Knight v. Enbridge Pipelines, L.L.C., No. 13-3481 (7th Cir. 2014)

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Justia Opinion Summary

In 1952 an Illinois owner granted a pipeline operator an easement for two pipelines across the parcel. The first was built immediately; the second, if built, had to be within 10 feet of the first. The contract says that any pipeline must be “buried to such depth as will not interfere with such cultivation.” In 2012 the operator notified the owner that it planned to build a second pipeline. The owner filed a quiet-title suit, alleging that either the right to build a second line had expired or that another line would violate the farmability condition. The operator replied that 49 U.S.C. 60104(c), preempts enforcement of the farmability condition. The district court dismissed. A second pipeline has been built 50 feet from the first, using eminent domain to obtain the necessary rights, but the owner anticipates construction of a third pipeline. Vacating the judgment, the Seventh Circuit held that no construction is currently planned and the district court acted prematurely. Until details of a third pipeline’ are known, it is not possible to determine what effect it would have on agricultural use. Only if a third pipeline prevents using the land for agriculture would it be necessary (or prudent) to determine whether section 60104(c) establishes a federal right to destroy more of the land’s value than paid for in 1952. The court stated that it had no reason to think that Illinois would call the 1952 contract an option or apply the Rule Against Perpetuities.

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In the United States Court of Appeals For the Seventh Circuit ____________________   No.  13-­ 3481   MICHELLE  KNIGHT  and  JEFFREY  BARTH,   Plaintiffs-­ Appellants,   v.   ENBRIDGE   PIPELINES   (FSP)   L.L.C.   and   CCPS   TRANSPORTATION,   LLC,   Defendants-­ Appellees.   ____________________   Appeal  from  the  United  States  District  Court   for  the  Central  District  of  Illinois.   No.  12-­ 1244    James  E.  Shadid,  Chief  Judge.   ____________________   ARGUED  APRIL  10,  2014    DECIDED  JULY  16,  2014   ____________________   Before   CUDAHY   and   EASTERBROOK,   Circuit   Judges,   and   LAWRENCE,  District  Judge.*   EASTERBROOK,   Circuit   Judge.   In   1952   the   owner   of   some   land   in   Illinois   granted   a   pipeline   operator   an   easement   for   two  pipelines  across  the  parcel.  The  first  was  built  immedi-­ ately;  the  second,  if  built  at  all,  had  to  be  within  10  feet  of  the                                                                                                   *  Of  the  Southern  District  of  Indiana,  sitting  by  designation.   2   No.  13-­ 3481   first.   The   operator   promised   that   the   land   would   remain   farmable.  (The  contract  says  that  any  pipeline  must  be   bur-­ ied   to   such   depth   as   will   not   interfere   with   such   cultiva-­ tion .)   The   current   suit   is   between   successors   to   the   parties   who   made   this   bargain.   We   call   them   the   Owner   (of   the   land)   and   the   Operator   (of   the   pipeline),   using   the   singular   for  simplicity  although  two  parties  are  on  each  side.   In   2012   the   Operator   notified   the   Owner   that   it   planned   to   build   a   second   pipeline.   The   Owner   responded   with   this   quiet-­ title  suit  under  Illinois  law.  It  is  in  federal  court  under   the  diversity  jurisdiction.  The  Owner  asked  the  court  to  de-­ clare  that  the  Operator  has  no  right  to  build  a  second  pipe-­ line either   because   the   right   to   do   so   has   expired   or   be-­ cause   another   pipeline   would   violate   the   farmability   condi-­ tion  of  the  1952  contract.  The  Operator  replied  that  the  right   to  build  a  pipeline  has  no  time  limit  and  that  federal  law,  in   particular   49   U.S.C.   §60104(c),   preempts   enforcement   of   the   farmability  condition.  The  district  court  agreed  with  both  of   these  arguments  and  dismissed  the  suit.   Meanwhile  a  second  pipeline  has  been  built.  It  is  located   not   10   but   50   feet   from   the   first   and   so   could   not   be   con-­ structed   under   the   easement.   The   Operator   used   eminent   domain   to   obtain   the   rights   needed   to   construct   the   second   pipeline.  This  does  not  make  the  controversy  moot,  howev-­ er,  because  the  Owner  anticipates  the  construction  of  a  third   pipeline   that   would   be   within   10   feet   of   the   first.   Once   a   utility   creates   a   transportation   corridor,   more   construction   may  follow.  A  quiet-­ title  suit  is  live  as  long  as  there  is  a  real   contest.  The  Operator  continues  to  assert  a  right  to  build  an-­ other   pipeline   within   10   feet   of   the   first,   the   Owner   denies   that   this   right   exists,   and   the   existence   of   competing   claims   No.  13-­ 3481   3   to  real  estate  means  that  the  controversy  is  real.  The  value  of   the   land   will   rise   if   the   Owner   prevails,   while   the   value   of   the  Operator s  interest  will  rise  if  it  prevails.   But  the  fact  that  no  construction  is  in  prospect  does  mean   that  the  district  court  acted  prematurely  in  resolving  the  Op-­ erator s  defense  under  §60104(c).  