News

1404, 2018

The Legal Maze of Small-Time Gold Dredging in Alaska

April 14th, 2018|

WRITTEN BY:  Adam Cook

Nome has been the epicenter of gold mining in Alaska since the Alaska Gold Rush blasted off in 1898.  Prospectors and miners have been finding gold deposits in the hills and creek beds around Nome for over a century.  They have also been finding placer gold (i.e., unrefined gold) in the seabed of Norton Sound, an inlet of the Bering Sea.

Several waterways drain into Norton Sound off the Seward Peninsula, depositing fine quantities of gold into the shallow waters near the coast.  For decades people have been dredging up sediment from the seabed, sluicing it, and collecting gold and other minerals.  They dredge frantically during the four months of the year that low ice levels permit such work.  This relatively obscure method of mineral extraction was pushed into the spotlight in 2012, when the Discovery Channel began airing the reality TV show Bering Sea Gold.  The show follows various groups of colorful characters dredging the waters near Nome.

Suction dredging is tricky business.  The placer gold does not appear in veins on the seabed, the way it does in rock formations on dry land.  Some sediments are rich with “paydirt,” but it is difficult to map profitable areas, and tidal forces or other geological activity might alter a rich location.  The work itself is also very dangerous.  Suction dredging often requires the work of a suited diver, who operates an airlift on the seabed, sucking sediment up to a boat and into a mechanical sluice.  In the meantime, the waters of the Norton Sound are icy cold, and visibility underwater near the seabed is almost nil.  And there are no guarantees.  For unlucky dredgers, weeks of dredging might result in barely any gold at all.

Regulatory Control

Gold dredging in Alaska is also legally complicated.  Like any other form of mining, dredging is heavily regulated by the Alaska Department of Natural Resources (“DNR”) and the U.S. Department of Interior.  Norton Sound is a protected salmon fishery.  Starting in 1993, the U.S. Army Corps of Engineers and the Environmental Protection Agency implemented regulations on suction dredging in order to preserve the seabed habitat.  A person with the daring and determination to plunge into the icy waters in search of gold must first plunge into an array of restrictions on dredging dates and permissible equipment and practices.

Also, unlike fishing, gold dredging is not a simple matter of heading out in a boat and then choosing a location that feels right.  DNR does allow some “recreational mining” in public areas off the Nome beach.  But these areas are limited to small-scale operations, in seabeds with limited gold deposits.  Dredgers who actually wish to make their fortune with suction dredging have to dredge in one of a limited number of claims, either “staked” by other dredgers, secured by patent, or leased out by the State of Alaska.  Dredgers fortunate enough to hold an offshore claim or lease can sublease it to another party, or grant another dredger permission to dredge the claim, in exchange for royalties.

Suction dredging is thus a risky, legally complex, and very competitive way of making money.  But it has only gotten worse in the last ten years.  Since 2000, the price of gold has skyrocketed, from $273 per ounce to about $1,325 per ounce today (placer gold is worth slightly less than pure gold).  These price movements sent droves of profit-seekers into previously-unpopular dredging locations.  The runaway success of Bering Sea Gold (now in its 9th season) added fuel to the fire.  In 2015, the Nome Harbormaster reported more than 100 gold dredges operating out of the Harbor.

Status of Operators

Once dredging near Nome started to take off, the State of Alaska moved to take advantage of the demand.  In September 2011, DNR held its first offshore mineral lease auction in almost 12 years.  DNR successfully auctioned 84 leases, constituting more than 24,000 acres off the coast of Nome.  The State of Alaska made about $9.3 million from the auction.

The outcry auction drew strong interest from bidders because there are a limited number of available parcels offshore for dredging — and the majority of them are currently held by large commercial operators.  Anyone who does not hold a claim or mineral lease must purchase “operator authorization” from a claimholder in order to perform commercial operations.  This situation has created its own miniature industry, as lessees and claimholders sign deals with small operators allowing them on the claims.

Around the same time that Bering Sea Gold peaked in popularity, two developments sent shockwaves through the dredging community.  The first development was a decision by DNR to update its antiquated recordkeeping and approvals process.  Prior to 2014, claimholders could grant operator authorization to anyone with a boat, with little government oversight.  But at the start of the 2014 dredging season the DNR modified the mandatory Application for Permit to Mine in Alaska (“APMA”) to include specific information about third-party operators.  The APMA Operator Authorization Supplement required detailed information about the plan of operations, with the plan now a part of accessible public records.

