NANETTE K. LAUGHREY, District Judge.
This class action is brought on behalf of several thousand Missouri landowners for claims arising out of Defendants' use of electric transmission line easements for commercial telecommunications instead of the generation and sale of electricity.
It is undisputed that Sho-Me Power Electric Cooperative and KAMO Electric Cooperative (Electric Cooperative Defendants) created Sho-Me Technologies and K-Powernet, respectively, to operate commercial telecommunication companies. The Electric Cooperative Defendants did this because Missouri law does not permit electric cooperatives to operate commercial telecommunication companies. The Electric Cooperative Defendants then leased to Sho-Me Tech and K-Powernet excess space on fiber optic cables that had been laid on the Electric Cooperative's respective electric transmission easements. Sho-Me Tech and K-Powernet then used their space to transmit commercial telecommunications, returning the profits from their enterprise to their electric cooperative parent.
The Plaintiffs argue that this use of the Defendants' easements for the generation of commercial telecommunications, instead of electricity, exceeds the scope of the easements which were granted to the Defendants and this deprived the Plaintiffs and the class of a valuable property right — the right to benefit from the use of their land as an information highway.
Pending before the Court are: (1) the KAMO Defendants' Motion for Summary Judgment Against Plaintiff Chase Barfield [Doc. 229]; (2) the Sho-Me Defendants' Renewed and Restated Motion for Summary
Dwight Robertson owns property in Miller County, Missouri. His properties are subject to easements in favor of Sho-Me Power Corporation. These easements, titled "Transmission Line Easements," state that Sho-Me Power Corporation and its successors and assigns are granted the right to enter the property and to
Michael and Gina Biffle own land in Oregon County, Missouri. The property is subject to a "Transmission Line Easement" in favor of Howell Oregon Electric Cooperative, which was subsequently assigned to Sho-Me Power. The easement contains similar language to the Robertson easement and states that the grantee has the right to enter the property and to
Plaintiffs have grouped the more than 6,000 easements at issue in this case into three broad categories, each of which are further divided into subparts based on differences in the language in the easements. The easement language in the various categories is described in more detail below where necessary to resolve the pending motions. See infra Part IV.A.2.
Sho-Me Power Corporation was incorporated in 1947 as a public utility under the General and Business Corporation Law of Missouri, Chapter 351 RSMo. In 1993, the Missouri Public Service Commission granted Sho-Me Power Corporation's application to convert to a rural electric cooperative governed by the Rural Electric Cooperative Act, Chapter 394 RSMo. Its name was then changed to Sho-Me Power Electric Cooperative.
For many years, Sho-Me Power used either microwave radios or power line carriers to communicate with its unmanned power substations. In 1995, the Federal Communications Commission ordered the sale of the radio frequencies previously assigned to utility microwave radios so that the frequencies could be sold to cellular telephone providers. Sho-Me Power then converted to fiber optic cables for its electric transmission system, constructing a sixty-fiber, 550-mile communications system through the easements it had on Plaintiffs' land.
The fiber optic communication system was developed to have far more capacity than Sho-Me Power needed to meet its current, internal communication needs. Sho-Me Power sought to use this excess capacity for the operation of a commercial telecommunications network. However, as a rural electric cooperative governed by Chapter 394 RSMo., Sho-Me Power can only supply electric energy; it is not authorized to provide commercial telecommunications services. Consequently, Sho-Me Power formed Sho-Me Technologies, LLC as a wholly owned subsidiary. Sho-Me Tech serves as the telecommunications provider and uses Sho-Me Power's electric
Shortly after the implementation of the Telecommunications Act of 1996, Sho-Me Power assigned to Sho-Me Tech the right to use or sell any excess capacity on Sho-Me Power's fiber optic network. The same fiber optic cable is used for Sho-Me Power's internal electric communication needs and marketed by Sho-Me Tech for commercial telecommunications. The Sho-Me Defendants have entered into some 5,000 contracts with various entities for commercial-telecommunications services on the fiber optic network.
As of December 31, 2012, the Sho-Me Defendants had installed approximately 1,094 miles of fiber optic cable across more than 4,300 parcels of private property burdened by easements acquired by Sho-Me Power. Sho-Me Tech owns no independent easement rights; it only uses Sho-Me Power's easements.
