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Valenzuela v. Union Pacific Railroad Co.

United States District Court, D. Arizona

February 21, 2017

Alonzo Valenzuela, et al., Plaintiffs,
v.
Union Pacific Railroad Company, et al., Defendants.

          ORDER

          David G. Campbell United States District Judge.

         Plaintiffs filed this case on behalf of a class of persons who own real property adjacent to approximately 505 miles of railroad right-of-way in Arizona, operated by Defendant Union Pacific Railroad Company. Defendants SFPP, L.P. (formerly known as Santa Fe Pacific Pipelines, Inc. and Southern Pacific Pipelines, Inc.); Kinder Morgan Operating L.P. “D”; and Kinder Morgan G.P., Inc. (collectively, “Kinder Morgan”) operate a pipeline under the right-of-way that carries fuel products. For decades, Kinder Morgan has paid rent to Union Pacific for operation of the pipeline. Plaintiffs allege that they are the rightful owners of the subsurface beneath the right-of-way and bring claims for trespass, quiet title, ejectment, inverse condemnation, unjust enrichment, recovery of rents, and an accounting. Doc. 75.

         Plaintiffs move to certify a class and subclass. Doc. 208. The motion is fully briefed, and the Court heard oral argument on February 10, 2017. For reasons stated below, the Court will deny the motion for class certification, but require the parties to provide additional briefing on whether an issue class should be certified under Rule 23(c)(4) of the Federal Rules of Civil Procedure.

         I. Rule 23 Requirements.

         Under Rule 23(a), a district court may certify a class only if (1) it is so numerous that joinder of all members is impractical, (2) there are questions of law or fact common to the class, (3) the claims of the representative parties are typical of the claims of the class, and (4) the representatives will fairly and adequately protect the interests of the class. Fed.R.Civ.P. 23(a)(1)-(4). The Court must also find that one of the requirements of Rule 23(b) has been met.[1] Plaintiffs rely primarily on Rule 23(b)(3), which requires that questions of law or fact common to the class predominate over questions affecting only individual class members, and that a class action be superior to other available methods for resolving the controversy. Fed.R.Civ.P. 23(b)(3). Plaintiffs also contend that the class can be certified under Rule 23(b)(2).

         Plaintiffs bear the burden of showing that the Rule 23 requirements have been met. Connecticutt Ret. Plans & Trust Funds v. Amgen Inc., 660 F.3d 1170, 1175 (9th Cir. 2011). At least four circuits have held that Plaintiffs must carry this burden by a preponderance of the evidence. Reyes v. Netdeposit, LLC, 802 F.3d 469, 484 (3d Cir. 2015); Messner v. Northshore Univ. HealthSystem, 669 F.3d 802, 811 (7th Cir. 2012); Novella v. Westchester Cnty., 661 F.3d 128, 148-49 (2d Cir. 2011); Alaska Elec. Pension Fund v. Flowserve Corp., 572 F.3d 221 (5th Cir. 2009). This standard appears to be the trend in federal courts. Newberg on Class Actions, § 7:21 (2016) (“Newberg”). The Court concludes that Plaintiffs must demonstrate that it is more likely than not that the requirements of Rule 23 have been satisfied. Smilovits v. First Solar, Inc., 295 F.R.D. 423, 427 (D. Ariz. 2013).

         The Court must rigorously analyze the proposed class to ensure it comports with Rule 23. See Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 351 (2011) (“Dukes”). The Court will first address the Rule 23(a) requirements.

         II. Rule 23(a).

         Plaintiffs seek certification of the following class: “all landowners who, from January 1, 1983 to the date of class certification, own or have owned land in fee adjoining and underlying the railroad right-of-way granted under the General Right of Way Act of 1875 under which the pipeline is located within the State of Arizona.” Doc. 208 at 8.[2]Plaintiffs further move to certify a “Current Owner Sub-Class” consisting of “all landowners who, as of the date of class certification, own land in fee adjoining and underlying the railroad right-of-way granted under the General Right of Way Act of 1875 under which the pipeline is located within the State of Arizona.” Id. at 8-9.[3]

         A. Numerosity.

         A proposed class satisfies the numerosity requirement if members are so numerous that joinder would be impractical. Fed.R.Civ.P. 23(a)(1). Courts in this circuit have held that classes of 40 or more members satisfy this requirement. See, e.g., Garrison v. Asotin County, 251 F.R.D. 566, 569 (E.D. Wash. 2008); Wamboldt v. Safety-Kleen Sys., Inc., No. C 07-0884 PJH, 2007 WL 2409200, at *11 (N.D. Cal. Aug. 21, 2007) (courts have found that “numerosity is satisfied if the class comprises 40 or more members”); Jordan v. L.A. County, 669 F.2d 1311, 1319 (9th Cir. 1982), vacated on other grounds, 459 U.S. 810 (1982) (class sizes of 39, 64, and 71 sufficient).