The era of “Wild West” operators was over.  The claimholders and lessees giving operator authorization were now assuring the various regulatory bodies that the dredging operations would be legal, safe, and environmentally responsible.  Many claimholders and lessees started insisting on bonding or insurance to provide protection in the event of an accident or violation of the law.  The crude, simple watercraft used in the past — sometimes consisting of just an air pump on pontoons — were under enhanced scrutiny.

The second development was the death of a diver working a dredge operation near Nome on August 12, 2014.  The death prompted the U.S. Coast Guard to classify gold dredges as “commercial vessels,” rather than recreational watercraft.  The dredges now must maintain various safety gear, undergo dockside inspection, and get credentialed before sailing.  The new regulations meant additional expenses for dredge operators.

The Future

Today, gold dredging off Nome is more popular than ever.  But the industry is marked by three ongoing trends:  (1) consolidation of leases and claims into the hands of a few large commercial operators; (2) the increasing price of gold; and (3) increasing government oversight.  These trends work to make dredging spots more rare, the payoff for success more lucrative, and the cost of compliance more burdensome.  All of this works in the favor of very large operators, such as South African mining company AngloGold Ashanti, which holds more than half of the offshore leases issued by the State of Alaska in 2011.

Meanwhile, the smaller operators are feeling the squeeze.  Large corporations can pay the cost of insurance and legal headaches with much greater ease than a two?man operation.  Legal battles can and do erupt over the right to dredge, and large corporations have an easier time shouldering the cost of these legal battles.  Alaskans have always grumbled that increasing regulation has yanked away the livelihoods of the “little guys,” whether the activity is hunting, fishing, or mineral extraction.  It remains to be seen if Nome’s small operators can weather the trend.

 

803, 2018

The U.S. Supreme Court Reviews the Right to Criticize Government

March 8th, 2018|

Written by:  Katie Davies

If you’ve ever attended a city council meeting, you’re likely to agree that the public comments on any given topic can range anywhere from the benign to the bizarre.  As a municipal law attorney who attends city council meetings all over the state, the public comments are my favorite part of any meeting because they can be both wildly unpredictable and effective. In fact, public participation at city council meetings is probably the purest form of democracy-in-action. Elected city officials are essentially forced to listen (without responding) to their constituents’ opinions, which can have a powerful effect on a community’s legislation, policies, and elections.

This is truer now than ever. Given the current volatile political climate in our country, people are frustrated and they are letting their lawmakers know it. Over the last year, we’ve seen countless examples play out in the news of people showing up at town-hall style meetings to chastise their elected officials for taking a particular position. Depending on your political leanings, you may have found this conduct to be heroic or downright uncivilized. So how far can, or should, the government let people go in voicing their frustrations at these types of meetings?

The U.S. Supreme Court is currently deciding this very issue. In Lozman v. City of Rivera Beach, Florida, (citation pending) the court is considering whether the existence of probable cause for disorderly conduct defeats a First Amendment retaliatory-arrest claim.

Fane Lozman lived in a floating house made of plywood in the Riviera Beach Marina in Florida. The city proposed to redevelop the private marina using eminent domain.  Lozman, disagreeing with this decision, became “an outspoken critic,” vocally criticizing the mayor and city council at council meetings. At a city council meeting Lozman offered comments about former county commissioners who had served in other communities being arrested. A councilperson had Lozman arrested for refusing to stop talking. The local prosecutor dropped the charges on the belief that they could not successfully prosecute the case.

Lozeman sued the city claiming his arrest violated his First Amendment right to oppose the redevelopment plan. The city argued Lozman was arrested for violating the city’s rule that comments during the public comment period must relate to city business. Notice that the City actually pursued a different legal theory at trial than it did when it arrested Lozeman. Initially, the City arrested Lozman for disorderly conduct, but at trial the City argued that Lozeman had violated the rule that comments must pertain to city business.

