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Case number 16-5018, Silver State Land LLC Appellant v. Janice M. Schneider and her official capacity as Assistant Secretary, Land and Minerals Management, and Neil Quaranty and his official capacity as Principal Deputy Director.

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Mr. Smythe for the Appellant, Mr. Beeler for the Appellees.

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Mr. Smythe, good morning.

[00:00:39] Speaker 03:
Good morning, Your Honors.

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May it please the Court, my name is Paul Smythe from the Perkins Cooley law firm.

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I'm representing Silver State Land, the appellant in this matter.

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May it please the Court.

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My name is Paul Smythe from Perkins Coie Law Firm.

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I'm representing Silver State Land, the appellant in this matter this morning.

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With the Court's permission, I'd like to reserve three minutes of my time for rebuttal.

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This morning I would like to make three key points.

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First, the Secretary's action to withdraw a sale at which my client paid $10 million for 480 acres of public land.

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was directly in violation of the applicable statute.

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That's 203G.

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203G, 43 USC 1713G.

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I wanted to be clear whether you think 203G applies to this case or not.

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I very much do, Your Honor.

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All right.

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OK.

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OK.

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And I'm going to discuss that more in just a second.

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My second point will be that the Justice Department uses post hoc rationales to support its arguments that Section 203 G does not apply here.

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Basically, they try to support the unsupportable secretarial decision.

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And lastly, even if the secretary's theory that she can apply plenary authority to this case, she did not meet the terms of the cases that she cited.

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In particular, the appellant here was not provided any due process.

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So.

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Could I ask you about the notification?

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Because the notice itself said if no acceptable visit received, the parcel may remain available for sale at a future date.

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in accordance with a competitive sales procedure without further notice.

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Now that's different from withdrawal.

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Or are you arguing it's not?

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No, I'm arguing that the withdrawal means to take the original sale back.

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What the Justice Department argues is that the fact that the Secretary put it back on the market is not the type of withdrawal in subsection G, where our position is that she removed the sale from our client and then turned around and said, oh, I'm going to re-offer it.

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She didn't turn around.

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That was in the notice.

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Correct.

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That was in the decision.

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You're right.

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So that's not a withdrawal.

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No, she did withdraw.

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Our argument is that when she canceled the sale, she withdrew the sale of the land.

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She terminated that.

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She terminated.

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She didn't withdraw the land.

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She did withdraw the land from sale.

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No, she didn't.

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She terminated the arrangement with your client.

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That's right.

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Yes, it was, Your Honor.

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Let me get to this point.

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The district court said that withdrawal in Section Sub-Second G means withdrawal under Section 204 of the Federal Land Policy Management Act, 43 USC 1714.

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The withdrawal authority under 1714 is to transfer land to another agency or to protect the land from harmful uses.

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So, for example, if the land had been withdrawn within the meaning of Section 204, it might have been placed into a military base, it might have been placed into a national park.

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or special restrictions might have been placed on the land to preserve its natural values, such as the creation of a national conservation area.

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So it's clear that the, and withdrawal is defined in the act as a noun,

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And it means to preserve the lands in the ways I just described.

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Here, in subsection G, the Congress uses the verb to withdraw.

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And that is not defined.

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And we argue that that has its plain meaning, to take back the sale.

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So what the secretary did here is withdraw within the meaning of take back.

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Subsection G does not require the secretary to put the land into a national park in order to take it away from our client.

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She only had to basically terminate, take back, call off the sale.

[00:05:26] Speaker 05:
Well, that sounds like a different definition from withdrawal.

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Yeah, there's the verb to withdraw, which is in subsection G, and then there is the term of art in public land law, a withdrawal, which is a noun.

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I know, but I thought you were saying withdrawal.

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I thought your position was withdrawal and withdrawal mean the same thing.

[00:05:44] Speaker 03:
No, it is not.

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Our position is that the verb to withdraw means simply in plain English, to take back.

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that the term withdrawal in 43 USC 1714 is a term of art in public land law that means basically to reserve or set aside land to make it unavailable for certain uses, such as mining.

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I don't see how withdrawal has a discrete

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meaning a term for that statute specifically, and you use the verb of that, if the definition of withdrawal then went on to say, and to withdraw, you first have to do such and such, you wouldn't argue that that verb, to withdraw, meant something different from

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the alternative meanings of withdrawal, would you?

