California Eminent Domain Report

In eminent domain cases, it is uncommon that right to take challenges are upheld, and when they are, it is typically a procedural deficiency that can be cured. It is even more unusual where a right to take challenge is successful based on the condemning entity not possessing the power of eminent domain. But, that is exactly what recently happened with an eminent domain case in Northern California involving a popular excursion train – the Skunk Train.

Background

As set forth in detail in this article and the court’s decision after trial, Mendocino Railway (operator of the Skunk Train) asserted that it is a public utility with the right to take property through eminent domain. The railway sought to acquire a 20-acre parcel to construct and maintain a rail facility related to its ongoing and future freight and passenger rail operations.

The railway runs from the City of Fort Bragg 40 miles to its depot in the City of Willits. However, due to a landslide in 2015, trains have been unable to run the full length and instead can run shorter round trips from each end of the line. Currently, the main operation of the railway is an excursion train known as the Skunk Train that makes sightseeing trips through the redwoods. The railway is designated by the California Public Utilities Commission as a Class III Commission, meaning it is regulated for safety purposes. 

Public Utility Status

The railway asserted that it was a “common carrier” public utility and therefore entitled to use the power of eminent domain. The Public Utilities Code defines “common carrier” to mean those providing “transportation” to the public for compensation. The parties did not dispute that “transportation” requires taking people or property from point A and dropping it off at point B, but its round trip excursions for sightseeing did not qualify.

However, the railway asserted that it should also qualify if it has the availability to provide the services of transporting freight or passengers (i.e., so long as it offered the services of transporting freight or passengers, whether or not that was actually occurring, should be sufficient). But, when it came down to the evidence offered at trial, the court was not convinced that the railway, or its affiliates, had sufficiently provided freight or passenger services to satisfy the definition of transportation and therefore the definition of common carrier.

Ultimately, the court determined that the intention to provide services in the future is not sufficient to establish the railway as a public utility now. The court did note that the railway may be able to obtain public utility status in the future, but that the current evidence did not support such a finding.

Use of Eminent Domain

Despite determining that the railway did not satisfy the definition of public utility, the court analyzed whether not the railway’s proposed acquisition met the requirements of eminent domain law. First, the court determined the proposed 20-acre acquisition could be characterized as a private operation for private gain, rather than public use (the fact that private commercial retail was proposed was one factor). Second, the railway did not satisfy the statutory requirements of greatest public good and least private injury. Specifically, the initial plan for the site prepared at the time the complaint was filed included a campground (which was not consistent with the operation of a railway and could not be the basis for eminent domain), the credibility of a later admitted site plan was questioned as it was admitted 18 months after the eminent domain action was filed, and the railway lacked analysis as to the impacts of the proposed maintenance and transload facility on residents living directly adjacent to the site. Altogether, the railway failed to meet its burden to establish that the project was planned or located in a manner that will be most compatible with the greatest public good and least private injury.

Conclusion

Based on the above, the court concluded that the railway had failed to establish it had the constitutional and statutory power to use eminent domain to acquire the property. This determination is unique in its conclusion that the entity attempting to condemn property did not actually have the power of eminent domain, as determinations such as this are rarely seen. The future of this railway (and others similarly situated) will be interesting to follow, as the court did leave open the possibility that it could rise to the level of a public utility in the future.

Also of note is that this case dealt with the power of eminent domain in the public utility context, which means that the statutory presumptions afforded to other types of condemning entities are not afforded in this case (i.e., the presumptions that are afforded to entities that condemn only after adopting a Resolution of Necessity). As such, the railway had a greater burden of proving it met the statutory requirements for the use of eminent domain, which it failed to do.