KAMO Electric Cooperative, Inc. is a rural electric cooperative formed in April 1941 under Oklahoma law.
Plaintiffs filed their original lawsuit against the Sho-Me Defendants in state court on January 21, 2010. Plaintiffs filed the current lawsuit, which included the addition of the KAMO Defendants, on November 29, 2011, and dismissed the state court lawsuit on the same day. Based on Missouri's five-year statute of limitations on trespass claims, § 516.120 RSMo., the Sho-Me Defendants seek partial summary judgment against Plaintiffs for any recovery sought for the period prior to January 21, 2005 (five years before Plaintiffs filed their state court petition against the Sho-Me Defendants). [Doc. 298]. After Sho-Me filed their motion, Plaintiffs filed a consent motion to amend their complaint by interlineation, limiting their claims to those that commenced not later than five years prior to the filing of this action against the KAMO Defendants and the
The Sho-Me Defendants also propose modifying the class definition because suit was filed against the Defendants on different dates, January 21, 2005 as to the Sho-Me Defendants and November 29, 2006 as to the KAMO Defendants. [Doc. 337, at p. 1]. However, there is no confusion over the certified class's scope because recovery is limited by Plaintiffs' Complaint, which, as amended, specifically limits the recovery time period. Further, Sho-Me's defendant-specific definitions fail to take into account that some class members have claims against both sets of Defendants, where, for instance, one electric cooperative defendant leased fiber optic capacity to the subsidiary of the other electric cooperative defendant and vice-versa. See infra Part III. The class will therefore remain defined as
The Court has previously determined that Defendants were not conducting their commercial telecommunications business as a joint venture. [Doc. 187, at p. 13]. Because no joint venture existed, the Court granted the KAMO Defendants' motion for summary judgment as to claims by Robertson and the Biffles because they only owned land burdened by Sho-Me transmission lines. Likewise, the Court granted the Sho-Me Defendants' motion for summary judgment as to claims by Barfield because Barfield only owned land burdened by KAMO transmission lines. Id. The Sho-Me Defendants now seek summary judgment against all class members whose land is burdened only by a KAMO transmission line. With three exceptions, Plaintiffs do not object to the Sho-Me Defendants' motion. [Doc. 317, at p. 52].
The first exception is a 20-mile stretch of KAMO transmission lines where fiber optic cable was installed by Sho-Me Tech instead of KAMO pursuant to a license agreement. The Sho-Me Defendants do not dispute that former and current owners of this land should be excluded from their motion and have excluded them from the motion. [Doc. 297, at p. 2-3]. Class members whose land is burdened by this 20-mile stretch of KAMO transmission lines may still have a claim against the Sho-Me Defendants if the easements burdening their land do no permit use for commercial telecommunications purposes.
The second exception is a 2.5 mile stretch of KAMO right-of-way where Sho-Me Tech uses KAMO's fiber optic cables. The Sho-Me Defendants acknowledge that Sho-Me Tech uses this stretch of cable, but argue that "KAMO owns the cable, not [Sho-Me] Tech" and Sho-Me "Tech is in the process of abandoning this very short segment of KAMO fiber." [Doc. 297, at p. 3 n. 1]. Sho-Me Tech's use of this stretch of cable resulted from a verbal agreement between Sho-Me and KAMO where Sho-Me's
The third exception is an agreement between Sho-Me and KAMO under which Sho-Me Tech acquired strands of dark fiber on approximately 200 miles of KAMO's fiber optic cables and resold that dark fiber to the University of Missouri so it could connect its campuses. [Doc. 317, at p. 53; Doc. 331, at p. 4-5 n. 3]. Sho-Me Tech acknowledges that it "acquired at least two strands of dark fiber from" several access providers, including 200 miles of KAMO dark fiber, but contends that since it resold the dark fiber to the University of Missouri, it neither owns nor uses the cable. Sho-Me argues that nothing in Plaintiffs' complaint or in the class certification order suggests a non-owner or non-user can be liable to Plaintiffs.
