Court Opinion

ID: 3054094
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:52:26.041184+00
Date Added: 2024-06-11T12:12:01.821566
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

TRANSWESTERN PIPELINE COMPANY,               
LLC, a Delaware limited liability
company,
                  Plaintiff-Appellant,
                   v.
                                                     No. 08-15991
17.19 ACRES OF PROPERTY
LOCATED IN MARICOPA COUNTY,                           D.C. No.
                                                  2:08-cv-00033-JWS
more or less; AGUA FRIA
INVESTMENTS, LLC, a Delaware                           OPINION
limited liability company; FIRST
NATIONAL BANK OF OLATHE, a
Kansas corporation; J. LAWRENCE
MCCORMLEY,
               Defendants-Appellees.
                                             
         Appeal from the United States District Court
                  for the District of Arizona
         John W. Sedwick, District Judge, Presiding

                  Submitted December 1, 2008*
                      Pasadena, California

                     Filed December 11, 2008

     Before: Harry Pregerson, Cynthia Holcomb Hall and
              N. Randy Smith, Circuit Judges.

                       Opinion by Judge Hall

   *This panel unanimously agrees that this case is appropriate for submis-
sion without oral argument pursuant to Fed. R. App. P. 34(a)(2).

                                  16281
     TRANSWESTERN PIPELINE v. 17.19 ACRES OF PROPERTY 16283

                      COUNSEL

John C. Lemaster, Ryley Carlock & Applewhite, Phoenix,
Arizona, and Jeffrey L. Hinds, Bricklemyer Smolker &
Bolves, P.A., Tampa, Florida, for the appellant.
16284 TRANSWESTERN PIPELINE v. 17.19 ACRES OF PROPERTY
Steven A. Hirsch, Bryan Cave LLP, Phoenix, Arizona, for the
appellees.

Kenneth B. Bley, Cox, Castle & Nicholson LLP, Los Ange-
les, California, for the amici curiae.

                            OPINION

HALL, Senior Circuit Judge:

   Transwestern Pipeline Co. (Transwestern) appeals the dis-
trict court’s denial of its preliminary injunction motion seek-
ing immediate possession of appellee landowners’ parcels of
land. As a holder of a valid Federal Energy Regulatory Com-
mission (FERC) certificate, Transwestern claims it is entitled
to condemn appellees’ land pursuant to § 717f(h) of the Natu-
ral Gas Act (NGA). The district court denied the injunction,
holding that, until condemnation proceedings are completed,
Transwestern maintains no substantive right of possession and
therefore the district court lacked authority to grant prelimi-
nary equitable relief. The district court had jurisdiction pursu-
ant to 15 U.S.C. § 717f(h) and 28 U.S.C. § 1331. We have
jurisdiction pursuant to 28 U.S.C. § 1292(a)(1). We affirm
and hold that, until an order of condemnation issues pursuant
to the requirements of 15 U.S.C. § 717f(h), Transwestern has
no substantive right of possession.

                       I.   Background

  Transwestern owns and operates natural gas pipelines serv-
ing much of the Southwest. Following the review of its appli-
cation and completion of public hearings, the Federal Energy
Regulatory Commission (FERC) issued a Certificate of Public
Convenience and Necessity (the Certificate) approving Trans-
western’s proposed construction and expansion of a natural
gas pipeline to meet the demands of a growing Phoenix mar-
        TRANSWESTERN PIPELINE v. 17.19 ACRES OF PROPERTY 16285
ket. The Certificate provided that Transwestern was to com-
plete the construction within one year of issuance, or by
November 15, 2008.1

