Third Circuit: If It Quacks Like A Quick Take, It's Just A Preliminary Injunction

An observation: courts seem to believe that in eminent domain, a taking, once it is instituted, is inevitable. Thus, the landowner should simply go with the flow, because this is going to happen. We get where that comes from. After all, most takings are completed and the property is acquired. But it isn't necessarily so. As a general rule, a condemnor is free to walk away after finding out how much the taking might actually cost them. Only when title actually transfers from the property owner to the condemnor does the taking actually become final. 

With that background, check out the latest decision about an issue we've covered before, and which isn't going away. 

Try as you might, you can read through the entirety of the Natural Gas Act and you will not find anywhere in the statute where Congress delegates to private pipeline companies the quick-take power -- those takings where the condemnor can obtain possession of the land prior to determination of the just compensation owed, and payment of that amount.

Or anything like it.

Instead, the statute delegates only the traditional "straight taking" power, which the U.S. Supreme Court in Kirby Forest Industries v. United States, 467 U.S. 1 (1984) described this way:   

Rule 71A requires the filing in federal district court of a "complaint in condemnation," identifying the property and the interest therein that the United States wishes to take, followed by a trial before a jury, judge, or specially appointed commission—of the question of how much compensation is due the owner of the land. The practical effect of final judgment on the issue of just compensation is to give the Government an option to buy the property at the adjudicated price. Danforth v. United States, 308 U.S. 271, 284, 60 S.Ct. 231, 236, 84 L.Ed. 240 (1939). If the Government wishes to exercise that option, it tenders payment to the private owner, whereupon title and right to possession vest in the United States. If the Government decides not to exercise its option, it can move for dismissal of the condemnation action. 

Id. at 2. Under straight taking, the right to possess the property transfers when title transfers. That is, when the government exercises its option to buy at the adjudicated price.

Kirby Forest also contains a good rundown of the three ways in which a condemnor can exercise eminent domain power: 

1. Straight taking (as described above). See 40 U.S.C. § 257.

2. Quick take: aka "declaration of taking" (see 40 U.S.C.  § 258(a)), where the government "any time before judgment" can file a declaration of taking and make a deposit of the estimate of just compensation which the property owner can withdraw, after which title to the land transfers, along with the right to possess the property. 

3. Statutory take: where Congress "exercises the power of eminent domain directly." One famous example cited in Kirby Forest: the taking of Redwood National Park in Northern California, where the statute itself vested "all right, title, and interest" in the federal government as of the date of the adoption of the statute. Kirby Forest, 467 U.S. at 5, n.5.

[Sidebar. There is a fourth way, of course: takings where the government just goes ahead and takes the property, either directly or by exercising some other power than eminent domain, and it is up to the property owner to sue for compensation. Inverse condemnation and regulatory takings, for example. But these are not situations where a statute authorizes a taking by an exercise of the eminent domain power.]

Thus, somewhat like the counting system for the Holy Hand Grenade of Antioch, there are three -- and only three -- ways to take property by eminent domain. No more, no less. Three shall be the number of the takings, and the number of the takings shall be three. Four is right out. 

And because the Natural Gas Act -- specifically 15 U.S.C. § 717f(h) -- doesn't mention quick take, and instead merely states that a private pipeline company "may acquire [property] by the exercise of the right of eminent domain in the district court of the United States for the district in which such property may be located, or in the State courts," it describes a straight taking. No question there. 

Thus, one might presume, since Congress has not in the NGA delegated the quick take power to private pipeline companies, that the courts wouldn't let them take early possession of property in NGA takings, and instead would make them wait until an adjudication of just compensation, followed by their exercise of the option to buy at that price, and tender of the money. And title transfer. Only then, you'd think, could they get possession of the property owner's land.  

But several federal courts of appeals -- save one -- apparently have not received the message that since the NGA doesn't delegate the power of immediate, pre-compensation possession, a pipeline company can't get immediate, pre-compensation possession. Because they seem to think there's a fourth way: let's call it "straight-take-with-immediate-possession."   

Here's the latest in growing list of federal courts that appear to fundamentally misunderstand eminent domain, and how it is exercised. In Transcontinental Gas Pipeline Co., LLC v. Permanent Easements for 2.14 Acres, No. 17-3075 (Oct. 3, 2018), the U.S. Court of Appeals for the Third Circuit held that even though the pipeline condemnor wasn't delegated the quick take power in the NGA, it nonetheless could get immediate pre-condemnation possession of the property by way of a preliminary injunction under Rule 65 of the Federal Rules of Civil Procedure.

The Third Circuit agreed with the property owners that the NGA does not contain a quick take mechanism, and "does not on its own create an entitlement to immediate possession." Slip op. at 23. And if that were the only fact in the case, then the injunction to get immediate possession would have been improper. So far, so good. 

