C.F. Hughes v. UGI Storage Co. ( 2022 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Carl F. Hughes and Ellen B. Hughes, : CONSOLIDATED CASES
h/w, and Bruce D. Hughes and :
Margaret K. Hughes, h/w, individually :
and on behalf of all others similarly :
situated, :
Appellants :
:
v. :
: No. 453 C.D. 2019
UGI Storage Company :
:
:
John Albrecht, individually and on :
behalf of all others similarly situated, :
Appellant :
:
v. :
: No. 454 C.D. 2019
UGI Storage Company : Submitted: September 9, 2022
BEFORE: HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE CHRISTINE FIZZANO CANNON, Judge
HONORABLE STACY WALLACE, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY JUDGE FIZZANO CANNON FILED: November 30, 2022
This case returns to us on remand from the Pennsylvania Supreme
Court. The sole issue presented on remand is whether Appellants, the plaintiffs in
consolidated class actions (Landowners), have waived their right to an evidentiary
hearing on the question of whether Appellee, UGI Storage Company (UGI), has
effected a de facto taking of Landowners’ rights in underground natural gas on their
properties. Concluding that no waiver has occurred, we remand to the Court of
Common Pleas of Tioga County (trial court) to conduct an evidentiary hearing.
I. Background
The extensive factual background of this case is set forth at length in
our Supreme Court’s opinion in Hughes v. UGI Storage Co., 263 A.3d 1144 (Pa.
2021) (Hughes III). Only those facts pertinent to this opinion are reproduced here.
In 2009, UGI filed an application with the Federal Energy Regulatory
Commission (FERC), seeking a certificate of public convenience and necessity to
enable it to acquire and operate certain facilities in the interstate transportation and
sale of natural gas. Hughes III, 263 A.3d at 1145. Relevant here, UGI wished to
acquire and operate underground natural gas storage facilities including a 1,216-acre
facility in Tioga County referred to as the Meeker storage field. Id. UGI also sought
to include within the certificated facilities a 2,980-acre protective zone around the
storage field, referred to as a buffer zone. Id. at 1145-46. Landowners’ properties
lie within the buffer zone. Id. at 1146.
FERC granted UGI’s application to acquire and assume the operation
of the Meeker storage field. Hughes III, 263 A.3d at 1146. However, FERC denied
UGI’s request to certificate a cohesive 2,980-acre buffer zone. Id. FERC granted
certification only for those portions of the buffer zone for which UGI demonstrated
that it had acquired or would be able to acquire necessary property rights. Id. UGI
has not acquired any rights to Landowners’ properties in the buffer zone. Id. at 1148.
The buffer zone surrounding the Meeker storage field remains in a partial, non-intact
form. Id.
2
In November 2015, invoking Section 502(c) of the Eminent Domain
Code,1 26 Pa.C.S. § 502(c), Landowners filed petitions seeking appointment of a
board of viewers to assess damages for an alleged de facto condemnation of their
property by UGI. Hughes III, 263 A.3d at 1148-49. Landowners alleged that UGI’s
application for certification of the buffer zone had effectively prohibited all
hydraulic fracturing activities, known as fracking, on properties within the proposed
buffer zone. Id. at 1149. Landowners averred that, as a result, leasing entities will
not lease oil and gas rights from Landowners or drill for exploitation of such rights
in the buffer zone. Id. at 1149. Consequently, Landowners asserted that they were
deprived of their right to obtain financial benefits from the natural gas lying beneath
their lands, and thus, they suffered a de facto condemnation. Id. at 1150.
UGI filed preliminary objections to Landowners’ de facto taking claim,
arguing that to be liable for a de facto taking, an entity must possess the power of
eminent domain relative to the plaintiffs’ property. Hughes III, 263 A.3d at 1150.
UGI posited that FERC did not prohibit development activity on non-certificated
properties in the buffer zone. Id.
The trial court initially found that a de facto taking had occurred and
appointed a board of viewers to assess damages, but later stayed its orders appointing
boards of viewers, pending resolution of the preliminary objections. Hughes III, 263
A.3d at 1150. Landowners sought discovery, which UGI resisted as unwarranted.