   Several property owners affected by the Certificate, most
prominently the Town of Buckeye, Arizona, opposed the Cer-
tificate’s issuance and filed a petition for rehearing of the Cer-
tificate with FERC. The petition alleged insufficient process
in approving the Certificate and requested that the proposed
pipeline route bypass a number of master planned communi-
ties. FERC denied the petition for rehearing, see 2008 WL
461054 (F.E.R.C.) and, pursuant to the process outlined by
the Natural Gas Act (NGA), several petitioners appealed the
denial to the D.C. Circuit. See 15 U.S.C. § 717r. These
appeals have since been dismissed during the pendency of this
appeal. See Town of Buckeye v. F.E.R.C., No. 08-1126 (D.C.
Cir. filed June 27, 2008); El Paso Natural Gas Co. v.
F.E.R.C., No. 08-1161 (D.C. Cir. filed Aug. 25, 2008).2

   Because neither the rehearing nor the appeal automatically
stayed the Certificate’s enforcement, see § 717r(c), Transwes-
tern continued to pursue its construction objectives through-
out this time. Transwestern was able to reach an agreement on
an easement price with most of the 897 affected landowners.
With regard to the remaining 129 parcels, Transwestern filed
condemnation actions in the district court of Arizona. The
NGA authorizes FERC Certificate holders to acquire neces-
  1
     The ramifications of a possible delay in completion are uncertain, how-
ever, as 18 C.F.R. § 157.20(b) (1999), as cited in the Certificate, appears
only to require that Transwestern notify FERC within ten days of expira-
tion of the Certificate if it is unable to meet the imposed timetable to com-
mence service. During the pendency of this appeal, Transwestern was, in
fact, able to obtain an extension with FERC to complete the project by a
revised deadline of April 15, 2009.
   2
     On August 25, 2008, the El Paso National Gas Company appeal was
placed in abeyance, pending the completion of a proposed sale.
16286 TRANSWESTERN PIPELINE v. 17.19 ACRES OF PROPERTY
sary land by the exercise of the right of eminent domain, after
negotiations with affected landowners fail. § 717f(h).3

   After consolidating the actions, Transwestern sought a pre-
liminary injunction to obtain immediate possession of the
contested parcels. Transwestern claimed entitlement to relief
under the court’s equitable powers and, specifically, Rule 65
of the Federal Rules of Civil Procedure. Transwestern argued
that the FERC certificate and NGA § 717f(h) guaranteed its
success on the merits, and it would suffer irreparable harm if
it could not take possession immediately, citing construction
delays and resulting expenses, the necessity of complying
with the timeline provided by the Certificate, its desire to
meet contractual forecasts with suppliers and customers, and
the public interest in getting the pipeline in service before fall
2008. The landowners argued the Certificate was improperly
granted and also contested the severity and nature of Trans-
western’s harm. They argued primarily that any harm incurred
by Transwestern was illusory and created by Transwestern’s
own choice to prematurely enter contracts, and that Transwes-
tern could easily obtain an extension of the FERC deadline.
  3
   15 U.S.C. § 717f(h) reads:
         When any holder of a certificate of public convenience and
      necessity cannot acquire by contract, or is unable to agree with
      the owner of property to the compensation to be paid for, the nec-
      essary right-of-way to construct, operate, and maintain a pipe line
      or pipe lines for the transportation of natural gas, and the neces-
      sary land or other property, in addition to right-of-way, for the
      location of compressor stations, pressure apparatus, or other sta-
      tions and equipment necessary to the proper operation of such
      pipe line or pipe lines, it may acquire the same by the exercise
      of the right of eminent domain in the district court of the United
      States for the district in which such property may be located, or
      in the State courts. The practice and proceeding in any action or
      proceeding for that purpose in the district court of the United
      States shall conform as nearly as may be with the practice and
      procedure in similar action or proceedings in the courts of the
      State where the property is situated. . . .
       TRANSWESTERN PIPELINE v. 17.19 ACRES OF PROPERTY 16287
   Following a lengthy evidentiary hearing, the district court
denied the preliminary injunction. Without reaching the par-
ties’ factual contentions or balancing hardships, the district
court held that it lacked authority to grant immediate posses-
sion under the terms of the NGA, and doing so would effec-
tively grant Transwestern a substantive quick-take power not
authorized by the statute.