Regardless of whether KAMO or Sho-Me owns the cable, Sho-Me Tech still uses, used, or resold the cable for commercial telecommunications purposes and gained the right to do so from KAMO Electric. Plaintiffs' theory of liability is that the Electric Cooperative Defendants licensed rights they did not have to their subsidiaries and as a result, their subsidiaries' use of plaintiffs' land for commercial telecommunications purposes is unauthorized and therefore, trespass. "[T]he owner of an easement may permit some use of its right of way . . . [but] it may not create a right in excess of the title held by it, nor her [sic] a right which as against the owner of the servient estate is an additional burden or servitude upon the fee simple title." Eureka Real Estate & Inv. Co. v. S. Real Estate & Fin. Co., 355 Mo. 1199, 200 S.W.2d 328, 332 (1947); Ogg v. Mediacom, LLC, 142 S.W.3d 801, 808 (Mo.Ct.App. 2004) (remarking that a licensing agreement between an easement holder and a licensee could, at most, lawfully confer on the licensee only the rights held by the easement holder). Further, Sho-Me Tech's plan to withdraw from the 2.5 mile stretch of land does not shield it from liability for use dating back to January 21, 2005. Therefore, the Sho-Me Defendants' motion for summary judgment against all class members whose land is burdened only by a KAMO transmission line, [Doc. 297], is GRANTED except for class members who own land in the three stretches of land described above. Sho-Me Tech may still be liable for trespass and unjust enrichment if the easements burdening those stretches of land do not permit use or lease for commercial telecommunications purposes.
The Parties have filed cross-motions for summary judgment on the issue of Defendants'
Plaintiffs claim Sho-Me Power and KAMO Electric exceeded the scope of the easements granted to them when they leased fiber optic capacity to Sho-Me Tech and K-PowerNet to be used for commercial telecommunications. Plaintiffs further claim Sho-Me Tech and K-PowerNet trespassed by selling fiber optic capacity because though they were licensed to do so by their parent companies, their parent companies were not authorized to license the easements for commercial telecommunications purposes in the first place.
Under Missouri law, trespass occurs either by unauthorized entry on land or by exceeding the scope of any license to enter upon the land. Illig v. Union Elec. Co., 652 F.3d 971, 977 (8th Cir.2011) (citing Ogg, 142 S.W.3d 801, 809 (Mo.Ct.App. 2004)). "[I]f the user of an easement exceeds his or her usage rights in either manner or extent, the user becomes a trespasser to the extent of the unauthorized use." Ogg, 142 S.W.3d at 809 (involving prescriptive easements); Reinbott v. Tidwell, 191 S.W.3d 102, 109 (Mo.Ct. App.2006) (same); Branson West, Inc. v. City of Branson, 980 S.W.2d 604, 606 (Mo. Ct.App.1998) (involving an express easement).
Branson West, 980 S.W.2d at 606 (quoting 25 Am.Jur.2d Easements and Licenses § 81 (1996)). "An easement is not the complete ownership of land with the right to use it for all lawful purposes perpetually and throughout its entire extent, but, instead, is a right that extends only to one or more particular uses." Maasen v. Shaw, 133 S.W.3d 514, 518-19 (Mo.Ct.App.2004).
"An easement granted in general terms without any limitations as to its use, is one of unlimited reasonable use." Branson West, 980 S.W.2d at 606 (emphasis in original). The appropriate standard then is whether the operation of a commercial telecommunications network is reasonable and necessary to Sho-Me Power's and KAMO Electric's authorized use of their easements. See id. at 607 (citing Pogue v. KAMO Electric Cooperative, Inc., 795 S.W.2d 566 (Mo.App. S.D.1990)). Whether an additional use is reasonable and necessary depends on "whether the additional use represents only a change in the degree of use, or whether it represents a change in the quality of the use. If the change is
Defendants insist no trespass has occurred and cite to the Eighth Circuit's decision in Int'l Paper Co. v. MCI World-Com Inc., 442 F.3d 633 (8th Cir.2006). The Eighth Circuit held that under Arkansas law, transmission of light signals across fiber optic strands for a particular purpose cannot constitute a trespass because Arkansas law requires a trespass to involve interference with a plaintiff's possession. However, as the Court has already stated in its Order denying Defendants' Motion to Dismiss, case law such as Ogg and Cape Girardeau, combined with § 523.283.1 RSMo., show that Missouri law is different in this respect from Arkansas law and that Missouri courts recognize claims based on violations of the manner and extent of usage rights provided by an easement regardless of whether or not those violations include actual physical injury. [Doc. 81, at 19]. These significant differences in Missouri and Arkansas trespass case law make International Paper inapplicable to this case, and the Court declines to further revisit this issue.
