Texas Supreme Court: Texas Central Has Eminent Domain Power for High Speed Rail

 

In a case we’ve been closely following, Miles v. Texas Central Railroad & Infrastructure, Inc., the Texas Supreme Court held that Texas Central does have the right to exercise eminent domain power in building the high speed rail from Dallas to Houston.

Background

This case revolves around the proposed high-speed electric-powered passenger train that would run between Dallas and Houston. In 2012, TXHS Railroad, Inc. was formed and in 2015, the company changed its name to Texas Central Railroad & Infrastructure, Inc. (“Texas Central”) with a purpose to “plan, build, maintain, and operate an interurban electric railroad.”  In 2017, Integrated Texas Logistics (ITL) was formed to “construct, acquire, maintain, or operate lines of electric railway…” and “to operate and transact business as a railroad company…”

In 2015, Texas Central sent Mr. Miles a packet including details about the project, an outline of the survey process, an invitation to open house meetings, and a survey permission form.  Mr. Miles refused to sign the survey permission form and refused to grant Texas Central access to survey his land.

Mr. Miles filed suit, seeking a declaration that Texas Central could not conduct the type of survey requested on the permission form as the form exceeded certain provisions in the Texas Transportation Code related to railroads and interurban electric railways.  Essentially, Mr. Miles did not argue that a “railroad company” or an “interurban electric railway” could not use eminent domain power; only that Texas Central and ITL did not meet the statutory definition of a “railroad company” or an “interurban electric railway.”  Mr. Miles based this on the facts that Texas Central owned no trains or railroad tracks, had constructed no train stations, had obtained only a small portion of the financing necessary for the project, and that ITL had no employees, officers, or office space independent of Texas Central.  Further, Mr. Miles argued that the “interurban electric railways” referenced by statute were obsolete for over 70 years and the statute was not intended to apply to a high speed rail.

Texas Central responded, seeking its own declaratory judgment that it was a “railroad company” and an “interurban electric railway” under the Texas Transportation Code with the right to conduct survey examinations as such. ITL intervened seeking the same declaration against Mr. Miles.  The entities based their argument on Texas Central’s expenditure of over $125 million on the project, engaging 100 technical experts and 200 employees and contractors, completing over 2,000 surveys, obtaining hundreds of option contracts to purchase the necessary land, a signed agreement with Amtrak to connect with Amtrak’s interstate rail system, retaining an engineering firm and railway company that have experience with building and operating high speed rails, and working for years to secure required federal and state permits.

Applicable Law

There are two statutes central to this case.

First, the Texas Transportation Code Section 81.002 defines a “railroad company” as “(1) a railroad incorporated before September 1, 2007 or (2) any other legal entity operating a railroad, including an entity organized under the Texas Business Corporation Act or the Texas Corporation Law provisions of the Business Organizations Code.”  Since both entities were incorporated after 2007, it is only the second clause at issue.  A “railroad” is defined by Texas Transportation Code Section 199.002(a)(1) as “an enterprise created and operated to carry passengers, freight, or both on a fixed track. The term includes all real estate and interests in real estate, equipment, machinery, materials, structures, buildings, stations, facilities, and other improvements that are necessary to, or for the benefit of, the enterprise.”  A railroad company has the right to use eminent domain authority  per Texas Transportation Code Section 112.002(5).

Second, an “interurban electric railway company” is a “corporation chartered under the laws of this state to conduct and operate an electric railway between two municipalities in this state.”  See Tex. Transportation Code Section 131.011.  Companies meeting this definition and have the purpose of transporting freight, passengers, or both freight and passengers are granted the power of eminent domain.  See Tex. Transportation Code Section 131.012.

Lower Court Rulings

The parties filed cross-motions for summary judgment on these issues.  The trial court sided with Mr. Miles, declaring that neither Texas Central nor ITL were “railroad companies” or “interurban electric railways.” Mr. Miles was also awarded attorney’s fees.  Texas Central and ITL appealed.