  During this appeal process, Tranwestern was able to settle
with all but one affected landowner, Agua Fria Investments,
LLC, the remaining appellee in this action.

                  II.   Standard of Review

   “In general, we review the denial of a preliminary injunc-
tion for abuse of discretion. The district court, however, nec-
essarily abuses it discretion when it bases its decision on an
erroneous legal standard or on clearly erroneous findings of
fact. When the district court is alleged to have relied on an
erroneous legal premise, we review the underlying issues of
law de novo.” Earth Island Inst. v. U.S. Forest Serv., 351 F.3d
1291, 1298 (9th Cir. 2003) (citations omitted). Here, the dis-
trict court found that it lacked authority to grant the prelimi-
nary injunction. This appeal thus presents a legal question that
we review de novo.

                        III.   Discussion

A.   Statutory Right to Possession Under NGA § 717f(h)

   [1] The usual process by which the government or another
authorized party takes property for public use is through the
straight condemnation proceeding. In straight condemnation
actions, the government takes possession of the land follow-
ing an order of condemnation and a trial determining just
compensation. See 40 U.S.C. § 3113; Kirby Forest Ind., Inc.
v. United States, 467 U.S. 1, 3-4 (1984) (outlining different
16288 TRANSWESTERN PIPELINE v. 17.19 ACRES OF PROPERTY
authority and procedures used by the government to condemn
property).

   [2] Certain other statutes, chiefly the Declaration of Taking
Act (DTA), provide an additional quick-take power, by which
the government’s right of possession vests immediately upon
filing a declaration of public use and assuring the court that
the government will pay the full just compensation amount,
once determined, by deposit, appropriation, or otherwise. See
40 U.S.C. § 3114 (DTA); Kirby, 467 U.S. at 4-5; Commercial
Station Post Office v. United States, 48 F.2d 183, 184-186
(8th Cir. 1931) (granting immediate possession to the govern-
ment after the order of condemnation issued, but before just
compensation was determined, because a congressional
appropriation existed to acquire contested property). Congress
has granted quick-take authority in only a limited number of
statutes, including the Atomic Energy Act and the Second
War Powers Act, and only for use by the federal government.
See United States v. Parcel of Land, etc., 100 F. Supp. 498,
501, 503, n.8 (D.D.C. 1951). Furthermore, the Uniform Relo-
cation Assistance and Real Property Acquisitions Policy Act
of 1970 limits the use of quick-take power and requires “to
the greatest extent practicable,” that the federal government
use straight condemnation proceedings. 42 U.S.C. § 4651.

   [3] The “additional [quick-take] right conferred” by Con-
gress is missing from § 717f(h) of the NGA. See Parcel of
Land, 100 F. Supp. at 501 (discussing the separate substantive
right of the quick-take power, which must be expressly
granted in a statute by Congress) (citing Catlin Trustees v.
United States, 324 U.S. 229, 239 (1945)). All courts examin-
ing the issue have agreed that the NGA does not authorize
quick-take power, nor can it be implied, because eminent
domain statutes are strictly construed to exclude those rights
not expressly granted. See Humphries v. Williams Nat’l Gas
Co., 48 F. Supp. 2d 1276, 1281 (D. Kan. 1999); see also
Northern Border Pipeline Co. v. 86.72 Acres of Land, 144
F.3d 469, 471 (7th Cir. 1998) (Northern Border); Northwest
        TRANSWESTERN PIPELINE v. 17.19 ACRES OF PROPERTY 16289
Pipeline Corp. v. The 20″ x 1,430′ Pipeline Right of Way, 197
F. Supp. 2d 1241, 1243-1244 (E.D. Wash. 2002); Northern
Border Pipeline Co. v. 127.79 Acres of land, more or less in
Williams County, N.D., 520 F. Supp. 170, 173 (D.C.N.D.
1981).