If the easement is used in a different manner or to an extent that the easement does not contemplate and the different use is not reasonable or necessary to the enjoyment of the easement, then the use exceeds the authorization granted by the easement and constitutes trespass. This determination requires an analysis of the easement language categories as discussed in more detail below. The Court must also determine whether leasing excess fiber for a commercial telecommunications network is reasonable and necessary or instead, exceeds the authorized use. However, before turning to those issues, the Court will address the Defendants' argument that no trespass has occurred because Plaintiffs have no legal right to control the electromagnetic spectrum.
Defendants argue Plaintiffs cannot succeed on a trespass claim because they do not have a legal right to exclusive possession of the electromagnetic spectrum. [Docs. 293, 295, & 304]. Defendants contend that since Plaintiffs do not challenge installation of the fiber optic cable, they are challenging use of those cables, which "consists of transmissions of invisible, infrared light pulses" that are part of the electromagnetic spectrum. [Doc. 304, at 15-16]. Defendants cite to Alltel Commc'ns, LLC v. Oglala Sioux Tribe, 2011 WL 796409, at *6 (D.S.D.2011), for the proposition that "the electromagnetic spectrum, like the air, is owned by no one."
Alltel is distinguishable from this case. In Alltel, the Oglala Sioux Tribe claimed "it, and it alone, [was] the owner of the electromagnetic spectrum . . . which exists over the Pine Ridge Indian Reservation." Id. at *1. The Tribe sought declaratory and injunctive relief, asking the court to prohibit Alltel from selling or assigning any licensing of the spectrum by the Federal Communications Commission (FCC) to any other party. The tribe claimed that as part of the Fort Laramie Treaty, it was granted "absolute and undisturbed use and occupation" of the land. Id. In concluding that the Tribe did not own the electromagnetic spectrum over its land, the South Dakota district court determined use of the electromagnetic spectrum was free and that the spectrum itself, like "air or light above land," belonged to no one. Id. at *3.
Plaintiffs are not claiming ownership of or the exclusive right to the electromagnetic spectrum. Rather, they are challenging whether Defendants can use fiber optic cables physically installed in their land to transmit those wavelengths. Although use of the spectrum may be free, use of the conduit in Plaintiffs' land is not. Outside that conduit, movement of light would not achieve Defendants' telecommunication purpose. To hold that use of the fiber cables can be limited only by the FCC would lead to the conclusion that the FCC could license use of Defendants' cables for free — a result Defendants would surely dispute.
The interpretation of an easement, like any contract, is a question of law. Erwin v. City of Palmyra, 119 S.W.3d 582, 584 (Mo.Ct.App.2003). When interpreting an easement, the primary rule is to ascertain the intention of the grantor from the four corners of the instrument, giving effect, if possible, to every part of it. McAlister v. Pritchard, 287 Mo. 494, 230 S.W. 66, 67 (1921). "Any doubt concerning as easement's scope should be resolved in favor of the servient owner's free and untrammeled use of the land." Maasen v. Shaw, 133 S.W.3d 514, 519 (Mo.Ct.App. 2004).
