singer—who did not conduct an economic analysis of the Property—cannot

17

opine as to whether mineralization was economic to mine. (ECF No. 480 at 2.) The

18

government concedes the point but argues that the statements challenged on these

19

grounds are not affirmative statements that the mineralization was uneconomic—they are

20

observations either that a previous appraiser found in 1986 that the mineralization was

21

uneconomic or that NGL failed to demonstrate that the mineralization would have been

22

economic to extract on the date of value. (ECF No. 432 at 3.) The Court rejects

23

Landowners’ request to exclude Dr. Singer’s entire opinion in favor of atomistic

24

consideration of particular challenged statements below.

25

///

26

///

27
28

17The

parties use the term “2014 SME/CIM Standards” to refer to the nearly
identical resource reporting standards established by the Canadian Institute of Mining,
Metallurgy and Petroleum (“CIM”) and the Society for Mining, Metallurgy & Exploration
(“SME”). (ECF No. 400 at 2 n.1.)
38

a.

1

Statement No. 1

2

Statement No. 1 provides: “As demonstrated below, the Nexus Geos estimates of

3

indicated and inferred resources remaining at the Groom Mine property are not supported

4

by relevant and reliable information and must be rejected.” (ECF No. 432-1 at 2.) The

5

government does not object to the exclusion of this sentence. (ECF No. 432 at 10.)

6

Accordingly, the Court will grant Landowners’ motion as to Statement No. 1.

b.

7

Landowners withdrew their request to exclude Statement No. 2. (ECF No. 480 at

8
9

Statement No. 2

7.) Accordingly, the Court takes no action with respect to Statement No. 2.

c.

10

Statement Nos. 3 & 4

11

Statement No. 3 provides: “The Pioche deposit is also a polymetallic replacement-

12

type deposit, but that does not support an estimate of 9,000,000 tons of inferred resources

13

at depth at the Groom Mine.” (ECF No. 432-1 at 21.)

14

Statement No. 4 provides: “Thus, the assertion by Nexus Geos that the similarity of

15

the Groom Mine property to the Pioche Deposit justifies an estimate of 9 million tons of

16

inferred resources at depth is wrong.” (Id.)

17

Landowners argue that both statements must be excluded because they require

18

application of the 2014 SME/CIM Standards. (ECF No. 480 at 7-8.) The government

19

disputes this characterization, insisting that Dr. Singer has simply stated that knowing the

20

tonnage of one deposit is insufficient to estimate the tonnage of another deposit. (See

21

ECF No. 432 at 11-13.)

22

The Court agrees with the government. Dr. Singer opined that tonnages among

23

deposits of the same type “often vary by factors of 4 to 25, or more.” (ECF No. 432-1 at

24

20.) He is qualified to express this opinion because he is a geologist with expertise on the

25

geology of Nevada, the mineral deposits found there, and the use of EMINERS. (ECF No.

26

432 at 12-13.) And this opinion is a sufficient basis for concluding that the similarity of the

27

deposit types at Pioche and the Property does not necessarily imply similarity of tonnage.

28

///
39

1

No step of this analysis requires application of the 2014 SME/CIM Standards. Accordingly,

2

the Court will deny Landowners’ motion as to Statements No. 3 and 4.

d.

3

Statement No. 5

4

Statement No. 5 provides: “This is not the kind of mistake that should be made by

5

experts in modern methods of ore reserve estimation.” (ECF No. 432-1 at 23.) The mistake

6

Dr. Singer identifies is NGL’s failure to account for densities, spatial distributions, and

7

volumes when extrapolating ore tonnage from samples. (See id. at 22-23.)

8

Landowners argue that Dr. Singer cannot opine as to what is involved in “modern

9

methods of ore reserve estimation” because he lacks expertise in applying the 2014

10

SME/CIM Standards. (ECF No. 480 at 8.) The government argues that Dr. Singer is

11

qualified to interpret a cumulative frequency plot and offer his explanation of the mistake

12

that NGL made. (ECF No. 432 at 14.) The Court agrees with the government. Dr. Singer’s

13

explanation does not incorporate the application of the 2014 SME/CIM Standards and is

14

admissible. (See id.) Accordingly, the Court denies Landowners’ motion as to Statement

15

No. 5.

16

e.

Statement No. 6

17

Statement No. 6 contains five sentences, two of which the government concedes

18

should be excluded. (ECF No. 432 at 14.) Those two sentence are struck from the

19

statement reproduced below:

20
21
22
23
24
25
26

Critique: [1] The 1 million tons in the indicated category (not consistent with
the modern classification of resources) is based on 13 drill holes that go to
a depth of up to 210 feet. [2] The Godbe report (1988) points out that in
addition to needing more drilling to confirm these numbers, the 1 million tons
would be uneconomic at 1986 prices and costs. [3] The 13 drill holes would
be considered insufficient to establish the degree of geological and grade
continuity appropriate for a modern inferred classification of resources in my
view. [4] Nothing presented in the Nexus Geos report shows that 1 million
tons would be economic to mine at 2015 prices and costs. [5] Nexus Geos’s
report does not present adequate support to determine that there are 1
million tons of indicated resources, under modern classification standards.
(ECF No. 432-1 at 25.)