   [4] Transwestern concedes that the NGA itself does not
authorize quick-take power, but cites numerous cases for the
proposition that courts nonetheless have authority to grant
immediate possession in condemnation actions under their
equitable powers. See, e.g., City of Oakland v. United States,
124 F.2d 959, 963 (9th Cir. 1942); Commercial Station, 48
F.2d at 184; United States v. Fisk Bldg., 99 F. Supp. 592, 594-
595 (S.D.N.Y. 1951); United States v. A Certain Tract or
Parcel of Land in Chatham County, 44 F. Supp. 712, 716
(S.D. Ga. 1942). These cases, however, do not address a pri-
vate entity condemning property under the limited statutory
authority of the NGA. Instead, these cases rely on other stat-
utes, or on the inherent power of the United States govern-
ment as sovereign, to condemn property. See, e.g.,
Commercial Station, 48 F.2d at 185 (relying on direct legisla-
tive act and appropriation); Chatham County, 44 F. Supp. at
716 (relying on inherent powers of United States government
as sovereign). Additionally, in each case, the court was first
assured of an adequate provision for payment. The govern-
ment is able to proceed and condemn land, even where no
appropriation has been made, because the Fifth Amendment
ensures just compensation and serves as an implied promise
to pay. See Commercial Station, 48 F.2d at 185. As a private
entity, Transwestern has neither sovereign authority nor the
backing of the U.S. Treasury to assure adequate provision of
payment. The cited cases are inapplicable.4
  4
   In addition, each of these cases preceded the passage of the Uniform
Relocation Assistance and Real Property Acquisitions Policy Act of 1970,
mentioned above. 42 U.S.C. § 4651. We question whether the cases would
have all reached the same result if the government had the additional bur-
den of showing that straight condemnation proceedings were not at all
practicable.
16290 TRANSWESTERN PIPELINE v. 17.19 ACRES OF PROPERTY
B. Preliminary Injunction Authority Under Rule 71.1
and 65 of the Federal Rules of Civil Procedure

   Transwestern correctly asserts that Federal Rule of Civil
Procedure Rule 71.1 governs condemnation procedure in the
district court. It argues that ordinary preliminary injunctions
are permitted under Rule 65 because quick-take proceedings
are not specifically addressed by Rule 71.1, and because 71.1(a)5
specifically incorporates the other Rules.6 In support of this
proposition, Transwestern cites both Ninth Circuit and
Supreme Court cases holding that absent clear limiting lan-
guage in a statute, the district court retains its equitable power
to issue injunctions. See Califano v. Yamasaki, 442 U.S. 682,
705 (1979); United States v. Alisal Water Corp., 431 F.3d
643, 654 (9th Cir. 2005).

  This argument fails to recognize that procedural rules can-
not provide the basis for new substantive rights.7 It also
  5
   Rule 71.1(a) Applicability of Other Rules
         These rules govern proceedings to condemn real and personal
      property by eminent domain, except as this rule provides other-
      wise.
   6
     In fact, Rule 71.1 may not apply at all to quick-take power as the origi-
nal notes to the May 1948 draft of the Rules stated: “Rule 71A is not
intended to and does not supercede the Act of February 26, 1931 [DTA],
which is a supplementary condemnation statute, permissive in its nature
and designed to permit the prompt acquisition of title by the United States,
pending condemnation proceedings, upon a deposit in court . . . the same
is true insofar as the following or any other statute authorize the acquisi-
tion of title or the taking of immediate possession.” Parcel of Land, 100
F. Supp. at 503, n.8.
   7
     While Rule 71.1 cannot provide additional substantive rights under the
NGA, it seems clear that it does supercede that part of the § 717f(h) which
requires the district court to “conform as nearly as may be with the prac-
tice and procedure in similar action or proceedings in the courts of the
State where the property is situated.” The Supreme Court interpreted the
precise language of the NGA in two other condemnation statutes and
found it to be superceded by the Federal Rules of Civil Procedure. See
       TRANSWESTERN PIPELINE v. 17.19 ACRES OF PROPERTY 16291
ignores that preliminary injunctions, including those upheld in
the cited cases, are primarily issued to preserve the status quo
of the parties and as a means for the court to retain jurisdic-
tion over the action. Here, Transwestern seeks not to preserve
the status quo, but instead seeks a mandatory injunction,
which is “particularly disfavored” in law. See Stanley v. Univ.
of S. Cal., 13 F.3d 1313, 1320 (9th Cir. 1994) (holding that
mandatory preliminary injunctions should be denied “unless
the facts and law clearly favor the moving party”).

