Garcia v. United States , 442 F. App'x 745 ( 2010 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 08-1250
GEOFFREY J. GARCIA; CHARLOTTE M. GARCIA,
Plaintiffs - Appellants,
v.
UNITED STATES OF AMERICA; INTERIOR BOARD OF LAND APPEALS,
Defendants - Appellees.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Claude M. Hilton, Senior
District Judge. (1:06-cv-00915-CMH-TCB)
Argued: October 28, 2009 Decided: January 20, 2010
Before MOTZ and GREGORY, Circuit Judges, and Benson E. LEGG,
United States District Judge for the District of Maryland,
sitting by designation.
Vacated and remanded by unpublished per curiam opinion.
ARGUED: Richard Merritt Stephens, GROEN, STEPHENS & KLINGE, LLP,
Bellevue, Washington, for Appellants. Anna Katselas, UNITED
STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellees.
ON BRIEF: Ronald J. Tenpas, Assistant Attorney General, John L.
Smeltzer, John S. Most, UNITED STATES DEPARTMENT OF JUSTICE,
Environment & Natural Resources Division, Washington, D.C.;
Michael A. Schoessler, Attorney-Adviser, UNITED STATES
DEPARTMENT OF THE INTERIOR, Washington, D.C., for Appellees.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Today marks a milestone for the Fourth Circuit as we
address, for the first time in recorded history, an appeal
involving a gold mining claim under the Mining Act of 1872. 1
Geoffrey and Charlotte Garcia (“the Garcias”) appeal from an
order of the United States District Court for the Eastern
District of Virginia granting summary judgment to the United
States and Interior Board of Land Appeals (“the Board”). The
district court held that the Board’s decision denying the
viability of the Garcias’ claim on a plot of land in Oregon did
not violate the Administrative Procedure Act (“the APA”). For
the reasons that follow, we vacate and remand.
I.
The Mining Law of 1872 encourages mineral exploitation by
allowing prospectors who patent mining claims to take fee title
to the land on which the claim rests. To obtain a patent from
the Department of the Interior, the applicant must prove that he
or she has discovered a “valuable mineral deposit,” which means
1
When we inquired about venue at oral argument, the Garcias
informed us that they sued the Department of the Interior in its
home district to avoid unfavorable precedent in the Ninth
Circuit. The Government, for reasons unknown, decided not to
challenge the Garcias’ choice of venue.
2
a deposit that a prudent person would expend labor and means to
develop.
The Garcias are gold miners who applied in 1985 to patent
the Last Chance Association Placer Mining Claim on a 24.23 acre
plot in Oregon, and thus take title of the land. 2 In 1990 the
Bureau of Land Management (“BLM”) issued the Garcias a First
Half Final Certificate (“FHFC”) -- an official acknowledgement
that the necessary paperwork is on file that authorized the
Garcias to go forth and prove that they had discovered a
valuable mineral deposit.
During the process, a BLM mineral examiner evaluated the
Garcias’ claim and determined, based on soil samples and cost
estimates, that the Garcias had not discovered a valuable
mineral deposit. Based on the examiner’s report, the BLM filed
a contest complaint in the Department of Interior’s Office of
Hearings and Appeals disputing the Garcias’ claim.
This triggered a hearing before an Administrative Law Judge
(“ALJ”) in 1997, in which the Garcias appeared pro se. The ALJ
heard testimony, saw evidence, and considered post-hearing
briefs about the economics of the Last Chance mine. The ALJ
made findings regarding both the potential revenues from the
2
“Last Chance” is the name of the mine. “Placer mining”
refers to a mining process that entails sifting through gravel
to find valuable minerals.
3
mine, including the likely price of gold (estimated at $400/tr-
oz), and the cost of mining the claim. Based on these findings,
the ALJ determined that the Garcias stood to profit from the
mine, and so granted their application.
BLM appealed the ALJ’s order to the Board, which issued a
twenty-four page opinion reversing the ALJ. United States v.
Garcia, 161 IBLA 235 (2004). The Board agreed with all of the
ALJ’s findings except with regard to the wash plant rate. Id.
at 241, 253-54. The wash plant is a facility that uses water to
extract gold from gold-bearing gravel. The plant then expels
the water and non-gold sediment. Rather than discharge effluent
into public waterways, the Garcias intended to recycle the water
through “settling ponds.” Once water from the wash plant enters
a settling pond, the solids sink to the bottom, leaving the
water available to wash more gravel.
