RICHMOND, Va. (CN) – Landowners impacted by the construction of a natural gas pipeline through the Appalachian Mountains filed an appeal late Tuesday asking the en banc Fourth Circuit to reconsider a three-judge panel’s approval of a “take first, pay later” approach to eminent domain.
The Fourth Circuit’s 2004 ruling in East Tennessee Natural Gas Co. v. Sage created a loophole under the Natural Gas Act allowing companies to take land and begin construction prior to compensation being paid out for the property.
This precedent, landowners argue, has shifted the balance of power in eminent domain claims in favor of gas companies and violates the separation of powers doctrine.
The Sage ruling was cited two weeks ago by a three-judge Fourth Circuit panel that lifted an injunction blocking construction of the Mountain Valley Pipeline in the path of many landowners.
Now the landowners are asking the Fourth Circuit to rehear the case en banc and overturn the 15-year-old precedent, in the hopes of evening the playing field.
The petition, filed Tuesday night by Austin, Texas-based attorney Christopher Johns, says that “Congress did not authorize use of the quick-take power” and the three-judge panel never addressed the landowners’ separation-of-powers argument.
“Eminent domain is supposed to be the government’s power to take private property for public uses - to build roads or schools - and that’s what the courts are overlooking,” said Robert McNamara, senior attorney at the Institute for Justice and its Castle Coalition project advocating for landowners in eminent domain cases.
McNamara is all too familiar with the Sage ruling. He’s seen it used to take land from plenty of landowners long before they are paid for their property.
“Sage has been an incredibly influential opinion and an incredibly wrong opinion,” he said in a phone interview with Courthouse News.
He said eminent domain is a specific power granted by Congress and that system is considered equitable. But Sage added powers through the judiciary and it is long overdue for review, he said.
At the heart of the issue is the ability to grant immediate possession of property. This allows the gas company to take the land and begin construction before settling just compensation and is something not usually delegated to other eminent domain claims.
“The Constitution does not prevent a condemnor from taking possession of property before just compensation is determined and paid,” U.S. Circuit Judge M. Blane Michael, a Bill Clinton appointee who died in 2011, wrote in the 2004 opinion decided in favor of the gas company over landowner John Sage. “Once a district court determines that a gas company has the substantive right to condemn property under the [Natural Gas Act], the court may use its equitable power to grant the remedy of immediate possession through the issuance of a preliminary injunction.”
Judge Michael noted equitable payment must be placed with the court when such an injunction is issued, but McNamara said the landowner’s bargaining power is hurt once possession is granted and construction begins.
“In ordinary eminent domain cases you see hard-hitting negotiations beforehand where they try and bargain for the property,” he said. “With Sage in place, companies can say, ‘Here’s my offer, if you don’t take it I’m just going to go to court and take the property and you will get nothing for years.’”
McNamara said he’s seen cases where the pipeline is complete and landowners who held out are still waiting for compensation as the gas companies delay the cases.
He said the companies have “everything they want so the case just lingers while the landowner waits for just compensation.”
Stephen Clarke, a lawyer with Norfolk, Virginia-based Waldo & Lyle who has represented many of the landowners challenging the Mountain Valley Pipeline, agrees.
“The pipeline companies argue… they’re going to get this land eventually, but we think there are timing issues that make it really important for property owners to follow what we think is the law,” Clarke said in a phone interview.
He said it's hard to say how many of his clients decided to settle their cases with the pipeline company because of Sage, but warnings about the 2004 precedent and its lingering impacts were part of early discussions when those he represented asked about their likelihood of success.
“Some folks are more realistic about the process and they understand the pipeline is coming and some folks believe the pipeline can be stopped or slowed down enough that it makes it not financially viable,” Clarke said.
But he also noted the eventual challenge to Sage was part of the legal theory from the beginning.
Clarke said he walked into the Fourth Circuit oral arguments last September knowing the judges were bound by that precedent, and he pointed to questions from the panel that day challenging the landowners on that concept: that the three-member panel was not the appropriate venue to overturn court precedent.
But Clarke admitted as much, saying it was the first step before Tuesday’s en banc appeal.
“We’ve been posturing this case on the idea that we were unlikely to win with the three-judge panel, but we needed to set it up for the en banc review,” he said. “I’m cautiously optimistic they will take it up.”
Clarke also said comments from the panel were not all doom and gloom, particularly one from Chief U.S. Circuit Judge Roger Gregory: “Maybe Sage is wrong.”
McNamara similarly tried for an en banc appeal of Sage in the Third Circuit, but the request was denied. But he pointed to a Seventh Circuit opinion in favor of landowners, despite Sage,as hope for a change in the Natural Gas Act-related eminent domain fight. In that case, the Northern Border Pipeline had to pay landowners before property could be taken and construction could begin, in line with what McNamara advocates.
To that end, he’s filed a petition for review at the U.S. Supreme Court in the case the Third Circuit declined to hear.
“There’s a real disagreement,” McNamara said, noting previous eminent domain cases to go before the highest court have cut out narrow exceptions which he thinks Sage violates. “Courts are ignoring [those exceptions] and treating it like a condemnation if Department of Defense was condemning for an army base,” he added.
While McNamara waits for the highest court to decide to take that case, Clarke is keeping his focus on the Fourth Circuit in Richmond, Virginia.
“Eminent domain overcomes a land owner’s right to say no, and that's a pretty strong power,” he said. “If a [gas company] can go to court and force you to sell it to me but I can’t force you to transfer it to me until just compensation has been decided by a jury and paid, it puts landowners on a much more even footing with the pipeline companies. It gives them back some power.”
Requests for comment from Mountain Valley Pipeline were not returned Tuesday.
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