The NGA contains a three-part requirement before a private pipeline can exercise eminent domain power: (1) the pipeline obtain a certificate of public convenience from FERC; (2) it cannot acquire the property it wants by negotiated voluntary purchase; and (3) the amount claimed by the owner is more than $3,000. 15 U.S.C. § 717f(h). The pipeline told the district court that none of these three facts were disputed, and it therefore could exercise eminent domain to take the property. The district court agreed, and granted the pipeline summary judgment on we call the "ability to take" issue.

This was the critical fact to the Third Circuit, which concluded that the pipeline had vested into what the opinion called a "substantive" right to take the property. And that substantive right could be enforced immediately by the district court's equitable powers. Slip op. at 23. See also slip op. at 19 (the dispositive fact was that the pipeline condemnor had "established its substantive right to the property by filing for [and obtaining] summary judgment"). 

The Third Circuit thus concluded that even though Congress didn't delegate the quick take power to private pipelines, it also didn't prohibit the federal courts from exercising their usual equitable power to issue preliminary injunctions. This didn't violate the separation of powers (eminent domain, the court acknowledged, is a legislative power) because, well, the owners are no worse off under the Rule 65 process than they would have been under a quick take. Indeed, they may have more protections, the court concluded.

For example, the pipeline posted a bond. Which, we assume, was supposed to be a substitute for the quick take deposit. See slip op. at 19-20 ("Transcontinental also posted a bond at three times the appraised value of the rights of way, as required by the orders of condemnation."). Hey, the money is there, and is three times what a deposit would have been, so what is the landowner complaining about?

But to us, this just looks like the district court was making stuff up on the fly, because ... well, we can't figure out how the bond has the same effect as a quick take deposit. Doubt us? Check out footnote 60 on page 19 of the slip opinion, which notes that the district court's bond does not operate like a quick take deposit. (The property owner, for example, doesn't have the right to withdraw the bond.) But in the end, the Third Circuit simply shrugged, concluding that oh well, if the property owner shows "hardship," the court might relent and allow them access to the money. Which is way different than quick take, where the right of the property owner to get the deposit is not conditional, and no showing of hardship is needed. And most importantly, unlike quick take, title does not vest in the condemnor upon the injunction and bond. 

The Third Circuit appeared to believe that because the pipeline met the three factual predicates in the statute and was granted summary judgment that it could institute the action, that the taking was all but inevitable. But the district court's grant of summary judgment did no such thing. All it resolved was a preliminary standing question: could the pipeline institute the action? Yes. But the summary judgment emphatically did not -- and could not -- resolve the substantive question on  the merits: is the condemnor willing to exercise its option to pay the just compensation which the court will eventually establish must be paid, an issue the court has not yet determined?

Which, as Kirby Forest notes, means that the taking is not at this stage inevitable because the pipeline might not be willing to pay the compensation which the court eventually decides must be paid. 

The court's rationale not only goes against the well-worn rule of statutory interpretation of eminent domain statutes (they must be liberally read in favor of the property owner), but also reflects a fundamental misunderstanding of how eminent domain is exercised, and the precise effect of the district court's grant of summary judgment under the NGA. In quick take, the taking becomes inevitable when title transfers. Only then can the condemnor get possession. Here, by contrast, the court acknowledged that title would not transfer until the end of the case, but nonetheless allowed possession. See slip op. at 20 ("Here, unlike a 'quick take' action, Transcontinental does not yet have title but will receive it once final compensation is determined and paid."). 

To us, that is the opinion's Achilles' heel because possession can only follow after title. And title only can follow after tender by the condemnor of the court-determined compensation. 

Three ways to take by eminent domain - no more, no less. 

The Third Circuit isn't alone in this fundamental misunderstanding. As we wrote recently, some of the Supremes also seem to be exhibiting the same thinking.

One other thing that bothers us. The FERC certificate of public convenience gave the pipeline three years to acquire the property. Thus, the pipeline argued that the court's injunctive powers were needed to get the property now, or else we might lose the FERC certificate!

But the court's equity power to enter preliminary injunctive relief is, we thought, designed mostly to maintain the status quo antebellum. And that status was that owner possessed, the pipeline didn't. It was the pipeline that altered that status quo by getting a FERC certificate, thus creating the very situation which necessitated an exercise of the court's equity power. That doesn't seem right at all to us. 

So this case isn't over, and this issue isn't going anywhere. The Fourth Circuit is currently considering the same question, and whether to revisit a decade-old panel decision which agrees with the Third Circuit). There's a circuit split that will, we think, need to be resolved by the Supreme Court. 

Stay tuned, as always.   

Transcontinental Gas Pipeline Co, LLC v. Permanent Easements for 2.14 Acres, No. 17-3075 (3d Cir. Oct. 3