The ALJ had found that the Garcias’ existing wash plant
facility could process minerals at a rate of 100 loose cubic
yards per hour (“lcy/hr”) -- which would use 90,000 gallons per
hour of water. The Board found that this calculation failed to
take into account the small size of the settling ponds.
Including that variable, the Board determined that the plant
could operate at a maximum rate of 25 lcy/hr -- using 22,500
gallons per hour. 161 IBLA at 254-55.
4
The Board then evaluated the operating costs of the mining
operation, including the wash plant, and determined that at the
lower rate of operation, the mine would generate a loss. Id. at
258. Specifically, the Board considered the costs of mining
Area 1, the most easily mined (and hence the most likely to be
profitable) area of the claim, and concluded that mining Area 1
would return a $8700 loss. Id. Because a prudent person would
not mine at a loss, the Board held that the Garcias had failed
to prove that they had discovered a valuable mineral deposit,
and so voided their claim. Id.
The Garcias filed a petition for reconsideration with the
Board. The Board reconsiders its rulings only in “extraordinary
circumstances.” In their petition, the Garcias raised, for the
first time, several objections to the ALJ’s and the Board’s cost
estimates. The Board addressed each of the Garcias’ arguments
and then denied their petition, concluding that “their reasons
stated in support of reconsideration are essentially an attempt
to relitigate issues considered and decided by [the ALJ] and
this Board. The reasons do not establish extraordinary
circumstances to support reconsideration of our decision.”
The Garcias then brought this action under the APA in the
United States District Court for the Eastern District of
Virginia. On cross-motions for summary judgment, the district
5
court held in the Board’s favor. The Garcias timely noted this
appeal.
II.
The APA permits courts to review only those actions “made
reviewable by statute and final agency action for which there is
no other adequate remedy in a court.” 5 U.S.C. § 704 (2006).
In this case, the final agency action is the Board’s decision.
43 C.F.R. §§ 4.21(d), 4.403 (2009). Reviewing courts consider
the “whole record” and set aside agency actions that are, inter
alia, “arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law;” “without observance of
procedure required by law;” or “unsupported by substantial
evidence.” 5. U.S.C. § 706 (2006).
“In determining whether agency action was arbitrary or
capricious, the court must consider whether the agency
considered the relevant factors and whether a clear error of
judgment was made.” Ohio Valley Envtl. Coalition v. Aracoma
Coal Co., 556 F.3d 177, 192 (4th Cir. 2009). The standard of
review is “highly deferential, with a presumption in favor of
finding the agency action valid.” Id. We will uphold the
agency action if “the agency has examined the relevant data” and
provided an explanation of its decision that includes “a
‘rational connection between the facts found and the choice
6
made.’” Id. (quoting Motor Vehicle Mfrs. Ass’n v. State Farm
Mutual Auto Ins. Co., 463 U.S. 29, 43 (1983)).
“Substantial evidence is . . . such relevant evidence as a
reasonable mind might accept as adequate to support a
conclusion.” Mastro v. Apfel, 270 F.3d 171, 176 (4th Cir. 2001)
(quoting Richardson v. Perales, 402 U.S. 389, 401 (1971)). “It
consists of more than a mere scintilla of evidence but may be
somewhat less than a preponderance.” Id. In substantial
evidence review, a reviewing court “should not undertake to re-
weigh conflicting evidence, make credibility determinations, or
substitute its judgment for that of the [agency].” Id.(internal marks omitted).
The Garcias raise several issues. For ease of exposition,
we address the issues in a slightly different order than the
Garcias presented them in their brief.
III.
The Garcias maintain that the Board’s procedures violate §
557 of the APA. These arguments fail.
The Garcias contend that the statute compels the ALJ to
give the Board a recommended decision and to allow the parties
an opportunity to comment on that decision. But a careful
reading of the APA reveals that it only requires ALJs to
“recommend a decision” when the agency requires “the entire
7
record to be certified to it for decision.” 5 U.S.C. § 557(b)
(2006). The Board, however, requires no such thing. Instead,
it permits ALJs to make the initial decision in the case
themselves.
