Case 2:15-cv-01743-MMD-NJK Document 486 Filed 05/03/19 Page 1 of 16

NICHOLAS A. TRUTANICH
1
United States Attorney
2 District of Nevada
Nevada Bar No. 13644
3
TROY K. FLAKE
4
Deputy Civil Chief
5 501 Las Vegas Boulevard South, Suite 1100
Las Vegas, Nevada 89101
6 Telephone: 702-388-6336
7 Facsimile: 702-388-6787
Email: troy.flake@usdoj.gov
8
GEORGIA GARTHWAITE
9 JOHANNA M. FRANZEN
10 ANTHONY C. GENTNER
MARK C. ELMER
11 Trial Attorneys, U.S. Department of Justice
Environment & Natural Resources Division
12 P.O. Box 7611, Ben Franklin Station
13 Washington, DC 20044-7611
Telephone: 202-616-3129
14 Facsimile: 202-514-8865
Email: georgia.garthwaite@usdoj.gov
15 johanna.franzen@usdoj.gov
16 anthony.gentner@usdoj.gov
mark.elmer@usdoj.gov
17
Attorneys for the United States
18
19 UNITED STATES DISTRICT COURT
DISTRICT OF NEVADA
20
UNITED STATES OF AMERICA, Case No. 2:15-cv-01743-MMD-NJK
21
22 Plaintiff, UNITED STATES’ REPLY IN
v. FURTHER SUPPORT OF ITS RULE
23 71.1(h)(1) MOTION TO EXCLUDE
24 400 ACRES OF LAND, more or less, VALUATION EVIDENCE PREMISED
situate in Lincoln County, State of Nevada; ON SPECULATIVE TOURISM USE
25 and JESSIE J. COX, et al., (ECF NO. 409)
26 Defendants. ORAL ARGUMENT REQUESTED
27
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1 INTRODUCTION
2 The United States has not sought to exclude evidence of every conceivable tourism use of
3 the Groom Mine property. This motion asks the Court to exclude valuation evidence premised on
4 the specific, speculative use proposed by landowners’ litigation team—the fictional “buy it and
5 assume a Las Vegas tour operator will develop ‘Area 51-Disneyland’ on our land and pay us
6 millions of dollars” use in the opinions of experts Roddewig, DiFederico, Clauretie and
7 Steinagel. ECF No. 409 (U.S. Mot.). In this hypothetical scenario, as of September 10, 2015:
8  An investor would purchase the Groom Mine property and immediately rent it, as-is,
9 to a Las Vegas tour operator (or developer);
10  The tour operator would immediately start paying the property owner $3 million to
11 $9 million in annual rent;
12  The tour operator would finance, develop, staff and operate a year-round “Area 51”
13 tourist attraction at the remote Groom Mine property accommodating 150 to 324
14 visitors a day, ECF No. 447-26 at 2-4 & 6, with transportation from and to Las Vegas
15 3 hours away, at its sole risk and expense;
16  54,000 to 95,000+ people annually would be paying $200 to $500 apiece for
17 admission to the Groom Mine property ($750 for an overnight stay) to “view ‘Area
18 51’” from six to seven miles away; 1
19  The tour operator would develop an approved water supply complying with NAC 444
20 (Nevada Admin. Code – Sanitation) before occupancy, and meet all other County
21 special permitting conditions; and (among other assumptions),
22  Any potential hazards resulting from the Groom Mine property’s history of lead
23 mining and processing—including the “appreciable quantities” of lead and arsenic
24 measured by landowners’ own experts—would have no negative effects.
25 It is this scenario—and the valuation evidence depending on it—which the United States seeks to
26 exclude. Thus, this motion does not turn on whether “a tourist commercial use on the
27 1
The term “Area 51” is used to quote and respond to the landowners’ assertions; it is not
28 a government term for the remote operating locations near Groom Lake.