The Corpus Christi Court of Appeals reversed, finding that Texas Central and ITL were both “railroad companies” and “interurban electric railways” per Texas statute.  Thus, the companies do have the right to use eminent domain power.  [Read blog post here.]

Mr. Miles sought review from the Texas Supreme Court. Initially, the Court declined to hear the case, but then granted Mr. Miles’ motion for reconsideration.  During briefing, the State of Texas wrote a brief supporting Mr. Miles arguing that Texas Central should not have eminent domain power.  Oral argument was held on January 11.

Supreme Court Majority Opinion

The Texas Supreme Court affirmed in a 5-3 decision.  The majority opinion was authored by Justice Lehrmann and joined by Chief Justice Hecht, and Justices Boyd, Busby, and Young. [Read Majority Opinion here.]

Interestingly, the majority began by noting “it is important to recognize what this case is about and what it is not about.  The case involves the interpretation of statutes relating to eminent domain; it does not ask us to opine about whether high-speed rail between Houston and Dallas is a good idea or whether the benefits of the proposed rail service outweigh its detriments. The narrow issue presented is whether the two private entities behind the project have been statutorily granted the power of eminent domain, a power otherwise reserved to the State and its political subdivisions because of the extraordinary intrusion on private-property rights that the exercise of such authority entails.”

Interurban electric railway company

The Court tuned first to the statute granting eminent domain authority to interurban electric railway companies.  “Miles asserts that modern high-speed rail cannot be ‘shoehorned’ into the concept of the interurban electric railway the Legislature envisioned…in 1907.”  Miles argues that the concept of an interurban electric railway is a technical term referring specifically to the single-car interurban electric railways that grew out of the trolley car and ran through Texas in the late 19th and early 20th centuries.   The Court disagreed.

“Viewed as a whole, Chapter 131 is simply not limited in the way that Miles and the dissent contend.”  First, the statute does not limit the speed a train may reach, size of train, or distance between municipalities the railway connects.  Second, the Court points to statutory provisions within Chapter 131 discussing 200 foot right of ways to build railways and the ability to take additional land necessary to properly construct and secure railways as contemplating projects of similar scale as the Texas Central high speed rail. Third, the statute contemplates a railway being able to cross a major body of water and build the necessary infrastructure to do so.   In summary, “we do not read Chapter 131 to implicitly place the above-described limitations on the statute’s scope–regarding speed, size, and distance–that the Legislature easily could have placed expressly but chose not to.”

Next, the Court addressed Mr. Miles’ argument that when the statute was originally enacted in 1907, the modern version of the high speed rail had not been developed and, therefore, it cannot apply.  This is based on the concept that when a statute contains undefined terms, courts should consider the terms’ ordinary meaning when the statute was passed.  The Court disagreed for several reasons.  First, the Court does not seek to determine the meaning of an undefined term; the statute expressly defines an interurban electric railway company.  Second, even if the term were undefined, the statute does not grant eminent domain only to an “interurban electric railway company.”  Instead, it grants the authority more broadly to a “corporation chartered for the purpose of constructing, acquiring, maintaining, or operating lines of electric railway between municipalities in this state for the transportation of freight, passengers, or both freight and passengers.”  There is no dispute about the ordinary meaning of any of these words and, therefore, the historic meaning was not relevant.

Then, the Court noted that it has “long interpreted statutes, including eminent domain statutes, to embrace later-developed technologies when the statutory text allows.”  For example, in interpreting eminent domain statutes for telegraph companies, the Court held those statutes applied to telephone companies as well even though the legislature likely did not have telephones in mind when it used the word “telegraph.”  Thus, although the 1907 Legislature would not have considered a high speed rail, had that technology become available the next year, no one would have thought the Legislature needed to pass another statute to accommodate it.   This is not unlimited, the Court notes.  For example, it says that it would not read the interurban electric railway statute to apply to steam-powered locomotive, but nothing in the language  limits applicability to the small, single train streetcar as Mr. Miles argues.