Regardless, Lozman lost the jury trial and filed a motion for a new trial arguing that the evidence didn’t support the verdict.  The Eleventh Circuit Court of Appeals held that the jury’s finding of probable cause to arrest Lozman for disturbing a lawful assembly wasn’t against the great weight of evidence, and that, because the arrest was supported by probable cause, Lozman’s First Amendment retaliatory arrest claim failed.

The U.S. Supreme Court heard oral arguments on February 27, 2018. Lozeman insisted that the council’s chairperson took issue with the content of his speech, and not his actual conduct thereby making the arrest unlawful.  Lozeman was adamant that he “did maintain order” and that “[d]isorderly conduct relative to a public meeting is if you go beyond your three minutes, if you use profanity, if you’re screaming or yelling. I was doing none of those.” Lozman also pointed out that, “”If [the council member] didn’t want to listen to that content, she shouldn’t run for public office because the First Amendment protects comments that are critical and maybe comments people don’t like to hear.”

The city, on the other hand, argued that in the context of law enforcement, an open-ended right to sue for false arrest would sow chaos into law enforcement agencies’ ability to operate and would also be expensive for municipalities to defend. According to the city, if the court rules in favor of Lozman, the lower courts will be flooded with lawsuits by arrestees who claim the government was simply biased against them.

According to court watchers, the Court “seemed to express that they agreed Lozman’s arrest may have been unjustified and over the line, but they were having trouble clearly defining the line.”  While many of the justices were disturbed by the video, some were equally worried that a ruling in Lozman’s favor could open the flood gates for lawsuits against police who make more justifiable arrests, for example, during riots.

However, Justice Ruth Bader Ginsberg expressed grave concern for denying people like Lozman a remedy to their free-speech claims: “You are giving a green light to every vengeful city council in America to go after people when they demonstrate against abortion clinics, when they demonstrate about police, when they protest zoning decisions.”

While it’s difficult to predict how the Court will rule in this case, we should expect a narrow decision that is heavily driven by a fact-based analysis. As Justice Anthony Kennedy explained, the challenge is walling off legitimate police actions to “confine it in any way.”

2302, 2018

Meeting the Challenges of Electronic Discovery

February 23rd, 2018|

Written By: Bobbie J. Manson

During litigation, state and federal courts require parties to participate in a process called discovery. This involves each party exchanging all relevant documents and data with all of the other parties to the litigation. Depending on the subject of the litigation, this can be either a short process or an extremely large search and production effort.

The use of technology in business plays a large part in the discovery process. Technology has become a necessary and useful tool in running a business. Emails have replaced letters, text messages are now commonly used for work communications, and printing documents or receiving hard copies is practically a thing of the past. Additionally, we use all of these tools in our personal lives, frequently supplemented by one or more social media accounts. This has brought on a whole new set of challenges for electronic discovery.

While there are lots of pros to using technology, there are also some negatives when it comes to legal disputes. Previously, when a legal dispute arose, clients would gather their hard copy files and send it to their attorneys. Now, clients must navigate the following issues when attempting to gather the relevant documents and data:

• identifying where data is kept. For example, laptops, tablets, smart phones, servers and remote servers, social media sites, back-up tapes, and cloud accounts;
• collecting data without altering the metadata;
• spending the time to collect the data;
• keeping costs down;
• collecting data kept in special or proprietary software; and
• organizing and sending the data for review.

These are just a sample of some of the problems that parties may encounter when complying with court rules regarding e-discovery. Law firms commonly handle these types of issues, and work closely with clients to offer as much assistance as needed to make the process as painless as possible.

At Birch Horton Bittner & Cherot, we have resources to assist clients with:

• locating all relevant data;
• safely managing the collection without altering metadata;
• addressing data kept in special software; and
• analyzing, organizing and reviewing data for relevant documents.

Identifying the location of data at the outset of a claim helps keep costs down when clients receive additional discovery requests throughout the litigation. At Birch Horton Bittner & Cherot, we work hard to reduce the burden of e-discovery for our clients so they experience as little interruption to their business and personal lives as possible.