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1 Landowners’ Property” would probably “make $1” as of the date of value. See ECF No. 447
2 (“Opp’n”) 8. 2 The question is whether there is evidence showing the hypothetical tourism use
3 valued by landowners’ experts was reasonably probable and not speculative. Landowners and
4 their experts have not met that burden, so this hypothetical tourism use must be excluded from
5 trial. Olson v. United States, 292 U.S. 246 (1934).
6
ARGUMENT
7
8 I. Excluding Speculative Uses Is Part of the Court’s Screening Responsibility in
Federal Eminent Domain Cases, and Does Not Usurp the Factfinder’s
9 Determination of Highest and Best Use.
10
The Opposition misinterprets the law on admissibility of a proposed highest and best use
11
in federal eminent domain cases. Landowners appear to argue that any “highest and best use
12
evidence” must be “presented to the jury and the jury decides what weight to give [it].” Opp’n
13
14
2
The Opposition mischaracterizes certain testimony and conclusions of Warren Neville,
15 the United States’ case-in-chief appraisal expert. Neville did not claim that “financial feasibility
is met if the use results in a net profit of $1,” or that “the ‘most profitable use’ is determined
16
from those uses that will generate at least $1.” See Opp’n 8:2-4. He testified:
17
Q. . . . . [reading] “A use is financially feasible if it is both physically and legally
18 permissible, and capable of producing a positive return to the land after payments
to labor, capital, and coordination.”
19
20 How much of a positive return must there be? Is it just like a dollar?

21 A. It would have to be positive enough to induce somebody to make an investment.

22 ECF No. 390-1 (Neville Dep.) 164:23-165:1.

23 The assertion that Neville “relied exclusively on the opinion of Pat Travis for his
24 financial feasibility determination,” Opp’n 9 n.12, is inaccurate and confuses highest and best
use analysis and feasibility determinations. See ECF No. 445 (U.S. Opp’n to Landowners’ Mot.
25 to Excl. Neville) 12-19. It is also incorrect to claim that Neville valued the Groom Mine property
as a “residence.” See Opp’n 11. Neville determined the property’s highest and best use was to
26 continue using the patented claims for recreation and holding the unpatented mining claims for
27 future mineral exploration. He then concluded the market value of the Groom Mine property was
$333,300, comprising the patented claims, valued at $254,000 ($2,900 per acre), and the
28 unpatented claims, at $79,300 ($279 per acre). See ECF No. 445 at 24-25.

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1 21. But that is not the law—in or out of the Ninth Circuit. Nonspeculative highest and best use
2 evidence is to be considered by the factfinder, and given apt weight; but evidence of a
3 speculative highest and best use must be excluded. Olson v. United States, 292 U.S. 245, 257
4 (1934); Wash. Water Power Co. v. United States, 135 F.2d 541, 543 (9th Cir. 1943). 3 Thus, in
5 United States v. 99.66 Acres, the Ninth Circuit affirmed the exclusion of the landowners’
6 proposed use as “speculative,” specifically noting that “in a condemnation proceeding, the trial
7 judge’s role is much broader than in a conventional jury trial.” 970 F.2d 651, 656 (9th Cir. 1992)
8 (citing United States v. Reynolds, 397 U.S. 14, 20 (1970)). The Ninth Circuit further affirmed the
9 exclusion of valuations based on that speculative proposed use. Id. at 658.
10 Examples of trial courts’ analysis of proposed highest and best uses under its screening
11 function include two district court opinions in the Ninth Circuit, United States v. 10.082 Acres of
12 Land, No. CV05-00363-PHX-NVW, 2007 WL 962846 (D. Ariz. March 27, 2007) (excluding
13 proposed highest and best use and related opinion of value), and United States v. 87.98 Acres of
14 Land in Merced Cty., No. Civ.F03-6064AWILJO, 2005 WL 2810641 (E.D. Cal. Oct. 25, 2005)
15 (excluding two proposed highest-and-best-use scenarios and declining to exclude a third). 4
16 II. Landowners Must Show that Their Proposed Operator-Dependent Use—Not
17 Just Some Tourism Use—Is Reasonably Probable and Not Speculative.

18
Most of the Opposition concerns only a tourism use that is undefined beyond visitors
19
“seeing Area 51”—not the speculative operator-dependent proposal at issue in this motion. But
20
21 3
The Opposition’s narrow emphasis on specific highest and best use criteria (legal
22 permissibility, physical possibility, financial feasibility and maximum profitability) and
misinterpretation of “financial feasibility,” see note 2, miss the forest for the trees: The proposed
23
use must be reasonably probable, not merely possible. See ECF No. 445 (U.S. Opp’n to Mot. to
24 Excl. Neville) 15-19. Thus, it is well-established that a property’s highest and best use may be
something other than its existing use. Olson, 292 U.S. at 255. It is equally well-established that a
25 proposed, nonexistent use cannot be considered unless it is shown to be reasonably probable. Id.
26 4
The Opposition cites two “on-point” cases. Opp’n 3. It discusses the first, 87.98 Acres,
27 only in part, noting the use that was not excluded while ignoring the exclusion of two other use
scenarios. Id. The other, United States v. Certain Land in Detroit, 547 F. Supp. 680 (E.D. Mich.
28 1982), is outdated and has been criticized in this circuit and its own. See ECF No. 426 at 8 n.8.