Plaintiffs have categorized the nearly 6,500 express easements and condemnation orders in this case into categories and subcategories based on their granting language. The Court hereby incorporates Plaintiffs' categorization and description of the purpose language of the easements, [Doc. 317-4, at pp. 9-17]
Category General Description Number of Easements 1A Easements for electric transmission line only or for Total: 2,302 electric transmission line with unspecified appurtenances KAMO: 330 Sho-Me: 1,9721B Easements for electric transmission lines and Total: 721 appurtenances which include specific references to KAMO: 68 communications equipment Sho-Me: 6531C Court orders condemning easements limited to electric Total: 71 transmission lines and generic appurtenances or KAMO: 49 specifying related communications equipment Sho-Me: 221D Easements for electric transmission lines that purport to Total: 3,021 permit a license to another for communications purposes KAMO: 3,021 Sho-Me: 01E Hybrids: easements with individual deletions of some but Total: 51 not all references to communications; easements with KAMO: 49 individual additions that limit the scope; or easements Sho-Me: 2 with a title inconsistent with rest of the easement2A Easements for electric transmission lines that include an Total: 310 independent communications purpose KAMO: 167 Sho-Me: 143
2B Court orders condemning easements "for electrical power Total: 2 utility and communication purposes . . . including KAMO: 2 communication equipment as well a communication Sho-Me: 1 systems that may be required for, but not limited to the commercial transmission of communications"3 Standalone communications easements where grantee is Total: 13 Electric-Cooperative Defendant (not KAMO: 5 Telecommunications-Subsidiary Defendant) or where it is Sho-Me: 8 unclear whether a prior electric-transmission easement burdened the same property
The express easements classified within Categories 1A and 1B and the court ordered condemnation easements classified within Category 1C do not expressly authorize use and lease of fiber optic cable for commercial telecommunications purposes.
There are several variations of language in the Category 1A easements, but the variations do not materially affect the issues relevant to the dispute. For example, the Biffles' and Robertson's easements are Category 1A easements. These easements grant the holder the right to construct, maintain, and operate "an electric transmission and distribution line or system," or "an electric transmission line and all appurtenances thereto," or "lines for transmission of electric energy, and all appurtenances," or "an electric transmission and/or distribution line or system . . . [and] such additional transmission and/or distribution facilities as may, from time to time, be necessary or desirable." [Doc. 317-4, at p. 9-10]. Some also permit the holder to do "anything necessary or useful to the enjoyment of the easement herein granted." But none of the Category 1A easements includes language that confers rights on the easement holder to engage in commercial telecommunications services. They do not mention communications, telephones, or fiber optic cables.
Therefore, all Category 1A easements include rights limited to installation and maintenance of electric transmission lines and "appurtenances thereto." Under Missouri law, an appurtenance has been defined as "a thing used with, and related to or dependent upon, another thing more worthy, and agreeing in its nature and quality with the thing whereunto it is appendant or appurtenant," Snoddy v. Bolen, 122 Mo. 479, 24 S.W. 142, 144 (1893), or "an appendage; that which belongs to something else." Jackman v. St. Louis & H.R. Co., 304 Mo. 319, 263 S.W. 230, 231 (1924). Thus, inclusion of "appurtenance" in the language of Category 1A easements does not permit the easement holder to construct and use fiber optic cables for any purpose. Rather, the cables may only be used as an "accessory" or "appendage" to the electric transmission lines the easement holders are authorized to construct and operate. Likewise, inclusion of the phrase "anything necessary or useful to the enjoyment of the easement herein granted" does not give the easement holder carte blanche use of the easement. Use is limited to what is necessary and useful for operation of the electric transmission lines.
Sho-Me Power argues that the commercial telecommunications business is useful to the enjoyment of its easement because the profit from Sho-Me Tech's commercial sales offsets the cost of electrical service that members receive. Applying Sho-Me's
Because commercial telecommunications use is outside the scope of the rights granted by the Category 1A easements, Defendants' use of those easements for commercial telecommunications purposes is unauthorized and constitutes a trespass under Missouri law. The Biffles, Robertson, and those class members included in the 1A easement category have therefore shown as a matter of law that their easement holder has exceeded the scope of the easement.
