What is a ‘rails-to-trails’ case?

Many of you may not have heard of the “rails-to-trails” concept, so it is time to introduce you. What makes it timely is a recent decision by the U.S. Court of Federal Claims that plainly lays out the concept and its inner workings. Nicholson v. United States (2024) 170 Fed. Cl. 399. I have had some experience in this field, as I handled the first U.S. Supreme Court case involving the concept, Preseault v. United States (1990) 494 U.S. 1. Some brief statutory background, and a little history from Preseault should properly set the stage.

The general issue arose when Congress became aware that much of the vast railroad right-of-way system constructed in the nineteenth century was being abandoned as modern railroad companies decided that they no longer needed as extensive a track system as they had originally acquired. Upon discontinuing use, the railroads assumed that they owned the rights-of-way and sought to sell them. The natural targets for these lengthy stretches of linear property turned out to be state and local government agencies and private entities that wanted to convert these long, thin properties into recreational hiking and biking trails.

It turned out that there was a legal hitch in that program. When the rights-of-way were acquired, they were generally acquired as easements (not fee simple) that were temporary in scope and were to continue only so long as the property was used “for railroad purposes.” Thus, state courts around the country held that the railroads had no right to transfer and the easement “reverted” to the underlying property owner. Real property law had long been settled on that point.

Enter Congress, which thought it could solve the problem with a waive of its definitional pen. It enacted what has become popularly known as the Rails-to-Trails Act, 16 U.S.C. §1247(d). The solution devised by our national legislature was to attempt to provide an alternative meaning for the term “railroad use” found in most of the easement deeds. According to the new law, if a railroad transferred title to a rail easement, but did so with the proviso that the easement was subject to being reclaimed by the railroad if it decided at any time in the future that it wanted to reinstitute rail service, then that would not constitute “abandonment” of the easement, and all those pesky decisions applying state property law to “abandoned” property could be circumvented.

Mr. and Mrs. Paul Preseault challenged that law. They owned a small parcel in Vermont that was traversed by a railroad easement. When the railroad decided to cease service on that line and transfer it to the state, the case became the latest in the line of challenges to the title obtained by the railroad and the first to challenge the Congressional effort to retroactively amend the easement deeds. The Preseaults thought they could unify their formerly bisected property for unitary use. The government and the railroad thought otherwise. The case went through the federal system, where the Second Circuit Court of Appeals issued a curt opinion that said, in essence, there is no way—under any set of facts—that this statute could ever be a constitutional taking.

That absolutist position provided the opening needed to get a clear shot at the statute. SCOTUS granted cert. When the dust settled, the Court held that the issue could not be decided in an across-the-board facial manner. The deeds creating these easements were not identical, and each case would have to be decided on its own facts in the Court of Federal Claims. However, the clear message was that Congress’s definitional work–around didn’t work. The Court refused to buy the fiction that the railroad (having torn up all its tracks and ties and related equipment and closed the line) would ever actually entertain the idea of recreating its old rail line. If the Preseaults could prove their title, they would be entitled to compensation.

I thought that message was clear. The federal government disagreed. Big time. Since Preseault was decided thirty-four years ago, the feds have regularly denied claims for compensation for rail easement conversions and forced property owners to litigate for years to recover compensation. Perhaps it was that long history of government intransigence that caused the judge in the current Nicholson case to describe the process in detail, while concluding as a matter of law on summary judgment that the property owners had a right to compensation, with the only question being the amount.

Nicholson is simply the most recent illustration. There, the government actually sought summary judgment, claiming that the property owners had no right to compensation whatever. That led to the lengthy judicial exposition on the law of takings in general and rail-to-trail takings in particular.

Under the Trails Act, a railroad applies to the Surface Transportation Board (STB) for a certificate of interim use. If the STB agrees, it issues a Notice of Interim Trail Use. At that point, a government agency or recognized trail organization may intervene and promise to operate the trail. Then the railroad begins negotiations with either a government entity or an organized trail operator that will (if negotiations conclude positively) take responsibility for the trail. If there is no agreement, the railroad may abandon the line.

For those who need a refresher on just compensation law, the opinion lays it out, beginning with the bedrock precept that the government must pay for what it takes. E.g., United States v. Dickinson (1947) 331 U.S. 745, 750. In trail cases, the plaintiff must show ownership and interference. Preseault v. United States (Fed. Cir. 1996)100 F.3d 1525, 1550. Concluding that the plaintiffs had shown those things, the court said simply, “This begs the question, what are we doing here?”

What, indeed? It is time for the courts to put a stop to this governmental hassling of property owners and accept that it has essentially lost the rails-to-trails war and focus on reaching amicable resolutions to these cases.