The Court then turned to Mr. Miles’ argument that the statute applies to a type of train that has been extinct in Texas since 1948. Simply put, the Court stated, “nothing in the statute limits its application in this way.”  This would have meant the statute remained on the books with no purpose for over 70 years, despite being recodified in 2009 in an attempt to eliminate repealed, duplicative, expired and executed provisions.  The Court said this statutory revision program made little sense if the interurban electric railway statute was as outdated and useless as Miles and the dissent claims.

Next, Mr. Miles cited several Transportation Code provisions that do expressly apply to a high speed rail.  The Court said it failed to see how other provisions, with different definitions, somehow indicates that the high speed rail does not fall within the scope of the electric railway definition, particularly when nothing in the provisions in inapplicable with Chapter 131.

Lastly, Mr. Miles asserted that the 1989 enactment and 1995 repeal of the High-Speed Rail Act demonstrates that Chapter 131 cannot encompass Texas Central’s proposed railway.  The Court disagreed finding that Act established a state agency to award a franchise to a private entity to build a high speed rail and gave that entity eminent domain power, essentially creating a public-private partnership.  It then dissolved that partnership, but did not purport to restrict eminent domain authority authorized under different statutes.

Thus, the Court held that Texas Central and ITL are interurban electric railways who have the power of eminent domain.

Railroad company

Although the parties raised the issue of whether Texas Central is a railroad company, and the Chief Justices’ concurrence would hold that it was, the majority held it need not address that issue.

Application of Denbury “reasonable probability” test

Even if the companies could be interurban electric railway companies with eminent domain authority, Mr. Miles argues that merely filing a charter claiming to be one is insufficient.  Relying on Texas Rice Land Partners v. Denbury Green Pipeline-Tex., LLC (Denbury 1) and  Denbury Green Pipeline-Texas, LLC v. Texas Rice Land Partners (Denbury 2), Mr. Miles argues that Texas Central and ITL must demonstrate a reasonable probability that the project will produce the public good for which the authority is sought.  Texas Central, Mr. Miles argues, has failed to do so.

The Court rejected this reading of Denbury, noting that “while both the Texas Constitution and our precedent preclude an entity from obtaining condemnation authority by checking a box, they do not support the reasonable-probability-of-completion test Miles proposes, which would constitute an unwarranted sea change in eminent domain law with far-reaching consequences.”

The Court noted that in Denbury 1, the issue involved common carrier pipelines.  The Court held that for a person intending to build a CO2 pipeline to qualify as a common carrier, there must be a reasonable probability that the pipeline will, at some point after construction, serve the public by transporting gas for one or more customers who would retain ownership or sell to customers other than the carrier.

Thus, Texas Central does not qualify for eminent domain authority by simply checking a box.  However, here, there is no argument that Texas Central was charged for the purpose of building an interurban electric railway and is engaged in activities in furtherance of that purpose. There is also no question this railway would be for a public purpose.  “Miles’s argument that the Texas Central Entities must further show a reasonable probability that the railway will successfully be completed finds no support in Denbury or the Constitution.”

The Court notes that Mr. Miles’ attempt to “contort Denbury in this way is rooted in legitimate policy justifications” to protect Texas landowners from ill-equipped entities who take land and abandon it when funding runs dry.  The Court noted, however, there are a number of protections for property owners in that situation including a number of statutory provisions listed out in the opinion on page 26.  “The constitutional and statutory provisions governing eminent domain, as a whole, reflect a balance between the rights of property owners and the benefits served by projects for which eminent domain is authorized. It is not our place to second-guess the product of that balance.”

Thus, the Court rejected Mr. Miles’ reasonable probability of completion test interpretation of Denbury.

Expiration of authority

The Texas Government Code Section 2206.101 required entities that acquired eminent domain power before December 31, 2012 to submit a letter to the comptroller.  Failure to do so resulted in the expiration of the entity’s eminent domain authority on September 1, 2013.   Texas Central was formed in December 2012, but did not amend its charter for the purpose of operating an interurban electric railway company until 2015.  Texas Central submitted a letter to the comptroller in December 2012 claiming authority as a railroad company, but not as an interurban electric railway.  Thus, Mr. Miles argues its authority under the interurban electric railway statute expired.  The Court disagreed finding that since Texas Central did not amend its charter purpose to build an interurban electric railway until 2015, its authority did not expire.