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Well, I'm not sure that's this case, Your Honor, and if I may... Well, it isn't.

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It's in a different supervision.

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I realize that, but we've got to... Well, let me make another point about withdrawal as used in subsection G. For the secretary to effect a withdrawal, the noun, in 1714,

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That is a full process laden requirement.

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There's reporting to Congress.

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There is typically an environmental impact statement is done.

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it's in Congress that that kind of process would be necessary and could even occur within 30 days.

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The statute gives the secretary 30 days to withdraw the sale.

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At that point, and here, Your Honor, keep in mind that the appellant's bid offer was accepted by the department.

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So we basically, and then once the 30 days expired and there was no withdrawal within the 30 days, or no taking back of the sale within the 30 days, in essence the sale was to be consummated at that point.

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legal transfer as opposed to accurate.

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Your Honor, it doesn't say that.

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Justice argues that, oh, the statute doesn't say that this withdrawal must be exercised only within 30 days.

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So they would have this be untethered to any time constraint.

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But the problem is you have the foundation of plenary authority there, sitting there.

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And it seems to me indisputable.

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And so you have this particular provision which says, yeah, something can happen.

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authority is still there.

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I'm happy to address plenary authority and your point, Your Honor.

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Plenary authority comes out of primarily 19th century case law, and it says that the secretary... Is that bad?

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No, it's not bad.

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It's just a long time ago.

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Yes, there's a history of it.

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But the key cases, both the government and our side, both cite the Orchard v. Alexander case.

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And in Orchard, the court specifically makes clear that plenary authority may not be used to nullify an act of Congress.

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And that's at 152 U.S.

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383-84.

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That's the specific statement.

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also thereafter.

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I mean that's the argument.

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Right, well I'm not done yet with my plenary authority.

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The second part is that plenary authority

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The Federal Land Policy Management Act, where Subsection G comes from, was enacted in 1976.

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It repealed all of these old public land laws.

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And in its place, Congress put new authority how to conduct a public land sale.

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Now, if the Secretary wanted to retain this plenary authority post-Federal Land Policy and Management Act, she should have put that in her regulations like she did for the mining law of 1872.

[00:10:09] Speaker 04:
So the government cites us to 1701B indicating that the Act is supplementary?

[00:10:21] Speaker 03:
Yes, but it is supplementary, but when there's specific congressional direction,

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that would apply.

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That's the first argument that the statute does apply in Knoxville Plenary Authority.

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The second argument... No, no, no.

[00:10:36] Speaker 04:
All I'm saying is the government cites you to the purpose section, where in subsection B it doesn't say, and this wipes out

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any prior authority, it says, this is supplementary authority.

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At least that's the argument that's being made.

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I understand that argument, Your Honor.

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What I'm trying to address is that even if that were true, even if the Secretary had room to exercise plenary authority here, that she had to not nullify any act of Congress.

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She had to follow her own regulations, which were not followed in this case.

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Her regulations in this case, when she took jurisdiction of this matter from the BLM, the regulation 43 CFR 4.5c says the secretary, upon taking jurisdiction, must give notice to the parties and hold a hearing.

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where necessary.

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And given the fact that this whole thing was triggered by the Secretary's serious questions about the intent of the parties in going ahead with this stadium transaction, you would think that the Secretary had the full ability to hold a hearing and to have those questions the answer to her satisfaction.

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The third reason that plenary authority doesn't apply is because even under plenary authority, the decision may not be arbitrary.

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So the mere assertion of plenary authority does not get around whether the statute applies or not here, subsection G, does not get around the fact that the secretary did not incorporate this plenary authority in her regulations for public land sales.

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And I asked you to compare that with the regulations for the mining law.

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The mining law has the exact same language.

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We're talking about this plenary authority stuff until the patent is issued.

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The secretary has full ability to call back the transaction.

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And the cases cited by the government that are post the Federal Land Policy and Management Act, all are mining law cases, and they all apply the modern regs, the post-1976 regulations, where the Secretary clearly embodied the plenary authority into her review of mining claims.

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yes well and I would say your honor that we have a specific general versus specific type thing here the the plenary authority arises from general statutes about the secretary's supervision of the public lands and

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So they're general.