Id.
The trial court scheduled a “hearing/argument/conference” on the
preliminary objections. Hughes III, 263 A.3d at 1151. The ensuing proceeding,
1
The current Eminent Domain Code constitutes a replacement and codification of the
former Eminent Code of 1964. See Act of May 4, 2006, P.L. 112, No. 34, §1, as amended, 26
Pa.C.S. §§101-1106 (repealing and replacing the Act of June 22, 1964, Special Sess., P.L. 84, as
amended, 26 P.S. §§1-101-1-903).
3
conducted in February 2016 (2016 proceeding), was unrecorded. Id. Landowners
contended that the trial court verbally directed them to submit additional materials
on the question of whether there had been a de facto taking, along with supplemental
briefing. Id. They argued that UGI’s preliminary objections should be denied, or
alternatively, that the trial court should conduct an evidentiary hearing to resolve any
disputed factual matters. Id. However, UGI asserted that the unrecorded proceeding
represented the sole and final opportunity for an evidentiary hearing on the question
of whether there had been a de facto taking, and that Landowners, off the record,
had waived their opportunity to present any evidence. Id.
The trial court granted UGI’s preliminary objections and dismissed
Landowners’ petitions. Hughes III, 263 A.3d at 1151. In part, the trial court
observed that Landowners had offered no evidence to support their assertion that oil
and gas production companies would not enter into leases on properties within the
proposed buffer zone; thus, even if UGI had condemnation power, there was nothing
in the record to demonstrate that a de facto taking had occurred. Id. at 1152. Thus,
the trial court’s disposition arguably implied that Landowners’ failure to present
evidence forestalled them from doing so in the future. See id. (observing that the
trial court “appeared to credit” UGI’s argument that the 2016 proceeding
“represented a full, fair, and final opportunity” for Landowners to present evidence).
Landowners appealed to this Court, which remanded for an evidentiary
hearing concerning whether UGI had eminent domain power under Pennsylvania
law. Hughes III, 263 A.3d at 1152. On remand, the trial court conducted a
conference in January 2019 (2019 proceeding), at which both sides agreed that an
evidentiary hearing, as contemplated by this Court in its remand order, was
4
unnecessary to the resolution of the legal question of whether UGI was invested with
a sufficient power of eminent domain. Id. at 1153.
Without resolving the parties’ pending discovery disputes, the trial
court reaffirmed its position that an entity must have a property-specific power of
eminent domain before it can be liable to pay just compensation under the Eminent
Domain Code. Hughes III, 263 A.3d at 1154. Accordingly, the trial court again
sustained UGI’s preliminary objections and dismissed the petitions. Id. (citing
Hughes v. UGI Storage Co. (C.P., Nos. 714-CV-2014 & 854-CV-2015, filed Mar.
25, 2019)). Landowners again appealed; this Court affirmed. Hughes III, 263 A.2d
at 1154 (citing Hughes v. UGI Storage Co., 243 A.3d 278 (Pa. Cmwlth. 2020) (en
banc) (Hughes II)).
Our Supreme Court granted allocatur. Hughes III, 263 A.3d at 1155.
Landowners urged that they should be permitted to make their case regarding a de
facto taking at an evidentiary hearing in the trial court. Id. at 1157-58. Our Supreme
Court held that no specific power of eminent domain was required in order for a de
facto taking to occur. Id. at 1156-57. Rather, “[a] taking occurs when a public entity
substantially deprives a private party of the beneficial use of his property for a public
purpose. . . . Definitionally, the concept of an unconstitutional taking . . . turns on
the fact of the deprivation for public use.” Id. at 1157. The Court explained further
that
where governmental power is delegated to an otherwise
private corporation, that company may assume a quasi-
public status in furtherance of the public interest . . . . And
while the issue hasn’t been put before us in these terms,
and therefore our treatment of it is not binding, we do not
presently discern a constitutional requirement that a quasi-
public entity alleged to have invoked governmental power
to deprive landowners of the use and enjoyment of their
property for a public purpose must be invested with a
5
power of eminent domain in order to be held to account
for a de facto condemnation.