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1 to establish the landowners’ hypothetical scenario was reasonably probable—and therefore

2 admissible—it is not enough to show that some “people would pay to enter” the Groom Mine
3 property to “see Area 51,” or that some market participants believe that “the Groom Mine
4 Property, if used as a tourist commercial use, would succeed as a tourist commercial use.” ECF
5 No. 413-2 (Travis Decl.) at 2 (emphases added).
6 a. A proposed use must be specifically screened for reasonable probability.
7
Federal law makes plain that the trial court is to screen each specific proposed use. For
8
example, in 89.98 Acres in Merced, which the Opposition describes as “on point,” Opp’n 3, the
9
district court evaluated three separate proposed scenarios, and ultimately excluded two (along
10
with each theory of valuation). 2005 WL 2810641, *12-*23. And the Sixth Circuit, in remanding
11
for further proceedings regarding a property used for agricultural purposes, stated it “could not . .
12
. disagree” with a conclusion that a comprehensive residential subdivision scenario was “too
13
speculative.” United States v. 1,291.83 Acres of Land in Adair & Taylor Ctys., 411 F.2d 1081,
14
1086 (6th Cir. 1969). The court distinguished the proposed subdivision use from a simpler
15
proposed use for “homesites,” noting that this use “would not have required any expenditure of
16
capital and the evidence as offered indicated a demand for such homesites.” Id. at 1086-87. Thus,
17
in screening the proposed homesite use, unlike the proposed residential subdivision use that
18
lacked evidence of demand and would likely require significant capital expenditures to realize,
19
“serious consideration should have been given” to admitting evidence of the use. Id. Here,
20
landowners’ proposed tourism scenario has the same hallmarks—requiring capital expenditures,
21
lacking evidence of demand—that indicated to the Sixth Circuit that the “comprehensive
22
subdivision” proposal was too speculative to be considered. See id.
23
24 b. The opinions of landowners’ experts Roddewig, DiFederico, Clauretie and
Steinagel are all premised on a tour operator renting the Groom Mine
25 property and developing and operating a tourist attraction.
26
While the Opposition appears to dispute it, Landowners’ experts’ reports and testimony
27
make clear that their conclusions about financial feasibility are expressly premised on the
28

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1 expectation that an existing Las Vegas tour operator would develop and operate a tourism
2 concession at the Groom Mine property while paying rent—calculated as a percentage of
3 income—to a passive owner. See Opp’n 15-16 (“The Landowners’ experts never premised their
4 opinions on one operator taking over a tour to the Landowners’ Property – this appears nowhere
5 in the Landowners’ expert reports.”). This premise is the express basis of the income
6 capitalization approaches to value employed by Roddewig, DiFederico and Clauretie. See ECF
7 No. 408 (U.S. Mot. to Excl. Income Capitalization Approach). 5 It is also the raison d’être for the
8 purported feasibility analyses by Clauretie, DiFederico and Steinagel. See ECF No. 392-16
9 (Clauretie); ECF No. 447-8 (DiFederico); ECF No. 394-1 at 00043 (Steinagel).
10 DiFederico’s sales comparison valuation is just as dependent on the tour operator
11 scenario because highest and best use must be analyzed in order to select appropriate comparable
12 sales. See Ex. 392-13 (DiFederico Dep.) 168:9-13 (“[A]s an appraiser, the first thing you have to
13 do is -- well, you figure out the highest and best use, and then you start looking at sales, and you
14 have to value the property.”). And DiFederico’s highest and best use determination consisted of
15 only one scenario—the operator-paying-rent proposal at issue here. He testified:
16
So, I mean, I started out talking about all these things, but I just came down to is I believe
17 that the tourist commercial, based on what the income shows and what the value would
be, that value is the highest and best use of this property.
18
19 DiFederico Dep. 171:7-12. Accordingly, while DiFederico’s sales comparison approach to value
20 is (by definition) derived from comparing sales, rather than capitalizing income from a tour
21 operator’s rental payments, the tour operator scenario is the only potential use he analyzed—and
22 therefore the basis for his sales comparison valuation. As he testified:
23
I looked at it from an owner’s standpoint. If I’m going to lease it to you, you’re going to
24 pay me 10 percent of what you make. I’m going to go home and live wherever I live and
send me a check next month.
25
26 5
Clauretie testified that he determined market value “based on a specific-use property
27 and what the -- what the income would be generated from that particular use and thereby, what a
developer, who would generate that income and pay the expenses, would be willing to pay for
28 that particular land lease.” ECF No. 392-17 (Clauretie Dep.) 257:12-22.

