Yesterday the Federal Circuit issued its opinion in Hardy v. United States, a case we have been tracking because it attracted an amicus brief. In this case the government challenged a ruling by the Court of Federal Claims that a Notice of Interim Trail Use (NITU) amounted to a taking of private property. In the opinion, a panel of the court (including Judges Newman, Lourie, and Stoll) unanimously affirmed-in-part, vacated-in-part, and remanded. While the panel agreed with the lower court that Hardy has a compensable property interest, it vacated and remanded because the trial court did not focus on the relevant inquiry in analyzing the case. Here is a summary of the Federal Circuit’s opinion.

As explained in our argument preview, Hardy and other plaintiffs contend that they own disputed properties in fee simple, and that a railroad acquired easements limited to railroad purposes. Further, they contend that a conversion of the relevant railroad line for use as a public recreational trail under the Trails Act exceeded the scope of the easements and thus constituted a taking. The Court of Federal Claims agreed, finding a taking to have occurred. On appeal, this case attracted an amicus brief in support of Hardy.

Judge Stoll wrote the opinion for the panel, which as mentioned affirmed-in-part, vacated-in-part, and remanded the case back to the Court of Federal Claims. In the introduction of the opinion, the court described the relevant facts:

From 1889 to 1927, [the Central of Georgia Railway Company (“CGA” or the “Railroad”)]’s predecessor, the Middle Georgia & Atlantic Railway Company, acquired interests in Hardy’s parcels through standard form deeds (“MG&AR form deeds”), through other deeds, and by condemnation. . . . On July 1, 2013, CGA applied for authority to abandon a portion of its rail line by filing a notice of exemption from formal abandonment proceedings with the Surface Transportation Board (STB), the federal agency with exclusive jurisdiction to regulate abandonment of most of the rail lines in the United States. . . . On July 26, 2013, the Newton County Trail Path Foundation sought to prevent abandonment and filed a request for interim trail use with the STB pursuant to the National Trail Systems Act, indicating that the Foundation was interested in negotiating a trail use agreement with CGA. . . . CGA indicated its willingness to negotiate an interim trail use agreement with the Foundation and, on August 19, 2013, the STB issued a Notice of Interim Trail Use or Abandonment (NITU). . . . In May 2014, Hardy filed suit in the Court of Federal Claims, alleging that issuance of the August 2013 NITU effected Fifth Amendment takings by preventing CGA’s abandonment of sections of the rail line running through Hardy’s parcels. The Government argued that Hardy had no cognizable takings claims because the deeds at issue in this appeal each conveyed a fee simple interest such that Hardy had no property interest in the land at issue in this appeal. . . . In October 2016, CGA notified the STB that after filing its notice of agreement, CGA determined that its notice of exemption improperly described the location of milepost E-65.80. . . . After the STB corrected the NITU in November 2016, the Government moved for partial reconsideration of the trial court’s summary judgment decision. . . . the trial court concluded that “a NITU renders moot the issue of the [R]ailroad’s intent regarding abandonment,”. . . and that “[p]ost- NITU events may affect the duration of, and compensation for, the taking, but they do not foreclose the NITU from effecting the taking in the first instance.”

The government presented two issues in its appeal: (1) whether the lower court erred in ruling that the deeds for the rail corridor conveyed merely an easement to the railroad, rather than a fee, and (2) whether the court erred in ruling that a taking occurred of certain plaintiffs’ property where the notice did not actually apply to the section of rail line adjacent to those plaintiffs’ land, the railroad lacked any intent to abandon this section, and conversion never occurred.

The court rejected the government’s position on the first issue, holding that Hardy has a compensable property interest.

The court began its analysis by applying the law of the relevant state. Under Georgia law, “the crucial test in determining whether a conveyance grants an easement in, or conveys title to, land, is the intention of the parties, but in arriving at the intention many elements enter into the question.” The court then described in detail previous cases where conveyances were designated as a “fee” or “right of way,” and noted that although these were helpful in determining the intent of the parties, the designations were not controlling. In this case, the court found repeated use of the term “right of way” to weigh in favor of the conveyance being an easement. Additionally, the court pointed to one deed providing only for nominal consideration, which the court found supported that the deed conveyed an easement rather than a fee interest. Further, the court noted, the land was described not by its acreage but by reference to the railroad track, which the court said supported the same conclusion.

The court found that the existence of a warranty clause “does not compel the conclusion that [the deed] conveyed a fee simple estate.” The court found here that “[t]he word ‘forever’ in these clauses merely describes the duration of the conveyance.” Additionally, one of the deeds in question granted “the right to all necessary drainage in the construction and maintenance of said road constructed over said right of way.” The court found that “[t]he grant of drainage rights is inconsistent with a fee simple interest.” Finally, the fact that “some of the deeds recite a reversionary interest, supports conveyance of an easement.”

The court concluded that the “deeds, considered in their entirety, reflected the parties’ intent to convey easements.” Because all deeds in question conveyed only easements, the court affirmed the trial court’s holding that Hardy had a compensable property interest.

The court then turned to the government’s arguments that the NITU did not effect takings on certain parcels that the Railroad never intended to abandon.

Because “neither the trial court’s opinion nor the parties’ briefing before this court sufficiently focused on the relevant inquiry as recently promulgated by this court in Caquelin v. United States,” the court vacated and remanded “for the parties to address this issue before the trial court in first instance.”

In Caquelin, the court determined that “a NITU does not effect a taking if, even in the absence of a NITU, the railroad would not have abandoned its line.” Therefore, argument should address “a date of abandonment in the but-for world in which there was no NITU.” For more information see our coverage of Caquelin.

Here, the government argued that even in the absence of the NITU, the Railroad never intended to abandon the section of the rail line in question. At oral argument, Hardy disputed this, claiming that the government would have abandoned the portion of the rail line absent the NITU. Addressing this dispute, the court held the following:

Because the briefing and argument before this court did not sufficiently focus on whether or when the Railroad would have abandoned its easements for land east of milepost E-65.80 absent the NITU, we decline to address this issue on the merits in the first instance. Accordingly, we vacate the Court of Federal Claims’ decision that issuance of the NITU effected a physical taking of land east of milepost E-65.80 and remand for further proceedings on the questions of whether and when the Railroad would have abandoned the portion of its rail line east of milepost E-65.80 absent the August 2013 NITU.

As a result of this holding, the Court of Federal Claims will have another opportunity to determine whether a taking occurred.