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Eminent Domain Landowner Victory On Excessive Taking Upheld By Third District

Onda LaBuhn recently won an eminent domain appeal affirming the trial court’s
determination Columbia Gas of Ohio (“Columbia Gas”) was impermissibly seeking to appropriate unnecessary rights and dismissing Columbia Gas’s petition to appropriate easement rights from Phelps Preferred Investments, LLC (“Phelps”). Onda LaBuhn collaborated with Attorney Richard Ricketts to defend our mutual client’s property rights.

In Ohio, eminent domain is governed by R.C. 163 which provides certain governmental bodies and utility companies with the right to force property owners to relinquish property rights in exchange for “just compensation.” Under this statute, cases are required to proceed on an expedited basis with court proceedings occurring in as little as 5 days after an answer is filed. R.C. 163.09(B)(1). The expedited schedule for these cases requires landowners and their counsel to act swiftly and skillfully to obtain the necessary evidence and submit the necessary filings to protect the property owner’s rights.

In this case, Columbia Gas was attempting to take an easement spanning 1.7 miles of Phelps’ property as part of a 4.78-mile pipeline project identified as the Marysville Connector Pipeline Project. Columbia Gas of Ohio, Inc. v. Phelps Preferred Investments, LLC, 3d Dist. Union No. 14-22-07, 2022-Ohio-2540 at ¶¶ 2-3. Appellee Phelps Preferred Investments, LLC (“Phelps”) filed an answer specifically challenging:

1. Whether Columbia Gas could prove present necessity v. future necessity;

2. Whether it was necessity for Columbia Gas to take unlimited pipeline specification rights;

3. Whether it was necessity for Columbia Gas to take blanket rights to place valves and appurtenances anywhere on Phelps’ over 310 acre farm;

4. Whether it was necessity for Columbia Gas to take a 25-foot “perpetual temporary easement” in addition to the 50-foot pipeline easement;

5. Whether Columbia Gas was prohibited from taking the rights based on its bad-faith negotiations and bad-faith conduct;

6. Whether Columbia Gas was prohibited from taking the rights based on its failure to provide Phelps with a compliant statutory notice;

7. Whether Columbia Gas was prohibited from taking the rights based on its failure to include a reservation of statutory right for Phelps to repurchase the property under R.C. 163.02(D)(3) and R.C. 163.211;

8. Whether Columbia Gas was prohibited from taking the rights based on its failure to provide Phelps with an appraisal at, or before, the time it made its first offer to purchase under R.C. 163.04(C);

9. Whether Columbia Gas was prohibited from taking the rights based on its failure to include a proper verification of the Petition filed with the Court; and

10. Whether Columbia Gas was prohibited from taking the rights based on its failure to include a jury demand causing Phelps to incur additional costs for instituting legal proceedings to ensure a jury would determine just compensation as envisioned under Ohio law.

The trial court conducted a hearing on December 7, 2021. On February 8, 2022, the trial court issued a judgment in favor of Phelps as to denials 2, 3, and 4 above and ordered Columbia Gas’ case be dismissed with an award of fees, expenses, and costs to Phelps. The trial court declined to rule upon the other 7 denials because these three were sufficient to warrant dismissal of Columbia Gas’ Petition. Columbia Gas appealed the trial court’s decision asserting six assignments of error:

1. Columbia Gas was entitled to an irrebuttable presumption of necessity and thus no amount of evidence could be produced by Phelps (no matter how convincing) to prevent Columbia Gas from taking the property rights;

2. Alternatively, Columbia Gas was entitled to a rebuttable presumption of necessity and Phelps failed to present adequate evidence to prevent Columbia Gas from taking these property rights;

3. Columbia Gas was not required to limit the pipeline specifications because Columbia Gas’ witnesses testified the rights described in the proposed easement would be reasonably convenient or useful to the public;

4. Columbia Gas was not required to limit the placement of valves and appurtenances to the 50-foot pipeline easement because Columbia Gas’ witnesses testified the rights described in the proposed easement would be reasonably convenient or useful to the public;

5. Columbia Gas was not required to limit the duration of its “Perpetual Temporary Easement” because Columbia Gas’ witnesses testified the right to perpetually have access to the temporary easement described in the proposed easement would be reasonably convenient or useful to the public; and

6. Columbia Gas should have been permitted to take the demanded property rights, regardless of how the trial court decided Phelps’ specific denials, and should have scheduled the case for a compensation trial instead of dismissing the petition.

All 6 of these arguments were rejected by the Third District Court of Appeals.

In affirming Phelps’ victory in the trial court, the appellate court concluded the Ohio Power Siting Board (“OPSB”) had never reviewed or approved the terms of the demanded easement and, as a result, Columbia Gas was not entitled to an irrebuttable presumption of necessity. The Court of Appeals found “the trial court engaged in the scope or review of the proposed easement required under Norwood and R.C. 163.09(B) and properly found that the burden of proof is on Columbia Gas to show the necessity of the easement terms sought by Columbia Gas.” Columbia Gas at ¶ 24.

Ultimately, the Court of Appeals agreed Columbia Gas was improperly seeking to take unnecessary rights including the ability to increase the size of the pipeline and the maximum operating pressure, change the pipeline use from natural gas to some other speculative material, and “the easement is an unnecessarily broad ‘blanket easement’ or excessive taking relating to placement of valves and appurtenances.” Id. at ¶ 34. Columbia Gas’ arguments as to the reasonable convenience or usefulness of a “perpetual temporary easement” were also rejected because those arguments were factually inconsistent with the testimony of Columbia Gas’ own witnesses and the documentation submitted by Columbia Gas to the OPSB.

Finally, the Court of Appeals affirmed the dismissal of Columbia Gas’ case and Phelps’ entitlement to recover its reasonable attorney’s fees, expenses, and costs where Columbia Gas failed to succeed on any of the matters presented to the trial court at the December 7, 2021 hearing.

Prior to filing its Petition against Phelps (and others), Columbia Gas negotiated and obtained voluntary easements from other landowners containing many of the unnecessary rights which were fatal to its Petition in this case – rights those landowners will likely never get back. While it is unclear whether Columbia Gas will undertake any further actions seeking to take Phelps’ property rights, there can be no doubt Ohio landowners facing eminent domain must act promptly and skillfully to protect their rights.

The experienced litigation and real estate teams at Onda LaBuhn welcome the opportunity to help you investigate your case, defend your property rights, and pursue favorable tax treatment of your just compensation award.

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