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Montanore Minerals Corp. v. Bakie

United States Court of Appeals, Ninth Circuit

August 16, 2017

Montanore Minerals Corporation, Plaintiff-Appellee,
v.
Arnold Bakie; Optima, Inc.; Frank Duval, Defendants-Appellants, and Easements and Rights of Way Under, Through and Across Those Certain Unpatented Lode Mining Claims Located in the NE 1/4 of Section 15, Township 27 North, Range 31 West, Lincoln County, Montana and Identified as POPS 12, POPS 13, POPS 14 AND POPS 15; Unknown Owners, and all other persons, unknown, claiming or who might claim any right, title, estate, or interest in or lien or encumbrance the unpatented lode mining claims described above or any cloud upon title thereto, whether such claim or possible claim be present, Defendants.

          Argued and Submitted June 13, 2017 Seattle, Washington

         Appeal from the United States District Court No. 9:13-cv-00133-DLC for the District of Montana Dana L. Christensen, Chief Judge, Presiding

          Stephen Ross Brown (argued), Garlington Lohn & Robinson PLLP, Missoula, Montana, for Defendants-Appellants/Cross-Appellees.

          Mark Stermitz (argued), Matthew A. Baldassin, and Christopher C. Stoneback, Crowley Fleck PLLP, Missoula, Montana, for Plaintiff-Appellee/Cross-Appellant.

          Before: DOROTHY W. NELSON, MILAN D. SMITH, JR., and MORGAN CHRISTEN, Circuit Judges.

         SUMMARY[*]

         Colorado River Doctrine

         The panel held that the district court abused its discretion by not staying this federal case in deference to pending state court proceedings under Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817-19 (1976); reversed the district court's order condemning for Montanore Minerals Corp.'s public use easements and rights of way through four unpatented mining claims; remanded for the district court to stay the proceedings; and on cross-appeal, affirmed the district court's denial of Montanore's motion to determine the validity of the mining claims.

         The panel held that application of the Colorado River factors, along with the unusual circumstances of this case, compelled a finding that this was an exceptional case in which the district court's decision not to enter a stay constituted an abuse of discretion.

         The panel held that on balance the Colorado River factors strongly counseled in favor of a stay: the state court first assumed jurisdiction over the subject claims; proceeding with the federal case presented a risk of piecemeal litigation; the state court had jurisdiction over the case for several years, and had made substantial progress, by the time the federal proceeding was filed; state law provided the rule of decision on the merits, and the case presented complex state law questions better addressed by the state court; the state court could adequately protect the federal rights at issue; Montanore's actions strongly suggested that it was forum shopping by filing in federal court; and the suits were sufficiently parallel for Colorado River to apply.

          OPINION

          M. SMITH, CIRCUIT JUDGE.

         The causa belli in this case is the legal status of POPS claims 12-15 (the Subject Claims), which are four unpatented mining claims owned by defendant Arnold Bakie and his predecessors in interest since 1984, and then conveyed to defendant Optima, Inc., in October 2013.[1]Plaintiff Montanore Minerals Corp. (Montanore) seeks to resume construction of a tunnel near Libby, Montana (the Libby Tunnel), which Defendants contend would interfere with their rights in the Subject Claims. To accomplish its goal without objection from Defendants, Montanore first initiated an action in Montana state court in 2007, in which it sought a declaration that the Subject Claims were invalid. After the state court ruled in 2013 that the Subject Claims were valid, Montanore brought an action in federal district court, seeking to condemn for public use easements and rights of way through the Subject Claims. The district court ordered the easements and rights of way condemned for Montanore's public use, and determined that Defendants were not entitled to any compensation as a result of the taking.

         We conclude that the district court abused its discretion by not staying the federal case in deference to the pending state court proceedings. See Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817-19 (1976). Accordingly, we reverse the district court's condemnation order, and remand for the district court to stay the proceedings. On cross-appeal, we affirm the district court's decision to deny Montanore's motion to determine the validity of the Subject Claims.

         FACTS AND PRIOR PROCEEDINGS

         In 1989, Noranda Minerals Corp. (Noranda) began construction of the Libby Tunnel in order to gain underground access to valuable silver and copper deposits located within its patented mining claims, HR 133 and HR 134. To facilitate construction of the Libby Tunnel, in 1989 Noranda entered into a mining lease with certain entities and persons that claimed to own unpatented mining claims located within the Libby Tunnel, including Bakie and his predecessors in interest. After building approximately 14, 000 feet of the Libby Tunnel, Noranda ceased construction before it reached HR 133 and HR 134. In 2002, it ceased its development efforts entirely, and disclaimed any interests in the easements it held for tunnel construction pursuant to the 1989 mining lease.

         In 2006, Noranda changed its name to Montanore and sought to recommence construction of the Libby Tunnel. Rather than following its previous strategy of obtaining easements from unpatented mining claim holders, it sought to have those mining claims declared invalid, or, alternatively, have easements running through them condemned for public use.

         I. State court action.

         In 2007, Montanore filed a state court action seeking, inter alia, a declaratory judgment that the Subject Claims were invalid under state and federal law. After years of discovery and cross-motions for summary judgment, the state court issued an interlocutory order in March 2013 holding that the Subject Claims were valid. The order also enjoined Montanore from crossing the unpatented claims owned by Walter Lindsey, who is not a party to this case. The injunction did not concern the Subject Claims or Defendants.

         The injunction was immediately appealable under Montana law, and Montanore appealed to the Montana Supreme Court. In an unpublished order, the Montana Supreme Court vacated the injunction on procedural grounds and remanded for further consideration.[2] On remand to the state district court, Montanore sought to remove the judge who had presided over the state court action, pursuant to Montana Code Annotated (MCA) § 3-1-804(12), but was unsuccessful in its quest. Mines Mgmt., Inc. v. Fus, 334 P.3d 929, 931-32 (Mont. 2014). Montanore appealed, and the Montana Supreme Court affirmed the decision of the trial court. Id. at 932.

         Montanore has not yet appealed the state court's ruling concerning the validity of the Subject Claims, because it was not an appealable final order. In the meantime, the state district court has deferred further state court proceedings pending the outcome of this appeal.

         II. Federal court action.

         On June 28, 2013, Montanore filed a condemnation action in federal court pursuant to Federal Rule of Civil Procedure (Rule) 71.1, seeking to condemn easements and rights of way through the Subject Claims so that it could complete the Libby Tunnel in order to reach HR 133 and HR 134, and begin mining silver and copper. Montanore also moved for the district court to determine the validity of the Subject Claims.

         Defendants moved for the district court to stay the federal proceedings in deference to the pending, parallel state court proceedings, pursuant to the Colorado River doctrine. The district court agreed with Defendants regarding Montanore's motion to determine claim validity, and thus denied Montanore's motion. However, the district court declined to stay the condemnation action because it determined that the state ...


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