27

Landowners argue that the first sentence should be excluded because it requires

28

application of the 2014 SME/CIM Standards. (ECF No. 480 at 9.) In particular, Landowners
40

1

seem to take issue with the parenthetical statement “not consistent with the modern

2

classification of resources.” The government argues that the parenthetical statement does

3

not require application of the 2014 SME/CIM Standards because it simply references a

4

fact—the 1 million tons of mineralization identified in the McClung Estimate are not

5

consistent with modern classification standards. (ECF No. 432 at 15.) The government

6

argues that the remainder of the sentence is similarly factual. (Id.) Landowners counter

7

that the parenthetical only could apply to NGL’s estimate of 1 million tons of indicated

8

resources because the preceding statement references NGL’s report, not the McClung

9

Estimate. (ECF No. 480 at 9.) While the reference in Dr. Singer’s report to “[t]he 1 million

10

tons in the indicated category” is somewhat ambiguous, the parenthetical suggests that

11

Dr. Singer intended to refer to the McClung Estimate, which the Court already understands

12

as inconsistent with the modern classification system. (See ECF No. 246 at 24.)

13

Accordingly, the statement is factual and admissible.

14

The government argues that the second sentence is simply a statement of fact.

15

(ECF No. 432 at 15.) The Court agrees. While Landowners may dislike the inferences that

16

can be drawn from the statement (see ECF No. 480 at 9), they are free to argue against

17

those inferences at trial. Accordingly, the second sentence is admissible.

18

Landowners make several arguments that the fourth sentence is inadmissible, but

19

the Court agrees with the government that the statement amounts to an observation that

20

NGL has not shown that any of the mineralization would be economic to extract as of the

21

date of taking. (See ECF No. 480 at 10-11; ECF No. 432 at 15.) Accordingly, the fourth

22

sentence of the statement is admissible.

23
24
25

In summary, the Court grants Landowners’ motion as to the third and fifth sentences
and denies Landowners’ motion as to the first, second, and fourth sentences.

f.

Statement No. 7

26

Statement No. 7, with the challenged portion underlined, provides: “Because the

27

mined material at the Groom Mine was within 210 feet of the surface, the projected

28

additional 700,000 tons would occur within 210 feet of the surface also. It would be at the
41

1

shallow depth and total less than the estimated 1 million tons of ‘indicated resources’

2

mentioned as uneconomic.” (ECF No. 432-1 at 25.)

3

Landowners argue that the underlined portion of Statement No. 7 is inadmissible

4

because Dr. Singer does not know what is required to define mineralization as an indicated

5

resource and did not conduct analysis to conclude whether the mineralization was

6

uneconomic as of the date of taking. (ECF No. 480 at 11.) The government argues that

7

the disputed portion is admissible because Dr. Singer is simply noting that (1) 700,000 is

8

less than McClung’s 1 million tons of estimated “ore reserve” (an outdated classification

9

system) and (2) this 1 million tons, as noted by McClung, was not economic to extract in

10

1986 when the estimate was prepared. (ECF No. 432 at 16.) The Court agrees with the

11

government that the statement is admissible. Accordingly, the Court denies Landowners’

12

motion as to Statement No. 7.

13

g.

Statement No. 8

14

The portion of Statement No. 8 that remains in dispute provides: “In addition, the

15

Nexus Geos opinion that there are 2 to 3 undiscovered deposits at depth containing 9

16

million tons of inferred mineralization is unsupported by any information that is unbiased.”

17

(ECF No. 432-1 at 25.)

18

Landowners argue that this portion of Statement No. 8 should be excluded because

19

it refers to the information used to quantify inferred mineralization. (ECF No. 480 at 11.)

20

The government argues that the disputed portion of the statement lies within Dr. Singer’s

21

expertise because—given the size of the Property claims—there can only be one deposit

22

at the Property, and it has already been discovered. (ECF No. 432 at 17.) The government

23

also argues that Dr. Singer is qualified to opine that the existence of mineralization in other

24

Nevada locations (the Black Metal mine and Pioche mining district) is not sufficient to

25

support a specific estimate of 9 million tons. (Id.) The Court agrees with the government

26

that these opinions lie within his proffered area of expertise as an expert on the geology

27

of Nevada and the types of mineral deposits found there. Accordingly, the Court denies

28

Landowners’ motion as to the disputed portion of Statement No. 8.
42

1

In summary, the Court grants Landowners’ motion as to Statement No. 1. The Court

2

denies Landowners’ motion as to Statements Nos. 3, 4, 5, and 7 as well as the disputed

3

portion of Statement No. 8. As to Statement No. 6, the Court grants Landowners’ motion

4

as to the third and fifth sentences and denies Landowners’ motion as to the first, second,

5

and fourth sentences.