Id. at 1158. Accordingly, the Court vacated this Court’s decision and remanded the
case, concluding, in relevant part, that the matter should be returned to this Court to
address Landowners’ challenge to the trial court’s alternative disposition, which was
implicitly based on Landowners’ purported off-the-record waiver of entitlement to
an evidentiary hearing. Id. at 1158.
II. Discussion
Waiver is “the intentional relinquishment or abandonment of a known
right or privilege.” Trigg v. Children’s Hosp. of Pittsburgh, 299 A.3d 260, 275 (Pa.
2020) (quoting Johnson v. Zerbst, 304 U.S. 458, 464 (1938) (additional quotation
marks omitted)). Waiver “will not be presumed or implied unless by [one party’s]
conduct the opposite party has been misled, to his prejudice, into the honest belief
that such waiver was intended or consented to.” Commonwealth ex rel. Corbett v.
Large, 715 A.2d 1226, 1229 (Pa. Cmwlth. 1998) (citing Brown v. City of Pittsburgh,
186 A.2d 399 (Pa. 1962)).
Here, UGI asserts that Landowners twice waived their right to an
evidentiary hearing on whether a de facto taking occurred. We disagree.
A. The 2016 Trial Court Proceeding
UGI contends that the first waiver occurred when Landowners
appeared for the 2016 “hearing/argument/conference” on UGI’s preliminary
objections, Hughes III, 263 A.3d at 1151, but Landowners chose to present only
argument. See UGI Br. at 8-9 & 12-13. However, UGI concedes that the 2016
proceeding was not transcribed. Id. at 4; see also Hughes III, 263 A.3d at 1151.
6
Consequently, there is nothing in the record documenting what actually occurred.
We cannot consider matters outside the record. Sears, Roebuck & Co. v. Workers’
Comp. Appeal Bd. (Lear), 707 A.2d 618, 620 n.6 (Pa. Cmwlth. 1998) (stating that
“[t]his court may not consider or rely upon a matter dehors the record as the basis
for its decision”); Cnty. of Allegheny v. McCullough, 659 A.2d 40, 45 (Pa. Cmwlth.
1995) (observing that “we continue to adhere to the principle that we will not
consider matters that are outside the record”) (additional citation omitted).
Therefore, we cannot rely on UGI counsel’s representation of what transpired.2
There is insufficient information in the record to indicate that any
waiver occurred, and we will not infer waiver in the absence of a record. Moreover,
UGI does not assert any prejudice arising from its alleged belief that Landowners
waived their right to an evidentiary hearing. See Trigg, 299 A.3d at 275.
Accordingly, we reject UGI’s assertion that a waiver occurred in the 2016
proceeding.
B. The 2019 Trial Court Proceeding
UGI argues that a second waiver occurred at a 2019 hearing, at which
Landowners again offered no evidence and, in addition, affirmatively indicated no
hearing was required. See UGI Br. at 8-9 & 12-13. Contrary to UGI’s
characterization of the discussion at that proceeding, it was not a hearing, and
Landowners did not therein waive their request for an evidentiary hearing on the de
facto taking issue. A review of the transcript of the 2019 proceeding reveals that the
parties and the trial court understood its purpose to be a discussion of the legal issue
2
Similarly, we are not free to consider any representation by Landowners’ counsel
concerning any discussion during argument before our Supreme Court, even though based on
counsel’s “detailed notes.” Landowners Br. at 18 n.4.
7
of UGI’s authority to exercise eminent domain powers. Further, everyone
understood that issue to be a threshold question to be resolved as a conclusion of law
before the potential need for an evidentiary hearing on the de facto taking issue
would arise.
The proceeding, which only counsel attended, began with the trial court
stating the purpose of the proceeding, which was informational and not evidentiary.
The court explained: “The reason I . . . asked you guys to come is to clarify some
things in my . . . own mind and maybe I could start with . . . some very simply [sic]
concepts, okay?” Reproduced Record (R.R.) at 699a. Similarly, at the end of the
discussion, the trial court commented, “I very much appreciate you, you fellas
bringing me up to speed on this and answering my questions and educating me on it
. . . .” R.R. at 728a.
