| Hage v. US Comes to a Close 10/28/04 Liberty Matters News Service Nye County, Nevada - It's been nearly fourteen years since Nevada rancher, Wayne Hage and his late wife, Jean, filed their takings case against the United States. On Thursday, October 21, 2004, ranchers from at least five states crowded into the small courtroom and spilled out into the hallway to hear the closing arguments in this landmark case being heard by Judge Loren Smith of the U.S. Court of Federal Claims. From the time Hage purchased Pine Creek Ranch in 1978 until he filed the takings case in 1991, Hage spent countless hours fighting the BLM and the Forest Service over his water rights and grazing allotments. The mission of the government agencies was clearly to reclaim the use of the federal lands where Hage held grazing permits and owned the water and ditch rights of ways, by whatever means necessary, including fencing off Hage's springs and the eventual confiscation of his cattle. During the three week takings trial held in Reno last May, the Judge heard how the government's actions harassed and interfered with Hage to the point at which this profitable ranch was no longer a viable economic operation. Now that all the briefs have been filed and closing arguments have been made, the Court must decide whether the government took the property rights from Hage it had previously ruled he owned, and if so, how much compensation Hage is due for the takings. RELATED STORY: The Finish Line - Closing Arguments in the Takings and Valuation Phase of Hage v. United States By Fred Kelly Grant 10/28/04 The finish line in Hage v. United States is in sight. The track has been long and arduous but, finally, closing arguments were advanced by counsel in an all-day court session on October 21, 2004. Judge Loren Smith of the U.S. Court of Federal Claims then took the case under advisement. No date for issuance of a final decision is known, or can be predicted. The winning purse will be adequate compensation for property taken by the Government from Wayne Hage. After conclusion of the arguments, the parties and counsel have only one more opportunity to influence the final decision. Judge Smith admonished counsel to explore “any and all common ground” upon which settlement could be reached. Citing Justice Scalia of the United States Supreme Court, Judge Smith said he would neither make policy nor create new law, but would apply existing constitutional and statutory law to the facts in reaching his decision. Warning that it would be easier to end the case by settlement, he scheduled a telephone settlement status conference for November 18, 2004. If that conference concludes with no settlement discussions in the offing, the long awaited result of this litigation will be solely in the hands of Judge Smith. Leading up to this point, the Court previously found and decided that Hage has private property rights in water, ditch rights of way, forage adjoining the ditches and other rights. Based on the acknowledgement of these rights, the Court set a trial to determine whether the Government has taken the rights and, if so, what valuation should be placed on the rights taken. Compensation for the taken property would be based upon that valuation. During the “takings” three week trial in Reno in May, 2004, the history and chronological development of, operations of, and eventual destruction of, Hage’s Pine Creek Ranch in Nevada was presented from the witness stand and through documents. Judge Smith heard how property rights were purchased by Hage when he bought the ranch, and how he created additional property rights through range improvements. The evidence proved that Hage had the following property rights: (1) patented parcels of land totaling about 7,000 acres, (2) water rights in 7 streams confirmed by the Nevada state engineer and courts and recognized and declared in an earlier portion of the current case by Judge Smith, (3) underground water located all over the ranch, (4) 1866 ditch rights of way which were purchased with the ranch for conveyance of water for irrigation and stock, and (5) range improvements in the form of water tanks, pipes and troughs, 30 stockwater wells, 298 miles of fence, spring improvements, 92 ditches, corrals, cow camps, and 634 miles of roads and trails. Throughout the trial, the Judge heard how the Government’s actions harassed and interfered with Hage to the point at which this profitable ranch was no longer a viable economic operation. Hage was forced to liquidate the livestock which the Government did not confiscate. With the trial completed, the spotlight now turned on Hage’s attorneys, Ladd Bedford and Mike Van Zandt, to skillfully summarize the evidence and persuade the Judge to rule that the Government has taken property from Hage without compensation. Closing arguments cannot be effective unless the attorneys have been successful in getting into the record evidence sufficient to satisfy the Court of the merit of their case. But, many consider closing arguments to be the real test of a trial lawyer’s skill. These are the arguments where counsel must link the evidence to the points of law supporting the theory of their case and persuade the Court on any point of fact or law that the court might still find troublesome. Sitting beneath the Great Seal of the State of Nevada, in a court room packed to overflow by ranchers and supporters of private property rights, Judge Smith heard the closing arguments presented by counsel for Hage, the Government, and the State of Nevada Department of Wildlife and National Wildlife Federation. Plaintiff in any “takings” case normally has an uphill battle, and here, where no rancher has ever before successfully reached this stage of such a takings case, the burden is especially tough. Ladd Bedford and Mike Van Zandt proved again in closing arguments that they are more than “up to the challenge” they face. Both articulately presented their summaries of the evidence and applicable law. Then, in rebuttal arguments, passionately emphasized the importance of holding the Government responsible for compensating Hage. Bedford spoke first, presenting the plaintiff’s theory of