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1 ECF No. 392-13 (DiFederico Dep.) 167:11-16.

2 DiFederico speculated that a buyer might develop a tourist operation and attraction itself,
3 rather than lease it to an operator/concessioner—but he did no analysis of that premise: His
4 original report stated that “the likely buyer of this property is a regional or even international
5 investor that would have purchased the property to operate or lease the property to an operator of
6 a tourist commercial development.” ECF No. 411-2 (DiFederico Rep.) 00083. However,
7 DiFederico admitted at deposition that he only analyzed the concession-operator scenario, and
8 that his opinion of the most probable buyer was “[a]n investor that would look to lease it to a[n]
9 operator.” ECF No. 392-13 (DiFederico Dep.) 177:18-178:10. 6
10 In sum, neither DiFederico nor any of landowners’ other experts actually analyzed any
11 potential tourism use besides the operator-dependent scenario. That they have not done so, either
12 in their original reports or in any of more than a dozen collective supplements, is telling in and of
13 itself. 7 Without any analysis, however, they can only speculate about other tourism scenarios—
14 and mere speculation is not a valid basis for valuation. Olson, 292 U.S. at 257.
15
6
DiFederico testified:
16
17 Q. Okay. Do you have an opinion on the likelihood of an owner-operator versus a
tenant or franchisee, concessioner operator?
18
A. No. That’s very doable, too. The owner could have just invested in some
19 vehicles and started doing it himself.
20
Q. Do you analyze that specifically in your appraisal report?
21
A. No.
22
ECF No. 392-13 (DiFederico Dep.) 177:18-178:10.
23
7
Landowners’ experts have identified a handful of tourist attractions in rural Nevada that
24
are (or were) financed, developed and operated by the landowners, rather than a concessioner
25 paying ground rent. For example, in support of his proposed tourism use, Roddewig identified
the Eldorado Canyon Mine (Techatticup Mine), an established tour attraction about one hour
26 from the Las Vegas Strip. See Ex. 2 (Roach Rep.) US0183126 to -130. Admission to the property
27 (an old mine town) is free, or $10 to enter the old gold mine; the owners also operate a gift shop,
rent canoes and kayaks for the Colorado River down the road, and rent the site for photo shoots.
28 Id. Interviews and research revealed the entire operation generates about $100,000 to $110,000
in annual revenue (compared to tens of millions of dollars projected for landowners’ proposed
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III. Despite Landowners’ Efforts to Improperly Bolster Their High-Dollar Premise,

1
They Have Not Shown Their Proposed Tourism Use Is Reasonably Probable.
2
3 Tellingly, the Opposition and several motions reveal landowners’ extensive efforts to

4 bolster their experts’ speculative highest and best use, asking this Court to assume away several

5 obstacles to landowners’ proposed use that their experts failed to address. E.g., ECF No. 386

6 (access and view constraints); ECF No. 391 (evidence rebutting landowners’ experts’ tourism

7 valuations); ECF No. 395 (risk of environmental hazards due to mining activities); ECF No. 396

8 (use restrictions on unpatented claims); ECF No. 397 (lack of water rights for tourist use). None

9 of these matters can be assumed or ignored; and the fact that landowners’ proposed use depends

10 upon such an extensive, and precise, “combination of occurrences,” indicates that the use is too

11 speculative to be considered by the factfinder. See Olson, 292 U.S. at 257.