The result for Category 1B and Category 1C easements is the same. Category 1B easements are also typically titled "Transmission Line Easement." Although these easements grant the right to install and use some communications equipment, they permit such equipment only insofar as it is "appurtenant" to, "necessary in connection," or "related" with the transmission of electricity. [Doc. 317-4, at p. 11-12]. Equipment such as signal lines, wires, etc., in the easements are limited by the preceding word "appurtenant," and by the phrase "necessary in connection therewith" that follows the list. Inclusion of "communication and other wires" is limited by the preceding "necessary" and by the phrase "in connection therewith" that follows the list. Common forms of the easements in Category 1B include the right to
or the right to
or to
Similar to the "anything necessary and useful" language in the Category 1A easements, the phrase "the right of ingress and egress to, from, and over said lands for doing anything necessary or useful to the enjoyment of the easement herein granted" does not give the easement holder unlimited discretion. Rather, the holder of Category 1B easements has rights necessary to the operation and maintenance of electric transmission lines and nothing more. See McDonald v. Miss. Power Co., 732 So.2d 893, 897 (Miss.1999) (holding that easement language permitting the construction of "electric lines and all telegraph and telephone lines, towers, poles, wires, and appliances and equipment necessary or convenient in connection therewith" permitted use in connection with providing electrical services but did not permit lease of cable space to third parties for uses other than providing electricity, even if the lease "would not constitute an
Category 1C includes condemned easements in favor of either Sho-Me Power or KAMO Electric. The condemnation orders in this category contain "purpose" language similar to that found in the Category 1A easements, such as the right "to construct . . . operate and maintain a certain electric transmission line . . . and such other appurtenances, as may be necessary, convenient or proper for the purpose of supplying electric energy. . . ." For the same reasons that Category 1A easements do not permit use for commercial telecommunications purposes, the Category 1C easements do not either. While the installation of Defendants' fiber optic cables for internal communications purposes was necessary in connection with the continued and evolving needs of their electric transmission systems, the sale externally of the excess capacity of the cables for unrelated, third-party communications was never necessary for the continued operation of their electric transmission systems.
Defendants rely on Henley v. Continental Cablevision of St. Louis County, Inc., 692 S.W.2d 825 (Mo.Ct.App. 1985), for the argument that using fiber optic cable for their electric transmission systems and for commercial telecommunications purposes is a permissible additional use of fiber optic cable. In Henley, a phone company and electric company held easements across a subdivision granting them the right to construct and maintain electric, telephone, and telegraphic wires. Id. at 827. Both companies granted licenses to a cable company, which placed equipment on the existing easements for the purpose of providing cable television. Id. The plaintiffs sought to enjoin the cable company's use of the easements. Id. The Missouri court found in favor of the cable company, stating
Id. at 828. The Court further remarked
Id. at 829.
Where the easements in Categories 1A-C differ from the easements in Henley is that the Category 1A-C easements do not permit use for communications purposes outside of what is necessary for the transmission of electric energy. The Court in Henley found that cable television was the transmission of visual and audio communication, which is consistent with the grantors' original intention of permitting use of the easements for telephone purposes — another form of communication. See, e.g., Salvaty v. Falcon Cable Television, 165 Cal.App.3d 798, 212 Cal.Rptr. 31, 34-35 (1985) ("Although the cable television industry did not exist at the time the easement was granted, it is part of the natural evolution of communications technology. Installation of the equipment was consistent with the primary goal of the easement, to provide for wire transmission of power and communication."). But unlike in Henley, the Category 1A-C easements do not convey the right to use the property for the purpose of transmitting communications, and using the easements for commercial telecommunications purposes is not merely a more technologically advanced method of delivering electricity. Category 1A and 1C easements make no mention of communications or telephones. While the Category 1B easements do mention telephone or communication lines, they are specifically limited to what is necessary for the operation of the permitted electric transmission lines; a comparison of 1B easements to 1D easements demonstrates the important difference.
Easements within Categories 1A-C therefore do not authorize use and lease of fiber optic cable for commercial telecommunications. Nonetheless, Defendants argue that use of the easements for commercial telecommunications purposes is not trespass because Plaintiffs consented to use of their land for a commercial telecommunications network. Therefore, the Court turns to the issue of consent.
In their Motion for Summary Judgment against the Biffles, the Sho-Me Defendants argue that even if the Biffle easement does not authorize use of the fiber optic cables for commercial telecommunications purposes, Mr. Biffle nonetheless consented to that use. [Doc. 239]. The Sho-Me Defendants argue that because Mr. Biffle approached Sho-Me's crew as they were installing fiber optic cable and because Mr. Biffle thought the installation was "peculiar" but did not oppose installation of the cable, Mr. Biffle consented to use of the fiber optic cable for commercial telecommunication uses or otherwise did not care for what purposes the cable was used. However, the record demonstrates Sho-Me's crew only revealed they were installing fiber optic cable, not how the cable would be used. The record does not support a finding that Mr. Biffle understood that the cables would be used both for internal communications purposes—use permitted by the easement across his land — and external, commercial communication purposes. Therefore, he could not have consented to what he did not know.
