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Arizona Lithium Company Ltd. v. North American Cobalt, Inc.

United States District Court, D. Idaho

September 30, 2019

ARIZONA LITHIUM COMPANY LTD., an Arizona corporation; IDAHO METALS CORP., an Idaho corporation; INTERNATIONAL COBALT CORP., a Canadian corporation, Plaintiffs/Counter-defendants,
v.
NORTH AMERICAN COBALT, INC., a Nevada corporation, Defendant/Counterclaimant.

          MEMORANDUM DECISION AND ORDER

          David C. Nye Chief U.S. District Court Judge

         I. INTRODUCTION

         Pending before the Court is Defendant's Motion for Summary Judgment (Dkt. 45), Plaintiffs' Motion for Partial Summary Judgment (Dkt. 50), and Defendant's "Motion in Limine to Exclude Expert Opinion Testimony Not Previously Disclosed and Evidence Created by Plaintiffs after Close of Discovery" (Dkt. 59). Following briefing on the motions, the court held oral argument and took the matter under advisement. After fully considering the arguments presented by the parties, and for the reasons set forth below, the Court finds good cause to GRANT in part and DENY in part Defendant's Motion for Summary Judgment, to DENY Plaintiffs' Motion for Partial Summary Judgment, and to dismiss Defendant's Motion in Limine to Exclude Expert Opinion Testimony as MOOT.

         II. BACKGROUND

         A. Factual Background [1]

         This lawsuit arises out of a dispute over unpatented lode mining claims located in Lemhi County, Idaho. Plaintiffs/Counter-Defendants Arizona Lithium Company Ltd., and transferees of interests, Idaho Metals Corp. and International Cobalt Corp. (collectively "Arizona Lithium") brought this suit for declaratory relief and to quiet title to mining claim Nos. 1 through 58 inclusive, situated within various sections of Township 21 North, Range 18 East of the Boise Meridian, in Lemhi County, Idaho (collectively, the "BOCO Claims"). Defendant, North American Cobalt Inc. ("NAC"), formally known as Battery Mineral Resources (United States), Inc. ("BMR"), claims a senior possessory interest in 111 "BATT" lode mining claims ("BATT Claims") that cover, in part, the same locations as the BOCO Claims.

         The instant motions involve three types of claims: (1) those that overlap or partially overlap; (2) those which do not overlap and which only NAC claims an interest in; and (3) those which do not overlap and which only Arizona Lithium claims an interest in. Arizona Lithium seeks partial summary judgment with respect to some of the BOCO and BATT claims that undisputedly coincide, specifically BATT Claims 60-69 and 80-87, which the parties agree overlap with BOCO Claims 50-58. Arizona Lithium argues the undisputed facts entitle it to a declaratory judgment finding BATT Claims 60-69 and 80-87 are void as a matter of law due to NAC's improper staking. Arizona Lithium contends such conclusion would render that land open for mineral exploration and entitle Arizona Lithium to quiet title in BOCO Claims 50-58 based on Arizona Lithium's proper staking and discovery of mineral deposits within such claims.

         Arizona Lithium does not seek summary judgment on those claims which do not overlap and which only NAC claims an interest in, but argues there is a question of fact precluding summary judgment as to which BATT and BOCO Claims overlap. Arizona Lithium also seeks to quiet title in BOCO Claims 3-8 "on the undisputed basis that NAC does not seek to quiet title in those claims." Dkt. 50-2, at 7. The parties agree BOCO Claims 3-8 do not overlap with any of the BATT Claims, and that NAC does not claim an interest in BOCO Claims 3-8.

         By contrast, NAC suggests summary judgment should be granted because: (1) Arizona Lithium has not made a mineral discovery and cannot claim a possessory right to the BOCO Claims which undisputedly overlap with, and are junior to, NAC's valid claims; (2) Arizona Lithium does not have standing to contest the BATT Claims it does not claim an interest in; and (3) although NAC does not claim an interest in BOCO Claims 3-8, Arizona Lithium's attempt to quiet title in such claims exceeds the Court's jurisdiction.

