Schulenburg v. United States

• Decision Date: 26 March 2018
• Docket Number: No. 16-371L,16-371L
• Parties: DELBERT and CATHY SCHULENBURG, et al., Plaintiffs, v. THE UNITED STATES, Defendant.
• Court: U.S. Claims Court

DELBERT and CATHY SCHULENBURG, et al., Plaintiffs,
v.
THE UNITED STATES, Defendant.

No. 16-371L

United States Court of Federal Claims

March 26, 2018

Summary Judgment; Class Action; Fifth Amendment Takings; National Trails System Act; 16 U.S.C. § 1247(d); Ind. Rev. Stat. ch. 23 § 12 (1852); Ind. Code § 32-1-2-12; Ind. Rev. Stat. ch. 23 § 14 (1852); Ind. Code § 32-5-12-4; Ind. Code § 32-23-11-6; Fee Simple; Right-of-Way; Creation of Easement Under Indiana Law; Centerline Presumption.

Mark F. (Thor) Hearne, II, Lindsay S.C. Brinton, Meghan S. Largent, and Stephen S. Davis, Arent Fox, LLP, 112 South Hanley Road, Suite 200, Clayton, MO 63105, for Plaintiffs.

Jeffrey H. Wood and Kristine S. Tardiff, United States Department of Justice Environment & Natural Resources Division, Natural Resources Section, 53 Pleasant Street, 4th Floor, Concord, NH 03301, and Laura Duncan, United States Department of Justice Environment & Natural Resources Division, Natural Resources Section, P.O. Box 7611, Washington, DC 20044-7611, for Defendant.

OPINION AND ORDER

WILLIAMS, Judge.

In this action, Plaintiffs claim that the Government effected a taking of their property in Indiana when it converted an inactive railroad right-of-way to a recreational trail, pursuant to the National Trails System Act Amendments of 1983. Plaintiffs claim that their predecessor owners granted easements to the Evansville & Richmond Railroad for the sole purpose of operating a railroad, and that once these rights-of-way were no longer used for railroad operations, the exclusive right to physical ownership, possession, and use of these properties reverted to Plaintiffs as fee owners. Currently before the Court are the parties' cross-motions for partial summary judgment.

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Background

The Trails Act

Congress enacted the Trails Act to preserve shrinking rail trackage by converting unused rights-of-way to recreational trails. Preseault v. Interstate Commerce Comm'n, 494 U.S. 1, 5 (1990) ("Preseault I"); see also 16 U.S.C. § 1241 et seq. (2012). The operation of the Trails Act is subject to the Fifth Amendment to the United States Constitution, which provides that private property shall not "be taken for public use, without just compensation." U.S. Const. amend. V. Accordingly, when private property interests are taken by the Government pursuant to the Trails Act, commonly known as "rails-to-trails" cases, the property owners are entitled to just compensation. See Preseault I, 494 U.S. at 13. Because property rights arise under state law, Indiana law governs whether the landowners in this case have a compensable property interest. See Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1001 (1984) (citing Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 161 (1980)); Preseault I, 494 U.S. at 20 (O'Connor, J., concurring).

In a rails-to-trails case, a taking, if any, occurs when "state law reversionary interests are effectively eliminated in connection with a conversion of a railroad right-of-way to trail use." Caldwell v. United States, 391 F.3d 1226, 1228 (Fed. Cir. 2004). The Trails Act prevents a common law abandonment of the railroad right-of-way from being effected, thus precluding state law reversionary interests from vesting. Id. at 1229. Stated in traditional property law parlance, upon abandonment or termination of a railroad's easement, "the burden of the easement would simply be extinguished, and the landowner's property would be held free and clear of any such burden." Toews v. United States, 376 F.3d 1371, 1376 (Fed. Cir. 2004). By preventing the abandonment and concomitant restoration of a fee simple unburdened by the easement, the Trails Act effects a taking. See Barclay v. United States, 443 F.3d 1368, 1371 (Fed. Cir. 2006).

As the Federal Circuit has explained:

Abandonment is suspended and the reversionary interest is blocked "when the railroad and trail operator communicate to the STB their intention to negotiate a trail use agreement and the agency issues an NITU that operates to preclude abandonment under section 8(d)" of the Trails Act. We concluded that "[t]he issuance of the NITU is the only government action in the railbanking process that operates to prevent abandonment of the corridor and to preclude the vesting of state law reversionary interests in the right of way." Thus, a Trails Act taking begins and a takings claim accrues, if at all, on issuance of the NITU.