why the story told at trial constituted a “taking” by the Government. He emphasized that when Hage purchased the ranch, there were no elk present. In 1979, without consulting with Hage, the Forest Service and Nevada Department of Wildlife introduced elk on the Table Mountain allotment, and from that time on, the elk interfered with Hage’s ability to operate a viable ranching business. The elk tore down fences, and the hunting seasons which resulted from introducing the elk into that particular allotment interfered with Hage’s ability to remove his cattle at the end of the grazing season. Judge Smith is what trial lawyers often refer to as a “busy” or “active” judge, meaning that he actively engages in the closing arguments by asking a question in order to clarify a point, and then aggressively pursuing a response to his question. He posed the following question to Bedford: If there was no law prohibiting the Government from putting elk on the allotment, if the Government had the right to put the elk on the allotment, then how could there be a “taking” because of damage done by the elk who were rightfully placed? Bedford responded that the elk damage made the Table Mountain allotment unusable. Judge Smith persisted: But, if the Government had the right to put the elk on the allotment, and if grazing on the allotment was by permit, then what constitutes the base for a taking? Bedford emphasized that Hage had private property rights on the allotment in the form of water rights and range improvements, and the Government’s action in placing the elk there actually prevented Hage from using the water and range improvements, thus making it impossible for him to use his property rights. Nodding his head affirmatively, Judge Smith then allowed him to proceed to his next point. Bedford recounted the testimony of witnesses who specified the damage done by elk, and then pointed out that the Forest Service used that damage as a base for charges against Hage. The Forest Service filed charges linked to fence damage done by the elk, and ultimately cancelled 25% of the number of livestock allowed on Table Mountain allotment and suspended 20% of the number allowed for a period of two years. Bedford emphasized the testimony of David Grider, the Forest Service District Ranger, admitting that the cancellation and suspension was designed to punish Wayne Hage, not to protect the resource. Turning his focus to the 1866 ditch right of way issue, Bedford pointed out that when Hage tried to cut down Pinion pine and juniper trees along one of his ditches so that he could maintain the ditch, he was charged with a criminal offense by the Government. (Hage was convicted by a jury, but the conviction was later overturned by the 9th Circuit of Appeals because the Government failed to prove that the trees had a value sufficient to establish the felony with which he was charged.) Bedford pointed out that Hage’s investment backed expectations in his property rights included the use of the ditch and the ability to maintain it so that it could be effectively used to convey water. This Government interference was emphasized as an example of the type of harassment and interference used by the Government to interfere with Hage’s profitable ranch operation. Bedford pointed out that by the end of 1990, when Table Mountain allotment had been overrun by elk and allotment numbers had been cancelled and suspended to the point at which the allotment was unusable for a viable economic operation, the Government also interfered with the operation of the Meadow Canyon allotment. The Forest Service cancelled 38% of the livestock numbers, suspended use for 5 years and served notice of impoundment of cattle. Wayne Hage knew that when he brought his cattle out of Ralston Valley, he could not keep them out of Meadow Canyon and avoid trespass actions. Twice cattle were impounded and sold. So, the Government had rendered the ranch operation so unusable that Hage was forced to liquidate his herd and get out of a business which had yielded $300,000 a year from cattle sales. From the years 1992 to 2002, Hage could run just a few head of cattle on his patented land, averaging sales of only $6700 a year. Judge Smith, reacting to the argument that Hage had been cut away from the use of his water rights by being forced out of business, asked what the reduction of water had been on a yearly basis. Bedford responded that the state engineer’s report showed that water in Pasco Creek irrigated 80 acres, and none were irrigated in 2003; water in Pine Creek irrigated 1,156 acres, and none were irrigated in 2003; water in Andrews Creek irrigated 1,051 acres, but water in the creek didn’t even reach the pastures in 2003; water in Barley Creek irrigated 951 acres, but water in the creek didn’t come to within 2 miles of the pastures and water in Mosquito Creek irrigated 2,377 acres, but irrigated barely 100 acres in 2003. As a result, Hage is unable to use enough of his water rights to put the pastures to viable economic use. Bedford concluded by emphasizing that Hage can’t use his ranch to gain a viable economic return and he can’t borrow against it. So, he cannot make a living from the ranch operation. He isn’t even able to rent or lease the ranch because of the Government’s interference in his business. This entire loss results from the Forest Service’s policy, the interference with and harassment of Wayne Hage’s operation by Forest Service officials. The Forest Service cannot base its actions driving Hage out of business on resource damage. Private range experts produced evidence that there was no range condition which would have justified any cancellation or suspension. When the Forest Service referred to the Meadow Canyon’s allotment as a “dust bowl,” a renowned private range expert said there was “excellent” forage production in the area. Bedford concluded his opening portion of the argument by pointing out that the prime use of the ranch in 1990 was livestock grazing, and now the ranch has been converted to other public interests such as recreation, wildlife and grass bank use. Mike Van Zandt completed the main closing argument for Hage by summarizing