         1. The BATT Claims

         In early September of 2016, NAC hired Ethos Geological LLC ("Ethos") to stake mining claims for NAC on land that had previously been located by another company, Formation Capital, after Formation Capital allowed its claims to lapse. Prior to staking the BATT Claims, a geologist for Ethos, Scott Close checked with the Bureau of Land Management ("BLM") to ensure there were no outstanding claims on file, and also went to the courthouse in Lemhi County to check whether any outstanding claims had been recorded. Close found no competing claims of record in Lemhi County or with the BLM.

         On September 7-9, 2016, an Ethos crew headed by Close staked the 111 BATT Claims. Ethos staked many of these claims by hand. Specifically, on September 7, 2016:

[T]he Ethos crew drove to a trailhead, hiked to a prominent ridge above the area to be staked and established a permanent monument at that location. From that permanent monument, the four Ethos crew members hiked in parallel lines to locate the corners of the top or northern four rows of the BATT Claims. Each row consisted of 18 claims (600x1500 ft each). Each crew member had a GPS device used to accurately place the corner locations. The crew utilized natural monuments, including trees, stumps and other vegetation to locate the corners of the BATT Claims. They affixed tags describing the claim and flagging to each corner monument. ... It took them all day to locate the corners, finishing up in the twilight[.]

         Dkt. 45-2, ¶ 4.

         On September 8, 2016, Ethos arranged for a helicopter to come to Salmon to help complete the staking for the remaining BATT Claims. The helicopter arrived on September 9, 2016, and two members of the Ethos crew staked the remaining BATT Claims by hovering over the site of each corner and releasing 4x4 posts from the helicopter onto the ground. Close directed the helicopter to each corner of the remaining BATT Claims using his GPS coordinates. Ethos made two trips on September 9, 2016, and finished staking the area by helicopter that day. Ethos recorded certificates of location for all 111 BATT lode claims with the Lemhi County Recorder on September 9, 2016. As required by statute, Ethos subsequently filed copies of the recorded location notices with the Idaho field office for the BLM less than 90 days after staking the claims. Because it was retained to stake the claims on NAC's behalf, Ethos later quitclaimed, transferred, and assigned the 111 BATT Claims to NAC. For purposes of its Partial Motion for Summary Judgment, Arizona Lithium seeks a declaration finding BATT Claims 60-69 and 80-87 invalid due to NAC's helicopter staking.

         NAC contends an Ethos crew returned to the site of the BATT Claims several times over the course of the next two years. First, one year later, on September 23-24, 2017, Ethos returned to maintain, to explore, and to map the surface geology of the BATT Claims. Ethos returned in December of 2017, to take soil and rock samples and conduct additional site investigation. Ethos again visited the site in April 2018, to stake claims near the BATT Claims. Close returned in June of 2018, to collect rock samples. A four-person Ethos crew returned to the BATT claims in July and August of 2018, to perform additional maintenance work and site investigation, including soil mapping and soil and rock sampling. In September and October of 2018, a six-person Ethos crew continued geologic investigation, and, in purported work toward a discovery of mineral deposits on the BATT Claims, took approximately 300 soil samples covering each BATT Claim, and conducted extensive on-the-ground geophysical exploration. NAC suggests an aerial geophysical survey of the BATT Claims is underway, and that Ethos is developing a drilling plan to submit to the Forest Service for the next stage of investigation of the BATT claims.

         In addition to the aforementioned work, NAC contends Ethos has added new claim tags to the corners of the claims over the faded original corner tags, has ensured that all corner posts and monuments are in the correct location and standing, and has affixed copies of the recorded certificates of location and amended certificates in plastic vials to the corners of all of the BATT Claims. NAC has also paid the required fees and filed the appropriate documents to maintain the BATT Claims for the 2017, and 2018, annual periods.