6

F.

GOVERNMENT’S MOTION TO EXCLUDE THE EXPERT OPINION AND
TESTIMONY OF GEORGE HARRIS (ECF NO. 404)18

7
8

The Court will grant the government’s motion to exclude the expert opinion and

9

testimony of George Harris—hired by Landowners as an expert rebuttal witness—for the

10

following reasons.

11

Harris provided a one-page expert report that is reproduced in its entirety below:

12

Rebuttal of Warren Neville Financial Feasibility Determination

13

I have been asked to address the highest and best use conclusion by Warren
Neville, an appraiser retained by the United States Government to appraise
the Groom Mine 400 acre property. It is my understanding that Mr. Neville
concludes that “given the physical constraints of the subject, it is unlikely that
a potential buyer of the 6 patented claims would consider developing the
property as a commercial resort or recreational vehicle park. This is due to
the uncertain financial feasibility of this type of use.” It is also my
understanding that Mr. Neville concludes “[h]ence, the highest and best use
of the patented claims is rural recreational use.”

14
15
16
17
18
19

I strongly disagree with Mr. Neville’s highest and best use conclusion for the
following reasons:
•

I have visited the Landowners’ Property and know that it is located in
Lincoln County and has a clear and unobstructed view of Area 51.

•

I am aware that there is significant interest in seeing Area 51 as I am the
owner of the Alien Research Center in Hiko, Nevada and the Alien
Tequila Spirits;

•

It is my opinion that persons would pay to enter onto the Landowners’
Property to see Area 51; and

•

That a tourist commercial use on the Landowners’ Property would
succeed.

20
21
22
23
24
25
26

[Signature block]

27
28

18The

Court has reviewed the response (ECF No. 434) and reply (ECF No. 482)
related to this motion.
43

1

My Curriculum Vitae is attached hereto;

2

Testimony and deposition history in the past 4 years (N/A);

3

Publications within the past 10 years - I have published articles within the
magazine Liberty Watch on a variety of subjects within the past 10 years.

4
Payment: $250 per hour[.]
5
6

(ECF No. 404-1.) Although the report indicates that Harris’s curriculum vitae was attached,

7

it was not attached because Harris does not have a current resume or curriculum vitae.

8

(ECF No. 404 at 2-3.)

9

Landowners argue that Harris is qualified to provide expert rebuttal to Neville’s

10

testimony regarding financial feasibility because he has actual and specific business

11

experience in the exact market sector (alien and Area 51 related tourism) at direct issue

12

in this case. (ECF No. 434 at 13.) However, Landowners have not shown that Harris is

13

qualified to provide expert testimony on financial feasibility and the determination of a

14

property’s highest and best use. Rather, Landowners have shown that Harris may be able

15

to provide lay witness testimony.
Accordingly, the Court grants the government’s motion to exclude the expert

16
17

opinion and testimony of George Harris.
G.

18

GOVERNMENT’S MOTION TO EXCLUDE LANDOWNERS DANNY AND
JOE SHEAHAN’S OPINIONS OF VALUE (ECF NO. 402)19

19
The Court grants the government’s motion to exclude Landowners Danny and Joe

20
21

Sheahan’s opinions of value for the following reasons.
1.

22
Two

23

Background

Landowners—Danny

and

Joe

Sheahan—have

expressed

opinions

24

concerning the value of the Property. Danny is about 62 years old and has worked at the

25

Groom Mine for most of his life. (ECF No. 431 at 17.) Joe is about 57 years old and has

26

spent most of his life in southern Nevada. (Id. at 12.) He worked at McCarran International

27

///

28

19The

Court has reviewed the response (ECF No. 431) and reply (ECF No. 473)
related to this motion.
44

1

Airport for 20 years and for America West and Frontier Airlines for 13 years. (Id.) He has

2

spent a great deal of time at the Property over the course of his life. (Id.)

3

Danny values the Property at $79,488,000 based on use of the Property for active

4

mining. (See ECF No. 402-2 at 12; ECF No. 402 at 5.) Danny arrived at this figure by

5

multiplying the following factors: grade of remaining mineralization (8 ounces of silver per

6

ton), quantity of remaining mineralization (15 million tons), price of silver ($14.72 per

7

ounce), and royalty rate (4.5%). (Id.)

8

Joe values the Property at $74,250,000 based on use of the Property as an Area

9

51-themed tourist attraction. (ECF No. 402-1 at 16-17.) Joe arrived at this figure using the

10

direct capitalization method. Under this method, a property’s value is determined by

11

multiplying the annual income generated by the Property by a fixed factor or “multiplier.”

12

(ECF No. 402 at 6.) Joe assumed that the business would draw 250 people each day to

13

see Area 51, 200 of whom would pay $500 to spend a few hours on the Property and 50

14

of whom would pay $1000 to spend the night. (Id.) Joe assumed the business would

15

operate 330 days a year and generate $49,500,000 in annual gross income. (Id.) Joe then

16

assumed that the operator of the business would pay 25% of the assumed gross income

17

to rent the property ($12,375,000). (Id.) Joe then chose an income multiplier of 6, resulting

18

in a value of $74,250,000. (Id.)

