10yr Legal Battle Over 100yr-Old Railroad Land Deals; Perhaps Soon Resolved

By: Terri Jo Neff reprinted from Cochise County Record

U.S. government will pay Cochise County landowners for “taking” of property “Rails to Trails” legislation led to questions of easement ownership

FAIRBANK- A mediation session held in June may finally bring an end to a decade-long federal court battle involving several Cochise County property owners who sued the U.S. government for interfering with private property rights linked to railroad easements issued under the General Railroad Right-of-Way Act of 1875.

The landowners filed a complaint with the U.S. Court of Federal Claims in June 2007 demanding payment from the government for violating the “Takings Clause” of the Fifth Amendment of the U.S. Constitution which reads in part “no person shall be deprived of… life, liberty or property…without just compensation.”

The case, known as Jack Ladd et al vs. United States, involves legislation passed by Congress in the 1980s -commonly referred to as Rails to Trails (RTT) – which preempts the long standing legal premise of “reversionary rights” whereby full interest in property covered by a railroad easement reverts back to the private landowner once rail service is abandoned.

After dozens of legal filings, two dismissals, and three appeals, the Court ruled in favor of the local landowners in 2012, finding that an action by the U.S. Surface Transportation Board in 2006 led to a “RTT taking” which affected nearly a dozen easements along the San Pedro Railroad Holding Company’s abandoned corridor that runs through Cochise County.

The Court also ruled the landowners are “entitled to just compensation” as a result of the taking, but four years later the parties have not been able to agree on the amount due each plaintiff.

Railroad easements, public and private
The battle traces back to passage of the 1875 Act which President Ulysses S. Grant proposed to encourage westward expansion by granting railroad companies a right-of-way along public lands west of the Mississippi River.

Soon after, the Arizona & Southeastern Railroad surveyed a new route along the San Pedro River to move ore, supplies and people in and out of booming mining towns like Bisbee and Fairbank. However, in order to build the route the company also needed to secure several right-of-way easements from private landowners.

By 1911, El Paso & Southwestern Railroad owned the corridor stretching 76 miles from Benson to Douglas. Business decreased along the short line with the decline of the mining industry, and by 1955 Southern Pacific Railroad owned the track. In 2003 the San Pedro Railroad Holding Company took over, operating as the San Pedro & Southwestern Railroad.

However, San Pedro could not generate enough revenue to cover the cost of maintaining its aging – and little used – track. The company applied to the Surface Transportation Board for permission to abandon most of its line south of St. David. The request kicked in the provisions of the Rails to Trails legislation.

Abandoned tracks, trails and the landowners’ argument
As part of a national initiative to address a growing problem of abandoned track across the country, RTT legislation authorized “railbanking”, a practice that allows a company to discontinue use of a rail line but preserve – or bank- any easements and right-of-ways under their control. The corridor would then be developed into a public use recreational trail until rail service is reactivated along the line in the future.

In November 2005, San Pedro received permission from the Surface Board to move forward with its abandonment plan and begin removing track, ties and signals. Then in January 2006 the non-profit Trust for Public Land Use requested permission to develop the 76 mile San Pedro corridor into a public recreational trail as allowed under RTT.

In July 2006 the Surface Board issued a Notice of Interim Trail Use (NITU) for the San Pedro corridor and soon after several landowners along the corridor responded by filing a claim against the United States, demanding compensation for violations of the Fifth Amendment’s Takings Clause.

With the help of property rights attorney Mark F. Hearne of Arent Fox LLP, the landowners argued that RTT keeps easements in place for perpetuity despite original easement documents which give the landowners the “right to the exclusive use and physical possession of their property” once a rail line is abandoned.

Difficulty determining compensation formula, property values
Even though the U.S. Court of Federal Claims based in Washington D.C. ruled in favor of the Ladd et al plaintiffs, four years later the landowners are still waiting for payment while the parties argue over a complication in the case.

Compensation for RTT claims prior to the Ladd case were settled by paying landowners based on property value “before and after” a public trail was put in. But a trail was never built on San Pedro’s corridor, effectively leaving the government’s taking open-ended and making it difficult for the parties to agree on an “after” value.

Proceedings in the case were stayed – put “on hold” – throughout most of 2014 and 2015 while the parties tried to negotiate a compensation plan. Then earlier this year a new presiding judge referred the case for alternative dispute resolution in an effort to bring an end to the matter.

On June 9 the parties took part in a mediation session in hopes of finally formulating a compensation plan that everyone agrees on. A spokesperson for the U.S. Dept. of Justice (DOJ) – which represents the government – declined to comment on the outcome of the mediation session, noting “discussions are ongoing.”

But sources familiar with the case say a tentative settlement was outlined and once it is approved by senior DOJ officials, it can be presented to the Court.

More landowners may pursue compensation, including Town of Huachuca City
The plaintiffs are not the only ones anxious for an end to the Ladd case.  Arent Fox, the law firm representing the landowners, filed a special class certification request with the Court in order to allow other property owners along San Pedro’s corridor to pursue compensation.

According to attorney Meghan Largen of the Arent Fox law firm, the judge will rule on the class certification once Ladd is resolved but at this time about a dozen potential new plaintiffs have been identified.

One of those is the Town of Huachuca City.  The Town Council voted July 28 to engage Arent Fox to file a claim on the town’s behalf as the current owner of Camp Naco, a historic property located along the old railroad corridor. The law firm is representing Huachuca City on a contingency basis.  No payment will be due for services unless the town receives a payment in the settlement.

For full story and to see lawsuit click here.