         Plaintiffs rely on maps and other data provided by Defendants to assert that the class includes hundreds of landowners spread across five counties in Arizona. Doc. 208 at 9-10. Union Pacific does not dispute that the numerosity requirement is satisfied. Doc. 242. Kinder Morgan argues that many of the property owners included in the proposed class do not own property under the right-of-way granted in the General Right of Way Act of 1875 (“1875 Act”) and cannot be included in the class, and that Plaintiffs therefore have failed to prove numerosity. Doc. 243 at 27.

         Although it is true that not all 505 miles of railroad right-of-way in Arizona were acquired through the 1875 Act, a review of the railroad's valuation maps, the Kinder Morgan's alignment sheets, and Geographic Information System (“GIS”) data suggests that there are several hundred parcels of property adjacent to portions of the right-of-way acquired through the 1875 Act and containing the pipeline. Doc. 280-32. And although it also is true that many of these adjacent landowners may not own land under the right-of-way, as discussed more fully below, the Court concludes that Plaintiffs have provided enough evidence to show that it is more likely than not that class membership will exceed 40. Numerosity is satisfied.

         B. Commonality.

         Commonality exists if “there are questions of law or fact common to the class.” Fed.R.Civ.P. 23(a)(2). “This does not mean merely that they have all suffered a violation of the same provision of the law[.]” Dukes, 564 U.S. at 350. Rather, “[t]heir claims must depend upon a common contention[.]” Id. “That common contention must be of such a nature that it is capable of class-wide resolution - which means that determination of its truth or falsity will resolve an issue which is central to the validity of the claims in one stroke.” Id.

         Union Pacific does not argue that commonality is lacking. Doc. 242. Kinder Morgan argues that courts routinely find a lack of commonality in right-of-way cases due to significant legal and factual variations inherent in proving the extent of the railroads' rights and the corresponding rights of the putative class members. Doc. 243 at 28.

         Plaintiffs identify several questions they view as common. Doc. 208 at 17-18. From Plaintiffs' list, the Court finds three common issues:

• whether the Railroad lacks sufficient property interests in the subsurface of its right-of-way under the 1875 Act to convey property rights in the subsurface beneath its right-of-way to the Pipeline;
• whether the commercial pipeline underneath the Railroad's right-of-way is a railroad purpose under the 1875 Act;
• whether Defendants knew or had reason to know that the Railroad did not possess a sufficient ownership interest in the subsurface underneath its right-of-way to grant easements or other property rights to the Pipeline;

Id. at 17.[4]

         To satisfy Rule 23(a)(2), Plaintiffs need not show that most issues in the case are common, nor that common issues will predominate in the litigation (a requirement discussed later). The Supreme Court made clear in Dukes that even a single common question will do. 564 U.S. at 359. But mere pleading of a common question is not enough. There must be “significant proof that the question is common and central to the claims of all class members. In this case, Plaintiffs have provided such proof. They have raised serious and substantial questions about whether Union Pacific acquired rights in the subsurface and whether Kinder Morgan's pipeline fulfills a railroad purpose. See Union Pacific Railroad Co. v. Santa Fe Pacific Pipelines, Inc., 231 Cal.App.4th 134 (Cal.Ct.App. 2014). And they have presented evidence that representatives of Defendants raised questions between the 1950s and 1990s about whether the railroad could grant rights in land beneath the right-of-way. Doc. 208 at 11 (quoting Exs. 3-6). Although it is true that factual variations among parcels and class members will arise, as discussed below, the Court finds that the three questions identified above are subject to proof that will apply to all class members. Commonality is satisfied.

         C. Typicality.

         Typicality exists if “the claims or defenses of the representative parties are typical of the claims and defenses of the class.” Fed.R.Civ.P. 23(a)(3). “The test of typicality ‘is whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct.'” Ellis v. Costco Wholesale Corp., 657 F.3d 970, 984 (9th Cir. 2011) (quoting Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992)).

         Plaintiffs argue that named Plaintiffs James Paul Mooney and Lazy Coyote RV Village, LLC satisfy the typicality requirement because they own property adjacent to the railroad right-of-way where the pipeline is located, their claims arise from the same conduct of Defendants, and their claims are based on the same legal theories as the class claims. Doc. 208 at 19. Defendants argue that the named Plaintiffs are not typical for three reasons.