         2. The BOCO Claims

         In September of 2016, Arizona Lithium hired Carlin Trend Mining Services ("Carlin Trend") to stake the BOCO Claims for Arizona Lithium. Carlin Trend is located in Elko, Nevada, and provides claim staking services in various western states, including Idaho. Carlin Trend's team consisted of Sandi Sullivan, Curtis Barlow, and Parker Walker. Sullivan researched the BOCO Claims project area from Carlin Trend's Elko offices. She searched the BLM's database for public reports on mining claims. Sullivan checked the database several times between August and September 2016, but did not locate any mining claims filed in the proposed project area of the BOCO Claims. Sullivan also attempted to look on the Lemhi County Recorder's website for any claims in the project area that had been recorded with the County, but she was unable to access recorded records via Lemhi County's website.

         In late September, 2016, Barlow and Walker traveled to Lemhi County to stake the BOCO Claims. On September 25, 2016, the two began the process of locating the BOCO mining claims. There was no road access to the project area, so they were flown in by helicopter. Walker was left near the south end of the claim block, along with a number of 4x4 milled posts to be placed at designated points to locate the BOCO Claims. Barlow remained on the helicopter to drop the remaining posts in the BOCO Claim block so that he and Walker could return to place the posts at designated corner points. While staking, both Walker, on the ground, and Barlow, from the helicopter, spotted wooden posts lying on the ground in the same area where they intended to stake the BOCO Claims. The two men stopped the staking process to inspect the posts and attempt to identify the locator.

         On each post, Walker and Barlow found a tag dated September 7, 2016. The tag included a reference to "BATT," the corners, and an X with numbers. Barlow immediately consulted Sullivan regarding the BATT posts and asked whether he should continue staking the BOCO claims. Sullivan instructed Barlow to further investigate the area to determine any prior claims work he and Walker could identify.

         Barlow and Walker spent most of the rest of September 25, 2016, looking for additional information about the BATT Claims. They searched for paperwork, location monuments, and other corner posts. Barlow and Walker found three BATT posts on the ground. Although they hiked 1, 500 feet in all directions (the maximum length of a lode claim) from each BATT post, they did not find any paper notices containing all of the information necessary for a notice of location. Barlow and Walker also flew over the area by helicopter but did not see any additional posts from the air.

         Following the team's reconnaissance, Sullivan consulted with Arizona Lithium regarding what Barlow and Walker had observed and asked whether they should continue staking claims. Sullivan and Arizona Lithium ultimately determined the BATT Claims were not likely valid, and that the area remained open for location. Arizona Lithium directed Carlin Trend to continue staking the BOCO Claims unless the team found some evidence that the BATT Claims were legitimate.

         Barlow and Walker staked three BOCO Claims on September 25, and staked the remaining BOCO Claims on September 26-28, 2016. As they did so, they continued to look for posts or other evidence related to the BATT Claims. While staking, Barlow and Walker found a total of 10 BATT corners, most of which consisted of orange tags attached to trees, and a total of four posts lying on the ground. Arizona Lithium contends the Carlin Trend team did not observe any notices of location, and that none of the orange tags attached to trees or posts contained the information required to identify the tree or post as a notice of location.

         The BOCO Claims were staked by erecting 4x4 inch wooden posts that stood approximately four feet tall. At one corner of each claim, Carlin Trend attached a notice of location to the wooden post using a weather proof red vial. Some of the BOCO Claims were staked using "witness" posts, or posts used to mark a corner where it was impracticable to place a post in the true corner location. Arizona Lithium suggests Carlin Trend used witness posts because of the challenging terrain, including the heavily wooded area, new growth, and downfalls, for safety reasons, and so Barlow and Walker would not need to camp overnight in the remote project area. Arizona Lithium also notes no witness posts were used for location monuments.

         After staking the 58 BOCO Claims, Arizona Lithium recorded the BOCO Certificates of Location in Lemhi County, and with the BLM, in December of 2016. Arizona Lithium filed Amended Certificates of Location on January 2, 2018. On October 15, 2018, Sullivan filed Second Amended Certificates to add the name of the relevant mining district (Blackbird) and to correct an omission in the First Amended Certificates.