As the discussion proceeded, several interactions occurred that made
clear Landowners were deferring, not waiving, an evidentiary hearing in order to
first resolve the threshold legal question of UGI’s eminent domain power. The
following excerpts confirm the absence of waiver by Landowners and the
recognition by both UGI and the trial court that a future evidentiary hearing might
be needed:
[UGI’S COUNSEL]: [O]ur position, Your Honor,
is that you were correct that the threshold in [sic] question
is whether [UGI] has the power to condemn. If we don’t
have the power to condemn, nothing else matters.
THE COURT: I agree. Do you agree?
[LANDOWNERS’ COUNSEL]: I, I agree in part.
I do want to just, for purposes of preserving our
arguments, make clear that we do have this alternative
argument . . . which is even if [UGI] hasn’t perfected its
eminent domain powers there still was a de facto taking
here, but I do agree and it sounds like we all agree that the
8
main event [sic] is whether [UGI] has eminent domain
power under Pennsylvania Law, specifically the, the
[BCL].
R.R. at 703a-04a (emphasis added).
[LANDOWNERS’ COUNSEL]: . . . [W]e’ve
submitted declarations from, including [Plaintiff Carl F.]
Hughes, that said we initially had some interest in drilling
and then once, once it was determined that this was -- the
property was in a buffer zone, they got cold feet.
....
THE COURT: . . . So, you’re saying that the driller
has determined that they can’t drill?
[LANDOWNERS’ COUNSEL]: They did not
specifically say that, but . . . that was what they told Mr.
Hughes.
[UGI’S COUNSEL]: Your Honor, those, those
were the declarations that were hearsay on hearsay you
might recall that they submitted after the [2016] hearing.
THE COURT: Am I wrong or is this the gravamen
of the whole case? . . . . Whether they’ve lost something.
[UGI’S COUNSEL]: [W]ell, yeah, that is correct.
Because, remember, to have a de facto taking first, you
have to have the power to condemn, second . . . there has
to be some taking. You have to have lost something. And
third, that loss had to be as a result of the action of [UGI]
here. Now, we don’t think they’ve proved any of those,
but what we’re suggesting is we don’t even have to get into
those other two matters because if Your Honor finds that
we didn’t have the power of eminent domain that that’s it.
It doesn’t matter if the other two are there. We don’t think
they are there, we think all of this as we indicated in our
briefs is all the assumptions on the part of [Landowners].
I think [Landowners] were absolutely correct at the first
hearing in front of Your Honor when they said we don’t
have to put on any evidence because frankly, there is none
to put on. And as long as Your Honor finds that we didn’t
9
have the power to condemn, there is no need for any other
hearings.
THE COURT: Okay. Let’s go back to that then.
Do I need a hearing? Do I need a factual hearing as there
is a difference of opinion in the finding -- the proposed
findings of fact alone? Should I go ahead and schedule an
opportunity for [Landowners] to present whatever is it that
they wish to present in support of this through testimony?
[UGI’S COUNSEL]: Sure. Well, Your Honor,
with regard to the ability of [UGI] to have the power to
condemn[,] . . . if [Landowners] can indicate what kind of
testimony would bear on that then I think we might be able
to listen to it, but as far as I can tell, looking at the
undisputed facts, the undisputed fact that FERC didn’t
certificate [UGI], the undisputed fact that we do not have
a Public Utility Commission [(PUC)] Certificate of
Convenience and the undisputed fact that the
Commonwealth Court directed Your Honor to look at
these two cases that I certainly believe indicate
conclusively that without a [PUC] certificate and without
a FERC certificate we don’t have the power to condemn.
Now, I’m not sure what else can be had.
R.R. at 711a-14a (emphasis added).
THE COURT: Mr. Johns, I return to my original
question. And I guess it’s really a question that you have
control over. Do we need any type of evidentiary hearing?