Thus, the majority affirmed the Court of Appeals decision holding that Texas Central and ITL qualify as an interurban electric railway that may utilize eminent domain authority.

Concurring Opinion (Chief Justice Hecht, joined by Justice Young)

Chief Justice Hecht wrote separately to explain why he would hold that Texas Central and ITL also qualify as “railroad companies” under the statute.  [Read concurrence here.] The statute grants eminent domain authority to a railroad incorporated before September 1, 2007 or to any legal entity operating a railroad.  Mr. Miles argued that this requires trains running on tracks.  “The chicken-and-egg logic is obvious: an entity cannot obtain a right-of-way on which to run trains on tracks without first running trains on tracks.”  Mr. Miles’ approach would essentially ban all new railways in Texas after 2007.  Nothing in the history, the concurrence notes, indicates this intent. Further, the statute allows a company to condemn right-of-ways and “roadbed” which would occur before tracks are laid.  In fact, a company may condemn before incorporating, which the concurrence reads as “before doing any business at all.”  The statute also allows condemnation necessary to build the railroad, as well as operating and running it.  This language makes clear the Legislature did not intend to limit applicability to companies with trains running on tracks.

Concurring Opinion (Justice Young)

In an opinion expressly recognizing the great power and serious impact that eminent domain can have on property owners, Justice Young wrote to make clear the presumption that if there is any doubt as to the scope of the power, the statute granting eminent domain authority is construed in favor of the landowner remains.   [Read concurring opinion here.]  Justice Young notes that eminent domain power is great, “scary” and confusing.  He notes that there are times when “no compensation can accurately value the sweat, tears, pride, love, beauty, and history that, for some property at least, is its chief value.”  It is these circumstances, he notes, that explain why courts carefully scrutinize the exercise of eminent domain authority.  This is true for government takings, and is only heightened in situations where a private entity wields eminent domain power.

He says that nothing in the majority opinion disagrees, and where the scope of the power is in doubt, statutes shall be construed in favor of landowners.  The majority applied the exacting level of scrutiny in this case.  However, there was simply no “doubt” as to whether the interurban electric railway statute applied.  “We can judicially invalidate an exercise of condemnation only upon the kind of ‘doubt’ about the scope or meaning of statutory or constitutional provisions that is textually demonstrable. Even when we would much rather the result be different, and even when we persuade ourselves that the legislature must have intended otherwise, ‘we are bound by ‘the words of the statute’ and cannot ‘rewrite those words to achieve an unstated purpose.’”

Dissenting Opinion (Justice Devine)

Justice Devine authored a dissenting opinion.  [Read opinion here.]  Justice Devine believes that this case should be construed pursuant to Section 17(b) of the Texas Constitution, which provides that “public use” does not include the taking of property…”for transfer to a private entity for the primary purpose of economic development or enhancement of tax revenues.” The Court has not addressed this section since its amendment in 2019, and “although this case presents such an opportunity, the Court squanders it.”  He notes that the parties did not raise this issue and normally courts do not consider arguments not raised, but believes that this is a time when “prudence dictates the contrary.”

Justice Devine notes that Texas Central itself recognizes the primary purpose of building the rail is for economic development and enhancement of tax revenues. In briefing, Texas Central repeatedly pointed to the economic benefit of the high speed rail including additional jobs and tax revenues.  This was exactly the concern that promoted the post-Kelo amendment to Section 17(b) of the Texas Constitution. “The Court’s holding today flies in the face of that history and proud legacy of safeguarding the sacred right of land ownership.”  Further, he notes, “the Court incentivizes private businesses—even foreign ones—to exercise eminent-domain authority over Texas landowners. But giving such power directly to a private entity is not what our forefathers intended in drafting the Texas Constitution. Nor is it what Texans intended in amending the Constitution in 2009.”

