‘Rails to Trails’ Lawsuit Settlement: $5M Fed payout to landowners along old Cochise County railroad corridor

Cochise County, Arizona – The check is in the mail. That is the message several Cochise County landowners received recently after the U.S. Dept. of Justice agreed to a settlement in a decade-long lawsuit involving land encumbered by easements granted a century ago to the El Paso and Southwestern Railroad Company. The legal action involved the federal government’s interference with the landowners’ property rights along what is now known as the San Pedro rail corridor, a 76 mile long, 200 feet wide strip of land stretching from St. David, through Charleston and Bisbee, and on to Douglas.

The landowners finally prevailed in their 2007 lawsuit – known as Ladd vs. United States of America – after a mediation session was held in Tucson in June. Notice of the settlement was submitted to the U.S. Court of Federal Claims in November and now the plaintiffs are waiting on the U.S. Dept. of Treasury to issue the checks.

The payouts to individual landowners are confidential, according to Meghan Largent, an attorney with Arent Fox, the law firm based in Washington D.C. that represented the landowners. However, Largent reported the total settlement – including interest and costs – “is just shy of $5 million” with the biggest component being “delay damages” which is interest that accrued on the original money the government owed to the landowners.

The lawsuit involved legislation passed by Congress in the 1980s known as ‘Rails To Trails’ (RTT). Prior to RTT, full interest to property covered by a railroad easement reverted back to a private landowner once rail service was abandoned along that part of the corridor. But passage of RTT unilaterally eliminated the landowners’ reversionary rights in many situations, allowing the easement land to be used for public recreation trails without regard to the property owner’s longstanding rights.

Although RTT survived multiple constitutional challenges across the country, the U.S. Supreme Court ruled that under the Takings Clause of the Fifth Amendment of the U.S. Constitution, the federal government must compensate landowners in RTT cases if there is a “taking” of their property interests.

In 2012, the Court of Federal Claims affirmed that the Ladd plaintiffs were “entitled to just compensation” after RTT provisions were invoked by the San Pedro Railroad Operating Company when it discontinued rail service on part of its corridor. The court ruled the compensation must consider not only the value of the easement land but also the diminished value of the landowners’ remaining property adjoining the rail corridor.

Despite the 2012 ruling, the parties had been unable to agree on what formulas to use for calculating that compensation until the recent court-ordered mediation. Attorney Largent explained the settlement price tag is so high because “the government chose to litigate this case for eight years (including two appeals) rather than settle.” That strategy, noted Largent, “cost the taxpayers significantly more than the government’s actual liability for the land it took.”

The settlement also includes the landowners’ attorneys fees, she explained, because the “government is required to reimburse” such costs in cases involving violation of the Takings Clause.

Owen Lonsdale is one of the Ladd plaintiffs through his ownership interest of the Miller Ranch Trust property south of Saint David. Lonsdale believes that “far too often” the federal government infringes “on state and personal rights” and can do so because they have the “advantage in litigation as they have our very own tax dollars to fund attempts at illegal land takings” such as Rails To Trails.

When asked whether he would go through the process again, Lonsdale explained he felt “it’s a matter of patriotic duty” to get involved when the government “oversteps its bounds.” Permitting such actions to go unchecked, he noted, “will slowly erode our rights and set precedents, allowing such grievous actions to continue in the future.”

As part of the settlement, the Ladd plaintiffs withdrew a request to certify their case as a class action. Instead, the government agreed to not challenge a second lawsuit Arent Fox filed on behalf of 14 new plaintiffs whose property along the San Pedro rail corridor in Cochise County may have been impacted by RTT legislation. Largent said the new lawsuit – referred to as Lindstrom vs. United States of America – should be resolved quickly based on the facts already demonstrated in the Ladd case.

Contact reporter Terri Jo Neff at 520-508-3660 and cjw_media@yahoo.com

To read the full story in Cochise County Record click here.

EDITOR’S NOTE: for more information about this matter, see this story published by the Real Estate Daily News on Sept 12, 2016