         First, Defendants claim that Plaintiff Mooney has no injury and lacks standing because his property does not include land under the railroad right-of-way. Defendants base this argument on relevant deeds for his property, which state that the boundary of the land runs “to the Westerly right-of-way line of the Southern Pacific Railroad; thence . . . along said Westerly right-of-way line.” Doc. 243 at 26 (emphasis added). Defendants refer to this as “cut-off” language, and assert that it means title to land under the right-of-way was not included in the grant to Mooney. Id.

         Arizona law does not agree. In Cottonwood/Verde Valley Chamber of Commerce, Inc. v. Cottonwood Prof'l Plaza I, 901 P.2d 1151 (Ariz.Ct.App. 1994), the Arizona Court of Appeals confirmed Arizona's adoption of what the parties call “the centerline presumption.” Describing the presumption as “an almost universal rule governing transfers of lands abutting roadways, ” Cottonwood explains the presumption in these terms:

“[I]f land abutting on a public way is conveyed by a description covering only the lot itself, nevertheless, the grantee takes title to the center line of the public way if the grantor owned the underlying fee, unless the contrary intention sufficiently appears from the granting instrument itself, or the circumstances surrounding the conveyance. This rule is one of construction, and applies in the absence at the time of the grant of any indication as to the grantor's intent in dealing with his interest in the public way.”

Id. at 1154 (quoting Torrey v. Pearce, 373 P.2d 9, 12 (Ariz. 1962)).

         Cottonwood specifically rejects Defendants' argument. It holds that a deed conveying property “to” a right-of-way and then “along” the right-of-way actually conveys property to the centerline of the right-of-way. Id. at 1153, 1155. Defendants cite several cases from outside Arizona that reach the opposite conclusion, but the Court concludes that Arizona law should be applied to Mooney's Arizona property. Defendants also argue that Cottonwood concerned a highway right-of-way, not a railroad right-of-way, but the Court sees no material difference between the two. Indeed, as Plaintiffs note, the Arizona Constitution states that a railroad is a public highway. Ariz. Const. art. XV § 10. Because Defendants have presented no evidence of a “contrary intention” from Mooney's “granting instrument” or from “the circumstances surrounding the conveyance, ” Cottonwood, 901 P.2d at 1154, the Court concludes for purposes of this motion that Mooney owns land beneath the railroad easement where the pipeline is located.

         Second, Union Pacific argues that Plaintiff Lazy Coyote has suffered no injury and lacks standing because Union Pacific acquired the parcel under the right-of-way adjoining Lazy Coyote's property in fee in 1915. Union Pacific asserts that deeds from 1919 and 1930 contain language excluding the right-of-way, meaning that Lazy Coyote did not obtain an interest in the land under the right-of-way. Doc. 243 at 26. In support of these assertions, Union Pacific cites the expert report of Bernie Shaner. See Doc. 242-2 at 11. Mr. Shaner explains that he reached these conclusions after searching records in person in the Yuma County clerk's office. Id.

         Plaintiffs respond that Defendants have misread the title history for the Lazy Coyote property - that the 1915 deed was in fact to a different railroad. Plaintiffs argue that Lazy Coyote owns land to the centerline of the railroad right-of-way. In support, Plaintiffs cite the rebuttal report of their expert, John H. Rall. Doc. 247 at 17. With apologies to the reader, the Court quotes the relevant but lengthy language from the Rall opinion because it aptly illustrates the complexity of the title inquiry required for just one parcel of property, a point that will become important later in this order:

i. With regard to the Union Pacific Railroad Company Right-of-Way (“the Right-of-Way”) adjacent to the Lazy Coyote property, the first document that is relevant to the ownership of the fee interest of the Right-of-Way is the Right of Way and Track Map (“the Map”) listed in Schedule B of the Lazy Coyote chain of title. The Map contains numerous indications that the current Right-of-Way adjacent to the property owned by Lazy Coyote was originally established by the Southern Pacific Railroad Company as a railroad purpose easement pursuant to the General Railroad Right of Way Act of March 3, 1875 (“1875 Act”). Most notable among the various indications on the Map, is the statement within the Schedule of Property that identifies segments of the Right-of-Way as granted by the United States Government pursuant to the 1875 Act, and the following statement labeled “Note No 1”: “Map of definite location . . . approved by the Secretary of the Interior December 19, 1879.” The 1875 Act was a grant to railroads of a railroad purpose easement through public lands owned by the United States Government. Accordingly, the Map demonstrates that the United States Government was the fee simple owner of the land portrayed on the Map at the time the Southern Pacific Railroad Company established the Right-of-Way. The relevance of this, with regard to the ownership of the fee simple interest beneath the Right-of-Way, is that for the particular segments of the Right-of-Way established pursuant to the 1875 Act, the fee simple interest remained with the United States Government, while the Southern Pacific Railroad Company obtained an easement for railroad purposes. I have reviewed the Map and the boundaries of the property owned by Lazy Coyote, and I have concluded that the Lazy Coyote property is adjacent to a segment of the Right-of-Way established by the Southern Pacific Railroad Company pursuant to the 1875 Act.
ii. The next document in the Lazy Coyote chain of title that is relevant to the ownership of the fee interest beneath the Right-of-Way is the Patent from the United States of America to the Santa Fe Pacific Railroad Company, dated December 30, 1915, and recorded April 5, 1916 in Book 42 of Deeds, page 354. The Patent shows that as of the date of the Patent, the land conveyed was still among the public lands of the United States Government. Accordingly, the fee simple interest in the Right-of-Way was still in the possession of the United States Government, as of the date of December 30, 1915. I have reviewed the Patent, and it does not contain any indications that the United States sought to retain its ownership of the fee simple interest in the Right-of-Way. I have also considered the effect of the centerline presumption, which, from a railroad's perspective, results in the presumption that a fee simple interest to the centerline of an easement is presumed to be conveyed to the grantee of land adjacent to an easement such as the railroad purpose easement here. Thus, when the United States Government transferred the land to the Santa Fe Pacific Railroad Company, and failed to expressly reserve the fee simple interest in the Right-of-Way, it transferred the fee simple interest in land to Santa Fe Pacific Railroad Company to the centerline of the Southern Pacific Railroad Company railroad purpose easement. As is typical of such conveyances, no grantee in the chain subsequently reserved the fee, or even sought to transfer said land to a 3rd party (other than what is shown in the chain of title), thus indicating that each grantee sought to convey the fee to the land within the railroad right of way to the immediate subsequent grantee. Furthermore, I have reviewed the descriptions of the land conveyed by the Patent, and the land conveyed includes the property now owned by Lazy Coyote, across which the Union Pacific Railroad Company's current railroad purpose easement now runs.
iii. I note that it is irrelevant that a railroad, the Santa Fe Pacific Railroad Company, was the first successor-in-interest to the land underneath another railroad (at the time, Southern Pacific Railroad Company) that is now owned by Lazy Coyote. It is afforded no special treatment simply by virtue of being a railroad company. It was simply like any other landowner.
iv. The next document I reviewed was the Deed from the Santa Fe Pacific Railroad Company to Fen S. Hildreth, dated January 24, 1916, and recorded January 27, 1916 in Book 42 Deeds, page 359. I have reviewed the Hildreth Deed, and it does not contain any indications that the Santa Fe Pacific Railroad Company sought to retain its ownership of the fee simple interest under the Southern Pacific Railroad Company railroad purpose easement. Thus, when the Santa Fe Pacific Railroad Company transferred the land to Fen S. Hildreth, it also transferred the fee simple interest to Hildreth to the centerline under Southern Pacific Railroad Company railroad purpose easement. I have reviewed the descriptions of the land conveyed by the Hildreth Deed, and the land conveyed includes the property now owned by Lazy Coyote and across which the Union Pacific Railroad Company's current railroad purpose easement now runs.
v. I have also examined all of the other instruments included in the Lazy Coyote chain of title. For the same reasons as my conclusions regarding the grant from the United States to the Santa Fe Pacific Railroad Company, and the subsequent grant from that railroad to Hildreth, I conclude that none of the intermediate conveyances in its chain of title indicate that any grantor in the chain expressly reserved land in the railroad purpose easement when conveying the parcel that adjoined the railroad purpose easement, and furthermore there is no conveyance from any grantor in Lazy Coyote's chain of title to a 3rd party relating to the fee underlying the railroad purpose easement (other than the conveyances in its chain of title). Consistent with how railroads would view these conveyances across the rail corridor, I conclude that all grantees in the chain of title obtained the fee simple interest to the centerline of the railroad purpose easement, up to the current day ownership of Lazy Coyote to the centerline of Union Pacific Railroad Company's railroad purpose easement.

         Doc. 242-21 at 6-10.

