Nat'l R.R. Passenger Corp. v. 4.0446 Acres More Or Less of Land & Fixtures

574 F.Supp.3d 304

NATIONAL RAILROAD PASSENGER CORPORATION

v.4.0446 ACRES MORE OR LESS OF LAND AND FIXTURES and PPL Electric Utitlties Corp.

CIVIL ACTION NO. 17-1752

United States District Court, E.D. Pennsylvania.

Filed December 7, 2021

Kandice Kerwin Hull, Dana Windisch Chilson, Sarah Hyser-Staub, McNees Wallace & Nurick LLC, Harrisburg, PA, for National Railroad Passenger Corporation.

Joseph S. D'Amico, Jr., Fitzpatrick Lentz & Bubba, P.C., Allentown, PA, George J. Kroculick, Sean Patrick McConnell, Duane Morris LLP, Philadelphia, PA, for PPL Electric Utilities Corp.

MEMORANDUM

SCHMEHL, District Judge

This is a Complaint for Condemnation and Declaration of Taking brought by National Railroad Passenger Corporation ("Amtrak") pursuant to 49 U.S.C. § 24311. Amtrak seeks to condemn an electric power substation located in Lancaster County, Pennsylvania, known as the Conestoga Substation. Prior to this condemnation, fee title to the Conestoga Substation was owned by defendant PPL Electric Utilities Corp. ("PPL"). As required by 49 U.S.C. § 24311(b)(1), Amtrak filed a declaration of taking (a) stating "the public use for which the interest is taken"; (b) describing the property; (c) stating the interest in the property; (d) "showing the interest taken"; and (e) estimating just compensation for the interest taken. See Decl. of Taking (ECF 4.) Amtrak also deposited $2 million with the Court as an estimate of just compensation.

(Id. ¶ 19.) In a Memorandum and Order dated March 6, 2019, the Court found that Amtrak properly used its eminent domain powers to condemn the Conestoga Substation, leaving the issue of just compensation due to PPL. Presently before the Court is Amtrak's motion for partial summary judgment on the issue of whether the cost of certain construction work in progress ("CWIP") for upgrades on the Conestoga Substation that PPL paid for and procured prior to the condemnation should be included in the amount of just compensation owed to PPL. PPL defines its CWIP as its investment in equipment that was not installed, its engineering and design costs as well as its direct and indirect overhead costs related to the upgrade project.

Amtrak argues that the cost of CWIP should not be included because Amtrak did not condemn PPL's CWIP. For the reasons that follow, the motion for partial summary judgment is denied.

STANDARD OF REVIEW

Summary judgment is appropriate if there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). "A motion for summary judgment will not be defeated by ‘the mere existence’ of some disputed facts, but will be denied when there is a genuine issue of material fact." Am. Eagle Outfitters v. Lyle & Scott Ltd., 584 F.3d 575, 581 (3d Cir. 2009) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). A fact is "material" if proof of its existence or non-existence might affect the outcome of the litigation, and a dispute is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248, 106 S.Ct. 2505.

In undertaking this analysis, the court views the facts in the light most favorable to the non-moving party. "After making all reasonable inferences in the nonmoving party's favor, there is a genuine issue of material fact if a reasonable jury could find for the nonmoving party." Pignataro v. Port Auth. of N.Y. and N.J., 593 F.3d 265, 268 (3d Cir. 2010) (citing Reliance Ins. Co. v. Moessner, 121 F.3d 895, 900 (3d Cir. 1997) ). While the moving party bears the initial burden of showing the absence of a genuine issue of material fact, meeting this obligation shifts the burden to the non-moving party who must "set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 250, 106 S.Ct. 2505.

The parties have stipulated to the following facts ("SOF"):

I. THE PARTIES

1. Amtrak is a corporation that was authorized to be created by the Rail Passenger Service Act of 1970, 49 U.S.C. § 24101 et seq., located at One Massachusetts Avenue, NW, Washington, DC 20001. (ECF 43, ¶ 11).

2. PPL is a Pennsylvania corporation with its principal place of business at 2 North Ninth Street, Allentown, Pennsylvania 18101. (ECF 43, ¶ 2).

3. PPL is a public utility regulated by the Pennsylvania Public Utility Commission ("PUC") under the Pennsylvania Public Utility Code, 66 Pa.C.S. § 101 et seq., and by the Federal Energy Regulatory Commission ("FERC") under the Federal Power Act, 16 U.S.C. § 791a et seq. (ECF 43, ¶ 3).

II. THE SUBJECT PROPERTY

4. Before the filing of this condemnation action, PPL was the owner in fee simple of the land parcel and the improvements thereon at Powerhouse Road, Manor Township, Lancaster County, Pennsylvania, tax parcel 410-11106-0-0000, which was conveyed via the Special Warranty Deed attached to the Complaint as Exhibit A and recorded as Instrument number 6206115 (the "Tax Parcel"). (ECF 43, ¶ 4).