12 a. There is no evidence any market participant ever considered pursuing

landowners’ proposed tourism concept before the date of taking.
13
14 Landowners’ proposed use would require much more than finding an existing Area 51
15 tour operator operating “an Area 51 tour without a view of Area 51” and simply “allow[ing] his
16 tour to actually see Area 51 and charge more.” See Opp’n 16. And there is simply no evidence
17 that any tour operator would take on the significant expense involved to develop a property they
18 did not own, shouldering all the risk. 8
19
tour-operator scenario at the Groom Mine). Id. Another purported tourist attraction Roddewig
20 identified is the Mustang Monument property in Elko, Nevada, which Roddewig described as
21 an “upscale eco-tourism resort.” ECF No. 411-1 at 00118. Roddewig did not note that the owner-
operator was a nonprofit organization “established to protect and preserve wild Mustangs in
22 America.” Ex. 2 (Roach Rep.) 183122 & nn. 71-72. The operation did not open in 2016. Id.
23 8
While the Opposition attempts to explain away the “not remotely interested” response
24 of Will Tryon, the only tour operator contacted by any landowners’ experts, see U.S. Mot. 13-15;
Opp’n 15-16, Tryon was selling property with purported tourism potential. Had he wanted to
25 develop a tourism attraction, surely he would start with his own property. See U.S. Mot. 13-14.
26 Also, the Opposition incorrectly states a “tour operator” said “he could get $1,000 per
27 person for an overnight tour that provides a view of Area 51.” See Opp’n 10 (item 3e). But as
DiFederico has conceded, this was a booking agent, not a tour operator. ECF No. 392-13
28 (DiFederico Dep.) 160:13-19 (“Okay. So it should have said ‘booking companies.’”), 289:8-
290:7 (“I don’t know who it was specifically. Whoever was answering the phone.”). Several
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b. There is no valid basis to disregard known environmental hazards identified

1
by Landowners’ own experts.
2
3 The assertion that there is “no proof of actionable levels of mining contamination,”

4 Opp’n 18, misses the point. 9 Under federal eminent domain law and appraisal practice, it is well-

5 established that “the remnants of the [past use of a property] are relevant to determining the

6 ‘highest and best use’ of the landowners’ property,” and so must be considered. Rasmuson v.

7 United States, 807 F.3d 1343, 1346 n.1 (Fed. Cir. 2015) (vacating award premised on highest

8 and best use that disregarded physical remnants of property’s past use); see U.S. Mot. 15-17;

9 ECF No. 437 at 8-9 & n.3. Landowners cannot dispute their appraisers expressly recognized that

10 the property’s mining history raised environmental concerns, made “extraordinary assumptions”

11 to disregard this known risk in valuing the property, and admitted that their assumption that the

12 property was environmentally clean, if false, could alter their opinions. ECF No. 437 at 6-9. 10

13 In any event, contrary to the Opposition, see Opp’n 18, there is evidence on

14 environmental conditions at the Groom Mine property, including landowners’ experts’

15 measurements of “appreciable quantities” of lead and arsenic, and their appraisers’ admonition

16 that past mining activities may have resulted in “disposal of hazardous materials including heavy

17 metals in mine tailings.” ECF No. 411-1 (Roddewig Rep.) 00034; see ECF No. 411-8 (Davis

18 Rep.) US0181218 to -220 (environmental hazards) & 0183461 to -436 (Davis’ qualifications).

19 With no foundation (or prior disclosure), the Opposition includes a map purporting to

20 show the “mining related area” as very small and removed from the “proposed tourist

21 commercial area.” ECF No. 447-18; see Opp’n 19. Whoever created the map, on its face it is not

22 other assertions described as “opinions of nearby business owners/brokers,” Opp’n 9-10 (items
23 3a to 3h), are also inaccurate, disputed, and/or lacking foundation. See ECF. No. 448 (U.S.
Opp’n to Landowners’ Mot. for Summary Jgmt.) 11-13.
24
9
Landowners’ pending motion to exclude “evidence of environmental contamination,”
25 ECF No. 395, makes similarly mistaken arguments, as explained in the United States’ response
to same, ECF No. 437, incorporated here by reference.
26
10
27 Landowners incorrectly claim the United States’ experts made the same assumption,
valuing the property as if “clean.” Opp’n 18. The United States’ experts valued the property “as-
28 is,” and did not assume away potential environmental conditions. See ECF No. 437 at 4-5.

