It's flashback to Property I class today, folks.
Yesterday's opinion from the U.S. Court of Appeals for the Eighth Circuit in Barfield v. Sho-Me Power Elec. Coop., No. 15-2964 (Mar. 29, 2017) was about easements, and there wasn't really a takings issue presented, but we thought we would post it anyway since it is a good reminder of your traditional "Blackacre" property law principles, and because we have had easements on the brain lately, due to that topic being at the center of a cert petition we recently filed.
As the caption of the case might inform you, this was a case about Missouri law, in federal court presumably under diversity jurisdiction. The plaintiffs had granted Sho-Me, a rural electric cooperative, easements which gave it "the right to construct and operate an electric transmission line. Some grant the right to construct appurtenances or do things 'necessary and useful to the enjoyment of the easement.'" Slip op. at 3. Well, you can guess what happened next: this led to that, and Sho-Me began using the easement for something other than an electric transmission line.
Sho-Me had a good reason for doing so. As part of its electric transmission operation, it had a number of unattended power stations, and communicated with these stations by microwave radio. But the FCC subsequently disallowed use of the frequencies Sho-Me was using for this communication. So Sho-Me installed fiber optic cable to handle the commo previously taken care of by radio. These fiber optic lines had excess capacity, and Sho-Me sold off the excess capacity to the public for broadband internet. Sounds like a win-win. Sho-Me was still able to communicate, it recouped some of its costs, and the rural public had access to high-speed internet.
The owners of the land subject to the easement for an electric transmission line, however, didn't think so. We granted you an easement of an electric line, and now Sho-Me was using it for something else, they argued. They brought class-action lawsuits in state and federal court alleging that Sho-Me's use exceeded the scope of the granted easements, and that Sho-Me was therefore trespassing on their land. Their complaint also included a claim for unjust enrichment. The district court granted the owners summary judgment on liability on both claims, concluding that yes, Sho-Me's current use was not for an electric transmission line. The damages calculation on the unjust enrichment claim went to the jury, which held the company liable for $79 million. The plaintiffs did not seek damages for the trespass.
Next stop, Eighth Circuit.
Sho-Me argued that under Missouri easement law, use of the land for fiber-optic cables for internet service did not exceed the scope of the granted use. The plaintiffs didn't have a problem with Sho-Me installing the fiber optic cabling so it communicate with its power stations, only the bit about the company selling off the excess capacity for internet access. That is not electric transmission, according to the plaintiffs. The Eighth Circuit agreed with the plaintiffs and the district court. Sho-Me's current use was not electric transmission. We won't go into the "Blackacre" details of Missouri easement law, but we invite you to do so if you are interested in the details. Short story is that the Eighth Circuit concluded that Missouri property law plainly concludes that Sho-Me's new use was not the granted use, and that it was trespassing to the extent of the difference.
However, the court also concluded that unjust enrichment was not an available claim under Missouri law for this situation. Oh, the plaintiffs could have brought an inverse condemnation claim (Sho-Me possesses the power of eminent domain), but the Missouri courts have held in these situations, plaintiffs have four theories of liability: trespass, inverse condemnation, injunction, and ejectment. Slip op. at 13. Get off my lawn and pay up! But not unjust enrichment.
Since the jury had only awarded damages under the unjust enrichment claim, the court vacated the judgment and sent the case back to the district court where the plaintiffs "may choose to pursue damaged on their trespass claim." Slip op. at 15.
Overall, a good reminder of "first principles." Easements are a grant of limited rights. If the owner of the dominant estate starts to use the easement for a purpose other than that which was granted, this terminates the easement and the owner of the )former) servient estate may exercise her full rights as the fee owner. If the the (former) owner of the dominant estate continues to use the land for that other purpose, it has to pay up, either under a common law trespass theory, or, if the entity has the power of eminent domain, under an inverse condemnation or physical regulatory takings theory.