The Garcias also argue that the APA requires the ALJ and
the Board to allow them to comment on any proposed decision
before the decision becomes final, and the ALJ and the Board did
not allow them to do this. See 5 U.S.C. § 557(c) (2006). In
fact, the ALJ and the Board provided the Garcias with exactly
the procedure mandated by law. First, the ALJ gave the parties
an opportunity to submit post-hearing briefs, including proposed
findings, to the ALJ. 43 C.F.R. § 4.452-8(a) (2009) (“At the
conclusion of the testimony the parties . . . shall be given a
reasonable time by the administrative law judge . . . to submit
. . . proposed findings of fact and conclusions of law and
reasons in support thereof.”). Then, after the BLM appealed the
ALJ’s decision to the Board, the Garcias had ample opportunity
to comment on the entire record, including the ALJ’s decision. 3
We thus hold that the Board’s procedures complied with the
requirements of § 557 of the APA.
3
The Garcias also imply that the Board was required to hold
additional hearings on appeal. This position finds no support
in the APA or the related caselaw.
8
IV.
The Garcias argue that the Board arbitrarily reversed the
ALJ’s finding regarding the wash plant rate. The Garcias
contend that the ALJ was in a better position to hear the
evidence, that substantial evidence supported his decision, and
that the Board reversed the ALJ without reason.
This argument misconceives the relationship between the
ALJ, the Board, and this court. Although, as a practical
matter, the Board may have a disinclination to reverse an ALJ,
the Board reviews an ALJ’s decision de novo, with no obligation
to defer to an ALJ’s findings. 5 U.S.C. § 556(b) (2006), United
States v. Dunbar Stone Co., 56 IBLA 61, 67–68 (1981). Once the
Board completes its review, it speaks for the agency. 43 C.F.R.
§§ 4.21(d), 4.403 (2009). Our deferential standard then applies
to the Board’s decision, and not to the ALJ’s. Thus, the proper
question is not whether the Board arbitrarily reversed the ALJ,
or whether substantial evidence supported the ALJ’s decision,
but rather whether the Board’s ultimate conclusions on the
merits are arbitrary and capricious, or unsupported by
substantial evidence.
Applying that standard, we find no fault with the Board’s
conclusions regarding the wash plant rate. First, the Garcias
themselves used a processing rate of 25 lcy/hr in their patent
application. Second, three separate witnesses testified that
9
the settling ponds could not contain the discharge from a wash
plant running at 100 lcy/hr. The evidence to the contrary shows
that the plant was capable of operating at a faster rate, but
does not address the settling ponds, and therefore does not
address the crux of the Board’s decision. 4
Considering the record as a whole, we find that substantial
evidence supported the Board’s findings relating to the wash
plant rate, and that its decision was not arbitrary or
capricious.
V.
The Garcias continue to press the cost arguments that the
Board and the district court found untimely. Specifically, they
challenge the Board’s findings with regard to fuel and lubricant
costs, hours of operation for the wash plant, and permit costs.
We agree with the Board that these arguments are untimely
and therefore waived. “Simple fairness . . . requires as a
general rule that courts should not topple over administrative
decisions unless the administrative body not only has erred but
has erred against objection made at the time appropriate under
4
The Garcias also argue that the Board did not explain why
it singled out the wash plant rate finding for reversal, and not
the other findings. However, the Board discussed at some length
all of the ALJ’s findings. It singled out the wash plant rate
because that was the only finding “not supported by the record.”
161 IBLA at 241.
10
its practice.” United States v. L.A. Tucker Truck Lines, Inc.,
344 U.S. 33, 37 (1952); 1000 Friends of Maryland v. Browner, 265
F.3d 216, 227-28 (4th Cir. 2001). It would be odd indeed to
find an agency’s decision arbitrary and capricious because the
agency refused to consider an argument that nobody made.
The Garcias argue that submitting an argument with a
petition for reconsideration renders it timely. This argument
fails. The Board’s regulation for petitions to reconsider
states that the “Board may reconsider a decision in
extraordinary circumstances for sufficient reason.” 43 C.F.R. §
4.403 (2009). The accompanying release states:
This provision reinforces the Board's expectation that
parties will make complete submissions in a timely
manner during the appeal, not afterward on
reconsideration. This expectation is justified
because almost all those who petition for
reconsideration have already had two full
opportunities to present their cases to the
Department: once before the initial decisionmaker and
again before the Board. In general, the Board does
not give favorable consideration to a petition for
reconsideration which merely restates arguments made
previously or which contains new material with no
explanation for the petitioner's failure to submit
such material while the appeal was pending. Because
parties recognize their obligations in this regard,
relatively few petitions for reconsideration are ever
filed. Even so, the Board rarely finds it necessary
to grant them, and even more rarely reverses itself.