The  Owner s  assertion  that   a  third  pipeline  would  be  incompatible  with  farming  the  sur-­ face  is  just  speculation.  Until  the  details  of  a  third  pipeline s   construction   and   operation   are   known,   it   is   not   possible   to   determine   what   effect   it   would   have   on   the   land s   agricul-­ tural  use.  The  Operator  promised  to  leave  the  surface  farma-­ ble.   Failure   to   keep   that   promise   could   be   addressed   under   the   law   of   contract.   Only   if   a   third   pipeline   prevents   using   the   land   for   agriculture   would   it   be   necessary   (or   for   that   matter   prudent)   to   determine   whether   §60104(c)   gives   the   Operator  a  federal  right  to  destroy  more  of  the  land s  value   than  it  paid  for  in  1952 and,  if  it  does,  whether  the  Owner   would  be  entitled  to  just  compensation  for  a  taking.  The  Su-­ preme   Court   summarized   in   Susan   B.   Anthony   List   v.   Driehaus,   No.   13 193   (U.S.   June   16,   2014),   how   close   and   probable   a   loss   must   be   to   create   a   justiciable   controversy.   The  potential  dispute  about  the  effect  of  §60104(c)  on  a  third   pipeline  is  well  short  of  what  the  Court  requires.   What  remains  is  the  Owner s  contention  that  the  Opera-­ tor s  right  to  build  a  new  pipeline  within  10  feet  of  the  first   has   expired.   The   Owner   characterizes   the   right   to   build   an-­ other  pipeline  as  an   option  whose  unlimited  duration  vio-­ lates  the  Rule  Against  Perpetuities.  The  Operator  character-­ izes  the  right  to  build  a  further  pipeline  as  a  part  of  an  ease-­ ment  granted  in  1952.  If  there  is  no  option,  the  Rule  Against   Perpetuities  is  irrelevant.   4   No.  13-­ 3481   What   can   be   said   for   the   Owner s   position   is   that,   if   the   Operator   builds   another   pipeline,   it   must   pay   the   Owner   $68.   That   could   be   characterized   as   an   option s   strike   price,   though  maybe  it  is  just  (slight)  compensation  for  the  incon-­ venience   caused   by   digging   and   filling   in   a   new   trench.   What  can  be  said  for  the  Operator s  position  is  that  the  1952   document which   is   captioned   Right   of   Way ,   the   lan-­ guage  of  easement  rather  than  option declares  that  it  is  ef-­ fective   when   signed   and   hereby   grants   the   Operator s   in-­ terest.   The   specific   language   dealing   with   the   additional   pipeline   provides   that   the   Owner   gives   and   grants   unto   [the   Operator]   the   right   of   way   to   construct   and   operate   a   second  pipe  within  10  feet  of  the  first.  That s  the  language  of   an   immediate   grant,   not   of   an   option   promising   to   grant   something  in  the  future  if  a  condition  is  satisfied.   The   district   court   concluded   that   the   Operator   has   the   better   of   this   exchange.   Our   task   in   diversity   litigation   is   to   predict  how  the  Supreme  Court  of  Illinois  would  answer  the   question.  Contracts  such  as  this  must  be  common.  We  asked   counsel  for  the  Owner  whether  any  Illinois  court,  ever,  had   characterized   a   contract   of   this   kind   as   an   option   subject   to   the   Rule   Against   Perpetuities.   Counsel   answered   no,   and   if  there  is  no  support  for  the  Owner s  position  in  Illinois  case   law  the  game  is  up.  (The  Owner  does  not  rely  on  a  statute  or   any  gloss  such  as  one  of  the  ALI s  Restatements.)   Counsel   asserted   at   oral   argument   that   other   states   have   applied  the  Rule  Against  Perpetuities  to  transactions  similar   to   this   one,   and   he   asked   us   to   predict   that   Illinois   would   agree  if  given  the  chance.  What  a  peculiar  thing  to  say.  The   Owner   could   have   given   the   state   judiciary   that   chance   but   filed  in  federal  court  instead.  We  take  state  law  as  it  is  rather   No.  13-­ 3481   5   than   predicting   novel   developments.   See   Prime   Eagle   Group   Ltd.  v.  Steel  Dynamics,  Inc.,  614  F.3d  375,  379  (7th  Cir.  2010).   And  what  other  states  deem  similar  transactions  to  be  op-­ tions?  The  Owner s  opening  brief  does  not  cite  a  single  case   decided   outside   Illinois.   The   reply   brief   cites   a   few   non-­ Illinois   cases,   but   only   to   distinguish   them,   as   all   tend   to   support   the   Operator s   position.   We   have   not   gone   looking   on  our  own.  An  appellant  must  develop  an  argument  rather   than  depend  on  the  court  of  appeals  to  create  one.   We  have  no  reason  to  think  that  Illinois  would  call  the   1952  contract  an  option  or  apply  the  Rule  Against  Perpetui-­ ties.  The  district  court  therefore  properly  denied  the  Owner s   request   to   quiet   title   in   its   favor.   That   portion   of   the   judg-­ ment  is  affirmed.  The  remainder  of  the  judgment  is  vacated,   and   the   case   is   remanded   with   instructions   to   dismiss   the   farmability   aspect   of   the   case   for   want   of   a   justiciable   con-­ troversy.