Hoffmann v. WBI

What happened to Len Hoffmann and his neighbors?

Len Hoffmann’s family has ranched land in western North Dakota for generations. Their property sits in the heart of North Dakota’s oil and gas region and that’s generally been good for property owners. Len and many of his neighbors have allowed oil companies to build pipelines and other infrastructure on the property.

So, when a natural gas pipeline approached them, they knew what their land was worth. But the pipeline company had the approval of the federal government and the power of eminent domain. It thought that meant they could pay far below fair market value. Len and his neighbors took the company to court to get a fair price. After winning a critical motion, the reached a settlement. However, the appeals court ruled that the ranchers were not entitled to have their attorneys’ fees paid by the pipeline company.

Who will be arguing?

Institute for Justice Deputy Litigation Director Bob McNamara will argue first and give a short rebuttal at the end. An attorney from WBI Energy Transmission, Inc. will split argument time with an attorney from the U.S. Solicitor General’s office.

What is eminent domain?

Eminent domain is the power of government to take property. The U.S. Constitution requires that eminent domain be used for a public purpose and that owners be given just compensation. Many states define just compensation to include what property owners might have to pay in order to go to court and get a fair price for their property. When they win a legal fight over value, the judge may order the company to pay the cost of the condemnation.

What is at stake in Hoffmann v. WBI?

Fighting in court over value isn’t cheap—Len and his neighbors’ attorneys’ fees came to roughly $300,000. If property owners have to pay out of pocket, pipeline companies with eminent domain will be at a significant advantage when it comes to determining value. Other protections for property owners, like special consideration for homestead properties or protections for agricultural land, would also fall by the wayside.

What is the Natural Gas Act?

The Natural Gas Act is a law created by Congress that was amended in 1947 to allow companies building interstate pipelines to use eminent domain to acquire property. Prior to amending the law, not every state permitted pipeline companies to use eminent domain. Congress decided that a federal grant of eminent domain would make it easier to build the infrastructure to transport gas across state lines.

How is state compensation law different from federal?

When the federal government uses eminent domain to take property, the Fifth Amendment says it must provide “just compensation” to the owner. Broadly speaking, the Supreme Court says two things about just compensation: It says that “just compensation” means the property owner should not be left worse off because of the taking, and it says that “just compensation” means giving landowners the fair-market value of the property taken. But, as many states recognize, fair-market value often leaves landowners worse off in practice. A landowner who has to spend $50,000 to obtain compensation for his $200,000 home ends up with less money than his home was worth. Similarly, a homeowner who has lived in his home for 50 years presumably values that home more than the bare market price would suggest. States try to protect property owners in these circumstances in various ways, and the question in this case is whether private companies get to ignore those state-law decisions.

What does it mean that the federal government is “sovereign”?

By default, the federal government does not submit itself to state laws. But WBI isn’t the federal government—it’s a private corporation that ordinarily would have to follow North Dakota law. The lower court held that WBI “steps into the government’s shoes” when it takes property and therefore gets to ignore state law the same way the federal government would. IJ is arguing that’s wrong because courts are supposed to be skeptical of private delegations of eminent domain and read those delegations narrowly. Because the Natural Gas Act says nothing about whether private pipeline companies get the full power of the federal government here, courts should not rush to hand it to them.

What was the Jones case?

In the 1883 case United States v. Jones, the Supreme Court held that the “right of eminent domain” just means the government’s power to take property and doesn’t carry with it any particular standard for determining just compensation. That case matters here because WBI has argued that when the Natural Gas Act gives it “the right of eminent domain,” any reasonable person would understand that “the right of eminent domain” automatically means federal just-compensation rules apply. The Jones decision rejects that argument.

Use H3 Headings with [M] Sizing

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Vivamus porttitor dolor ac neque pulvinar sagittis. Donec sed bibendum risus. Nullam tempor dolor molestie, dignissim mauris quis, porta diam. Etiam ornare sapien quis posuere feugiat.

---

Use H3 Headings with [M] Sizing

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Vivamus porttitor dolor ac neque pulvinar sagittis. Donec sed bibendum risus. Nullam tempor dolor molestie, dignissim mauris quis, porta diam. Etiam ornare sapien quis posuere feugiat.

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Vivamus porttitor dolor ac neque pulvinar sagittis. Donec sed bibendum risus. Nullam tempor dolor molestie, dignissim mauris quis, porta diam. Etiam ornare sapien quis posuere feugiat.