Id. at 1373 (quoting Caldwell, 391 F.3d at 1233-34) (alteration and emphasis in original). If standard abandonment had occurred under 49 U.S.C. § 10903, the railroad, as the owner of the servient estate, would not retain any property interest in the right-of-way, and that property interest would revert to the dominant landowner. Id. at 1371. Thus, the Trails Act, in preventing this reversion, effects a taking. See id. In another sense, the taking occurs when the Government, pursuant to the Trails Act, creates a new easement for a new use over land that was encumbered by an easement limited to railroad purposes. See Preseault v. United States, 100 F.3d 1525, 1550 (Fed. Cir. 1996) ("Preseault II") (describing the conversion of a railroad easement to a recreational

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trail as "a new easement for [a] new use"). The statutory imposition of this second easement - - which otherwise had not been granted - - is a taking. Id.

The NITU and Trail Use Agreement

The Crane-Bedford Railroad Line, segments of which are at issue here, was initially developed by the Evansville and Richmond Railroad, a company incorporated in Indiana on September 11, 1886. Def.'s Mot. Ex. 1, at 3. The Evansville and Richmond Railroad acquired the segments of the corridor by six deeds from grantors Ferguson, Cosner, Dussard, Whitted, Johnson, and Cox in the 1880s. In 1897, the Evansville and Richmond Railroad was acquired by John R. Walsh and renamed the Southern Indiana Railroad. Pls.' Mot. Ex. 2-22, at 6.

Through a series of railroad reorganizations, mergers, and acquisitions, the line was eventually acquired by Canadian Pacific Railway, and ultimately, in 2006, Indiana Rail Road ("INRD") acquired Canadian Pacific's portion of the line between Chicago, Illinois and Louisville, Kentucky by quitclaim deed. Id. Ex. 2-3, at 9 n.6. Since INRD's acquisition, on-line and overhead traffic on the Crane-Bedford line have decreased, and on December 7, 2009, INRD filed a petition with the STB seeking an exemption under 49 U.S.C. § 10502 from the prior approval requirements of 49 U.S.C. § 10903 to abandon approximately 21.15 miles of its railroad corridor extending across portions of Martin and Lawrence counties in Indiana. INRD determined that the "limited amount of overhead traffic . . . hardly justifie[s] the costs of maintaining the Line." Id. at 10.

The STB served and published a notice instituting an exemption proceeding on December 23, 2009, and on December 28, 2009, the Indiana Trails Fund, Inc. ("ITF") requested the STB invoke Section 8(d) of the Trails Act to allow for interim recreational use of the railroad right-of-way. On March 26, 2010, the STB issued a NITU for the Crane-Bedford Line, and provided INRD and ITF with 180 days to negotiate an agreement for interim trail use and railbanking of the corridor.

On September 2, 2011, INRD reported that it had reached an agreement with ITF on "all terms of a trail use agreement with the exception of certain language related to insurance." Pls.' Mot. Ex. 2-48, at 2. Consistent with that report, INRD entered into a License Agreement with ITF on September 16, 2011, relating to the railroad right-of-way ("Licensing Agreement"). Under the Licensing Agreement, INRD granted ITF the right to occupy the premises for use as a "bicycle-pedestrian-equestrian recreational-transportation trail" while reserving rights regarding the continued and future use of the premises for utility facilities and other structures within the corridor. The Licensing Agreement also reserved for INRD all current and future mineral rights in the premises and required ITF to assure that its use would not interfere with the rights reserved by INRD. In addition, INRD expressly retained the right to reactivate railroad service over all or part of the premises. Id. Ex. 3, at 2-3. The subject corridor is presently known as the Milwaukee Road Transportation Trailway, and portions of the trail have been improved and opened for recreational use.

Discussion

Summary Judgment Standard

Summary judgment is appropriate where the evidence demonstrates that there is "no genuine dispute as to any material fact and the moving party is entitled to a judgment as a matter

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of law." RCFC 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). A genuine issue is one that "may reasonably be resolved in favor of either party." Liberty Lobby, 477 U.S. at 250. A fact is material if it "might affect the outcome of the suit . . . ." Id. at 248. The moving party bears the burden of establishing the absence of any genuine issue of material fact, and any doubt over factual issues will be resolved in favor of the non-moving party. Mingus Constructors, Inc. v. United States, 812 F.2d 1387, 1390 (Fed. Cir. 1987) (citing United States v. Diebold, Inc., 369 U.S. 654, 655 (1962) and SRI Int'l v. Matsushita Elec. Corp., 775 F.2d 1107, 1116 (Fed. Cir. 1985)). Once the moving party's burden is met, the onus shifts to the non-movant, who must present sufficient evidence of a material fact in dispute that would allow a reasonable finder of fact to rule in the non-movant's favor. Liberty Lobby, 477 U.S. at 256. The evidence need not ultimately be admissible, but mere denials, conclusory statements, or evidence that is merely colorable or not significantly probative will not defeat summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986); Liberty Lobby, 477 U.S. at 249-50; Mingus Constructors, 812 F.2d at 1390-91.

A court does not weigh each side's evidence when considering a motion for summary...