Fighting $105M Jury Award, County Says It Didn’t Target Growing Mine

(CN) – Still digging itself out from a $105 million jury verdict, Sacramento County on Friday defended its decision to clamp down on a longstanding riverside gravel mine and asked the Ninth Circuit to drill into the mammoth judgment.

After decades of pulling sand and gravel, miners struck proverbial gold in 2017 when a federal jury found the county targeted their operation because of its recent growth and tried to shut it down at the behest of an influential competitor.

During oral arguments of its appeal in San Francisco on Friday, the county refreshed its claim that the jury award was excessive and that it wasn’t trying to shutter the mine but instead make sure it passed environmental muster.

While the three-judge panel hinted at the possibility of reducing the award, it chilled the county’s request for a whole new trial.

“There’s evidence here that the county targeted them and treated them differently,” U.S. Circuit Judge Ryan Nelson, a Donald Trump appointee, told the county’s lawyer. “Given the emails, given that the jury looked at this, that’s a pretty high hurdle for you to meet.”

At issue is a decades-long fight over Jay Schneider’s rural Sacramento County ranch, and a gravel mining business formerly operated on the property by Joseph Hardesty.

Aerial view of the lower Cosumnes River in Sacramento County. (USFWS photo)

The over 4,000-acre ranch sprawls across former tribal lands near the Cosumnes River, the only undammed river on the western side of the Sierra Nevada mountain range. Schneider says mining has occurred on the ranch since the 1800s, well before the state implemented strict regulations on surface mining, meaning the ranch was essentially “grandfathered in.” With his so-called vested rights in tow, the Schneider family eventually ditched the mining business and became landlords.

In 1980, Hardesty leased the property and started an aggregate mining business.

But as the decades went on, the business drew complaints from neighbors and regulators began pecking around Hardesty’s mines, specifically the ones near the river. According to court documents, Hardesty’s larger competitors added their own complaints and made political donations to a county official.

The county eventually decided the operation had grown beyond the scope of Schneider’s vested right to mine and said the property needed to be re-zoned to continue mining.

“It is now clear that your mining operation has grown to the extent that it is very different from what was envisioned in 1994,” the county said in a 2009 letter.

Schneider and Hardesty claim that after decades of being left alone, a flood of regulators flocked to the property. While the federal and state inspectors eventually backed off, the county persisted and issued cease-and-desist orders.

The men believe the reason for the sudden government interest in the property was caused in part by rival Teichert Construction Co.

“We proved that on the evidence, the motivation was Teichert pressured the county to run us out of business and the county acceded to that pressure,” said Hardesty’s attorney Christian Ward of Yetter Coleman in Houston.

Rather than apply for the permits, Hardesty shut down the mine and Schneider was unable to find a new tenant. The men claim the permits would have cost millions of dollars and taken up to 10 years to obtain, adding the county wouldn’t allow them to continue mining during the application process.

With their livelihoods frozen, the duo sued over a dozen agencies and the county in federal court in 2010.

The 2017 trial lasted over a month and in the end, a federal jury came down against the county and awarded the gravel miners $105 million for past and future business losses. The jury approved a variety of equal protection, due process and First Amendment claims and also awarded the two families nearly $2 million in punitive damages, to be paid by three county officials.

The county asked U.S. District Judge Kimberly Mueller for a new trial, but she upheld the jury verdict and entered the massive nine-figure award.

On Friday, the county reiterated its claim that it wasn’t trying to shut down the operation but to make it comply with new environmental regulations due to its exponential growth. According to state data, Hardesty’s production spiked from 9,840 tons in 1995 to 242,000 by 2007.

In briefs filed with the Ninth Circuit, the county says the men offered “conflicting evidence” during the 2017 trial and that they vastly overestimated their business losses. The county’s expert says the operation was only worth about $3 million, nowhere near the $75 million the jury ultimately awarded Hardesty.

“The county never ordered them to shut down as far as I understand, the county said you have to get a permit and they didn’t do that,” said the county’s private attorney Scott Dixler of Horvitz & Levy in Burbank, Calif.

Dixler called the award “grossly excessive” and argued the county didn’t prevent Hardesty from making a living as he could continue other mining endeavors.

Judge Nelson, who occupied himself with a tablet and cellphone throughout the conversation, said that while he couldn’t see the panel supporting the full jury award, he was “struggling” with how to potentially break it up. He asked how the miners’ attorneys came up with the estimated value of the operation.

“It’s like giving somebody a lottery ticket. I mean, you have no idea whether this thing is even going to be viable 20 years from now, 30 years from now,” Nelson said.

Ward defended the total by saying the jury based it on the predicted valuation of the booming enterprise that was clearly increasing its output.

Dixler also says a new trial is warranted because Judge Mueller didn’t explicitly order the jury not to consider campaign contributions given by a competing mining company to a county supervisor.

Schneider’s attorney painted the men as victims of a potent combination of corporate bullying and government intrusion.

“This is a case of shutting down a small operator out in the country in Sacramento County,” said Richard Ross. “We had over 30 agencies for two years descending on the ranch; some of that investigative activity was pretty harsh. We were required to respond to something virtually every day.”

When asked whether the court had legal means to slash the award if it decides not to order a new trial, Dixler responded that it does have the authority.

“We’re in a difficult spot it seems to me,” Nelson said.

U.S. Circuit Judge William Fletcher, a Bill Clinton appointee, and U.S. District Judge William Sessions, a Barack Obama appointee sitting by designation from the District of Vermont, rounded out the panel.

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