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It's sort of like the secretary can fill in the blanks where necessary.

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At the time the plenary authority was created, there was no Administrative Procedure Act.

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There was a question about whether the secretary actually had the ability to step in and review something.

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Those courts in the 19th century sustained that.

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Now we have a more modern year where Congress through the Administrative Procedures Act and other things have defined how the secretary is supposed to conduct business administratively.

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You know, we basically have a situation where this plenary authority was just pulled out of the air in this case as an excuse to nullify the sale because of the Secretary's concerns.

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There was an ongoing Inspector General report, our investigation at the time, the patent was due to be delivered.

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And our view is that they just came up with this theory out of thin air based on a 1976 appartmental manual and threw that out there to stop this transaction.

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And now the Inspector General has issued his report after two or three years and is basically in solid silver state of any wrongdoing in this matter.

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So it's basically time to allow this transaction to go forward.

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There was no degradation of public rights.

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The Silver State paid fair market value.

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The land is zoned for a stadium.

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It's still awaiting that.

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The city of Henderson's in favor.

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And the land is still available for disposal under the Secretary's authority.

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So...

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process normally would have occurred.

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Well, what happened there, Your Honor, is with the termination of the project, well, the sale itself went forward with no other competitive bidders.

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The high bid was Silver State.

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It's not the way you would normally bid, though.

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Well, there weren't any other bidders.

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It doesn't matter.

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It was clearly done on exceptional process.

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The client said, no, I'm out of here.

[00:15:39] Speaker 03:
No, that was six months after the sale, Your Honor, because the escrow agreement required six months to put the final payment into escrow.

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So it was after the escrow payment.

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But it was six months after the auction in the case.

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And it was during the six months that Silver State's financing to do the stadium fell through.

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They were going to face a penalty of a million dollars that they'd have to pay to the city of Henderson if they didn't meet the construction requirements.

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So they terminated the sale and wrote Henderson to say, we still want to go ahead with this thing.

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We're trying to avoid this penalty that's in our agreement.

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You're out of my time.

[00:16:17] Speaker 03:
I'm out of time at the moment.

[00:16:18] Speaker 05:
Can I just ask you one thing?

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I didn't see it in your briefings.

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On the interpretation of withdrawal, withdrawal, do you see that as a chevron one, chevron two?

[00:16:29] Speaker 03:
I would say that it's Chevron 1.

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I mean, because there's no interpretation really that – well, the secretary didn't exercise any kind of Chevron here.

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She didn't promulgate a rule.

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If she had promulgated a rule that said what you're saying, maybe she could have shoehorned the sin.

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But without a rule, there's nothing to give deference to, just an interpretation out of thin air.

[00:16:58] Speaker 05:
Well, I'm talking about your interpretation of the verb withdraw, which is different from the noun withdraw.

[00:17:05] Speaker 03:
Well, I would point to, I think, the regulation you cited me up front where the BLM said when a sale is terminated, or the sale is withdrawn, it says, that the Secretary should make a decision about whether to return it to the market or not.

[00:17:24] Speaker 03:
So that's a very important regulation that I point the court to, where the Secretary basically interpreted withdrawal not to mean a 204 withdrawal and not to mean just for market.

[00:17:35] Speaker 05:
All right.

[00:17:36] Speaker 05:
We'll give you some time to reply.

[00:17:38] Speaker 05:
Thank you.

[00:17:43] Speaker 01:
Good morning, Your Honor.

[00:17:44] Speaker 01:
My name is Jeff Beeler.

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I'm here on behalf of the federal defendants.

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With me at council table is Ryan Sklar from the Department of the Interior.

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When Congress contemplated the federal government selling federal lands, it required

[00:18:00] Speaker 01:
the government to use competitive bidding.

[00:18:02] Speaker 01:
In this case, the government did not use competitive bidding because as Judge Edward points out, it used an exception.

[00:18:08] Speaker 01:
It allowed modified competitive bidding and it allowed them modified competitive bidding because of the agreement that the developer had with the City of Henderson.

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When the developer terminated that agreement, it not only removed the public benefit that that agreement contemplated, but it jettisoned the legal basis by which it was allowed to have its special status at this bidding.

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And what the secretary did here, after it found out, after the city came to the government and said, do not let this go forward, there was a number of ESCO agreements, two of which were at Silver State's request.