19

Joe also expressed an alternative opinion of value based on active mining. (Id. at

20

8.) Using the same method as Danny, he values the Property between $46,685,952 and

21

$70,028,928 as an active mine. (Id.)

22

2.

Discussion

23

Danny and Joe’s opinions are inadmissible because they have not complied with

24

Federal Rule of Evidence 702. While Danny and Joe are offered as lay witnesses, their

25

testimony is based on scientific, technical, and other specialized knowledge under Rule

26

702 as opposed to their own perceptions under Rule 701. Their testimony is scientific and

27

technical in nature because it relies on computation of various factors that require

28

specialized knowledge. For example, a lay person does not typically know how to calculate
45

1

a royalty rate or how to use a direct capitalization method of valuation. While the

2

calculations involve simple multiplication, identifying and computing the factors to be

3

multiplied requires specialized knowledge. Danny and Joe cannot qualify as expert

4

witnesses because Landowners have not offered them as expert witnesses or identified

5

their qualifications to provide expert testimony.

6

Landowners argue that Danny and Joe may testify about the value of the Property

7

solely because of their ownership. (ECF No. 431 at 6.) The government counters that the

8

right to give an opinion of value is not absolute. (ECF No. 473 at 2.) The Court agrees with

9

the government. None of the cases that Landowners cite expressly exempt landowners

10

from the requirements of Rule 702 when they are offering testimony based on scientific,

11

technical, or other specialized knowledge. Indeed, the Eighth Circuit case that

12

Landowners primarily rely upon, U.S. v. 3,698.63 Acres, 416 F.2d 65 (8th Cir. 1969), was

13

decided in 1969, six years before the Federal Rules of Evidence were adopted in 1975.

14

Moreover, the Advisory Committee Notes to the 1972 Proposed Rules affirmatively

15

indicate that landowner opinions of value are subject to Rule 702: “Thus within the scope

16

of the rule [referring to Rule 702] are not only experts in the strictest sense of the word,

17

e.g., physicians, physicists, and architects, but also the large group sometimes called

18

‘skilled’ witnesses, such as bankers or landowners testifying to land values.” Finally, the

19

government cites several recent cases in which courts have applied Rule 701 or 702 to

20

landowners’ opinions of value. See, e.g., United States v. Easement Over 6.09 Acres, 140

21

F. Supp. 3d 1218, 1242 (N.D. Ala. 2015).
Accordingly, the Court grants the government’s motion to exclude Landowners

22
23

Danny and Joe Sheahan’s opinions of value.

24

XI.

MOTIONS FOR RECONSIDERATION

25

A.

LEGAL STANDARD

26

A motion to reconsider must set forth “some valid reason why the court should

27

reconsider its prior decision” and set “forth facts or law of a strongly convincing nature to

28

persuade the court to reverse its prior decision.” Frasure v. United States, 256 F. Supp.
46

1

2d 1180, 1183 (D. Nev. 2003). Reconsideration is appropriate if this Court “(1) is presented

2

with newly discovered evidence, (2) committed clear error or the initial decision was

3

manifestly unjust, or (3) if there is an intervening change in controlling law.” Sch. Dist. No.

4

1J v. AC&S, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993). “A motion for reconsideration is not

5

an avenue to re-litigate the same issues and arguments upon which the court already has

6

ruled.” Brown v. Kinross Gold, U.S.A., 378 F. Supp. 2d 1280, 1288 (D. Nev. 2005). Both

7

the government’s motions for reconsideration appear to be properly considered on the

8

basis of newly discovered evidence, and Landowners do not dispute this.
B.

9

GOVERNMENT’S MOTION TO EXCLUDE EVIDENCE OF SALES TO THE
GOVERNMENT (ECF NO. 406)20

10
The Court grants the government’s motion to exclude evidence of sales to the

11
12

government for the following reasons.
1.

13

Background

14

In an earlier motion, the government sought to exclude expert opinions that relate

15

to or consider value to the government in determining just compensation. (ECF No. 241

16

at 7.) The Court denied relief because it was unclear at the time whether Landowners’

17

experts had improperly considered value to the government. (See id. at 10-11.)

18

The government seeks partial reconsideration of that order, asking the Court to

19

exclude evidence of the prices paid by the government to acquire (1) a former industrial

20

railyard adjacent to Tinker Air Force Base in Oklahoma City (the “Tinker Acquisition”) and

21

(2) the Indian Springs Casino, an operating casino/resort, hotel, and restaurant, gas

22

station/convenience store, and RV park adjacent to Creech Air Force Base in Indian

23

Springs, Nevada (the “Creech Acquisition”). (ECF No. 406 at 3.)
Two of Landowners’ experts—Richard Roddewig and Tio DiFederico—used data

24
25

from these sales in their reports.

