Today’s post is kind of long, but we think the case is well worth your time.

NGA Preliminary Injunctions

Regular readers know that we’ve made no secret of our disapproval of the prevailing practice in federal courts of using preliminary injunctions to allow private for-profit pipelines to grab immediate pre-condemnation possession of property using the Natural Gas Act’s delegated federal power of eminent domain, even though everyone agrees the NGA delegates only the straight (slow) taking power.

Save the Seventh Circuit, every other federal appeals court that has considered this practice has figuratively shrugged its shoulders, rejecting arguments made by the property owners that this exceeds the powers which Congress delegated in the NGA, and violates separation of powers and basic eminent domain principles. The courts of appeals simply pay no mind. And two cert petitions have been denied, and one more is teed up.

But yesterday, the Third Circuit (one of those circuits that recently OK’d the use of preliminary injunctions to obtain pre-condemnation possession) finally found a case where it held for the property owner.

What’s Different About This Case?

What was the difference in In re PennEast Pipeline Co., LLC, No. 19-1191 (Sep. 10, 2019) that made the difference in result? After all, the basic setup was the same: a private pipeline company, exercising the straight takings eminent domain power delegated to it by the NGA, filed condemnation actions against owners, and after obtaining summary judgment under the three statutory prerequisites in the NGA, sought and obtained preliminary injunctions from the district court allowing the pipelines to take possession immediately. Same as it ever was.

But here, rather than affirming, the Third Circuit vacated the district court’s injunction and its judgment. You see, in the earlier cases, private owners were the defendants. But here, the State of New Jersey was the property owner / condemnee. It or one of its agencies either owned outright several of the parcels to be condemned, or held easements on others.

And, as you know, the general rule is that states cannot be sued in federal court. Eleventh Amendment, sovereign immunity, and all that. In accepting New Jersey’s arguments and dismissing the eminent domain actions, the Third Circuit panel detailed (its a 35-page opinion, no dissent) why Congress in the NGA may have delegated one of its sovereign powers (eminent domain) to private for-profit entities, but it did not delegate the separate power to override the states’ immunity from being sued in federal court.

Con Law Mavens, Read On

There’s a lot there for you Eleventh Amendment and Con Law mavens, and we won’t go through the court’s analysis in detail. Suffice it to say that it is not entirely disagreeable to our thinking.

But, eminent domain mavens, there are things there for you, too. Because we thought that in going through all the reasons Congress didn’t allow private pipelines to haul states into federal court, the Third Circuit backhandedly validated many of the points we and others have been making about why Congress didn’t delegate the quick-take power to private pipelines in the NGA, either.

Sidebar: No, These Weren’t “Orders of Condemnation”

Before we get into some of those reasons, a sidebar comment: in reciting the proceedings below, the Third Circuit noted that the district court “granted PennEast’s request for orders of condemnation.” Slip op. at 10. Wait a minute. Everyone agrees that the NGA only delegates to these pipelines the straight takings power (the argument in the preliminary injunction cases acknowledges that, but also posits that neither did Congress withdraw district courts’ usual equitable power to issue injunctions to preserve the status quo if the plaintiff is likely to win eventually). And in a straight taking, no “order of condemnation” issues until the court has adjudicated the final compensation owed, the pipeline has agreed to pay that amount, and has actually paid. Only then is the property condemned.

As the Supreme Court held, “the taking in a condemnation suit under this statute takes place upon the payment of the money award by the condemnor.” Danforth v. United States, 308 U.S. 271, 284 (1939). In short, until payment of the final adjudicated compensation that is owed, the lawsuit is simply “a means by which the sovereign may find out what any piece of property will cost.” Id.

This wasn’t a dispostive point in the case, and we highlight it only to illustrate our sense that the courts are really lost in the wilderness in eminent domain, not truly understanding the way takings are supposed to work. These are not your ordinary civil lawsuits. They are not in rem proceedings, despite the way federal cases are styled (“U.S. v. 12345 Acres,” for example). And final compensation has not been determined. But here we have the district court ordering that final judgment will be entered when (more correctly “if”) court adjudicates compensation, ordering transfer of title at that time, and issuing “orders of condemnation.” See District Court Order at 49.

