Norfolk S. Ry. Co. v. Intermodal Props., LLC

• Decision Date: 06 August 2013
• Parties: NORFOLK SOUTHERN RAILWAY COMPANY, a Virginia Corporation, Petitioner–Respondent, v. INTERMODAL PROPERTIES, LLC, Respondent–Appellant.
• Court: New Jersey Supreme Court

215 N.J. 142

71 A.3d 830

NORFOLK SOUTHERN RAILWAY COMPANY, a Virginia Corporation, Petitioner–Respondent,

v.INTERMODAL PROPERTIES, LLC, Respondent–Appellant.

Supreme Court of New Jersey.

Argued May 14, 2013.

Decided Aug. 6, 2013.

Eric D. McCullough argued the cause for appellant (Waters, McPherson, McNeill, attorneys; Mr. McCullough and James P. Dugan, Secaucus, of counsel).

Alan P. Fox argued the cause for respondent (Capehart & Scatchard, attorneys; Mr. Fox and John K. Fiorilla, Mt. Laurel, of counsel).

Carl A. Wyhopen, Deputy Attorney General, submitted a letter on behalf of respondent Commissioner of Transportation (Jeffrey S. Chiesa, Attorney General of New Jersey, attorney).

Nancy Winkelman submitted a brief on behalf of amici curiae The American Short Line & Regional Railroad Association, The Association of American Railroads, Consolidated Rail Corporation, CSX Transportation, Inc., and The New Jersey Short Line Railroad Association (Schnader Harrison Segal & Lewis, attorneys).

Justice HOENS delivered the opinion of the Court.

The State's power to condemn private property is strictly limited by the constitutionalrights of citizens to be free of takings without just compensation. See U.S. Const. amend. V; N.J. Const. art. IV, § 6, ¶ 3. Moreover, as a further means to protect the constitutional rights of the people, the Legislature enacted the Eminent Domain Act of 1971, N.J.S.A. 20:3–1 to –50, to govern the manner in which the State may exercise its authority to condemn.

In addition to the general statutory framework embodied in the Eminent Domain Act, our Legislature has enacted other statutes that govern the exercise of the power of eminent domain, including two that are at the center of the dispute now before this Court. The first of these statutes authorizes public utilities, including railroads, to exercise the power of eminent domain and defines the circumstances and the manner in which they may do so. See N.J.S.A. 48:3–17.6 to –17.8. The second of these statutes applies specifically to railroads and further defines the extent of their authority to condemn. See N.J.S.A. 48:12–35.1.

This appeal arises from the exercise of the power of eminent domain by plaintiff, Norfolk Southern Railway Company, as a means to take property owned by defendant, Intermodal Properties, LLC, for use in the expansion of the railroad's facility in Secaucus. That exercise by the railroad of its authority to condemn was challenged by defendant, leading to decisions by an Administrative Law Judge (ALJ) and by the Appellate Division interpreting the two statutes and giving rise to the two questions of statutory interpretation that are now before this Court.

First, we are called upon to determine whether the railroad's taking of the property met the statutory proscription that it be “not incompatible with the public interest[.]” N.J.S.A. 48:3–17.7. Second, we are asked to consider whether the railroad demonstrated that the taking of defendant's property was occasioned by the “exigencies of business” within the meaning of that phrase as it is used in the statute that governs takings by railroads in particular. N.J.S.A. 48:12–35.1.

I.

Norfolk Southern owns a large tract of land in Secaucus, comprised of between 240 and 275 acres, where it operates a freight facility known as Croxton Yard (Croxton). Croxton is an intermodal freight facility, meaning that it accommodates transportation of goods by more than one form, or modality, of carrier, as for example, by rail and by truck. At Croxton, freight containers are transferred between trains and tractor-trailer trucks to facilitate the transport of freight to its eventual destination.

Norfolk Southern operates the Croxton facility nearly around the clock, spanning twenty-four hours each weekday and sixteen hours each day on weekends. According to a 2007 estimate, approximately 1,500 to 2,000 trucks then moved through Croxton each day, accounting each month for approximately 18,000 lifts, a term that refers to the loading and unloading of a container from a train.

Containers are off-loaded at Croxton and moved to parking spaces within the yard prior to being loaded onto the next transportation modality for distribution. Parking spaces are, on average, filled with containers and trailers to eighty percent of capacity, reaching one hundred percent full to capacity on Monday mornings. In addition, elsewhere in the facility, there is an area where empty containers are stored while waiting to be reloaded onto trains as space becomes available. In 2007, there were an average of 400 to 500 empty containers parked in that area each week, with the total sometimes reaching 1,000.