2501, 2018

Legal and Ethical Challenges Associated with Mental Health in the Last Frontier: A Primer for Alaskan Families

January 25th, 2018|

Written by:  Aaron Sperbeck

Alaska is home to over 739,000 people from many different and unique walks of life.[1] Mental health continues to be a matter of public concern in Alaska’s ever-growing and aging population.  In 2014 alone, more than 33,000 Alaskans self-reported suffering from a Serious Mental Illness (“SMI”).[2] It is estimated that one in five Alaskans continue to silently suffer from other less severe forms of mental illness which go unreported.[3] The Alaska Department of Labor predicts that the number of Alaska residents aged 65 and older will more than double from 63,832 in 2012 to 140,340 in 2042.[4] An increase in Alaska’s elderly population will mean a dramatic expansion of the number of residents requiring medical and other health-related services, such as informal caregiving and assistance with daily living activities.[5] This increase also translates into a surge of mental illness and mental health related issues that Alaskans and their families will likely encounter.

Proper diagnosis of mental illness or dementia, including Alzheimer’s disease, in the elderly is vital in order to ensure that appropriate treatment is provided as soon as possible. Misdiagnosis of mental illness in seniors can easily occur since symptoms are so similar to dementia, such as confusion and erratic behavior. While dementia does affect mental health, it is not classified as a mental illness, but rather a disorder of the brain that causes memory loss and trouble communicating.

Most people are not comfortable making plans for a time when they will be unable to make decisions and not have control of their own lives. Discussing personal values in relation to illness and death, finances and living arrangements, for example, is difficult. It is critical to remember how important decision-making can be to maintain a person’s confidence and self-esteem. As a person loses the ability to make decisions, decision-making will involve others, such as family members, substitute decision-makers and health-care professionals. Making decisions on another person’s behalf can be difficult and highly stressful, especially when the values and wishes of the person with the mental health issue are unknown, unclear, or impossible to follow.

More often than might be expected, lawyers encounter mental health issues in their everyday practices. In some instances, lawyers work directly with clients who suffer from mental health disabilities or with the family of a loved one who suffers the misfortune of age-related mental health decline. Lawyers are often responsible for drafting important legal documents which authorize individuals to act on another’s behalf with regard to an individual’s private or business affairs. It is not only fundamental, but critical, that lawyers understand the legal and ethical challenges faced when working with mentally ill clients and their families. The normal client-lawyer relationship is based on the assumption that the client, when properly advised and assisted, is capable of making decisions about important matters.  The fact that a client suffers impairment does not diminish the lawyer’s obligation to treat the client with attention and respect, protecting the confidences and secrets of that client pursuant to the professional rules of conduct.

If you have questions regarding how to address mental health issues in your life, or the life of a loved one, please take time to understand the issues involved and seek the advice and counsel of medical and legal professionals for further resources.

_____________________

[1]           United States Census 2016

[2]           National Survey on Drug Use and Health – Alaska Mental Health Board (2015)

[3]           Alaska Behavioral Health System Assessment 2016

[4]           Alaska Department of Labor and Workforce Development, Research and Analysis Section. Alaska population projections: 2012 to 2042. 2014. [cited 2015 Dec 29].

[5]           RM Rosich and SR Thompson, Gerontological Knowledge and Elderly Health Care Services in Alaska: Aging in the Last Frontier. Educational Gerontology 1997; 23:443–52

1901, 2018

Zoos and Aquariums Need Lawyers, Too!

January 19th, 2018|

Written by:  Melinda Meade Meyers

Do you exhibit wildlife to the public?  Are you considering opening a new zoological or aquarium facility or expanding your existing collection of animals and birds?  Do you have questions about your possession and exhibition permitting or licensing requirements?  Birch Horton’s experienced team of animal and wildlife law practitioners can assist you in navigating this unique area of law.

Our team has a deep understanding of the complexities of federal laws, regulations, and policies governing the exhibition of wildlife to the public, including the Animal Welfare Act (AWA), Endangered Species Act (ESA), Migratory Bird Treaty Act (MBTA), and Marine Mammal Protection Act (MMPA), as well as various state and local exhibition laws and regulations.  We have successfully used this knowledge to help our clients obtain various transfer and possession permits, arrange for purchase and sale of regulated animals, and persuade both our clients’ regulators and judges if these issues come before a court.  We understand the importance of having a good working relationship with your regulators, and we help our clients build and maintain these contacts.