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that allowed this state litigation to go forward, but also allowed the parties to find a way to resolve their dispute.

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And the secretary at the end of that period looked at it and was given a recommendation from the Bureau of Land Management to assert her jurisdiction, which she could do under regulations.

[00:19:05] Speaker 01:
We talked about it, 43 CFR 4.5, and it allows the secretary to take

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basically authority over a decision that is pending and render a final decision.

[00:19:17] Speaker 01:
The secretary complied with the requirements of 4.5, and I note that counsel brings up 4.5C in his due process argument.

[00:19:27] Speaker 01:
That argument was raised in his reply brief.

[00:19:29] Speaker 01:
It doesn't appear in his opening brief, and I would argue, first of all, that it's waived.

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Second of all,

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The secretary complied with 4.5C.

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And we know the secretary complied with 4.5C because the secretary issued a written decision.

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The council complains it's a one-page thing, but they received a letter letting them know what the secretary had done, giving the decision.

[00:19:52] Speaker 01:
And you can find that at JA664 to 672.

[00:19:56] Speaker 01:
That's the letter that they received.

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It includes an explanation of why the secretary acted.

[00:20:01] Speaker 01:
It also includes a copy of that decision memo.

[00:20:04] Speaker 01:
The decision memo lays out in reasonable terms why the secretary did what she did here.

[00:20:10] Speaker 01:
We got it in our brief.

[00:20:11] Speaker 01:
You can find it at JA671.

[00:20:13] Speaker 01:
The memo talks about the fact that the secretary has broad plenary authority over the administration of public lands.

[00:20:20] Speaker 01:
Judge Edwards recognized this.

[00:20:21] Speaker 01:
The case law is well established.

[00:20:23] Speaker 01:
It's a long-standing principle.

[00:20:25] Speaker 01:
And under Silver State's reading, it would create an absurd result if you read section 1713 G to say that the secretary cannot assert that plenary authority after accepting an offer.

[00:20:39] Speaker 01:
Because imagine a scenario where you've got sort of the repentant fraudster who comes forward and says, oh, the 30 days have expired.

[00:20:46] Speaker 01:
You haven't issued the patent.

[00:20:48] Speaker 01:
I committed fraud in getting this patent.

[00:20:50] Speaker 01:
Under their reading, the secretary would not be allowed to cancel that sale.

[00:20:53] Speaker 01:
And that can't be right.

[00:20:55] Speaker 01:
The secretary maintains authority over public lands.

[00:20:59] Speaker 01:
That authority, we trace it back to Cameron, Supreme Court's decision in Best, talked about Orchard.

[00:21:05] Speaker 01:
And those cases rely on, it's true, general statutory provisions.

[00:21:10] Speaker 01:
But what those provisions say, if the court looks at them, and the district court did that below,

[00:21:16] Speaker 01:
With those at JA 63, there's section 1457 and 43 USC 2.

[00:21:23] Speaker 01:
The duty the secretary has over public lands.

[00:21:27] Speaker 01:
And the secretary has a very unique responsibility as the guardian of the federal government's supervision of federal lands.

[00:21:34] Speaker 04:
So you're relying on these case citations.

[00:21:40] Speaker 04:
You're not relying on any statutory or regular.

[00:21:43] Speaker 04:
statement of this authority, are you?

[00:21:47] Speaker 01:
Well, Your Honor, two things.

[00:21:50] Speaker 01:
First of all, when you look at the decision memo, it does cite, as counsel recognized, to the manual.

[00:21:57] Speaker 01:
But then there's sort of a string of case citations.

[00:22:00] Speaker 01:
When you go and look at Cameron, it does discuss the statutory basis, this general.

[00:22:05] Speaker 04:
And the argument there is that the statutes were a mess.

[00:22:12] Speaker 04:
Nobody knew what was going on.

[00:22:13] Speaker 04:
So Congress steps in and passes.

[00:22:16] Speaker 04:
comprehensive statute and so the argument is those cases we're looking at a statutory regime that no longer exists so I understand your absurdity argument but just looking at the facts of this case does it mean that no matter what process

[00:22:40] Speaker 04:
a person follows under the statute or the secretary's regulations, the secretary can step in at any time and say, we're not going forward.