   [5] In Grupo Mexicano de Desarrollo S.A. v. Alliance Bond
Fund, Inc., 527 U.S. 308, 323 (1999), the Supreme Court held
that a district court lacks authority to grant a preliminary
injunction under Rule 65 if the party does not have a substan-
tive right to the injunction. There, even where the moving
party creditor ultimately received final judgment and a perma-
nent injunction, the creditor had no substantive right to freeze
the debtor’s assets until the judgment issued. Id. Only with the
actual judgment did the creditor’s substantive right to the
debtor’s assets accrue, “[n]otwithstanding the fusion of law
and equity by the Rules of Civil Procedure . . . .” Id. The
Supreme Court’s analysis in that case helps to illustrate that
“likelihood of success on the merits” does not subsume the
entire preliminary injunction analysis and allow parties to
obtain relief before bearing the burden of proof in their claim.

  [6] Here, Transwestern’s substantive right to condemn the

Kirby Forest, 467 U.S. at 4, n.2; United States v. 93.970 Acres of Land,
360 U.S. 328, 333 (1959). While there is no Supreme Court holding spe-
cifically finding the condemnation provision of the NGA to be superceded
by Rule 71.1, there appears to be no argument for distinguishing the
NGA’s language. Indeed, other courts have already determined that Rule
71.1 did supercede the state procedural provisions of the NGA. See Nat’l
Fuel Gas Supply Corp. v. 138 Acres of Land, 84 F. Supp.2d 405, 415
(W.D.N.Y. 2000); Guardian Pipeline, L.L.C. v. 950.80 Acres of Land, 210
F. Supp.2d 976, 979 (N.D. Ill. 2002) (citing Southern Nat’l Gas Co. v.
Land, Cullman County, 197 F.3d 1368, 1373 (11th Cir. 1999)).
16292 TRANSWESTERN PIPELINE v. 17.19 ACRES OF PROPERTY
affected parcels accrues only through the issuance of an order
of condemnation by the district court. To obtain such an
order, Transwestern must, at minimum, meet the requirements
of § 717f(h), which include showing: “(1) that it holds a
FERC certificate authorizing the relevant project, (2) that the
land to be taken is necessary to the project; and (3) that the
company and the landowners have failed to agree on a price
for the taking . . . . In addition to showing an inability to agree
on a price with the landowner, [Transwestern] must also
establish that it engaged in good faith negotiations with the
landowner.” Nat’l Fuel Gas Supply Corp. v. 138 Acres of
Land, 84 F.Supp.2d 405, 416 (W.D.N.Y. 2000) (citations omit-
ted).8

