On January 31, 2018, in proceedings to condemn easements for the Mountain Valley Pipeline project, the US District Court for the Western District of Virginia ruled that the pipeline company’s preliminary injunction motions for pretrial possession of the easements would be granted only if it appraised each of the nearly 300 properties at issue.

In a 52-page memorandum opinion, District Judge Elizabeth K. Dillon found that Mountain Valley Pipeline, LLC (MVP) had not presented valuation evidence sufficient to justify granting immediate possession on all but nine of the properties being condemned. During the preliminary injunction hearing, MVP’s real estate appraiser, who had appraised only nine of the parcels at issue, offered valuation “estimates” of the remaining properties based on tax assessment data. Judge Dillon ruled that those estimates, as well another witness’ testimony about the aggregate amount of MVP’s pre-condemnation purchase offers, did not constitute sufficiently reliable evidence of value.[1]

Judge Dillon held that competent valuation evidence of the easements being condemned was necessary not only to establish the security required for a preliminary injunction under Rule 65(c), but also to satisfy a constitutional requirement under the Fifth Amendment that a landowner is assured of “reasonable, certain and adequate provision for obtaining compensation before his occupancy is disturbed.” She explained that, “until MVP can provide a more fulsome basis on which the court can assure that just compensation will be paid, the court cannot allow immediate possession at this time as to nearly all of the properties.” Accordingly, Judge Dillon’s order only “conditionally granted” MVP’s preliminary injunction motions for those lands, holding “physical possession” in abeyance until MVP returns to court with actual appraisals of those parcels. The court did, however, award immediate possession of the easements over the nine parcels for which MVP had obtained appraisals.

The Natural Gas Act (NGA) gives eminent domain power to natural gas companies like MVP that have obtained a Certificate of Public Convenience and Necessity from the Federal Energy Regulatory Commission. But it does not confer statutory “quick take” power allowing immediate possession of condemned lands before final judgment. Nonetheless, the Fourth Circuit and a number of other federal courts have recognized the equitable power to grant the pendente lite remedy of immediate possession through the issuance of a preliminary injunction. Such motions have become customary in FERC-approved interstate pipeline projects so that construction is not delayed until the conclusion of the condemnation proceedings. Indeed, in most cases, obtaining a preliminary injunction granting immediate possession is critical to meeting FERC-ordered project in-service deadlines.

Notably, Judge Dillon’s decision appears to be the first time a district court has cited insufficient valuation evidence as the basis for refusing a pipeline company’s immediate possession motion. “Surprisingly, moreover, and despite a large number of district court cases that grant immediate possession and require the posting of security, the parties have not pointed the court to any case addressing the issue of what constitutes sufficient evidence of land value such that a bond and/or deposit, or multiple thereof, is adequate,” she wrote. And although Judge Dillon held that actual appraisals were required in the MVP case, she noted that “there may be methods of estimating value (other than appraisals) that would suffice for the court to use in setting security.”

The court’s decision also breaks new ground on who bears the burden of proof on the valuation issue in immediate possession motions. Although Judge Dillon observed that “two lines of cases . . . at first blush, seem to suggest that the burden [of proving the value of the easements] should be on the defendant [landowner],” she held that the plaintiff pipeline company bears that burden. “[T]he court concludes that neither line of cases is controlling because a constitutional requirement exists separate and apart from the security requirements of a preliminary injunction,” Judge Dillon explained.

Additionally, the court imposed an unusually large security requirement for the nine parcels on which it granted immediate possession: a cash deposit of “three times the appraised value of each property and a certified surety bond in an amount two times the total appraised value, conditioned on payment of just compensation.” By contrast, courts in other cases have generally required a cash deposit or bond ranging from one to three times the appraised amount of the easements at issue.[2]

[1] Judge Dillon observed that it is unclear whether the Daubert standard for admissibility of expert opinion testimony applies in a preliminary injunction proceeding. She held, however, that even if Daubert, did not apply, the weight of the valuation evidence presented was insufficiently reliable to “set a bond [amount] sufficient to ensure that just compensation will be paid.”

[2] E.g., East Tennessee Natural Gas Co. v. Sage, 361 F.3d 808, 824 (4th Cir. 2004) (affirming adequacy of a cash deposit equal to the condemnor’s appraised value of the easements at issue); Sabal Trail Transmission, LLC v. 7.72 Acres, Case No. 3:16-CV-173-WKW, slip op. at 15 (M.D. Ala. June 20, 2016) (conditioning immediate possession injunction upon the posting of a security bond in the amount of three times the pipeline company’s appraised value of the condemned easements).