The Sho-Me Defendants rely on two cases—Muir v. Ruder, 945 S.W.2d 33 (Mo. Ct.App.1997), and Sinopole v. Morris, 743 S.W.2d 81
As a matter of law, the Biffles' easements do not authorize use of the fiber optic cables burdening their land for commercial telecommunications purposes, and Mr. Biffle did not consent to use of his land for that purpose. Therefore, Sho-Me Power, as the holder of the easements, could not license rights to use the cables for commercial telecommunications purposes to Sho-Me Tech. Accordingly, Sho-Me Tech's use of the fiber optic cable across the Biffles' land for commercial telecommunications purposes exceeds the authorized scope of the easement and is therefore, trespass.
The Sho-Me Defendants argue that even if Plaintiffs—including Robertson— have claims against Sho-Me, summary judgment is still appropriate against "every class member who had knowledge that [Sho-Me] Tech was marketing and selling excess fiber optic capacity, and never objected" because those class members thereby consented to the trespass. [Doc. 299, at p. 1]. The Sho-Me Defendants argue they began an "extensive publicity campaign" to publicize that Sho-Me Tech was marketing and selling excess fiber optic capacity on Sho-Me Power's transmission system and that "there are undoubtedly class members who were aware [Sho-Me] Tech was marketing and selling excess fiber optic capacity." Id. at p. 6.
When a landowner is aware that another is using and maintaining his property and never objects to the other's conduct, the landowner's consent to such use is implied, and the consent continues until revoked. Grossman v. St. John, 323 S.W.3d 831, 834 (Mo.Ct.App.2010). Implied consent requires both awareness of use and failure to object to that use. With the exception of one document—an Order from the Missouri Public Service Commission—Sho-Me submitted the same publicity documents
The evidence submitted by Sho-Me is insufficient to demonstrate that a reasonably prudent person would be aware that the fiber optic cable burdening his or her land was being used for an impermissible purpose. Even assuming that various magazine and newspaper articles and member reports were widespread enough to create an inference that Plaintiffs had access to the articles and actually read them, the content within the articles themselves would not lead a reasonably prudent person to believe trespass was occurring on his or her land. For instance, a February 2000 magazine article states, "There will be more installation of fiber optic cable on our system, allowing additional automated control of substation switching equipment. . . . The fiber installation will also allow opportunities for additional services to be taken to members." [Doc. 199-10, at p. 2]. In a speech to cooperative members, it was stated that Sho-Me Power would complete a fiber route that will provide fiber optic connections in various service areas. Id. Other examples state that "High-speed fiber optic technology now connects a large portion of our service territory. . . ." or that "fiber optic access contracts continue to increase income for Sho-Me Power Cooperative. . . ." [Doc. 199-12, at p. 2]. This evidence does not mention Sho-Me Power's easements in connection with the fiber optic projects and only a few of the examples mention specific commercial telecommunication sales.
While the Order from the Missouri Public Service Commission outlines Sho-Me Power's and Sho-Me Tech's relationship and operation more clearly than Sho-Me's other evidence, the Order does not state or explain that the fiber optic cables were installed on Sho-Me Power's electric transmission easements. However, even if it did, the likelihood of a reasonably prudent person regularly reading orders published by the Missouri Public Service Commission is even less than the likelihood that a reasonably prudent person would deduce from a newsletter that the Sho-Me Defendants were using their land in an unauthorized way.
The Sho-Me Defendants primarily rely on Grossman v. St. John, 323 S.W.3d 831, 834 (Mo.Ct.App.2010), for the proposition that implied consent occurs when a property owner does not object to unauthorized use and that the consent continues until revoked. Grossman is distinguishable from this case. In Grossman, the property owner watched his neighbors clear debris from his land, lay sod, construct concrete benches and lights, and plant bushes. The landowner testified that he did not say anything to his neighbors because "it wasn't bothering" him. Id. The Missouri Court of Appeals held that the landowner impliedly consented to his neighbor's use when he did not object. The plaintiff in Grossman knew unauthorized use occurred; Plaintiffs in this case did not. Plaintiffs' consent to the installation of fiber optic cable for internal communications purposes is not consent to its use for commercial telecommunications purposes.