   [7] Most courts presented with the issue agree that a plain-
tiff gas company must secure an order of condemnation
before taking possession. In Northern Border, the Seventh
Circuit held that the gas company could not obtain a prelimi-
nary injunction without first showing a “substantive claim to
immediate possession.” Norther Border Pipeline Co. v. 86.72
Acres of Land, 144 F.3d 469, 472 (7th Cir. 1998). In East
Tennessee Natural Gas Co. v. Sage, 361 F.3d 808, 825 (4th
Cir. 2004), the Fourth Circuit found that the district court’s
grant of immediate possession was appropriate only where an
order of condemnation had first issued. In construing the
holding of Northern Border, the Sage court agreed that with-
out first accruing its substantive right of possession through
an order of condemnation, the gas company could not invoke
the court’s equitable powers. Id. at 828. Sage also cited
Northern Border Pipeline Co. v. 64.111 Acres of Land, 125
F. Supp.2d 299, 301 (N.D. Ill. 2000) and Guardian Pipeline,
  8
   Before satisfying the requirements to condemn under the NGA, Trans-
western could likely obtain a preliminary injunction which sought only to
maintain the jurisdiction of the court and the status quo of the parties. As
contemplated, such an injunction could prevent the landowners from alter-
ing their land in such a way that would make the property unsuitable for
the gas company’s use or would prohibitively increase the cost of its use.
Transwestern has not sought such relief.
       TRANSWESTERN PIPELINE v. 17.19 ACRES OF PROPERTY 16293
L.L.C. v. 950.80 Acres of Land, 210 F. Supp. 2d 976, 979
(N.D. Ill. 2002), cases interpreting the Seventh Circuit’s
Northern Border decision and which granted possession to
gas companies only following judgments of condemnation.

   Transwestern relies upon Northwest Pipeline, because there
the district court relied heavily on the court’s equitable pow-
ers to grant a preliminary injunction under the NGA. North-
west Pipeline Corp. v. The 20’ x 1,430’ Pipeline Right of
Way, 197 F. Supp. 2d 1241, 1246 (E.D. Wash. 2002). Trans-
western argues that the Northwest Pipeline decision cannot be
reconciled with the district court’s decision in this case. But
its reliance is misplaced. The court in Northwest Pipeline
granted the gas company possession only after first deciding
the gas company’s summary judgment motion, issuing an
order of condemnation, and requiring the gas company to
deposit the estimated fair market value of the condemnation.
Id. Using the court’s equitable powers after issuing an order
of condemnation and ensuring the preliminary injunction
standard is met was proper. The Northwest Pipeline decision
is also consistent with the district court’s actions here, as
Transwestern did not file any summary judgment motion
before seeking immediate possession.

   [8] Given the limited statutory authority afforded by the
NGA, an order of condemnation must be issued before the
substantive right of taking accrues. This approach strikes the
correct balance of requiring the gas company to satisfy all ele-
ments of the statute, but does not require it to wait for the full
determination of just compensation for each parcel before the
district court uses its equitable powers to grant possession.
Rather, once the order is issued, the district court can require
Transwestern to deposit the full estimated amount of the tak-
ing and engage in the standard preliminary injunction analy-
sis, as it did in Northwest Pipeline.

  Requiring an order of condemnation also protects the due
process rights of landowners by affording them the opportu-
16294 TRANSWESTERN PIPELINE v. 17.19 ACRES OF PROPERTY
nity to show that the gas company is exceeding the authoriza-
tion under the Certificate, or that the gas company did not
negotiate in good faith, before losing possession of their prop-
erties. This protection is particularly necessary when, as here,
the landowners have challenged the validity of the FERC cer-
tificate itself in a separate proceeding.9

                            IV.     Conclusion

   [9] We hold that the substantive right to condemn under
§ 717f(h) of the NGA ripens only upon the issuance of an
order of condemnation. At that point, the district court may
use its equitable powers to grant possession to the holder of
a FERC certificate if the gas company is able to meet the stan-
dard for issuing a preliminary injunction.

   AFFIRMED.

  9
    The NGA does not allow landowners to collaterally attack the FERC
certificate in the district court, it only allows enforcement of its provisions.
See Williams Nat’l Gas Co. v. City of Oklahoma City, 890 F.2d 255, 264
(10th Cir. 1989). As noted above, during the pendency of this appeal,
FERC denied the petition for rehearing and the appeals to the D.C. Circuit
have been dismissed.