5. The premises acquired by Amtrak is that portion of the Tax Parcel which is approximately 575 feet in width and 380 feet in depth, comprising 4.0446 acres, and which comprises the Conestoga Substation power station (the "Conestoga Substation"). (ECF 43, ¶ 5).

6. The Conestoga Substation is an electrical power substation that is directly connected to the Safe Harbor Hydroelectric Facility ("Safe Harbor") and that receives power at 25 Hertz for Amtrak's use. (ECF, ¶ 6).

7. The Conestoga Substation was built in 1934. (ECF, ¶ 12).

8. Most of the equipment installed at the Conestoga Substation is from the 1930s and quite deteriorated. (ECF 43, ¶ 29).

9. Until the filing of the Declaration of Taking in this matter, PPL, through its predecessors, owned the fee interest in the Conestoga Substation since it was built in 1934. (ECF 43, ¶ 13).

10. Prior to the condemnation, Amtrak was the only PPL customer served by the 25 Hertz power from the Conestoga Substation. (ECF 43, ¶ 14).

11. Amtrak uses the 25 Hertz power from the Conestoga Substation to power the south end of its Northeast Corridor ("NEC") and its Harrisburg Line. (ECF 43, ¶ 15).

12. Prior to this condemnation, Amtrak paid PPL a tariff rate approved by the PUC for the service PPL provides through the Conestoga Substation. (ECF 43, ¶ 25)

III. INTERACTIONS BETWEEN THE PARTIES REGARDING THE SUBSTATION

13. In or around 2011, PPL informed Amtrak that it had begun taking steps to upgrade the deteriorated equipment at the Conestoga Substation, (ECF 43, ¶ 40).

14. Amtrak and PPL agreed that upgrades were necessary. (ECF 43, ¶ 41).

15. From 2011 through 2015, Amtrak paid a monthly customer charge to PPL of $37,100 per month for the service it received from PPL through the Conestoga Substation under a tariff approved by the PUC (the "LPEP Tariff"). (ECF 43, ¶ 35).

16. The LPEP Tariff included the cost to maintain the site, recoupment of the cost of investments PPL made at the site (including the upgrades), return on those investments, taxes PPL paid, and depreciation. (ECF 43, ¶ 37).

17. The LPEP Tariff did not include the purchase of electricity. (ECF 43, ¶ 39).

18. Because Amtrak was the sole rate payer for the Conestoga Substation, Amtrak was responsible for the cost of the upgrades under the LPEP Tariff. (ECF 43, ¶ 43).

19. Between approximately 2011 and 2015, PPL and Amtrak had weekly meetings regarding the scope of the proposed upgrades and options for funding the upgrades. (ECF 43, ¶¶ 44-45).

20. Amtrak and PPL did not come to an agreement on how to fund upgrades to the Conestoga Substation. (ECF 43, ¶ 46).

21. In 2015, PPL initiated rate proceedings before the PUC to adjust Amtrak's monthly customer charge from $37,100 to $252,000 (the "Rate Case"). (ECF 43, ¶ 47).

22. The proposed rate of $252,000 per month would not go into effect until the upgrades were completed and represented a $2.6 million annual increase in Amtrak's operating expenses. (ECF 43, ¶ 48).

23. PPL asserted before the PUC that it required an increased rate based on the capital improvements it proposed at the Conestoga Substation, which at that time PPL projected would cost $18 million. (ECF 43, ¶ 49).

24. The new rate was comprised of the same components as the rate that Amtrak had been paying from 2011 through 2015 (i.e., the cost to maintain the site, recouping cost of investments made at the site, return on those investments, taxes, and depreciation), which would increase as a result of the upgrades. (ECF 43, ¶ 50).

25. Amtrak intervened in the Rate Case and opposed PPL's requested rate increase. (ECF 43, ¶ 51).

26. In September 2015, Amtrak and PPL reached a settlement of the Rate Case on the following basis: a. Amtrak agreed to pay PPL a monthly rate of $126,323.59 until September 1, 2016 or until the parties agreed upon a new rate. (ECF 43, ¶ 52.a). b. That rate consisted of the previous monthly customer charge of $37,100, plus a charge of approximately $89,000 as an advance payment to PPL relating to proposed upgrades. (ECF 43, ¶ 52.b). c. The Settlement Agreement required both parties: [T]o continue to work together to resolve all open issues regarding the upgrade of the Conestoga Substation, including possible alternative resolution regarding the final scope, timing, and costs of the upgrades needed for the Conestoga Substation. Both parties agree to consider all potential solutions, including, but not limited to, direct funding by Amtrak, purchase of the Conestoga Substation by Amtrak, recovery of costs through base rates, and/or transfer of 2 existing Amtrak transformers from the Metuchen Station to the Conestoga Substation. (ECF 43, ¶ 52.c).

27. The Settlement Agreement further provided: If PPL Electric and Amtrak are unable to reach an agreement by September 1, 2016, PPL Electric will undertake all improvements needed for the Conestoga Substation that are in its opinion necessary or proper to provide safe and reliable service to Amtrak, and will make an appropriate

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