The Story of the Fiber-Optics Right-of-Way Litigation
A Fifteen Year Struggle That Continues to This Day
Mr. Vowell filed Buhl v. Sprint, the first fiber-optics right-of-way class action ever filed, in 1988. Ten years later other plaintiffs around the country began filing similar class actions, and now there are more than 80 of them pending against all of the major fiber-optics companies. The original case, which is still going on fifteen years later, started out in the Tennessee Chancery Court in Clinton, Tennessee, and then moved to Knoxville, Tennessee, then to Dandridge, Tennessee, then to Nashville, Tennessee, then to Chicago, Illinois, then to Tucson, Arizona, then to Portland Oregon, and then back to Chicago. Mr. Vowell has participated in multiple hearings in each of these cities. Now the case is on appeal in the United States Court of Appeals for the Seventh Circuit in Chicago, where a decision is expected any day. Mr. Vowell tells the story of the case in this article.
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The story begins with the court-ordered breakup of AT&T in 1984. Before the breakup, AT&T had a nationwide monopoly on long distance telephone service. But with the breakup, the opportunity to provide long distance service was thrown open to other companies. At that time United Telecom, Sprint’s predecessor, was a sleepy local phone company. However, with the break-up, Sprint, as it would soon be called, realized that there was a one-time business opportunity to shoot through a rapidly closing “window of opportunity” to enter the long distance telephone business. It devised a plan to rapidly construct a nationwide fiber-optics network, to be built 100% on railroad rights-of-way. Acquiring railroad right-of-way property was the “critical first step” in the plan. Sprint expressly recognized that delay in obtaining the right-of-way would result in missing the “window of opportunity”.
However, the plan had one major problem – it called for the purchase of the right-of-way from the railroads. And it had been established since the railroads were first built that the railroad’s interest is generally a mere railroad easement – the bare right to operate a railroad and nothing more. All other rights belong to the underlying landowner – the owner of the “fee simple”. The Tennessee Supreme Court recognized this principle in 1890:
“An easement merely gives to a railroad company a right-of-way in the land – that is, the right to use the land for its purposes… The former proprietor of the soil still retains the fee of the land and his right to the land for every purpose not incompatible with the rights of the railroad company.”
The Tennessee Attorney General summarized the situation in a 1984 opinion:
"It is well settled in the state of Tennessee that a grant of a right-of-way to a railroad company is the grant of only an easement for railroad purposes, and the fee interest in the property over and through which that easement passes remains vested in the grantor."
Further, it had been specifically settled by the Tennessee Supreme Court in 1921 that the railroad had no interest whatsoever that it could sell to telegraph companies:
"In other words, a railroad company has no such title to its right-of-way as authorizes it to permit the erection thereupon of a commercial telegraph line, altogether disconnected from railroad operation, for commercial purposes. Therefore, to value a railroad’s right to lease a right-of-way along its right-of-way to a telegraph company for such purposes would be to value something that the railroad company did not have, and which could not possibly be taken from it".
Sprint’s method of acquiring right-of-way was in complete conformity with a 1983 railroad industry study, which recognized the limitations on railroad title, and made specific recommendations for dealing with this problem. The first recommendation was as follows:
"Ignore the problem. The holders of reversionary or underlying rights are adjacent landowners, easy enough to identify through land records but usually not vigilant and perhaps not even conscious of their legal interests…It might be safe to assume that the installation of [the fiber optic cable] would not excite their interest.”
The study then noted that “the pattern of dealing with this problem, thus far, is to accept it as a business risk.”
The Tennessee Cases
The Sprint crews arrived in East Tennessee in the fall of 1987. Danny Buhl found one of the crews in his yard near Clinton, Tennessee. The men said that they worked for “Sprint”, and that they were going to put a “fiber-optics cable” through his yard. When Mr. Buhl questioned the men, they told him, “You can’t stop us. You don’t know what you’re talking about. This is not your property – it belongs to the railroad.” And they kept right on working.