[00:22:51] Speaker 04:
Then the challenges follow.

[00:22:53] Speaker 04:
But it's that sort of umbrella authority that's nowhere stated, but it's in these old cases.

[00:23:00] Speaker 04:
And I mean, we have a case that in more recent times references it, but it's

[00:23:08] Speaker 04:
It's like the Secretary shall do good.

[00:23:13] Speaker 01:
No, and I understand Your Honor's concern.

[00:23:15] Speaker 01:
You know, we started out with this earlier that the Federal Land Policy Management Act very clearly, Congress said, this is supplemental authority that we're giving the Secretary.

[00:23:25] Speaker 01:
It is true.

[00:23:26] Speaker 04:
But it refers to, it is a very broad statement, but it says construed as supplemental to and not in derogation of

[00:23:37] Speaker 04:
the purposes for which public lands are administered under other provisions of law.

[00:23:45] Speaker 04:
And when I first read that, I thought, what are those other provisions of law?

[00:23:50] Speaker 04:
And your response is, look at these old cases.

[00:23:53] Speaker 01:
Well, yes, Your Honor, and I'll point the court's attention to 43 USC section two, and this is the duty, this is what Cameron discusses, and the district court recognized this in its decision.

[00:24:03] Speaker 01:
It talks about this, it talks about where does this general authority come from, and you go to 43 USC section two, and I admit it's very broad, but it discusses the duties concerning public lands, and it says, one of those things is issuing patents for all grants of land under the authority of the government.

[00:24:21] Speaker 01:
Where does the government's authority come from?

[00:24:23] Speaker 01:
It comes from the Constitution.

[00:24:24] Speaker 01:
It comes from the Property Clause.

[00:24:25] Speaker 04:
Well, it says Congress.

[00:24:28] Speaker 04:
Those cases you cite are talking about Congress's authority over public lands under the Property Clause.

[00:24:35] Speaker 04:
We're a step further down the road.

[00:24:37] Speaker 04:
I mean, the Secretary is not Congress.

[00:24:39] Speaker 01:
That's right, Your Honor.

[00:24:40] Speaker 01:
And so this court's decision in Udall, and I think the Union oil case that I cited, where it talks about this Congress specifically had a choice who's going to, who's it delegating its authority to?

[00:24:52] Speaker 01:
It's delegating it to the Department of the Interior.

[00:24:54] Speaker 01:
The Secretary from the founding of this nation going forward, the land office, all that.

[00:25:00] Speaker 01:
Congress was in the business originally of passing laws when it wanted to sell public lands.

[00:25:05] Speaker 04:
So the way I read versions of the statute is Congress didn't delegate all of its powers to the Secretary of Interior, but only certain powers.

[00:25:20] Speaker 04:
And even in this statute, Congress keeps its finger, you know, in the process

[00:25:28] Speaker 01:
That's certainly right, Your Honor, but certainly in the context of issuing land patents.

[00:25:32] Speaker 01:
I think that the argument is that the Secretary does have plenary authority in the specific context of issuing land patents, because it's a conveyance of land from the federal government to, in this case, a private party.

[00:25:45] Speaker 04:
So just looking at this case, is all this court needs to look at is the facts of this case

[00:25:55] Speaker 04:
five reasons given essentially by the secretary for the action taken here.

[00:26:04] Speaker 04:
And then you would rely on section 4.5 of the regulations.

[00:26:09] Speaker 04:
And that's the end of the case.

[00:26:10] Speaker 01:
Yes, Your Honor.

[00:26:11] Speaker 01:
There's no reason to get into.

[00:26:13] Speaker 01:
And I mean, I'm being accused of post hoc rationale.

[00:26:16] Speaker 01:
I respond to the arguments that were raised in their opening brief.

[00:26:19] Speaker 01:
these, I'm relying solely on the rationale that was put forth in this decision memorandum and that's, there's nothing, there's no reason why this is somehow arbitrary, capricious or not in accordance with the law and you don't need to get to 1713 G because it doesn't apply.

[00:26:36] Speaker 01:
For the same reason the court discussed, we argue about what the word withdraw means, the verb withdraw and I don't think that

[00:26:44] Speaker 01:
I mean, I'll go back to look at the district court, but I don't think the government made the argument that it has to be a withdrawal, meaning take away the operation of public land laws.