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1 a reliable or credible depiction. One example: The map labels a small polygon in the Mill claim
2 as “processed tailings,” which according to the Opposition shows the mine tailings are “a very
3 small portion of the Property.” Opp’n 19. But a much larger tailings pond is plainly visible on
4 the map, starting in the Mill claim and stretching into the (aptly named) Pond claim. ECF No.
5 447-18. Moreover, the Opposition does not address that the “tourist area” is to the south of the
6 “mining related area” and the mapped portion of the tailings—and sampling shows “high
7 concentrations of lead and mercury in stream sediments south of the Groom Mine workings.”
8 ECF No. 395-1 (Davis Rep.) 018218. The Opposition also ignores the mineshaft, dump and other
9 remnants of the Black Metal Mine located within the proposed tourist use area (in the Southern
10 Groom claim). See id.; Ex. 1 (Springer Rep.) 0021462 to -63 (photographs of Black Metal
11 mineshaft and surroundings, including development muck dump extending from shaft).
12 c. Contrary to the Opposition, obtaining water rights for landowners’ proposed
13 tourism use remains speculative.

14
The Opposition’s claims regarding an approved water supply, Opp’n 20-21, are belied by
15
the record. 11 Landowners’ proffered water expert, Tom Driggs, in no help, because virtually
16
17 11
If Landowners dispute that their hypothetical tourism proposal would be required to
develop an “approved water supply” under NAC 444 prior to occupancy and satisfy other
18
“special conditions” imposed by Lincoln County, see Opp’n at 21, they have no support. The
19 “Staff Report for the zone change” states that Landowners’ hypothetical development would be
subject to these conditions. ECF No. 413-7 (Staff Report for zoning change) at 4 (stating that
20 landowners’ “[p]roposed use . . . would require an additional Special Use Permit with applicable
21 conditions” (emphases added)). As Cory Lytle, the Director of Lincoln County Planning and
Building Department, explained at the commissioners meeting where the resolution was passed,
22 “All special use permits and/or zone changes go through planning. . . . [The landowners] would
first go through the zone change and get that done and special use permit would come -- come in
23 tandem. . . . Things like make sure the water was proven safe. Things -- things like that are all
24 part of the conditions in the special use permit.” ECF No. 450-9 (Lincoln Cty. Tr.) 13:15-14:12.
And even the hypothetical Special Use Permit required, among other conditions, an “approved
25 water supply” to be developed “prior to occupancy of the site.” ECF No. 413-7 at 3; see U.S.
Mot. 20-21. Landowners’ counsel, Jim Leavitt, also stated at the Lincoln County commissioners
26 meeting that “we would comply with all the conditions which were put in the application -- or in
27 the staff report . . . . We submitted our application, had the opportunity to meet with Cory
[Lytle]. . . . We reviewed the conditions. We agree with them. We think they’re appropriate and
28 consistent with staff’s recommendations.” ECF No. 450-9 (Lincoln Cty. Tr.) 11:13-12-2.

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1 every element critical to his opinions is assumed rather than proved. See ECF No. 446 (U.S.
2 Opp’n to Landowners’ Mot. to Establish Water Rights) 4-5. And contrary to landowners’
3 assertions, none of the United States’ experts have opined that “the water supply is reasonably
4 probable” for commercial tourism purposes. See Opp’n 20.
5 Maurice Robinson, a hospitality expert retained by the United States, mentioned
6 “trucking in” water among a number of “creative ways to bring water to potential tourist
7 commercial projects.” ECF No. 392 (Robinson Dep. vol. I) 298:12-299:15 (“Don’t laugh. In the
8 Grand Canyon project in Tusayan we were looking at rail cars for water.”). He did not determine
9 it would be feasible to bring water to the property or “any particular form in which . . . water
10 might be brought to or serve the property.” ECF No. 392-1 (Robinson Dep. vol. II) 213:2-9. In
11 fact, Robinson testified: “Somebody really needs to determine how to get water to the site, how
12 to remove water from the site, what the quality of the water is on the site.” ECF No. 392
13 (Robinson Dep. 147:25-148:4; see id. 300:16-301:15 (“I don’t know how to get the water there
14 or the electricity or what the costs are going to be.”). 12
15 Warren Neville, the United States’ case-in-chief appraisal expert, stated that a water
16 permit was “not a problem” for the existing recreation use of the property. ECF No. 390-1
17 (Neville Dep.) 142:4-14. But obtaining water for commercial tourism purposes is another matter:
18 Neville concluded that the uncertain availability of water “could be a significant constraint [on]
19
The Opposition does not substantively address the United States’ arguments that “post-
20 taking ‘plans’ manufactured for this litigation” by landowners’ litigation team are not evidence
21 of their proposed highest and best use, and that to be considered, “a proposed use must be
reasonably probable, not fabricated after the fact.” U.S. Mot. 12 (citing Olson, 292 U.S. at 257.
22 Contrary to the Opposition, Opp’n 14-15, the United States has not alleged any fabrication or
other misconduct by any Lincoln County official or employee in this matter. U.S. Mot. 12, 20-
23
21. These criticisms refer to landowners’ proposed valuations in this case—not public servants.
24 12
Robinson also stated that landowners’ expert did not adequately address the fact that
25 any on-site water sources could well be contaminated due to the property’s mining history. ECF
No. 392 (Robinson Dep. vol. I) 146:20-7, 147:11-15, 148:22-149:7 (“having watched my clients
26 spend tens of millions of dollars to clear contaminated water and land in kind of surprise
27 discoveries once they’re planning to build a visitor-serving development, my antenna is up that
this site would seem like a good candidate for having contaminated water, and yet I don’t see a
28 lot of money prepared to be thrown at it”).