         In addition to this chain of title dispute about ownership of land under the right-of-way, Defendants argue that the chain of title for Lazy Coyote includes an express easement granted to Kinder Morgan's predecessor “to construct, maintain and operate a pipeline” on the Lazy Coyote property. Doc. 243 at 26. Plaintiffs respond that the easement concerns land outside the railroad right-of-way and is therefore irrelevant. Doc. 247 at 17. In support, Plaintiffs cite a copy of the deed that is largely illegible, without further explanation (id. (citing Doc. 243-10 at 33-34)), and the report of defense expert Lawrence Lacombe (id. (citing Doc. 242-1 at 11)). Lacombe opines, however, that “[a]lthough the easement may not refer specifically to allowing the pipeline in the land underlying the right-of-way, it is recorded, and evidences Hibbard's intent to grant an easement to the Pipeline. . . . Based on the documents I have reviewed, it appears that there is record notice that the Pipeline had a right to install a pipeline on Lazy Coyote's property.” Doc. 242-1 at 11. Defendants have also produced pages from Lazy Coyote's title insurance policy showing a pipeline easement on its property. Doc. 243-14 at 139. Thus, even if the pipeline is not within the railroad right-of-way adjacent to Lazy Coyote's property, there appears to be a question as to whether Lazy Coyote's predecessor granted an easement for the pipeline and whether Lazy Coyote knew of that easement - knowledge that could support affirmative defenses.

         These questions concerning the viability of Lazy Coyote's claim in this case are complex. They have produced sharp disagreements between the experts, and they are unique to Lazy Coyote's property. No other property owned by class members has precisely the same title or easement history. These unique issues suggest that Lazy Coyote does not satisfy the typicality requirement of Rule 23(a)(3). See Ellis, 657 F.3d at 984 (“[t]he named plaintiff did not satisfy Rule 23(a)'s typicality requirement because his ‘unique background and factual situation require[d] him to prepare to meet defenses that [were] not typical of the defenses which may be raised against other members of the proposed class.'”) (quoting Hanon, 976 F.2d at 508).

         Third, Defendants argue that no landowner can be typical in a case like this. Each class member has a different title and easement history, different levels of notice of the pipeline, and different possible defenses. For example, Defendants presented evidence at the hearing that Kinder Morgan posted several signs with warnings about the pipeline next to the Mooney and Lazy Coyote properties. Doc. 258-1 at 6-9. Defendants also present evidence that Kinder Morgan sent written communications to Mooney in 2006, 2012, and 2014 regarding the pipeline (Doc. 243-13 at 74), and had oral communications with a person on the Lazy Coyote property in 2014 and 2015 regarding the pipeline, during which the person said he was aware of the pipeline (Doc. 243-24 at 153). Defendants also note that Mooney and the owners of Lazy Coyote do not live on their property, distinguishing them from some class members and raising questions about the level of their notice that will differ from class members who live on their property.

         Several cases have found typicality lacking in similar cases involving landowners adjacent to a railroad right-of-way. See, e.g., Sustainable Forest, L.L.C. v. Qwest Commc'ns Int'l, Inc., No. CV 0:01-2935-CMC, 2005 WL 8146267, at *8 (D.S.C. Nov. 28, 2005) (in railroad right-of-way case, “the necessary differences between the proof of the various class members' claims so overwhelm the ‘common' issues as to make it unlikely that any individual or group of individuals could have claims ‘typical' of the class”); Kirkman v. N. Carolina R. Co., 220 F.R.D. 49, 52-53 (M.D. N.C. 2004) (“The problem with Mr. Kirkman's position on commonality and typicality is that the Defendants' right to lay cable on a railroad right-of-way is only part of the equation. Other issues involved in this case include the nature of the Defendants' property interest in each of the disputed rights-of-way, the property interest of each potential class member in the right-of-way at the time of the alleged trespass, and the possibility of statute of limitations defenses for some class members. . . . By its nature as a property dispute, this inquiry is necessarily an individual one.”); Nudell v. Burlington N. & Santa Fe Ry. Co., No. A3-01-41, 2002 WL 1543725, at *5 (D.N.D. July 11, 2002) (“The case would require resolution of several property-related issues: the extent of the railroad's interest in the land at issue; the extent of each property owner's interest; whether the defendant's activities regarding laying of fiber optic cable exceeded the scope of the railroad's interest vis-a-vis that of the class members; whether any legal defenses exist to bar the claim of each class member, such as consent, acquiescence, or the statute of limitations; and, finally, assuming the claims are legitimate and proven, whether and how much damages are due. The Court concludes that these decisions turn on so many individual questions that the claims of the named ...


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