         B. Procedural Background

         Arizona Lithium filed suit on July 17, 2017, in the Idaho district court for Lemhi County. NAC's predecessor in interest, BMR, removed the matter to the United States District Court for the District of Idaho. Arizona Lithium's initial complaint sought a declaratory judgment invalidating the BATT Claims and quieting title in BOCO Mining Claims 1-58.

         On September 27, 2017, NAC moved to dismiss Arizona Lithium's suit for failure to comply with Idaho Code. Dkt. 12. Specifically, NAC suggested Arizona Lithium failed to adequately fulfill the affidavit requirement of Idaho Code section 47-611.[2] After briefing, but before oral argument, Arizona Lithium filed its first amended notices of location. The Court denied NAC's motion to dismiss, concluding that even if the original notices of location were deficient, the amendment was proper and related back to the original date of filing: December 16, 2016.

         Arizona Lithium filed its First Amended Complaint on June 13, 2018. Dkt. 31. In its Amended Complaint, Arizona Lithium seeks: (1) declaratory judgment, specifically a declaration of its rights to the BOCO Claims and the invalidity of the BATT Claims; and (2) to quiet title to the BOCO Claims. NAC counterclaimed for declaratory relief finding Arizona Lithium has no right, title, or interest in any of the BOCO Claims which overlap with the BATT Claims, declaring NAC is entitled to possession of the BATT Claims which do not overlap with the BOCO claims, and enjoining Arizona Lithium from trespassing on, or interfering with, NAC's possessory interest in the BATT Claims. Dkt. 34. The parties filed cross-motions for summary judgment on October 19, 2018. Dkt. 45; Dkt. 50.

         III. LEGAL STANDARD

         A party is entitled to summary judgment if the "movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The moving party has the burden of establishing the absence of a genuine dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The court must view the evidence in the light most favorable to the non-movant and draw all reasonable inferences in the non-movant's favor. Clicks Billiards Inc. v. Sixshooters Inc., 251 F.3d 1252, 1257 (9th Cir. 2001). Although "[credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge," the "mere existence of a scintilla of evidence in support of the [non-movant's] position [is] insufficient" to avoid summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252-255 (1986). If the "record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citation and quotation marks omitted).

         Where, as here, parties file cross-motions for summary judgment, the court "evaluate[s] each motion separately, giving the non-moving party in each instance the benefit of all reasonable inferences." A.C.L.U. of Nev. v. City of Las Vegas, 466 F.3d 784, 790-91 (9th Cir. 2006) (quotation marks and citation omitted); see also Pintos v. Pac. Creditors Ass 'n, 605 F.3d 665, 674 (9th Cir. 2010) ("Cross-motions for summary judgment are evaluated separately under [the] same standard."). In evaluating the motions, "the court must consider each party's evidence, regardless under which motion the evidence is offered." Las Vegas Sands, LLC v. Nehme, 632 F.3d 526, 532 (9th Cir. 2011).

         IV. ANALYSIS

         At the outset, it is necessary to define the nature of the property rights at issue in this dispute. Although the parties ask the Court to quiet title with respect to certain claims, this suit is properly classified as an action to determine competing possessory interests to unpatented mining claims. Hedrick v. Lee, 227 P. 27, 28 (Idaho 1924) ("The rights of conflicting locators to an unpatented mining claim can in the very nature of things be the subject of only a possessory action, and not of an action to quiet title in the true sense of the term."). Due to issues regarding standing and jurisdiction, the Court must first dispose of those claims which are not subject to competing possessory interests.

         A. Non-Overlapping BATT Claims

         In its Amended Complaint, Arizona Lithium asks the Court to declare all 111 BATT Claims invalid due to NAC's alleged failure to properly locate such claims. NAC counters that Arizona Lithium does not have Article III standing to challenge 52 of the BATT claims because ...


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