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1 commercial use of the subject including the owner’s proposed use.” ECF No. 390-2 (Neville
2 Rep.) 20199. As Neville concisely testified, “there is theoretically enough water in that basin.
3 But the question is can you get the water on the subject property?” Neville Dep. 143:7-9; Neville
4 Rep. 20187. He specifically discussed the permits required for landowners’ “scenario of tourist
5 commercial RV resort” with water resource specialists at the Nevada Division of Water
6 Resources (NDWR). Neville Dep. 142:15-144:20. Based on his investigation, and with no
7 evidence the Groom Mine owners would be able to obtain access to an offsite water source,
8 Neville could not determine “there was sufficient water to service a tourist commercial use on
9 the property.” Neville Dep. 143:14-17; Neville Rep. 20187.
10 The “Nevada State Engineer” (the NDWR water resource specialists interviewed by
11 Neville) indicated that “water is not an issue” for the existing rural recreation use, but to obtain
12 the right to use water for the “proposed commercial development” there must be “sufficient
13 water on the subject property and/or they [must] have the right to access an offsite water source.”
14 ECF No. 390-2 (Neville Rep.) at 0020187. As for “[the] ‘Potable’ water well design and cost
15 report” and related reports touted in the Opposition, they expressly assume there is potable water
16 at the property. See ECF No. 446 (U.S. Opp’n to Landowners’ Mot. to Establish Water Rights) 2.
17 d. Landowners’ remaining arguments present no valid support for their
18 proposed tourism use.