26

///

27

///

28

20The

Court has reviewed the response (ECF No. 436) and reply (ECF No. 485)
related to this motion.
47

1

Roddewig analyzed the Creech and Tinker Acquisitions and concluded that the Air

2

Force paid a substantial location premium to acquire the adjacent properties. (ECF No.

3

406-2 at 8 (“Our analysis of both acquisitions indicated the Air Force likely paid a

4

substantial location premium to acquire the adjacent properties.”).) To determine this,

5

Roddewig estimated the sales price of the properties that were taken in the Creech

6

Acquisition as if they were purchased by private buyers. (See id. at 18-31.) Roddewig

7

totaled that amount, then compared it to the amount that the United States paid. (Id. at 30-

8

31.) Roddewig found that that the price paid by the Air Force for the Creech Acquisition

9

was between 26% and 112% higher than the price private buyers would have paid. (Id. at

10

30.) Roddewig performed a similar analysis for the Tinker acquisition and concluded that

11

the premium the government paid for the land ranged from 60% to well over 1,000%. (Id.

12

at 34-35.) Based on these sales, Roddewig added a premium of 25% to his appraisal

13

value of the Property. (Id. at 35.)

14

DiFederico relied on the Creech and Tinker Acquisitions as comparable sales,

15

comparing them to the Property to estimate value under the sales comparison approach.

16

(See ECF No. 406-1 at 24-25.) DiFederico found that the Property compared favorably to

17

both properties and would command a higher price. (Id. at 24-25.)

18

2.

Discussion

19

“The price paid by a condemnor in settlement of condemnation proceedings or in

20

anticipation of such proceedings is inadmissible to establish value of comparable land as

21

‘such payments are in the nature of compromise to avoid the expense and uncertainty of

22

litigation and are not fair indications of market value.’” United States v. 10.48 Acres of

23

Land, 621 F.2d 338, 339 (9th Cir. 1980) (quoting Slattery Co. v. United States, 231 F.2d

24

37, 41 (5th Cir. 1956)). “The only recognized exceptions to this rule are in cases of

25

voluntary sale, or where ‘the fact that parties were condemnor and condemnee either was

26

not known or had no influence because the sale was not in connection with, or in

27

anticipation of, condemnation proceedings.’” Id. (quoting Slattery, 231 F.2d at 41); see

28

also United States v. 0.59 Acres of Land, 109 F.3d 1493, 1498 (9th Cir. 1997).
48

1

A proponent of evidence within one of these exceptions “must show that the sales

2

were uninfluenced by the buyer’s possession of the eminent domain power.” United States

3

v. 2.739 Acres of Land, No. CV 09-488 TUC AWT, 2013 WL 11311743, at *1 (D. Ariz. Mar.

4

13, 2013), aff’d, 609 F. App’x 436 (9th Cir. 2015) (quoting Transwestern Pipeline Co. v.

5

O’Brien, 418 F.2d 15, 19 (5th Cir. 1969)).

6

In 2.739 Acres, the court found that two sales to entities with the power of eminent

7

domain were admissible as voluntary sales. The first was a sale of land from the Arizona

8

Department of Transportation (“ADOT”) to the United States. Id. In connection with that

9

sale, the government’s appraiser testified “that he had investigated and confirmed the

10

voluntary nature of the sale as part of his due diligence in preparing his appraisal report.”

11

Id. The court also considered a letter in which the government purchaser said that the offer

12

amount was based on a recent appraisal. Id. at *1-2. “The price offered in this letter was

13

ultimately the price paid, and there was no mention of condemnation proceedings

14

anywhere.” Id. at *2. The court found it “clear that the sale price did indeed reflect fair

15

market value, rather than a compromise to avoid litigation.” Id.

16

The second was a previous sale of land from a private party involved in the litigation

17

with the ADOT. Id. The Court noted that the private party’s conduct suggested it was

18

“enthusiastic” about the deal and concluded that the private party “took advantage of a

19

welcome opportunity to sell some of its vacant land to ADOT, without any hint of

20

compulsion.” Id.

21

The Ninth Circuit expressly affirmed both the trial court’s rulings:

22

[I]t was not an abuse of discretion to admit the sale to ADOT, because that
sale was not used as a comparable and was instead offered to rebut
testimony that Holy Cross was reluctant to sell its property. That sale was
properly disclosed in a letter by Aries that Holy Cross attached to its motion
to exclude Aries’ testimony. It was also not an abuse of discretion to admit
the sale to GSA, given the government’s evidence that the sale had been
voluntary.

23
24
25
26

United States v. 2.739 Acres of Land, 609 F. App’x 436, 438 (9th Cir. 2015).