the evidence as to valuation, and moving to persuade Judge Smith to establish compensation based on that valuation. When Judge Smith questioned a distinction between regulatory taking and physical taking, Van Zandt responded that the key question was whether the owner was deprived of the ability to use the components of his property rights. He urged that when use of the ranch was prevented, the ranch was gone. He pointed out that the Government’s evidence as to valuation contained major inconsistencies which attacked credibility. Pointing to the Government’s theory that the valuation be set at approximately 1.5 million dollars, Van Zandt set forth the evidence regarding the 17,000 acre feet of water which the Government would get with this ranch. Based upon Nevada comparable sales, the water alone would be valued at $12 million dollars. So, the Government’s proposal to get the ranch for 1.5 million dollars would acquire for the Government $12 million dollars in water rights plus range improvements. Van Zandt concluded his portion of the arguments with emphasis on
the evidence which showed that the valuation of the property taken
by the Government is $10,453,000.00 just for agricultural value, and
is $23,979,000.00 at the highest and best use valuation. Several times, Government counsel focused their argument on the issue of Hage’s ditch rights of way maintenance. Judge Smith interrupted the government’s argument for the first of many times with a question: Was not the Government’s charging Wayne Hage with a criminal offense for maintaining his ditch right of way a major restriction on his access to his water? Judge Smith elaborated by asking whether a reasonable person would be reluctant to maintain his ditches if faced with arrest and chance of conviction for performing the maintenance work. Government counsel responded that the Judge had previously ruled that the 1866 ditch right of way was subject to reasonable regulation such as a special use permit. But the response prompted a second question---one that was never clearly answered throughout the arguments: Is there a specific regulation that requires a special use permit to perform the type of tree clearing maintenance which Hage performed? The Government simply cited the regulations upon which it relied in its brief, and Judge Smith pursued the question by pointing out that if there is no clearly defined rule, thus allowing such maintenance only under the naked discretion of the agency, due process might not be satisfied. Again he asked, “Is there a regulation that says that a special use permit is needed if the maintenance is to be done with anything other than hand tools?” Government counsel admitted that he knew of no such specific regulation. Judge Smith concluded this first series of due process questions by pointing out that ditch maintenance issues go to the question of whether interference with maintenance reduced the water right by interfering with access to the water. Government counsel seemed relieved to move from the ditch maintenance issue to his next point that Hage had failed to prove that any actual property right had been taken. He contended that any taking of forage rights adjacent to the ditches was of minimal value. As to water rights, he argued that Hage’s counsel was incorrect, factually and legally, in contending that Hage should be excused from any requirement for a special use permit to clear trees from his ditch because the Forest Service would not have granted such permit. He contended that Hage’s clearance of trees was simply a theft from the Government. By taking this position, he opened the opportunity for Judge Smith to return to his pointed questions regarding the maintenance. He reminded counsel that the Forest Service witness at the trial called the trees that had been cleared “trash trees.” He then asked how Hage’s action could have been a crime if the trees clearly had no value. Counsel’s answer was that the trees were Government property and any taking of them was a crime. Judge Smith turned to the Administrative Procedure Act, pointing out that when a person acts without requesting a permit, the test for whether the Government’s response is arbitrary and capricious is whether there is a clear standard by which one can determine whether a permit would have been issued or denied, if requested. In other words, is there any standard, which clearly governs the Government’s response, or is it left to the naked discretion of the Government? Counsel’s response was the same as before, he knew of no such clear regulation. As to valuation, the Government contended again, that Hage had shown no actual property loss, but only a loss of rights “on pape.” This lead to a series of questions from Judge Smith, which focused on what would be included in the deal if a buyer were considering a purchase of the water rights. Would the buyer expect to be purchasing the water rights as decreed on paper, or would he be speculating on what amount of water could actually be delivered, for example, in a drought year? The Government responded that Hage had failed to delineate between any loss of water, which might have occurred from drought and that which might have occurred because of restrictions on ditch maintenance. Government counsel then returned to the position that Hage is contending that because he has a stock water right, he has the right to graze. The Government’s position is that the plaintiff has a right to access to the water and to the use of it, if he is able to use it. But, the Government contends there is no taking simply because the plaintiff is not able to use the water---for whatever reason. The contention is that there is no taking when the Government simply destroys what it creates: in other words, since the Government permits the rancher to graze, there is no taking when it ceases to permit the grazing. Judge Smith asked whether there would be a taking if he decided that the Government’s actions which caused the loss of grazing also interfered with the use of water rights. The Government’s answer was that since there is no property right to graze, there can be no taking simply because the Government