In nearby Knoxville, Tennessee, Joe Meighan had a similar experience. One Saturday morning in the spring of 1988, he was awakened by the sound of bulldozers. He looked out the window and saw one of his trees falling. Besides the bulldozers there was a crew of fifteen men working near the railroad tracks that cross his property. He threw on his clothes, grabbed his carbine, and went outside and asked the men what they were doing. They said they were installing a “fiber-optics cable” for “Sprint”. Joe ordered them off his property, but later relented because the men told him it was not really his property. “This is railroad property,” they said, “and you don’t have the right to stop us.” Mr. Meighan, a former bulldozer operator in the Seabees, admits that he was “buffaloed” by these events.
On October 18, 1988, Mr. Buhl and other representative plaintiffs, who would later be joined by Mr. Meighan, filed a class action lawsuit against Sprint on behalf of all landowners in Tennessee. This marked the beginning of a now 15-year legal battle that continues to this day. The trial court dismissed the case almost immediately, but on appeal, the Tennessee Supreme Court held that Sprint’s action constituted the wrongful taking of property:
"The foregoing authorities require the conclusion that the installation of the telephone cable without the consent of the owners of the fee constituted the taking of an interest in the property for which they are entitled to compensation and such other rights as provided by law."
Buhl v. Sprint , 840 S.W. 2d 904, 913 ( Tenn. 1992)
That decision marked the 4-year point in the litigation.
Action then shifted to the companion case of Meighan v. Sprint in Knox County. On July 9, 1993, the trial court certified the case as a class action, but only for one county. At the same time, the trial court dismissed the plaintiffs’ claims for trespass, but ruled that the plaintiffs were entitled to pursue claims for punitive damages. On appeal, the Court of Appeals ruled against the plaintiffs on all issues: no class action whatsoever, no claims for trespass, and no claims for punitive damages. However, on further appeal, the Tennessee Supreme Court reversed the Court of Appeals on all issues, holding that the case ought to be certified as a class action, that the case was suitable for a state-wide class action, and that the plaintiffs could pursue claims for trespass and punitive damages. [Meighan v. Sprint, 924 S.W.2d 632 ( Tenn. 1996) ] The Tennessee Supreme Court held that the class action was the “far superior method of resolution.” Id., at 638. At the same time, the Tennessee Supreme Court held that the trial court could determine “an aggregate damage amount for the class as a whole” and that “[t]his case is particularly amenable to the aggregate damage approach.” Id.
That decision marked the 7 ½-year point in the litigation.
Immediately after the Tennessee Supreme Court handed down the decision, a group of attorneys from neighboring Cocke County, Tennessee, checked out the Meighan v. Sprint file from the Knox County Courthouse and photo-copied every paper in the file. They then typed a virtually verbatim copy of the Meighan v. Sprint complaint, inserted their own client’s name as plaintiff and filed the complaint in Cocke County. Within sixty seconds the Judge in Cocke County certified the case as a state-wide class action, except for Knox County, thereby, at least for the moment, superseding the case of Buhl/Meighan v. Sprint. The order expressly stated that the class certification was based on the Tennessee Supreme Court’s just-entered order in Meighan v. Sprint.
Mr. Meighan and Mr. Buhl then applied to the Tennessee Supreme Court for a writ of mandamus that would direct the judge in Cocke County to reverse his class certification order. A sympathetic Tennessee Supreme Court noted that it was “clear” that the recently filed case should not be allowed to supercede Buhl/Meighan v. Sprint, and remanded to the trial court for reconsideration. Meighan v. Sprint, 942 S.W. 2d 476, 483 ( Tenn. 1997) . On receiving that direction, the judge in Cocke County vacated his class certification order, and after a 1½ year detour, the case was moving forward again.
That decision marked the 9-year point in the litigation.