27

Landowners have not shown that the Creech Acquisition was “uninfluenced by the

28

buyer’s possession of the eminent domain power.” 2.739 Acres, 2013 WL 11311743, at
49

1

*1. The owners of the Creech property expressly informed the Air Force that they “were

2

not opposed to pursuing litigation to ensure that they are paid the fair value of the

3

property.” (ECF No. 436-1 at 3.) In addition, the report states that the owners’ attorney

4

reiterated “no less than three times during negotiation talks” that Air Force delays in

5

acquiring the property had diminished its value. (Id. at 2-3.) Plus, unlike in 2.739 Acres,

6

the price offered was not the price paid. The government initially offered $9,940,000 and

7

increased the offer to $9,965,000 the next day due to an increase in the land area

8

determined by a professional survey. (Id. at 2.) The owners counteroffered at $12,250,000

9

in part because “the Air Force’s actions in recent years have considerably diminished the

10

value of [the] property.” (Id.) The “action in recent years” seems to refer to the “Air Force’s

11

inaction to acquire the property promptly after the public announcement of their intent to

12

acquire the property.” (See id.) The government made another offer of $10,200,000. (Id.)

13

The owner then made a final offer of $11,450,000, and the government accepted. (Id. at

14

3.) While the negotiator’s report states that “[n]egotiations were conducted in a fair and

15

courteous manner and no threats of condemnation were made,” the content of the report

16

suggests that the owners resented the Air Force’s delay and negotiated under the express

17

possibility of litigation. Accordingly, the Court finds that the Creech Acquisition is not

18

admissible as a reflection of “fair market value, rather than a compromise to avoid

19

litigation.” 2.739 Acres, 2013 WL 11311743, at *1.

20

Landowners also have not produced sufficient evidence to show that the Tinker

21

Acquisition is admissible. Landowners rely solely on a news article that does not

22

demonstrate either exception to the general rule against admission of government sales

23

applies. (See ECF No. 436 at 8-9; see also ECF No. 436-7.) The news article details a

24

complex negotiation between the property owner—Burlington Northern Santa Fe Railway

25

(“Railway”)—the federal government, the Oklahoma state government, and the Oklahoma

26

City government. (See generally ECF No. 436-7.) Nowhere does the article expressly state

27

that the sale was “uninfluenced by the buyer’s possession of the eminent domain power,”

28

nor does the article imply such a conclusion. When the government approached the
50

1

Railway, the Railway proposed selling the property for $75 million even though the U.S.

2

Army Corps of Engineers “had appraised the property at about $5 million or $6 million.”

3

(ECF No. 436-7 at 6.) Ultimately, the Railway accepted an offer of $44 million. (Id. at 7.)

4

The Railway became concerned about liability regarding environmental issues over the

5

course of the sale and then “still hesitated because of other dealings they had in the state.”

6

(Id. at 11-12.) Nevertheless, the sale proceeded. At best, Landowners have provided

7

insufficient information for the Court to conclude that the Tinker Acquisition was

8

uninfluenced by the government’s power of eminent domain. At worst, the article suggests

9

a reluctant sale on the part of the Railway that was perhaps only accomplished through

10

the tacit threat of condemnation.
Accordingly, the Court grants the government’s motion to exclude evidence of sales

11
12

to the government and excludes evidence of the Creech and Tinker Acquisitions.
C.

13

GOVERNMENT’S PARTIAL MOTION TO RECONSIDER EXCLUDING
ALL EVIDENCE REGARDING ONLINE SURVEYS (ECF NO. 407)21

14
The Court grants the government’s partial motion to reconsider excluding all

15
16

evidence regarding online surveys for the following reasons.
1.

17

Background

18

Several of Landowners’ experts relied on survey data to predict how much revenue

19

the Property would generate if it were transformed into a commercial tourist destination.

20

(ECF No. 246 at 3.) The Court has previously referred to two of these surveys as Qualtrics

21

I and Qualtrics II. (See id.) The government sought to exclude the results of these surveys

22

as inconsistent with generally accepted principles of survey research in a prior motion.

23

(See id. at 8.) The Court denied relief. (Id.) The government again seeks to exclude

24

Qualtrics I and II, this time based on Landowners’ purported involvement in the drafting of

25

the surveys. (ECF No. 407 at 4.)

26

///

27

///

28

21The

Court has reviewed the response (ECF No. 441) and reply (ECF No. 483)
related to this motion.
51

2.

1

Discussion

2

Counsel’s involvement in designing surveys can render them inadmissible. In Elliott

3

v. Google, Inc., the Ninth Circuit affirmed a district court’s exclusion of survey data when

4

those surveys were designed by the proponent’s counsel. 860 F.3d 1151, 1160 (9th Cir.

5

2017). The court noted that counsel was “not qualified to design or interpret surveys” and

6

cited the Federal Judicial Center’s Reference Manual on Scientific Evidence, which

7

explains that survey design typically requires graduate training or professional experience

8

in survey research. Id. In Marlo v. United Parcel Service, Inc., the Central District of

9

California found that a survey was flawed and inadmissible in part because the plaintiff’s

10

counsel “who has not claimed to be an expert on survey methodology appears to have

11

designed the questions.” 251 F.R.D. 476, 485 (C.D. Cal. 2008).