19
None of the Opposition’s remaining arguments provide valid support for their
20
hypothetical tourism scenario. A few merit brief discussion. First, the Groom Mine property’s
21
remote and isolated location cannot be dismissed on the basis of speculation. The fact that Death
22
Valley National Park, Zion National Park, and the Skywalk at Grand Canyon West are about the
23
same distance from Las Vegas as the Groom Mine property, see Opp’n 19, does not make the
24
landowners’ hypothetical tourism scenario any more likely. The Opposition does not otherwise
25
address any of the logistical challenges by the property’s location. See U.S. Mot. 18-20. 13
26
13
27 It is unclear what “government access argument” the Opposition attempts to rebut.
Opp’n 24-25. Landowners cannot seriously dispute that access to the Groom Mine property is
28 via unmaintained dirt roads, or that portions are reachable only by all-terrain vehicles or on foot.
See Opp’n 25 (“Landowners maintained the dirt road portion of access to their Property with
11
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1 Second, capitalization (cap) rates in income-based valuations do not, and cannot, address
2 the speculative nature of the use on which a valuation is based. Landowners’ arguments on cap
3 rates and risk incorrectly conflate highest and best use—at issue in this motion—with valuations
4 based on a property’s highest and best use. But the probability (risk) of a hypothetical use
5 occurring does not change depending on an appraiser’s choice of capitalization rate to capitalize
6 hypothetical income from that hypothetical use. Landowners must first establish their proposed
7 tourism scenario was reasonably probable before valuing the property based on that use.
8 Capitalizing income that could be generated by an improbable use—here, landowners’ tourism
9 scenario—will not make that use any more probable. See, e.g., ECF No. 451-1 (DiFederico Dep.)
10 547:3-551:11 (capitalizing income could indicate positive value but “[m]y gut tells me it
11 wouldn’t be feasible at that number . . . . you’re creating a situation where it’s under water”); see
12 also ECF No. 451-7 (DiFederico Dep. errata) 550:22-23. It simply results in calculation of value
13 that is hypothetical, improbable, and inadmissible. 14
14 CONCLUSION
15 For the reasons stated above, and in the United States’ opening brief, this Court should
16 exclude valuation evidence premised on landowners’ proposed tourism scenario—specifically,
17 the opinions of Clauretie, DiFederico, Roddewig and Steinagel.
18
19 their own grader”). Plainly, access to the property is not maintained by municipal, state or federal
services. ECF No. 392-17 (Clauretie Dep.) 147:21-151:1 (tour operator at Groom Mine property
20
could spend more than $200,000 annually on road maintenance); ECF No. 392-13 (DiFederico
21 Dep.) 114:20-117:21 (“It was kind of like in a mountain area.”) (“you wouldn’t be driving up in
there [on part of the property]. You would stop before that and then walk through”).
22
The claim that the government “implies it could restrict access,” Opp’n 24, is equally
23
unclear. Landowners’ experts’ hypothetical tourism scenario expressly contemplates “enhanced
24 security and screening requirements,” including “limitations on visitors,” an “advance
reservation system to assure security clearances,” and “limitations on camera equipment and
25 computer equipment . . . .” ECF No. 411-1 (Clarion Rep.) 00092.
26 14
For the same reason, federal courts hold that the subdivision method (which
27 incorporates income capitalization techniques) cannot be used to value property unless
subdivision development is reasonably probable in the reasonably near future. E.g., 99.66 Acres,
28 970 F.2d 651; see ECF No. 408 (U.S. Mot. to Excl. Income Capitalization) & U.S. Reply.

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1
2
NICHOLAS A. TRUTANICH
3 United States Attorney
District of Nevada
4
5 TROY K. FLAKE
Deputy Civil Chief
6 District of Nevada
7
8 /s/ Georgia Garthwaite
GEORGIA GARTHWAITE
9 JOHANNA M. FRANZEN
ANTHONY GENTNER
10 MARK C. ELMER
11 Trial Attorneys
U.S. Department of Justice
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EXHIBITS
1
2 Exhibit 1 Report of Marc Springer (excerpts)
3
Exhibit 2 Report of Stephen D. Roach (excerpts)
4
5
6
7
8
9
10
11
12
13
14
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 Case 2:15-cv-01743-MMD-NJK Document 486 Filed 05/03/19 Page 16 of 16

CERTIFICATE OF SERVICE
1
2 I hereby certify that on May 3, 2019, I caused the foregoing Reply in Further Support of
the United States’ Rule 71.1(h)(1) Motion to Exclude Valuation Evidence Premised on
3 Speculative Tourism Use to be served on all parties who have appeared in this action using the
Court’s case management/electronic case filing system. I further certify that on May 3, 2019,
4
the United States sent a copy of the foregoing Reply via U.S. mail to the following interested
5 parties:
6 Sandra Sears-Lavallee Debbie DeVito
7 1172 Skyline Road c/o Stanley Pedder
Henderson, NV 89002 3445 Golden Gate Way
8 Lafayette, CA 94549
9 John B. Sheahan Melanie Goodpasture
10 c/o Michael W. Sheahan P.O. Box 7044
6717 Rolling Meadows Dr., #916 Cotati, CA 94931
11 Sparks, NV 89436-0106
12 Deborah Lynn Sheahan House Rabbit Society
13 4662 Gabriel Drive c/o Anne Martin (Registered Agent)
Las Vegas, NV 89121 148 Broadway
14 Richmond, CA 94804
15 Diane Sibley-Origlia Animal Place
16 1615 Via Romero c/o Kim Sturla (Registered Agent)
Alamo, CA 94507 17314 McCourtney Road
17 Grass Valley, CA 95949
18
Katherine Kell Hui Chu Poole
19 c/o Stanley Pedder 165 Lakewood Road
3445 Golden Gate Way Walnut Creek, CA 94598
20 Lafayette, CA 94549
21
Amy E. Sears
22 P.O. Box 71
Pioche, NV 89043
23
24 /s/Georgia Garthwaite
Georgia Garthwaite
25
26
27
28

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