Opinion ID: 28186
Heading Depth: 2
Heading Rank: 2

Heading: Public and Necessary Purpose

Text: 7 Under Louisiana Revised Statute § 19:2(2), [a]ny domestic or foreign corporation created for the construction of railroads may expropriate needed private property when the owner of the property and the corporation cannot agree upon a purchase price. 7 A second provision, Louisiana Revised Statute § 45:353, allows foreign railroad companies operating in Louisiana to expropriate property needed to construct railroads and rail spurs and for other railroad purposes. 8 Both of these statutes are, however, subject to the state constitutional protections afforded to owners of private property. Article I, Section 4 of the Louisiana Constitution specifically provides that [p]roperty shall not be taken or damaged by any private entity authorized by law to expropriate, except for a public and necessary purpose and with just compensation to the owner. 9 The Louisiana Constitution also makes clear that, in a given expropriation case, whether the purpose is public and necessary is a judicial question. 10
8 Whether a particular expropriation will serve a public purpose is a two-pronged inquiry. 11 Under the first prong, the expropriating corporation must show that there is a public right to use the expropriated property (i.e., the right of way for the rail spur). 12 This prong consists of two subparts. 13 Not only must the public have the right to use the spur, but there must also exist a possibility that more than one particular user will have access to the spur. 14 Under the second prong, the court considers whether the expropriation will contribute to the general welfare of the community. 15 9 There is no question that the public will have the right to use the spur in this case. The fact that PetroUnited will initially own the spur 16 is inapposite; Louisiana courts have held that the financing and ownership arrangement for a proposed spur has no effect on whether the spur will serve a public purpose. 17 Because Illinois Central proposes to connect the spur to its main line, the spur is subject to regulation by the Louisiana Public Service Commission, and Illinois Central must use it to serve the public without discrimination. 18 Thus, the first subpart is satisfied. 10 The second subpart concerns whether the spur will actually be available to multiple shippers. The Louisiana Supreme Court has made clear that in the context of railroad expropriation, the number of potential shippers is a key factor in establishing public purpose. In River & Rail Terminals, Inc. v. Louisiana Railway & Navigation Co., the Court held that a rail spur built to serve only one shipper was not built for a public purpose. 19 The railroad company in River & Rail had built a rail spur exclusively to serve the New Orleans Refining Company in the shipment of its own products. 20 Because the spur benefitted no shipper other than the one refining company, the court held that it did not serve a public purpose. 21 The holding focused on the fact that the spur exclusively served one private shipper: 11 The evidence clearly shows that the spur track of defendant company serves no other enterprise but the New Orleans Refining Company, and that it was constructed solely for the purpose of enabling defendant company to handle tank cars shipped out by the refinery. 12 There is nothing in the record to show that the public has ever used the spur track of defendant company, or that defendant company's spur track will accommodate a number of plants on the river front, and will be open to all other business enterprises, present and future, in the same vicinity. 22 13 Although one shipper is not enough, the proposed rail spur does not have to serve a large number of shippers to serve a public purpose. In Kansas City, S. & G. Railway Co. v. Louisiana Western Railroad Co., public purpose was established by showing that a spur would reach nine private industrial plants. 23 In Gumbel v. New Orleans Terminal Co., a railroad company established a public purpose by showing that the rail spur would be open to the public and that it could potentially serve three private companies already operating in the area along the spur. 24 In Calcasieu & Southern Railway Co. v. Bel, the court held that public purpose was satisfied when a gravel company built a spur primarily to ship gravel from its own gravel pit. 25 The court found a public purpose because some of the land along the seven-mile rail spur belonged to lumber companies that might use the spur to ship lumber. 26 14 The general public utility of a proposed rail spur also figures into the public purpose analysis. The Bel decision demonstrates that after River & Rail, the Louisiana Supreme Court adopted a broader view of public purpose that encompasses the general public utility of a proposed expropriation. In determining that the gravel company's rail spur served a public purpose, the Bel court considered the economic benefits that the spur would bestow upon the general public: 15 It was shown that ... the construction of the road will be a public advantage and will tend to enlarge the resources, increase the industrial energies, and promote the productive powers of a considerable number of the inhabitants or businesses of a section of the state, and manifestly will contribute to the general welfare and prosperity of the community in which it is located. 27 16 The court then referred with approval to a section of Nichols on Eminent Domain discussing the nationwide trend of interpreting public purpose broadly to mean public utility. 28 In the next paragraph, the court cited River & Rail, but stated that it is not pertinent to, or determinative of, the issue in the instant case. 29 Having determined that the gravel company's rail spur was available to other shippers and that it would generally benefit the public, the court simply dismissed River & Rail as irrelevant to its analysis. 