12

Here, the evidence suggests that Landowners’ counsel—who do not claim to be

13

experts on survey methodology—designed the questions. Landowners argue that

14

Qualtrics—a company that helped to administer the survey online—helped to design the

15

substantive questions in the surveys (ECF No. 441 at 3-6), but Qualtrics’ 30(b)(6) designee

16

testified to the contrary:

17
18

Q. [D]id Qualtrics have responsibility for the survey methodology of Job One?
A. No.
Q. And did Qualtrics have responsibility for the survey design of Job One?
A. No.

19
***
20

22

Q. [D]id Qualtrics have a responsibility for the survey methodology of Job Two?
A. No.
Q. Did Qualtrics have responsibility for survey design of Job Two?
A. No.

23

***

24

Q. So starting with Job One, was Qualtrics responsible for the content of the
survey?
A. No.
Q. And for Job Two, was Qualtrics responsible for the content of the survey?
A. No.

21

25
26
27
28

52

1

XII.

MOTIONS DENIED AS MOOT

3

LANDOWNERS’ MOTION FOR SUMMARY JUDGMENT ON RANGE OF
VALUES FOR JUST COMPENSATION THAT CAN BE PRESENTED TO
THE FACTFINDER (ECF NO. 391)22

4

The Court denies Landowners’ motion for summary judgment on the range of

5

values for just compensation that can be presented to the factfinder as moot for the

6

following reasons.

A.

2

7

Landowners’ seek summary judgment “that the range of testimony for this case is

8

between the values testified to by the Landowners and the independent valuation experts

9

they have retained in their case-in-chief.” (ECF No. 391 at 2.) Landowners’ motion is

10

expressly predicated on the Court having granted their motion to exclude Neville’s

11

testimony. (See id.) Given that the Court has denied Landowners’ motion to exclude

12

Neville’s testimony, see supra Section X(B), the Court will deny this motion as moot.
Accordingly, the Court denies Landowners’ motion for summary judgment on the

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14

range of values for just compensation that can be presented to the factfinder as moot.
B.

15

LANDOWNERS’ MOTION REGARDING ACCESS TO AND VIEW FROM
THE PROPERTY (ECF NO. 386)23

16
The Court will deny Landowners’ motion regarding access to and view from the

17
18

Property as moot for the following reasons.

19

Landowners ask the Court to decree that the following propositions related to the

20

Property are true: (1) Landowners had full and unrestricted access to the Property for

21

themselves and their business invitees; (2) the government had no legal right to constrain,

22

interfere with, restrict, move, or prohibit this access; (3) there is a clear and unobstructed

23

view of the secret military base known as Area 51 from the Property; and (4) the

24

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25

///

26
27
28

22The

Court has reviewed the response (ECF No. 448) and reply (ECF No. 472)
related to this motion.
23The

Court has reviewed the response (ECF No. 440) and reply (ECF No. 470)
related to this motion.
54

1

government is prohibited from denying this view or claiming that it was impeded in any

2

way. (See ECF No. 386 at 2.)

3

Landowners’ first request is moot. The government “does not dispute that a buyer

4

could be granted permission to the NTTR to access the Groom Mine for themselves, their

5

employees, and business visitors.” (ECF No. 440 at 16.)

6

Landowners’ second request also is moot. The only dispute between the parties in

7

relation to the second request is whether the Air Force can require visitors by force of law

8

to pass through security checkpoints. (See ECF No. 440 at 20; ECF No. 470 at 13.) But

9

Landowners’ evidence is designed to show that the security checkpoints—legally

10

enforceable or not—cause the value of the Property to increase. (See ECF No. 440 at 22-

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23; ECF No. 470 at 12-13 (the experts “used these access limitations as an increase to

12

the value of the Property”); ECF No. 440-4 at 12 (one expert’s assertion that “the enhanced

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security and screening requirements – and limitations on visitors – would enhance the

14

visitor experience and make the Groom Mine more desirable as a travel destination since

15

it would ratify the widespread popular culture beliefs and mythology about Area 51 and its

16

purposes”).)

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Landowners express concern that the government will claim it could delay

18

processing individuals through the security checkpoint for up to 20 hours (ECF No. 470 at

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13), but Landowners exaggerate the government’s position. While the government asserts

20

that guards might spend 20 hours per day screening visitors, it is clear that no one

21

individual would regularly wait 20 hours per day for screening. Rather, the government’s

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contention is based on an estimate that guards would spend one to two minutes per visitor

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screening, for a total screening time of 20 hours per day. (ECF No. 440 at 23.)

24

Defendants’ third and fourth requests are overbroad, vague, and ambiguous. As

25

the government points out, “[i]t is illogical to assume the Groom Mine has a clear an[d]

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unobstructed view of a facility miles away in all weather conditions, at all times, and in all

27

seasons.” (ECF No. 440 at 24.)

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55

Accordingly, Landowners’ motion regarding access to and view from the Property

1
2

is denied as moot.