Rail carriers such as Norfolk Southern compete for customers, requiring that they maintain efficiency. One measure of efficiency that is significant to customers is dwell time. As the ALJ found, dwell time is

a measurement of how long it takes for a truck to enter a yard and depart the yard [and] is also used as a measurement of the amount of time that a container stays in the yard from the time it is off-loaded from the train until it is picked up by the carrier.... If dwell time increases significantly, it can reach a point where it is no longer profitable for customers to ship by intermodal and they can decide to move cargo to another carrier or by truck.

In 2002, Norfolk Southern concluded that its intermodal business in general was expanding rapidly and that, in order to meet the anticipated demand, it would need to expand the Croxton facility. That conclusion was based on a variety of considerations. First, the existing traffic at Croxton had already led to double-parking of containers, which made it difficult to move trucks around the yard and increased dwell time. Second, Norfolk Southern projected that freight growth in New Jersey, by some estimates, would double within ten to fifteen years and, according to other projections, would continue to grow for twenty-five years. Third, the railroad projected that the overall traffic using Croxton would increase based in part on forecasts prompted by a new undertaking known as the Crescent Corridor Project. That project was a long-range plan by the railroad to expand rail service from ports in New Jersey and New York into the southeastern and western regions of the United States and thereafter into Mexico.

Norfolk Southern concluded that the solution to all of its growth concerns was to increase its facilities at Croxton. Moreover, the railroad determined that it would need to acquire nearby or adjacent properties in order to accommodate the expansion at Croxton. As a result, in May 2004, the railroad's managers decided to sell a piece of property across from Croxton that was owned by the railroad and to use the proceeds to acquire three properties they believed were needed for the expansion of their facility. One of those properties is owned by Intermodal.

Intermodal's property, comprising approximately 5.99 acres, is adjacent to Croxton. It is currently the site of an 80,000 square foot warehouse which, at all times relevant to this dispute, was leased by Intermodal to a company that operated a freight-forwarding business. Acquisition of Intermodal's property would allow the railroad to create an additional 291 container parking spaces and would connect Croxton with another small parcel of land on the other side of Intermodal's property that is owned by Norfolk Southern. In addition, because Intermodal's property is close to Croxton's tracks, it would not increase dwell time and would improve the efficiency of the operations at Croxton.

At the time when Norfolk Southern embarked on its effort to acquire the property, the railroad projected it would need the Intermodal property within five years. Norfolk Southern entered into negotiations to acquire the Intermodal property, but its offers were rebuffed. By September 2005, Intermodal had informed the railroad that it was not interested in selling the property. As a result, Norfolk Southern initiated condemnation proceedings through a petition filed with the New Jersey Department of Transportation (NJDOT) as a means to acquire the Intermodal property.

A.

The matter was deemed to be a contested case, referred by NJDOT to the Office of Administrative Law (OAL) and assigned to an ALJ. Before commencing the hearing on the railroad's petition, the ALJ considered, and decided, the two issues that were raised by Intermodal and are now before this Court. The ALJ's determination of those issues, to a large extent, shaped the testimony and evidence that the parties offered.¹

Intermodal's first argument focused on the statutory command that the taking be “not incompatible with the public interest[.]” N.J.S.A. 48:3–17.7. In particular, Intermodal sought to offer evidence that it proposed to use its property as a parking facility that would serve the nearby Secaucus Junction passenger rail station. It argued that its proposed use would be more compatible with the public interest than the use proposed by Norfolk Southern and that the railroad therefore should be prohibited from exercising the power to condemn.

The ALJ rejected Intermodal's proffer for two reasons. First, observing that Intermodal's property was not zoned for use as a parking facility, the ALJ concluded that Intermodal could not demonstrate that its property could be used for the purpose it proposed. Second, the ALJ ruled that, pursuant to the prior public use doctrine, evidence of the type Intermodal sought to present would only be relevant if the property were already being used to serve a public purpose. Because Intermodal could not meet that test, the ALJ barred it from offering any evidence relating to the property's potential use as a parking facility.

Intermodal's second argument was based on the statutory authorization that only permitted a taking “as exigencies of business may demand[.]” N.J.S.A. 48:12–35.1. Specifically, Intermodal...