[00:26:54] Speaker 01:
We raised the argument that it's a termination of the sale solely because that was the argument that they pressed.

[00:27:00] Speaker 01:
And they ran away from that in their reply brief because they realized the BLM regulation that they're citing to actually says, distinguishes between terminating a sale and taking the property off the market.

[00:27:10] Speaker 01:
And in this case,

[00:27:12] Speaker 01:
The property is still available.

[00:27:14] Speaker 01:
It was in the notice of reality action.

[00:27:16] Speaker 01:
There's nothing preventing Silver State from going back to the city of Henderson and asking them to renominate and go through the process and have an open competitive bid.

[00:27:25] Speaker 01:
But that's not what they want here.

[00:27:27] Speaker 01:
What they want, they want specific performance.

[00:27:29] Speaker 01:
And they come in under the APA, and they're asking this court to demand order that we issue a patent.

[00:27:36] Speaker 01:
Well, where does that come from?

[00:27:37] Speaker 01:
How do they get there?

[00:27:39] Speaker 01:
And then you go look at section 17, 18.

[00:27:41] Speaker 01:
They say that the secretary has a ministerial duty to transfer this patent.

[00:27:46] Speaker 01:
That reading of that statute is incorrect.

[00:27:49] Speaker 01:
It does not say that.

[00:27:50] Speaker 01:
What section 1718 says is that when the secretary transfers a patent, the secretary is required to put forth terms and covenants to protect the public interest.

[00:28:01] Speaker 01:
It does not apply to this case.

[00:28:03] Speaker 01:
There's no reason why this court should not affirm the district court's decision and not

[00:28:10] Speaker 01:
require the secretary to transfer the patent in this case.

[00:28:13] Speaker 05:
All right, thank you.

[00:28:14] Speaker 05:
Thank you, Your Honor.

[00:28:16] Speaker 05:
Does Mr. Smythe have any time?

[00:28:20] Speaker 05:
Okay, why don't you take two minutes?

[00:28:24] Speaker 03:
Thank you very much, Your Honor.

[00:28:27] Speaker 03:
The sale remained authorized once the project agreement was terminated.

[00:28:31] Speaker 03:
First, the sale was not made contingent on the project agreement remaining in place.

[00:28:36] Speaker 03:
The government's appraisal said specifically that there's no guarantee in our appraising of the land that this project will ever be built.

[00:28:44] Speaker 03:
The Notice of Realty action did not advertise to the sale to the public as having any contingency.

[00:28:49] Speaker 03:
No violation of law occurred here.

[00:28:53] Speaker 03:
The secretary said, had she known the facts six months sooner, that she would have likely put it forward for a competitive sale.

[00:29:06] Speaker 03:
There's nothing in the administrative record that shows that the competitive sale was contemplated by any member of the Department of Interior.

[00:29:16] Speaker 03:
The sale went ahead on a modified basis.

[00:29:21] Speaker 03:
There were no other bidders.

[00:29:22] Speaker 03:
The BLM regulations say that when there's no other, as a result of no other bidders, Silver State did not have to exercise any preference.

[00:29:32] Speaker 03:
It did not have to trump any other high bid.

[00:29:35] Speaker 03:
And the BLM regs say if the designated bidder does not use its preference, that the sale will proceed as a competitive sale.

[00:29:45] Speaker 03:
So, and the Justice Department, in terms of some of the post-hoc rationale, I was going to point out, they say that, oh, the sale would have been

[00:29:58] Speaker 03:
Somebody else would have been higher.

[00:30:00] Speaker 03:
It hadn't been competitive.

[00:30:02] Speaker 03:
There's nothing in the record for that They say that Silver State did did lower because it was not competitive sale.

[00:30:08] Speaker 03:
There's nothing in the record for that Lastly section 208 is a mandatory duty.

[00:30:14] Speaker 03:
It says the secretary shall

[00:30:16] Speaker 03:
convey and deliver patents authorized by this act.

[00:30:21] Speaker 03:
We assert that the sale remain authorized at all times.

[00:30:25] Speaker 03:
The Secretary's decision to find it to be complicated was arbitrary and capricious and in violation of the statute.

[00:30:33] Speaker 03:
Thank you.