4

GOVERNMENT’S MOTION TO EXCLUDE EVIDENCE AND ARGUMENT
RELATED TO ACTIVE MINING AS THE HIGHEST AND BEST USE OF
THE PROPERTY (ECF NO. 403)24

5

The Court denies the government’s motion to exclude evidence and argument

6

related to active mining as the highest and best use of the Property as moot for the

7

following reasons.

C.

3

8

The government moves to exclude all evidence and argument that active mining is

9

the highest and best use of the Property. (ECF No. 403 at 3.) The government’s motion is

10

moot because Landowners concede that “no witness in this case believes that ‘active

11

mining’ is the highest and best use of the Landowners’ property or its mineral estate on

12

the date of value.”25 (ECF No. 433 at 2.) The government’s motion also is moot because

13

it has already received its requested relief. First, the government seeks to exclude Danny

14

and Joe Sheahan’s opinions of value. (ECF No. 403 at 4.) The Court already has excluded

15

Danny and Joe Sheahan’s opinions of value because Landowners sought to elicit their

16

testimony in violation of Federal Rule of Evidence 702. See supra Section X(G). Second,

17

the government seeks to exclude a small portion of Richard Roddewig’s opinion of value

18

based on ongoing mining. (ECF No. 475 at 2.) Roddewig already has prepared a

19

supplemental analysis disregarding any potential income from ongoing limited mining of

20

the Property. (Id.) Thus, it does not appear that Landowners seek to offer Roddewig’s

21

opinion of value based on ongoing mining.
Accordingly, the Court denies the government’s motion to exclude evidence and

22
23

argument related to active mining as the highest and best use of the Property as moot.

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25
26
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24The

Court has reviewed the response (ECF No. 433) and reply (ECF No. 475)
related to this motion. The Court also heard oral argument on this motion on July 1, 2019.
(ECF No. 493.)
25To

the extent that Landowners Danny and Joe Sheahan’s opinions of value are
based on use of the Property for active mining, the Court has excluded those opinions.
See supra Section X(G).
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1

XIII.

CONCLUSION

2

The Court notes that the parties made several arguments and cited to several cases

3

not discussed above. The Court has reviewed these arguments and cases and determines

4

that they do not warrant discussion as they do not affect the outcome of the motions

5

addressed in this Order.
It is therefore ordered that Landowners’ motion regarding the standard of

6
7

admissibility that applies in this case (ECF No. 385) is denied.
It is further ordered that Landowners’ motion to exclude the opinion and testimony

8
9

of Warren Neville (ECF No. 390) is denied.
It is further ordered that Landowners’ motion to exclude the opinion and testimony

10
11

of Nathan Moeder (ECF No. 398) is denied.
It is further ordered that Landowners’ motion to exclude the opinion and testimony

12
13

of Marc Springer (ECF No. 399) is denied.

14

It is further ordered that Landowners’ motion to exclude the opinion and testimony

15

of Dr. Donald Singer (ECF No. 400) is granted in part and denied in part. The Court grants

16

Landowners’ motion as to Statement No. 1. The Court denies Landowners’ motion as to

17

Statements Nos. 3, 4, 5, and 7 as well as the disputed portion of Statement No. 8. As to

18

Statement No. 6, the Court grants Landowners’ motion as to the third and fifth sentences

19

and denies Landowners’ motion as to the first, second, and fourth sentences.
It is further ordered that the government’s motion to exclude the expert opinion and

20
21

testimony of George Harris (ECF No. 404) is granted.
It is further ordered that the government’s motion to exclude the opinion and

22
23

testimony of Danny and Joe Sheahan (ECF No. 402) is granted.

24

It is further ordered that the following motions are denied as moot: Landowners’

25

motion for summary judgment on the range of values for just compensation that can be

26

presented to the factfinder (ECF No. 391); Landowners’ motion regarding access to and

27

view from the Property (ECF No. 386); and the government’s motion to exclude evidence

28

///
57

1

and argument related to active mining as highest and best use of the Property (ECF No.

2

403).

3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

It is further ordered that Landowners’ motion to exclude all evidence of
environmental contamination (ECF No. 395) is denied.
It is further ordered that Landowners’ motion to confirm uses of unpatented land
(ECF No. 396) is denied.
It is further ordered that Landowners’ motion to establish the condition of the
Property related to water rights (ECF No. 397) is denied.
It is further ordered that the government’s combined motion for a property viewing
and to appoint a land commission (ECF No. 401) is granted.
It is further ordered that the government’s motion to exclude evidence of sales to
the government (ECF No. 406) is granted.
It is further ordered that the government’s partial motion to reconsider excluding all
evidence regarding online surveys (ECF No. 407) is granted.
It is further ordered that the government’s motion to exclude the income
capitalization approach (ECF No. 408) is granted.
It is further ordered that the government’s motion to exclude valuation evidence
premised on tourism use (ECF No. 409) is denied.
DATED THIS 29th day of August 2019.

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21
MIRANDA M. DU
UNITED STATES DISTRICT JUDGE

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