In 1997 the trial court certified Buhl/Meighan v. Sprint as a statewide class action for punitive damages, and as a two-county class action for compensatory damages. In 2000, the trial court, now Judge Thomas W. Brothers, sitting in Nashville, expanded class certification for compensatory damages to cover all included counties in Tennessee. At the same time Judge Brothers dismissed claims relating to some segments of the cable, finding that the statute of limitation had run as to those claims. The result of this decision is that the case is now certified as a class action as to all property in Tennessee east of Nashville, a distance of approximately 310 miles in 14 counties.
That decision marked the 12-year point in the litigation.
There have been approximately 45 hearings in the case to date, with 22 depositions taken in Knoxville, Nashville, Kansas City, Boston, Philadelphia, Houston, and Little Rock. One focus of the plaintiffs’ discovery is evidence relating to punitive damages. The key question is whether Sprint intentionally broke the law – whether it was aware that it was taking land that belonged to others. The evidence includes Sprint’s “License Agreement” with the Norfolk Southern Railroad, in which the railroad specifically disclaimed any warranty of title. The License Agreement even included a “money back” provision, which provided that the railroad would give Sprint a full refund in the event Sprint was required to pay a “third party” for the right-of-way. The evidence also includes the deposition of the first attorney hired at Sprint, who admitted that Sprint had a “clear view” that the rights of landowners was a “live issue” and a “somewhat unsettled question.” The evidence also includes the letter from the Tennessee Attorney General, quoted at the beginning of this article, which carefully explains that the railroad’s interest in Tennessee is a mere railroad easement, and that the fee interest remains vested in the landowner. This letter landed at Sprint in 1985, long before Sprint got to Tennessee.
Until interrupted by Chicago proceedings, discussed below, Buhl/Meighan was expected to be tried in September, 2003.
* * * * *
In 1998, ten years after the Sprint build, the “second wave” of fiber-optics installation began. Qwest, the biggest player in the second wave, hired its general counsel straight from Sprint, where he had supervised the Buhl/Meighan litigation. But, like Sprint, Qwest did not ask permission from landowners and did not file condemnation lawsuits to obtain its right-of-way. Instead, it simply made agreements with railroads and proceeded to install its cable, just like Sprint had done. Qwest tried to get the railroads to guarantee their title, but the railroad negotiators made it “vividly clear” that the railroad did not have good title, explaining that the railroad’s title was like “Swiss cheese.” And, in spite of repeated entreaties by Qwest, the railroad negotiators steadfastly refused to guarantee title, even telling the Qwest negotiators “Read my lips” and “N-O.”
The Qwest crews arrived in Tennessee in April of 1998. Things went according to plan until they came to Elmwood Farms, owned by Charles (Bubba) and Joy Hord, near Murfreesboro. They arrived at Elmwood Farm early in the morning with ten trucks and bulldozers and lots of reels of conduit. But, before they had gotten very far, Joy Hord asked them to leave the property.
The men left, but a month later, they were back, unannounced, and this time with a work train and a “rail plow” – a giant plow mounted on a railroad car. Before the day was over they had buried their conduit from one end of Elmwood Farms to the other.
Seven days later, the Hords, represented by Mr. Vowell and Gilreath & Associates, another law firm in Knoxville, filed a class action complaint against Qwest and the CSX Railroad in the Tennessee Circuit Court in Murfreesboro. The Court then issued an injunction shutting down Qwest’s illegal operation in Tennessee. Qwest then had the case removed to Federal District Court in Nashville. The District Court later decided that Qwest had wrongfully removed the case, and remanded the case to the state court in Murfreesboro. However, before the remand, the Federal Court dissolved the injunction, which had the effect of permitting Qwest to finish the installation of its Tennessee cable.
Back in Murfreesboro, after the remand, Chancellor Robert E. Corlew certified the case as a class action on June 13, 2000. Chancellor Corlew later entered an order requiring Qwest to post bond to secure payment to the Tennessee landowners. The plaintiffs filed the affidavit of an MAI real estate appraiser which stated that the value of the property taken from the Tennessee class members was $15-$19 per foot, for a total value of $14,720,000 - $18,400,000 for the entire Tennessee corridor. On Feb. 28, 2003, Chancellor Corlew set the amount of the bond at $5,030,480, or $5.25 per foot. Qwest has now paid the money to the Clerk, and it is safely on deposit, drawing interest for the class members.