52 Fed. Reg. 21307-01, 21307 (June 5, 1987). Plainly, the
“appropriate time under [the Board’s] practice” for the Garcias
to raise their cost arguments was in the appeal to the Board,
11
and not in a petition for reconsideration. See L.A. Tucker
Truck Lines, 344 U.S. at 37.
The Garcias contend that they had no reason to submit their
cost arguments on appeal because they were content with the
ALJ’s decision below. But the Board reviews the ALJ’s factual
findings de novo, and, therefore, the Garcias would have been
prudent to point out any errors that inflated the costs of their
mining operation. Instead, it appears that they argued that it
is the Board that should defer to the ALJ, and they offered no
evidence or arguments about the specific errors that the ALJ
made in his initial cost assessments. It is unclear whether
this was inadvertent or part of a strategy to shore up the ALJ’s
credibility, but whatever the reason, we cannot consider the
Garcias’ cost arguments now. 5
VI.
Finally, the Garcias argue that the Board held them to an
incorrect legal standard by requiring them to demonstrate to a
certainty that their mine would yield an immediate profit.
5
The Garcias also contend that the Board arbitrarily
refused to grant their petition for reconsideration. This
argument lacks merit. The Garcias did not persuade the Board
that they had good reason for failing to make their cost
arguments on appeal, and the Board thus correctly explained that
the Garcias arguments for reconsideration did not amount to the
type of “extraordinary circumstances” that merit reconsideration
under its regulations.
12
The Supreme Court has held that the test for determining
whether a claimant has discovered a valuable mineral deposit is
whether “a person of ordinary prudence would be justified in the
further expenditure of his labor and means, with a reasonable
prospect of success, in developing a valuable mine.” United
States v. Coleman, 390 U.S. 599, 602 (1968) (quoting Castle v.
Womble, 19 L.D. 455, 457 (1894)). In Coleman, the Supreme Court
supplemented this “prudent-person test” with a “marketability
test,” requiring applicants to show “that the mineral can be
extracted, removed and marketed at a profit.” Id. at 600.
The Court further stated that:
While it is true that the marketability test is
usually the critical factor in cases involving
nonmetallic minerals of widespread occurrence, this is
accounted for by the perfectly natural reason that
precious metals which are in small supply and for
which there is a great demand, sell at a price so high
as to leave little room for doubt that they can be
extracted and marketed at a profit.
Id. at 603. Applying the Coleman Court’s dictum about precious
metals, both the Ninth Circuit and the Board have held that:
Although the claimant of a mining claim located for a
precious metal (gold) need not prove that the gold can
presently be extracted, removed, and marketed at a
profit, evidence of the costs and profits of mining
the claim may be properly considered in determining
whether a person of ordinary prudence would be
justified in the further investment of his labor and
capital.
13
Moon Mining Co. v. Hecla Mining Co., 161 IBLA 334, 361 (2004)
(citing Lara v. Sec’y of the Interior, 820 F.2d 1535, 1541 (9th
Cir. 1987)).
Citing these authorities, the Garcias argue that the
marketability test does not apply to claims involving precious
metals. We agree that, when precious metals are concerned, the
applicant does not have to demonstrate present marketability,
and that the correct legal standard for precious metal claims is
whether, considering the likely costs and revenues, a prudent
person would expend labor and capital to mine the claim. This
standard permits an applicant to point to the likely future
price of a precious metal to demonstrate that a prudent person
would mine that metal even if market conditions at the moment
were not favorable.
Because “an administrative order cannot be upheld unless
the grounds upon which the agency acted . . . were those upon
which its action can be sustained,” we must vacate the judgment
of the district court, affirming the decision of the Board. SEC
v. Chenery Corp., 318 U.S. 80, 95 (1943). We remand the case to
the district court with instructions to remand to the Board to
consider the Garcias’ claim under the correct legal standard.
14
VII.
The judgment of the district court is
VACATED AND REMANDED.
15