A recent decision, Texas Central Railroad & Infrastructure v. Miles,  from the Corpus Christi Court of Appeals  garnered substantial media coverage.  Are the companies proposing Dallas-to-Houston high-speed rail, Texas Central Railroad & Infrastructure, Inc. (TCRI) and Integrated Texas Logistics (ITL), considered “railroad companies” or “interurban electric railways”  such that they have eminent domain power? [Read full opinion here.]

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Background 

This case revolves around the proposed high-speed electric-powered passenger train that would run between Dallas and Houston. In 2012, TXHS Railroad, Inc. was formed and in 2015, the company changed its name to TCRI with a purpose to “plan, build, maintain, and operate an interurban electric railroad.”  In 2017, ITL was formed to “construct, acquire, maintain, or operate lines of electric railway…” and “to operate and transact business as a railroad company…”

In 2015, TCRI sent Mr. Miles a packet including details about the project, an outline of the survey process, an invitation to open house meetings, and a survey permission form.  Mr. Miles refused to sign the survey permission form and refused to grant TCRI access to survey his land.  Mr. Miles filed suit, seeking a declaration that TCRI could not conduct the type of survey requested on the permission form as the form exceeded certain provisions in the Texas Transportation Code related to railroads and interurban electric railways.  Essentially, Mr. Miles did not argue that a “railroad company” or an “interurban electric railways” have eminent domain power; only that TCRI and ITL did not meet the statutory definition of a “railroad company” or an “interurban electic railway.”

TCRI responded, seeking their own declaratory judgment that they were a “railroad company” and an “interurban electric railway” under the Texas Transportation Code, with the right to conduct survey examinations as such. ITL intervened seeking the same declaration against Mr. Miles.

The parties filed cross-motions for summary judgment on these issues.  The trial court sided with Mr. Miles, declaring that neither TCRI nor ITL were “railroad companies” or “interurban electric railways.” Mr. Miles was also awarded attorney’s fees.  The entities appealed.

Applicable Law

First, keep in mind that under Texas law, a company with the power of eminent domain has the right to conduct limited surveys–visual inspection and lineal surveys–of property,  even over the objections of landowners.  [Read prior blog post here.]

Second, the Texas Transportation Code Section 81.002 defines a “railroad company” as “(1) a railroad incorporated before September 1, 2007 or (2) any other legal entity operating a railroad, including an entity organized under the Texas Business Corporation Act or the Texas Corporation Law provisions of the Business Organizations Code.”  Since both entities were incorporated after 2007, it is only the second clause at issue.  A “railroad” is defined by Texas Transportation Code Section 199.002(a)(1) as “an enterprise created and operated to carry passengers, freight, or both on a fixed track. The term includes all real estate and interests in real estate, equipment, machinery, materials, structures, buildings, stations, facilities, and other improvements that are necessary to, or for the benefit of, the enterprise.”

Third, an “interurban electric railway company” is a “corporation chartered under the laws of this state to conduct and operate an electric railway between two municipalities in this state.”  See Tex. Transportation Code Section 131.011.  Companies meeting this definition and are for the purpose of transporting freight, passengers, or both freight and passengers are granted the power of eminent domain.  See Tex. Transportation Code Section 131.012.

Fourth, the Texas Code Construction Act provides that, “words in the present tense include the future tense.”  See Tex. Gov’t Code Section 311.012(a).

Finally, Section 2206 of the Texas Government Code requires entities created or holding eminent domain power before December 31, 2012 to submit a letter to the Comptroller stating that the entity is authorized to exercise the power of eminent domain and identifying each provision of law granting that authority.  Failure to comply results in the expiration of eminent domain power.

Opinion

The Corpus Christi Court of Appeals reversed the trial court and ruled in favor of TCRI and ITL. [Read full opinion here.]

Are the entities “railroad companies?”

First, the court addressed the issue of whether the entities are “railroad companies.” The court noted “we are not interpreting the eminent domain authority, but rather we are interpreting Section 81.002(2)’s definition of a railroad company.”

The entities argued they are “engaging in railroad operations.”  They claimed that because they will have running trains and tracks upon the completion of construction, they qualify under the definition. They relied Denbury Green Pipeline-Texas v. Texas Rice Land Partners, a case addressing whether the pipeline was a common carrier, for the proposition that a company need not show it is currently operating a certain way, but only that there is a reasonable probability in the future it would.  [Read prior blog post on Denbury Green here.]

Mr. Miles argued to the contrary because the entities “own no trains, have constructed no track or train depots, have expended less than 1% of the total estimated cost of the project, and cannot even purchase the parcels optioned along the project’s proposed alignment.”  He believes that by using the word “operating,” the Legislature’s intent was to limit the meaning to those entities presently operating a railroad.