Twenty-one depositions have been taken in Murfreesboro, Knoxville, Nashville, Denver, Kansas City, and Jacksonville.
Until interrupted by the Chicago proceedings, discussed below, the case was expected to be tried in February of 2004.
The Chicago Proceedings – Round One
In 1998, ten years after the filing of Buhl/Meighan v. Sprint, and shortly after the filing of Hord v. Qwest, other plaintiffs around the country began filing similar class actions against Sprint, Qwest, MCI-WorldCom, AT&T, Level 3, and Williams Communications, all based on the original cases of Buhl/Meighan v. Sprint and Hord v. Qwest. By the latter part of 2000 the number of these cases had grown to more than 80. However, only three were certified as class actions: Buhl/Meighan v. Sprint and Hord v. Qwest in Tennessee and another case in Kansas. At that point, Sprint, Qwest, and the other defendants could see the handwriting on the wall. They realized that more and more cases were going to be filed and that more and more would be certified as class actions. They also realized that if they didn’t do something, they were going to have a real problem on their hands. Against that background, five of the fiber-optics companies, including Sprint and Qwest, banded together to attempt a nationwide settlement.
Interestingly, the defendants did not call us or any other firm that had a case certified as a class action or that had had any success in the litigation. Instead they called a group called the Smith group. The Smith group had filed several cases, but none were certified as class actions, and they had lost on all three class certification motions that they had argued. Interestingly, their first case had not been filed until the fall of 1998, eleven years after the Sprint installation.
The defendants literally telephoned the Smith group and shot them a deal. The deal included three basic terms. First, the landowners could attempt to claim $.60 per foot (practically nothing). Second, the fiber-optics companies would be granted a permanent easement that would ordinarily be 100 feet wide, at least in Tennessee. (The fiber optics cable is about 2 inches wide.) Third, the Smith counsel would get all the attorney fees for all five companies for the entire country.
The Smith group jumped at the offer, of course, and the settlement was teed up in Chicago. We went to Chicago to contest the attempted settlement as did virtually every other plaintiffs’ group that was involved in the litigation. Judge Andersen noted the extent of opposition to the settlement, and commented, after a few hearings, that he was “disinclined” to approve the settlement in light of the substantial opposition.
The Flight to Oregon
Judge Andersen’s comment spooked the settling parties, and they decided to try their settlement elsewhere. They wrote Judge Andersen a letter telling him that his services would no longer be needed, and they filed the very same settlement agreement in the Federal District Court in Oregon. We went to Oregon, along with the other objectors, and explained that the settling parties were simply shopping around for what they perceived to be a favorable judge, something that is highly frowned upon in our court system. It just took one hearing, and the District Judge in Oregon dismissed the case on grounds of “judge shopping.” Zografos v. Qwest Communications Corp ., 225 F.Supp.2d 1217, 1223 (2002).
The Chicago Proceedings – Round Two
The Oregon dismissal left the settling parties with a simple choice: further embarrass themselves further by trying yet another Federal judge, or to return to Chicago. They eventually made the trip back to Chicago, and teed the settlement up before Judge Andersen once again, with a few minor changes. Unfortunately, in spite of his earlier statement that he would be “disinclined” to approve an offer that “isn’t embraced by a broad range of plaintiffs,” on July 25, 2003, Judge Andersen approved the settlement anyway, in spite of our objections and the objections of virtually every other plaintiff’s group in the country. At the same time, Judge Andersen issued an injunction that purports to enjoin every other fiber-optics right-of-way class action in the country, including Buhl/Meighan v. Sprint and Hord v. Qwest. The settlement, as approved had two basic points: first, the landowners could claim an average of $.60 per foot, which, as mentioned, is practically nothing. Second, the class members would be required to give up a floating easement 100 feet wide. The fiber-optics cable is two inches wide, yet the fiber optics companies would end up with a floating easement 100 feet wide!!