Why Don’t Courts View The Delegation of the Sovereign Power of Eminent Domain to For-Profit Pipelines Through The Same Lens As Delegation of The Power to Sue in Federal Court? 

Back to our story.

First, the court noted that were it to recognize the ability of private pipelines to override states’ immunity to federal court lawsuits goes against the “accountablity” that underlies all government actions. If you don’t like what the government is doing, go petition, go vote. But here, the state property owners can’t do that because the condemnor isn’t a government subject to such things:

Second, fundamental differences between suits brought by accountable federal agents and those brought by private parties militate against concluding that the federal government can delegate to private parties its ability to sue the States.

Slip op. at 16-17.

True, but we ask: why doesn’t this same vibe apply to the feds delegating the sovereign power of eminent domain to private pipelines? No transparency, no political reckoning mechanism.

Second, the court noted that Congress did not delegate to private pipelines the power to sue states in federal court, because the interest the pipelines are pursuing in these cases are their own private interests, not the interest of the United States. See slip op.at 18 (“Courts of Appeals have been similarly skeptical that the federal government can delegate to private parties its exemption from state sovereign immunity — even when the private party seeks to assert the interests of the United States, rather than the party’s own.”).

Is it just the way we’re reading it, or does this acknowledge that these NGA takings are predominately for private benefit, and not for the public at large? As the court noted, “there are meaningful differences between suits brought by the United States, an accountable sovereign, and suits by private citizens.” Slip op. at 20. Pipeline companies, after all, make no promises to “take Care that the Laws be faithfully executed.” Id. We ask: why is that any different when it is the sovereign power of eminent domain being exercised? What checks are there on the private condemnor’s self-interested motivations? See also slip op. at 26 (detailing the private benefits the pipeline gains by NGA takings).

So the elephant in the room that is lurking, unanswered in the Third Circuit’s opinion, is whether there’s a difference when Congress delegates its ability to sue states in federal court, and when it delegates its sovereign power to take private property? The court acknowledged that “[t]hose considerations are clearly in play in the eminent domain context.” Id. It noted:

There, the condemning party controls the timing of the condemnation actions, decides whether to seek immediate access to the land, and maintains control over the action through the just compensation phase, determining whether to settle and at what price. The incentives for the United States, a sovereign that acts under a duty to take care that the laws be faithfully executed and is accountable to the populace, may be very different than those faced by a private, for-profit entity like PennEast, especially in dealing with a sovereign State. In other words, the identity of the party filing the condemnation action is not insignificant.

Slip op. at 20-21. But the court never closed the circle, and only analyzed these concerns when a state is a defendant, never explaining why it has been perfectly ok when the condemnee is one of the little people, and not a state government.

Third, we have argued that if pipeline companies want to obtain immediate possession in NGA cases, they should go to Congress and amend the law to include the quick-take power. That argument thus far has fallen on unlistening ears. But in this case, the Third Circuit proclaimed that “[t]here is a way that Congress can subject the States to suits by private parties. It can abrogate the sovereign immunity of the States.” Slip op. at 21. What’s not good for the goose is apparently very good for the gander.

Finally, we end on this note. We thought the states were immune from being sued in federal court for retrospective damages. A federal court still has jurisdiction to order prospective equitable relief against a state official as long as the suit does not interfere with the state’s treasury (or at least that is how we generally recall what is a very nuanced doctrine). How is a lawsuit to “find out what any piece of property will cost” where the state is supposed to be fully indemnified for any loss, so the impact to the state’s fisc is, theoretically, a wash?

Don’t get us wrong. We’re not suggesting that the Third Circuit should not have concluded that the pipeline could not step into Congress’ shoes and sue New Jersey in federal court. We’re only wishing that the same concerns that animated the court’s decision were viewed as applying with equal force when it isn’t a government on the target end of the taking.

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One final note on the quote from footnote 7 of the court’s opinion that we included at the very start of this post. To anyone who questions whether property owners who are subject to these NGA preliminary injunctions are being seriously deprived of their property rights as a consequence, need only to read the footnote.

In re PennEast Pipeline Co., LLC, No. 19-1191 (3d Cir. Sep. 10, 2019)