The court noted that it must assume that the legislature intended each statute be interpreted in accordance with the Code Construction Act and that adopting Mr. Miles’ argument “would ignore the legislature’s instruction under the Code Construction Act by limiting the word ‘operating’ to solely the present tense.”  The court declined to do so. Additionally, the court noted the entities had taken a number of steps necessary in order to build and operate a railroad, including design, planning and preliminary studies; surveying; construction; acquisition; financing; maintenance; and purchasing property. Thus, the court held the entities are “railroad companies” pursuant to the Transportation Code.

Are the entities “interurban railway companies?”

Next, the court addressed whether the entities qualify as “interurban railway companies.”

TCRI and ITL simply argued they meet the statutory definition in the Transportation Code. They stated that the statute requires a company be chartered for the purpose of conducting and operating an electric railway between two municipalities in the state and point to the organizational documents of both companies as evidence this was satisfied.

Initially, Miles argued the mere act of filling out corporate documents containing these purposes should not grant the right of eminent domain to a company.

The Court rejected Mr. Miles’ argument that the company must do more than complete organizational paperwork, noting that Mr. Miles did not argue the entities were not chartered for the required purposes or that further investigations might have shown the contrary.  Thus, the fact that no hearing took place or investigation was conducted does not provide the court with any indication of what might have been found to change the entities’ status had this type of investigation occurred.

Mr. Miles then turned his argument to Section 2206 of the Government Code, arguing that because TCRI was created in 2012 and failed to file its letter with the comptroller, its eminent domain power expired in 2013.  TCRI responded that as of December 31, 2012, it was not chartered as an “interurban railway company,” but only as a railroad company.  It was not until 2015 when TCRI amended its filing to state that its purpose was an interurban electric railway that it acquired eminent domain authority as such.

The court agreed with TCRI.  “TCRI could not have been expected to file a letter with the comptroller purporting to have eminent domain powers that it had not yet acquired.”

Mr. Miles further argued the entities are not “interurban electric railway companies” because the Legislature “could not have intended the eminent domain powers it conferred upon electric trolley cars over a century ago to apply to TCRI and ITL’s 200-mile-per-hour bullet trains today.”  Mr. Miles points to the 1989 HSRA bill, which established the Texas High-Speed Authority to award a franchise to the private sector to construct, operate and maintain a high-speed rail facility if the authority determined the award of a franchise was for the public convenience and necessity.  That act was then repealed in 1995. This, Mr. Miles argued, indicates the legislature did not intend for the “interurban electric railway” statute to govern high-speed trains.

The entities argued that nothing in Section 131.011 regarding “interurban electric railways” precludes high-speed rails, and that the 1989 act being passed and repealed did not mean there is no place for high-speed rails.

The court stated that because the HSRA is no longer effective, it must address the current statute that does pertain to this case, namely, the “interurban electric railway” statute, which it finds applicable.  Thus, the court held the entities are ‘interurban electric railways.”

Violations of Texas Property Code

Next, Mr. Miles argued that even if the companies were “railroad companies” and “interurban electric railways,” they failed to comply with the statutory requirements in their interactions with him.  First, he claims they failed to provide him with a  timely copy of the Texas Landowner Bill of Rights, with the Property Code Section 21.0112 requires be provided to the landowner “before or at the same time the entity first represents in any manner to the landowner that the entity possesses eminent domain authority.”   Mr. Miles says TCRI did not provide the bill of rights until September 2016, three months after TCRI filed counterclaims against him and asserted it had eminent domain power. He claims ITL publicly sued him upon intervening in the case in May 2018 and did not provide the bill of rights until August 2018.

The court found that Mr. Miles did not raise this argument against TCRI in the trial court and, therefore, failed to preserve it to be considered on appeal. With regard to ITL, the court held that it was required to present a bill of rights at the time it intervened in the lawsuit claiming it had eminent domain power and failed to do so. However, the court stated, “we find no statutory provision of authority that requires we deprive ITL of eminent domain authority…”  Since the violation was cured when Mr. Miles was given the bill of rights, there was no remand necessary.

Conclusion

The court wrote the following:  “We acknowledge Miles’s well-founded policy concerns regarding the wielding of eminent domain powers by private entities. However, it is not the Court’s role “to second-guess the policy choices that inform our statutes or to weigh the effectiveness of their results; rather, our task is to interpret those statutes in a manner that effectuates the Legislature’s intent.” Our inquiry is necessarily constrained by the language of the pertinent statutes, which is determination of the legislature’s intent.” (citations omitted).

Thus, the court found TCRI and ITL were both railroad companies and interurban electric railways.  The lower court opinion was reversed and the case remanded.  The award of attorney’s fees to Mr. Miles was also reversed.

Appeal Expected

The high-speed rail project has been extremely controversial for years.  It seems likely that will continue, as Mr. Miles has announced that he intends to appeal this decision to the Texas Supreme Court.