Trial Judge Upholds $100 Million Civil Rights Verdict in Favor of Hardesty Sand & Gravel, and the Schneider Family by David A. Diepenbrock

By David A. Diepenbrock, Esq.

In a notable ruling, United States District Judge Kimberly J. Mueller affirmed a jury verdict exceeding $100 million against Sacramento County and three individual county officials for violating the civil rights of Joe and Yvette Hardesty (“Hardesty”) and the Schneider family, owners of the Schneider Historical Mine (“SHM”).[1] Hardesty mined SHM for approximately 30 years under a lease with the Schneider family until the defendants shuttered the SHM at the behest of one of Hardesty’s competitors.

After a lengthy trial, the jury found that the defendants violated plaintiffs’ substantive due process rights by arbitrarily terminating vested mining rights at SHM without notice. The jury awarded $75 million to Hardesty and $30 million to the Schneiders on that claim. The jury also found that the defendants unlawfully retaliated against the Schneiders in response to their filing a civil rights lawsuit objecting to defendants’ arbitrary termination of the vested mining rights. The jury awarded $1,775,000 million in punitive damages against three County officials, including a former member of the County’s Board of Supervisors.

The defendants argued, in their renewed motion for judgment as a matter of law, that the plaintiffs failed to offer sufficient evidence that they possessed a liberty or property interest protected by the Fourteenth Amendment’s substantive due process clause. Defendants also argued that plaintiffs failed to produce sufficient evidence to permit the jury to find that the County’s actions lacked a rational basis. The court disagreed.

The court began its analysis by noting that the U.S. Supreme Court long ago recognized that “the right to follow a chosen profession free from unreasonable governmental inference comes within the liberty and property concepts of substantive due process.”[2] In this case, Hardesty possessed a liberty interest to pursue their chosen occupation as mine operators, and the Schneiders had a liberty interest in maintaining their ranch and selling aggregate resources from it to Hardesty.

A central argument the defendants advanced was that Hardesty had impermissibly expanded their mining operation, including by using new mining methods. According to defendants, these changes justified terminating the vested mining rights without notice. These arguments failed because the County’s original letter recognizing vested mining rights at SHM, and the reclamation plan the County subsequently approved, did not limit production levels or mining methods. Rather, the reclamation plan contemplated mining on almost the entire ranch, expanding in response to market demand. Because California allows mining operations to expand under the “diminishing assets doctrine” even after mining becomes a ‘non-conforming’ use, the court refused to disturb the jury’s finding that the County originally recognized vested mining rights as encompassing virtually the entire ranch, and imposed no limits on mining methods, or production levels.

The court then analyzed whether the evidence supported the jury’s finding that the defendants arbitrarily deprived plaintiffs of their vested mining rights, in violation of substantive due process. The defendants argued that an improper motivation, standing alone, cannot support the claim. After reviewing Ninth Circuit precedent, the court disagreed. The court found that substantial evidence showed that (i) the defendants abruptly changed their position regarding vested mining rights at SHM – from recognizing vested mining rights in 1994, to later abrogating those rights without notice – and, (ii) this change in position was driven by a desire to help one of Hardesty’s competitors. The evidence showed that the competitor: funded a County position responsible for inspecting mines located in the County; met multiple times with County employees during which competitor argued that Hardesty’s operation was unlawful; drafted findings the County used in abrogating the vested mining rights; made campaign contributions to the chair of the County’s Board of Supervisors the day before the Board rejected the Schneider’s appeal of the County’s termination of the vested mining rights; and, signed a renewed contract funding the mine inspector position the day after the Supervisors voted to reject the Schneider appeal. From this, and additional evidence showing the competitor’s efforts to cultivate favor among County staff, the jury could infer that the County’s actions were not based on a legitimate governmental objective.

The court also affirmed the jury’s verdict finding that the defendants unlawfully retaliated against the Schneiders after they filed their civil rights complaint. In that complaint, the Schneiders alleged that the County increased the Financial Assurance Cost Estimate required by California’s Surface Mining and Reclamation Act, from $177,942 to over $8.8 million shortly after the Schneiders filed their lawsuit. The evidence did not support this massive increase, as nothing of substance had changed at SHM, and the County imposed reclamation standards that were inconsistent both with the approved reclamation plan and common mining practices.

The court rejected the former Supervisor’s contention that he was entitled to legislative immunity. Applying Ninth Circuit precedent, the court explained that legislative immunity applies only where the act at issue involves a formulation of policy, is applied to the public at large, is formally legislative, and bears all the hallmarks of traditional legislation. Because the Supervisor’s actions did not meet those requirements, the court held that he was not entitled to legislative immunity.

The defendants’ qualified immunity defense fared no better because their conduct violated clearly established law. That clearly established law included the California Supreme Court’s decision in Hansen Bros. Enterprises v. Bd. of Supervisors, 12 Cal. 4th 533 (1996), which established that vested mining operations may expand even after they become nonconforming uses. The clearly established law also included Ninth Circuit precedent dating back to 1990 holding that government officials whose conduct is motivated by either political pressure or an improper motive may be found liable for treating an individual arbitrarily and irrationally.

In conclusion, the Hardesty case demonstrates the continued vitality of the federal Civil Rights Act of 1871, which now protects all U.S. citizens, regardless of their race, from arbitrary and capricious government conduct, including conduct motivated by a desire to protect large and politically influential businesses seeking to drive smaller competitors from the marketplace.

Diepenbrock Elkin Gleason, LLP used a civil rights claim to successfully defend Hardesty against a lawsuit brought by the Sacramento Air Quality Management District in which the District south to recover over $90 million in civil penalties from Hardesty. The case involved some of the same facts as those litigated in the federal action, discussed above, where Hardesty was awarded over $75 million. Diepenbrock Elkin Gleason also has represented Hardesty on vested mining rights issues concerning a mine located in El Dorado County.

[1] Hardesty v. Sacramento Metro. Air Quality Mgmt. Dist., 307 F. Supp. 3d 1010 (E.D. Cal. 2018).

[2] Id. at 1024 (citing Green v. McElroy, 360 U.S. 474, 492 (1959)) (internal quotations omitted).

For additional information contact:

David A. Diepenbrock