He would have applied Section 17(b) of the Texas Constitution to hold that Texas Central is not entitled to exercise eminent domain power because the requirement of ‘public use’ is not met.  He statutes that the majority opinion “advances a devastating erosion of Texas landowners’ property rights” and respectfully dissents.

Dissenting Opinion (Justice Huddle, joined by Justices Devine and Blacklock

Justice Huddle also filed a dissenting opinion.  [Read opinion here.]

The dissent notes that the majority holds that two for-profit corporations wield the power to take thousands of parcels of privately owned Texas land along the proposed route of a high speed rail they hope to someday build and operate based on a 115-year-old statute governing sisters to the trolley car.  “No one questions that the statute, Transportation Code Section 131.012, granted eminent-domain authority to facilitate construction of small electric railways for ferrying Texans short distances between adjacent towns and up and down Main Streets alongside horse-drawn carriages. But it blinks reality to conclude, as the Court does, that the same trolley-car statute confers eminent domain power on private entities aspiring to build—in 2022—a massive $30 billion infrastructure project capable of supporting an elevated, 672-foot-long high-speed train as it traverses hundreds of miles and thousands of privately owned parcels between Houston and Dallas.”

First, Justice Huddle discusses the concept that eminent domain statutes are strictly construed to protect private property rights for those situations whereby cases clearly fall within a statute’s terms. Texas Central, he would hold, does not “clearly fall within” the scope of the interurban electric railway statute.  He would look to the historical context of the statute as applicable to streetcars or trolleys.  “Texas Central’s high-speed rail system is a world apart from this–in design, scale, and intrusiveness.”  He cannot conclude that Texas Central’s project “clearly falls” within the statutory terms.  He also notes that the proposed Texas Central railway would be incompatible with several other statutory provisions within Chapter 131 as it could not navigate municipal streets or alleys as the statute envisions, for example.

Next, the dissent notes that the court should not erode fundamental rights based merely on embracing later-developed technologies.  He cites to Kyllo v. United States, whereby the court held that a police officer’s use of a thermal imager to surveil a home was an unlawful search, which he says stands for the proposition that the “fixed nature of the constitution assures preservation of that degree of privacy against the government that existed when the Fourth Amendment was adopted.” The same is true here, he believes.

Finally, he notes that Texas Central also does not qualify as a “railroad company.”  He would not rely upon the Code Construction Act, as did the court of appeals, which provides that words in the present tense include the future tense.  That Act, he notes, is meant to clarify common situations and this case is “anything but common.”  Texas Central has never operated a railroad and it will take years and billions of dollars before it can ever do so.  This does not “plainly fall within” the terms of the statute and, thus, the statute should be construed in favor of the landowner.

In conclusion, the dissent writes:

“Whether Texas Central’s project will succeed is anyone’s guess. What is certain is that today’s decision places Miles and hundreds of other Texas landowners at Texas Central’s mercy. Texas Central may take their land and, if the project succeeds, bisect each parcel with an enormous infrastructure project on which a train blazes past at 200 miles per hour every thirty minutes. Or it could begin construction and abandon the project, unfinished, leaving behind half-built viaducts leading nowhere. Or it may take their land and do nothing for a decade, triggering a feeble repurchase ‘remedy’ for landowners.”

Conclusion 

Although this case focuses on the narrow issue of statutory interpretation for interurban electric railways, it certainly has the potential to have greater impact on eminent domain cases going forward.  In the coming weeks, I will be releasing a podcast episode with Luke Ellis, a landowner eminent domain attorney from Austin to discuss how this case (and the Texas Supreme Court’s decision in Hlavinka v. HSC Pipeline) will impact Texas landowners going forward.  Be sure to subscribe to the Ag Law in the Field Podcast so you don’t miss it!

 

 

The post Texas Supreme Court: Texas Central Has Eminent Domain Power for High Speed Rail appeared first on Texas Agriculture Law.

from Texas Bar Today https://ift.tt/3NloseU
via Abogado Aly Website