30 17 Although PetroUnited is presently the only company with property adjacent to the proposed spur line, multiple shippers will have access to the spur. Consequently, this case is distinguishable from River & Rail. PetroUnited is in the chemical storage and distribution business; it does not merely manufacture and ship its own products. Rather, various companies deliver their products to the facility for storage until they make arrangements to ship them elsewhere. The arrangement is one of bailment; at all times, PetroUnited's customers retain ownership of the products stored at the facility. Thus, PetroUnited's customers decide when, where, and how to ship their products from the facility. 18 The summary judgment evidence indicates that from 1995 to 1999, PetroUnited's Sunshine facility stored chemicals for thirty-three different companies. The evidence also shows that, on several occasions, various chemical companies asked Illinois Central to build a spur to the PetroUnited facility so that they could ship their chemicals via rail from that location. Thus, unlike the spur in River & Rail, there is uncontroverted evidence that the rail spur in this case could serve numerous shipping companies and benefit the general public. Since PetroUnited produces nothing, the only way that its facility generates a profit is by storing and facilitating the distribution and shipment of other companies' products. 31 19 Contrary to the dissent, our public purpose analysis does not conflict with the holding in River & Rail. We do not hold that a public purpose is established merely because the public will have a theoretical right to use the spur; the expropriator must also show that a sufficient number of shippers will have actual access to the spur. There was no public purpose in River & Rail because at the time of the lawsuit, only one shipper had access or occasion to use the spur. 32 In the present case, dozens of shippers will have access to the spur. 20 Furthermore, there is no basis for the dissent's claim that the general public must have access to the terminal served by the rail spur. Neither Kansas City, Gumbel, nor Bel involved public terminals. In each of these cases, public purpose was established by showing that the spur was open to the public and that several companies would actually have occasion to use it. 33 There is no indication in any of these cases that the public would have a right to use the private terminals that abutted the proposed spurs. Nor is there any indication that River & Rail requires that the rail terminal be open to the public. 34 The holding of River & Rail is simple: a spur built to serve one private shipper does not serve a public purpose. Neither it, nor the cases that it relied upon, require the spur to serve a public terminal. 35 21 In Gumbel, for instance, public purpose was established because there were three private companies operating along the track that could use it for shipping products. 36 It would be nonsensical to conclude that a public purpose exists when a spur serves three private companies operating from three private terminals, but that a public purpose does not exist when a spur serves dozens of companies shipping products from one terminal. 22 Thus, the public purpose requirement is satisfied in this case. The undisputed evidence shows that the spur will be open to the public and that the dozens of companies who use the St. Gabriel facility will have access to the spur as a means of shipping their products through the region. Summary judgment was therefore proper on the issue of public purpose.
23 There are at least two components to the necessary purpose inquiry under Louisiana law. First, the private expropriator must show that there is a public necessity for the expropriation; i.e., that there is a public demand for the expropriation. 37 Second, the expropriator must show that the expropriation is expedient; i.e., [t]he amount of land and the nature of the acreage taken must be reasonably necessary for the purpose of the expropriation. ... 38 24 The district court erred in its necessary purpose analysis because it focused only on the expediency aspect of the inquiry. The court stated that the necessary purpose requirement is satisfied if the taking is for railroad purposes, 39 and emphasized that the expropriator need not show actual, immediate, and impending necessity for the expropriation. 40 Since the Mayeuxs did not allege that Illinois Central was attempting to expropriate more property than was needed for the proposed spur, the court found that summary judgment was proper. 25 Before reaching the expediency issue, however, the court should have considered whether there was a public necessity for the spur. A key aspect of the public necessity inquiry under Louisiana expropriation law is whether there is an actual public demand for the expropriation. 41 The court should have examined this issue and found a genuine issue of fact regarding the public demand for the proposed spur. Illinois Central presented evidence of public demand for the spur by showing that certain chemical companies had directly petitioned the railroad to build a spur to this location. The Mayeuxs, however, presented expert testimony from a transportation and logistics specialist stating that there is no public demand for the proposed spur because it will be unattractive to companies in the business of shipping bulk chemicals. The Mayeuxs' expert opined that the proposed spur will rarely, if ever, be used to ship chemicals from the Mississippi Valley. Despite its relevance to the public demand or public necessity inquiry, the district court's summary judgment opinion makes no mention of this expert testimony. 26 Because the Mayeuxs have shown that there is a genuine dispute as to whether there is a public demand or public necessity for the spur, summary judgment on this material issue of fact was unwarranted. On remand, the district court must determine whether there is a sufficient public demand for the proposed spur to satisfy the necessary purpose requirement under Louisiana law.