We, along with one other plaintiffs’ group, have appealed Judge Andersen’s decision to the United States Court of Appeals for the Seventh Circuit, which also sits in Chicago. The case was argued on January 20, 2004, and is now under advisement. If you want to listen to the oral argument, which lasted about 30 minutes, click here. You can also listen to the oral argument and review the parties’ briefs on the Seventh Circuit website. The case is called Smith v. Qwest, Docket Number 03-3087. The speakers are not always clearly identified, but they are in this sequence: I am the first to argue. Bill Gotfryd, the attorney for the other appealing objector is second. Emmett Logan, the attorney representing Sprint, is third. Sam Heins, the attorney representing the Smith Group, is fourth and last. Then both myself and Mr. Gotfryd had rebuttal. We anticipate that the Court will announce its decision any day now and of course we expect to be successful.
The problems with the attempted settlement are very simple. The foundation for our argument is the fact that the Smith representatives – “disarmed” because their case was not certified as a class action and horribly handicapped because they delayed eleven years in filing suit – could not possibly serve as adequate representatives of the certified classes in Buhl/Meighan v. Sprint and Hord v. Qwest. The Smith representatives have settled for practically nothing because they were afraid that they could not clear “three difficult hurdles”: 1) getting class certification, 2) establishing liability, and 3) proving damages. However, after fifteen years of litigation and three decisions of the Tennessee Supreme Court, the certified Tennessee classes have already cleared each of these three hurdles. Both cases are certified as class actions, the Tennessee Supreme Court has already ruled that the defendants are liable, and the Tennessee Supreme Court has already approved the use of aggregate damages. Further, the plaintiffs’ proof in Hord v. Qwest is that compensatory damages will be $15-19 per foot, with claims for punitive damages that may multiply that figure by several times. The trial court has required Qwest to post a cash bond of more than $5,000,000, which is safely on deposit with the clerk of court. And trial dates were imminent in both cases. The Smith v. Sprint representatives may be typical representatives of people who waited eleven years to file suit, who aren’t certified as a class action, who are on the wrong side of the three difficult hurdles, who don’t have $5,000,000 in the bank, and who don’t have any prospect of a trial date. But they are not typical of the certified classes in the Tennessee cases and their cases are not superior to the Tennessee cases. The effect of the orders below is to unfairly discriminate against the certified Tennessee classes, dragging them down to the level of people with horribly defective cases. A worse case of conflict of interest between the representative plaintiffs and those represented would be hard to imagine.
The second major problem is the fact that the settlement has the effect of condemning a 100-foot wide floating easement from one end of the country to the other. In Judge Andersen’s own words, it is the grant of “staggering property rights” by “judicial fiat.” Here is how it would work. The Court would send class action notices to everybody. The notice would give them the right to opt-out of the class action. However, if they do not opt out, they would be included in the class and they would be deemed to have conveyed an easement to the fiber optics companies. Of course, many people do not understand class action notices and many do not even read them at all. The result would be that people all over the country would simply wake up one day and learn that Sprint or some other fiber-optics company has acquired a floating easement 100 feet wide from one end of their property to the other! It is surprising that such an argument – that a person might lose his real estate because he did not respond to a class action notice – would be made in modern America. More surprising is the idea that a court would actually approve of such a procedure, but that is exactly what has happened in this case!
Needless to say, we are confident that the Seventh Circuit will reverse the approval of the settlement. If and when that happens, there are several possibilities. It is possible, although unlikely, that the defendants would come back and negotiate a settlement that is fair and reasonable. But more likely, we will simply come home and get our cases ready for trial. We will post the result of the Seventh Circuit’s decision on this website as soon as it happens. If you want to receive email notification developments in the case click here.