[LANDOWNERS’ COUNSEL]: As to the [BCL]
legal issue? . . . Your Honor, what I would suggest,
respectfully, is I think it would be helpful for the parties to
get guidance from the Court on that issue and then I think
we’ll be in a better position . . . to answer that question. I
think we’re still, essentially on first base here because we
don’t know if the first element of our cause of action is,
from the Court’s perspective, . . . if [UGI] has the power
of eminent domain or not. I would suggest that the Court
give us some guidance on that issue.
THE COURT: Suppose I rule in [UGI’s] favor . . . .
[H]ow does that change the landscape on what you’re
going to do?
10
[LANDOWNERS’ COUNSEL]: Well, I think for
that issue if we were to lose we would . . . take an appeal.
We would take it back up to the Commonwealth Court . . . .
THE COURT: -- [S]o you don’t want an
evidentiary hearing at this point?
[LANDOWNERS’ COUNSEL]: Exactly.
[UGI’S COUNSEL]: And, and I believe, Your
Honor, with, with that you have or will have a [sic]
follow[ed] the mandate from the Commonwealth Court.
You, you will have considered these two cases, you would
have given the opportunity for an evidentiary hearing. I
agree that there is no need for an evidentiary hearing . . .
on this threshold matter of whether we have the power to
condemn . . . .
....
[LANDOWNERS’ COUNSEL]: And, and, Judge,
just to be clear, our position on appeal was it was
premature to have an evidentiary hearing because there
were several and there still are discovery related issues
that were in dispute and I wanted to have them resolved
and get the discovery we need before there is some kind of
a hearing. I think that’s fair and --
THE COURT: -- [O]kay. Is it agreed now that, that
the discovery issues are, are resolved?
[LANDOWNERS’ COUNSEL]: No.
....
[LANDOWNERS’ COUNSEL]: -- [A]nd I think
before we have a hearing on that issue of whether fracking
is prohibited in the buffer zone, we’re going to want
discovery on that. And, again, that’s why I think let’s get
past first base on the [BCL] issue, see where we are . . . .
....
[UGI’S COUNSEL]: Well -- actually, I think we’re
more [or] less on the same wave length here because I, I
don’t disagree . . . . [W]ith regard to the second [and] third
11
criteria for a de facto taking, there may or may not be some
discovery issues that, you know, we can talk about. But I
think we all agree that we’re -- with regard to the initial,
the threshold question as to whether [UGI] has the power
to condemn, as, as [Landowners’ counsel] pointed out, we
don’t need an evidentiary hearing on that . . . .
R.R. at 720a-24a (emphasis added).
In short, it is clear from the 2019 transcript that Landowners were
specifically preserving their right to a future evidentiary hearing. Moreover, both
UGI and the trial court understood that Landowners were not waiving their right to
a hearing, but rather, were seeking to resolve some discovery issues and a threshold
legal issue before proceeding with an evidentiary hearing on whether a de facto
taking occurred. Accordingly, we reject UGI’s assertion of waiver related to the
2019 proceeding.
III. Conclusion
Based on the foregoing discussion, we conclude that Landowners have
not waived their right to an evidentiary hearing on the issue of an alleged de facto
taking by UGI. Accordingly, we remand to the trial court to conduct such a hearing.
__________________________________
CHRISTINE FIZZANO CANNON, Judge
12
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Carl F. Hughes and Ellen B. Hughes, : CONSOLIDATED CASES
h/w, and Bruce D. Hughes and :
Margaret K. Hughes, h/w, individually :
and on behalf of all others similarly :
situated, :
Appellants :
:
v. :
: No. 453 C.D. 2019
UGI Storage Company :
:
:
John Albrecht, individually and on :
behalf of all others similarly situated, :
Appellant :
:
v. :
: No. 454 C.D. 2019
UGI Storage Company :
ORDER
AND NOW, this 30th day of November, 2022, this matter is
REMANDED to the Court of Common Pleas of Tioga County, and that court is
directed to hold an evidentiary hearing on the issue of whether UGI Storage
Company effected a de facto taking of Appellants’ rights in natural gas beneath the
surface of their properties.
Jurisdiction is relinquished.
__________________________________
CHRISTINE FIZZANO CANNON, Judge