interfered with, or destroyed, the grazing operation. Judge Smith then pursued this point with several other questions related to a government official deliberately interfering with grazing, thus interfering with the ability to use water, and the relevance of that interference as the proximate cause for the property loss. The Government simply returned each time to its position that there is no grazing right, and any action by the Government regarding the grazing could not be the basis for a taking. In short, the Government rested its complete argument as to the taking of water rights and the taking of 1866 ditch rights of way on its position that there is no right to graze, so any interference by the Government with the grazing operation cannot stand as the base for a taking of the related rights. That position was used to explain away the placement of elk on the allotment which resulted in loss of the viable use of the allotment: The Government had the right to put the elk on federal lands because “multiple use” has been made a part of every grazing permit issued to Hage, so the result of the exercise of that right by the Government could not be a taking. Judge Smith then asked what the result would be if the Government put wild lions in the area and the lions caused damage and injury. Would the Government have any liability? This question and a series of comments about wild animals caused a relief to the intensity of the courtroom, culminating with the Judge telling an anecdote about his wife spraying coyote urine around the base of their house to keep the raccoons out of the crawl space. Once again, Judge Smith demonstrated a sense of humor that must benefit him as he works through some of the most important property rights cases ever decided by an American court. When the levity ended, the Government’s answer to the question was that the elk are native, not wild, animals, and that Hage cannot complain about the interference with grazing because he had no right to graze. Amicus (friend of the court) arguments were presented in behalf of the State of Nevada Department of Wildlife and national wildlife organizations such as the National Wildlife Federation. Counsels’ arguments centered on the Government’s theme that simple interference with grazing cannot be used as a base for taking a water right. Since the Government has the right to permit or not permit grazing, it has the right to totally end it, and the impact on a water right is irrelevant. Counsel urged that there is no takings case which holds that diminishing a water right by denial of use of public property is a taking. Counsel reviewed a series of cases standing for the proposition that in a takings case the harmed person can only get the value of his private land, and that damages cannot be enhanced by the loss of use of public land or public property. On rebuttal, Ladd Bedford pointed out the fallacy of the Government and amicus arguments regarding the placement of elk on the allotment. He emphasized that the Table Mountain allotment was designated by the Forest Service as a livestock grazing allotment, for cattle and horses, not for elk. On this livestock grazing allotment the Forest Service placed the elk, and, as a result, Hage could no longer use his private property water right and range improvements. The elk were not managed so as to be compatible with livestock grazing for which the allotment was designated. The elk were put on the allotment for the benefit of hunters. The activities of hunters caused cattle to scatter, and at the end of the grazing season removal of cattle was made virtually impossible because of hunters moving along the narrow trails used for driving the cattle. Bedford also pointed out that the Forest Service suspensions of grazing had now matured into 13 years of suspension and were in reality, cancellations which resulted in Hage’s private property rights becoming economically useless. Van Zandt presented an emotionally charged rebuttal. He pointed out that Hage’s clearance of trees along his ditch right of way was an exercise of the historic law of the west: a ditch right of way includes the natural channel above the point of diversion which means that an owner of water rights can go upstream and clear away obstructions to the natural and free flow of water. He dramatically emphasized that this case is not as characterized by the Government and amicus; it is a case about water rights. In this case, the court has found that water rights and 1866 ditch rights of way exist. Van Zandt asked, “Can the Government put up road blocks to the plaintiff’s use of his water rights, even if the blocks are on Government property?” He quickly answered, “Yes, the Government as sovereign can do so.” “But,” he continued, “and this is the key of the case, when it does so, it must pay Hage for the loss.” Otherwise the 1866 Mining Act would be meaningless; the Taylor Grazing Act would be meaningless; all the countless times that Congress has acknowledged the existence of property rights would be meaningless.” Rebuttals by the Government and amicus added no new twist to their
prior arguments, and with the conclusion of their rebuttals, Judge
Smith took the case under advisement. Many in the audience tried to read from the Judge’s questions how he might be leaning on the issues. But, those with long trial experience warn that in closing arguments as well as in appellate arguments, it can be misleading to try to predict a decision from the court’s questions. The issues in this case are clear cut. The Government contends that there is no right to graze, thus any interference with grazing cannot be used as the base for a taking of water rights and ditch rights of way. They contend that this is a case about “takings” of a grazing right, which does not exist. Hage contends that this is in fact a classic case of “taking” a water right and ditch rights of way. When the Government interferes with those rights to the point at which the ranch ceases to be a viable economic operation, there is a taking. Judge Smith holds the “finish flag” and will decide the issue.
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