Although we seek to keep our clients out of the courtroom, we aggressively defend our clients through administrative appeals and litigation if necessary.  Some of our recent animal law litigation victories include:

Our team also utilizes the Freedom of Information Act (FOIA) – the equivalent of running your name through Google occasionally to make sure there are no surprises out there – to help our clients stay on top of any potential regulatory issues.  We have used information obtained through FOIA requests to successfully defend our clients in litigation brought by third parties.

We stand ready to help our clients deal with the complexities of animal law.  If you need assistance with permitting, administrative rulemaking, enforcement actions, or dealing with your applicable regulating agency, please contact James H. Lister or Melinda L. Meade Meyers.

501, 2018

Business Entity Formation 101

January 5th, 2018|

Written By:  Kristy Garrett

A reoccurring question that commonly arises in the area of commercial transactions is, “What type of legal entity should I form for my business?”  The answer to that question depends on, among other factors, the type, the size, the management, and the intended purpose of the business.  There are many important considerations when deciding which type of entity will suit a client’s business objectives.  It is most advantageous for these considerations to be made prior to any business action or operations being taken.  This article will discuss the questions that should be answered prior to picking an entity type for a business operation and a brief description of three (3) of the most popular entities utilized.  The information below is to provide a general framework only and a complete legal and tax consultation is recommended prior to taking any formal steps in the corporate formation process to ensure that the entity is properly formed and structured and in order to realize the intended advantages.

Considerations For Choosing An Entity Type

  • Management: Will this business be run by a single manager?  Will there be a board of directors?  Will it need to have officers?  Will it be run by its sole member or members?  Will decisions be made by a majority vote of the owners?  Will certain decisions require unanimous consent?
  • Size: Will this company be a closely held company?  Will there be just one or two owners?  Does the structure need to accommodate several owners?
  • Tax Considerations: There are important tax reasons and implications for choosing an entity structure for a particular type of business.  A consultation and analysis by an accountant is an important step in the business formation process.
  • Future Growth and Changes: Are there plans for growth and expansion or is the company’s purpose limited and distinct?
  • Capitalization: How will the company be capitalized?  Is there a need for investors now or potentially in the future?  Will the company need to obtain financing?

 Common Entity Types

  • Limited Liability Company or “LLC”:  The LLC is a business structure that generally combines the pass-through taxation of a partnership or sole proprietorship, with the limited liability of a corporation.  An LLC is not a corporation in itself; it is a legal form of a company that provides limited liability to its owners, when properly structured and capitalized, and under certain circumstances.  It is often more flexible than a corporation, and it is well-suited for companies with a single owner or a closely held organization.  LLCs have less corporate formalities than corporations.  Additionally, ownership in an LLC is represented by a “membership interest” or an “LLC interest”.   An LLC can be managed by a manager or managed by its members.  A member managed LLC is most common.  An LLC is formed in Alaska, among other requirements, by the filing of Articles of Organization with the Division of Corporations and the management of the entity is structured by its Operating Agreement.
  • C-Corporation: A C corporation, similar to an LLC, generally limits the owners’ personal liability for business debts and court judgments against the business.  A C corporation is an independent legal and tax entity, separate from the people who own, control, and manage it.  Additionally, ownership in a corporation is represented by shares of stock that can be issued to several owners, called shareholders.  Corporations in Alaska must have a President, Secretary, and Treasurer.  Corporations are better suited for operations with several owners and a structure that supports having officers, a board of directors, and regular board and shareholder meetings.  A C corporation is formed in Alaska, among other requirements, by the filing of Articles of Incorporation with the Division of Corporations and the management of the entity is structured by its Bylaws.
  • S-Corporation: An S corporation is a regular corporation that has elected “S corporation” tax status, which means that the corporation is not a separate taxable entity like a C corporation.  Basically, owners pay income taxes as if they were sole proprietors or partners. S corporations are very similar to LLCs, but there are a few key differences and certain restrictions on S corporations.  S corporations have several limitations that LLCs do not and include the following:  (a)  Each S corporation shareholder must be a U.S. citizen or resident; (b) S corporations may not have more than 100 shareholders; and (c) S corporation profits and losses may be allocated only in proportion to each shareholder’s interest in the business.  Like regular C corporations, S corporation owners have to issue stock, hold regular board of directors’ and shareholders’ meetings, and keep corporate minutes of all meetings.