What are they thinking?

This is a story about railroads, property owners and government litigation strategy. The background, in a nutshell, is this. More than a century ago, when railroads were helping to open the west by snaking their tracks all over the country, both government agencies and property owners were happy to speed the process. In some instances the government donated land for rights-of-way. Where that didn't happen, railroads negotiated with property owners to purchase the needed property interest. In many (and possibly most) cases, the railroads obtained the least interest they needed to buy. That turned out to be an easement limited to railroad purposes only. Time passed. Other modes of transportation displaced many of the railroads. What to do with the rights-of-way that had become surplus? A match seemed to have been made in heaven. The railroads owned miles of linear rights-of-way that they no longer needed. Enter the 20th century exercise fad. The railroads thought they could sell the unwanted linear property to groups that needed linear property for hiking, running and biking trails. Problem: Courts refused to allow the transfers because the railroads owned only a restricted interest in the property that vanished as soon as the railroad use was abandoned.

Enter Congress. Congress heard the pleas of the railroads and the exercise folks and enacted a statute known colloquially as the "Rails-to-Trails Act." See 16 U.S.C. Section 1247(d). The statute provided in essence that transferring a right-of-way to a government agency or a recognized trail user would not constitute "abandonment" of rail usage for any purpose. So the railroads could actually abandon railroad use without legally abandoning railroad use. Get it? They thought that was a classic "win-win." They were wrong.

I must make a confession at this point. Thirty years ago, I handled a case in the United States Supreme Court that presented the court with its first opportunity to consider the possible 5th Amendment takings implications of the Rails-to-Trails Act. The issue was whether a taking occurred when Congress overrode state property law by authorizing railroads to transfer property interests they did not own. The 2nd U.S. Circuit Court of Appeals had held that the statute could not, at any time or under any circumstances constitute a taking. The Supreme Court reversed. It held that such a wholesale congressional override of state property law could indeed violate the 5th Amendment. It prescribed suits in the U.S. Court of Federal Claims. Preseault v. Interstate Commerce Commn., 494 U.S. 1 (1990). On remand, compensation was awarded. Preseault v. United States, 100 F.3d 1525 (Fed. Cir. 1996). I thought that should have ended the matter.

But the federal government has never been happy with this result. Indeed, following Preseault, numerous cases were filed by property owners. When the owners won, the government routinely appealed. Regardless of the amount involved. The most recent case is a paradigm. In Caquelin v. United States, 959 F.3d 1360 (Fed. Cir. 2020), the government appealed a judgment for $900. That is not a typo. Your federal government brought the entire weight of its system down on an individual property owner over a judgment for nine hundred bucks.

There was nothing unusual about the Caquelin case. It proceeded much as most of these cases do, as the protocol is laid down by the statute and follow-on regulations. When the North Central Railway Association decided to abandon a 10-mile long right-of-way across the Caquelin property, it applied to the federal Surface Transportation Board (STB) for permission to abandon. Permission was granted, but it was delayed when permission was then sought to negotiate to transfer the easement to a public entity. At that point, the STB issued a Notice of Interim Trail Use (NITU) which created a 180-day window to negotiate such a transfer. No transfer occurred and the NITU expired.

However, during the 180 days the NITU was in effect, the federal statute blocked Norma Caquelin from making any use of her property. After trial, the court held that the existence of the NITU caused a categorical (or per se) taking of the property for that period. Thus, the $900 judgment. The Federal Circuit affirmed, as it has routinely done in these cases.

So, what happened? Why would the government go to the trouble of appealing (and put Ms. Caquelin to the effort of defending)? This may get a bit into the weeds for non-takings aficionados. But bear with me. The United States Supreme Court has established two different ways of analyzing takings. Under Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992), government action that precludes all economically beneficial or productive use is a categorical (or per se) taking. That is the way the Claims Court and Federal Circuit have traditionally analyzed these cases. The other was created in Penn Central Transp. Co. v. City of New York, 438 U.S. 104 (1978) and augmented in Arkansas Game & Fish Commn. v. United States, 568 U.S. 23 (2012). There, as the court explained in Tahoe-Sierra Preservation Council v. Tahoe Reg. Plan. Agency, 535 U.S. 302, 326 (2002), if the impact of the government action does not satisfy the categorical Lucas standard, a more "ad hoc" mode of analysis is used. Here, the court held (as it had repeatedly) that the NITU effects a categorical taking for the period of the restriction because the owner is deprived of all use of the property for that time.

What was the point of this $900 appeal? The government wanted the Federal Circuit to reexamine all of its cases since Preseault and insist that all NITU takings be judged by the "ad hoc" mode of analysis. The reason that is important is that the ad hoc mode of analysis almost always results in a government win. Numerous commentators have noted this phenomenon and lawyers have repeatedly asked the Supreme Court to reconsider a rule that almost always results in one side winning. As even a strong supporter of government regulation explained, if one side always wins, there is something wrong with the rule. See John Echevveria, "Is the Penn Central Three Factor Test Ready for History's Dustbin?" 52 Land Use L. & Zon. Dig. 3 (2000).

Suffice to say that the Federal Circuit wasn't buying it. The court concluded that, because the NITU created an absolute prohibition of use for the period it was in effect, and that was sufficient to satisfy the Supreme Court's standard for a categorical taking. Is it possible that the government will finally stop appealing these cases? 