Because the Category 1A-C easements across Robertson's and the applicable class members' land do not authorize use for commercial telecommunications purposes, the Electric Cooperative Defendants, as holders of the easements, could not license rights to their subsidiaries that the Electric Cooperative Defendants did not have. Accordingly, the subsidiary Defendants' use of the cable across Robertson's and the Category 1A-C class members' land for commercial telecommunications purposes exceeds the authorized scope of the easement and is therefore, trespass.
The express easements classified within Categories 1D, 2A, and 3 and the court ordered condemnation easements classified within Category 2B expressly authorize the holder of the easements to install and use fiber optic cable for internal or commercial telecommunications purposes and to license that right to third parties.
All of the easements in Category 1D are KAMO Electric easements. The Barfield easement is an example of a Category 1D easement. The two most common KAMO Electric easements in this category are titled either "Transmission Line Right-of-Way Easement" or "Transmission Line Easement" and provide the right to
or to
[Doc. 317-4, at p. 13]. The Category 1D easements are very similar to the Category 1B easements with one significant difference. While both 1B and 1D easements contain communication language qualified by limiting language such as "appurtenant" and "necessary in connection therewith," the 1D easements contain additional language permitting the holder to license joint use of the constructed lines for electrification or telephone/communication purposes. Further, the language permitting the easement holder to license use for telephone purposes to "any other person, association or corporation" suggests that "telephone purposes" does not have to be related to the holder's internal electric transmission business since "any other person" or corporation would not be concerned with the holder's internal communication system. Use of the Category 1D easements for commercial telecommunications purposes is a reasonable use that is
Category 2A easements permit the grantee to use Plaintiffs' land for both power and communication purposes. Common examples of Category 2A easements include
and
[Doc. 317-4, at p. 14-15]. Unlike the easements in Categories 1B and 1C, the language of the easements in Category 2A do not restrict the holder to use "necessary," "appurtenant," or "related" to electric transmissions. The easements that do not expressly say "commercial" nonetheless contemplate broad authority for the construction and operation of a communications system without restriction as to what kind of communication system it is. A holder of an easement granted in general terms without any limitation has unlimited, reasonable use of that easement. Use of these easements for commercial telecommunications is a reasonable use.
Similarly, Category 3 easements contain no restriction on the uses for the communication systems over Plaintiffs' land. Unlike the rest of the easements in the case, these easements do not grant rights to operate and maintain electric-transmission lines or other electric equipment. Rather, they are easements that purport to convey only communications rights. Category 3 easements allow one of the following: (1) construction of "underground communication systems . . . consisting of cables and wires"; (2) making use of the easement "for communication purposes including . . . install[ing] . . . a communication line and equipment"; (3) "under ground [sic] fiber optic cables" and the licensing of the same for "telephone or telecommunication purposes"; (4) an "underground facilities system consisting of such communication and other broadband service cables . . . as may be required"; and (5) use of the easement for "fiber optic communication purposes." Id. at 16.
Category 2B contains easements obtained through condemnation proceedings. These easements are "for electrical power utility and communication purposes," and
Plaintiffs argue that regardless of whether the easement language expressly permits use for commercial telecommunications purposes, Sho-Me Power and KAMO Electric, as rural electric cooperatives governed by Chapter 394 of the Missouri Revised Statutes, are limited to acquiring, using, and leasing easements "for the purpose of delivering electricity to the communities they were created to serve and nothing more." [Doc. 245-1, at p. 21]. Plaintiffs argue that if the easements cannot be read in a manner consistent with the limited powers granted by Chapter 394, then any provisions that purport to grant interests in conflict with Chapter 394 are illegal and cannot be enforced.
A rural electric cooperative "may be organized under [Chapter 394] for the purpose of supplying electric energy and promoting and extending the use thereof in rural areas." Mo.Rev.Stat. § 394.030. Section § 394.080 RSMo. outlines a rural electric cooperative's powers.
Under Missouri law,
Marshall v. Knights of the Maccabees of the World, 270 S.W. 418, 419 (Mo.Ct.App. 1925). An agreement is illegal if it "is predicated on the violation of the laws and regulations, which have as their purpose the protection of the safety and health of the public." Déjà Vu of Missouri, Inc. v. Talayna's Laclede's Landing, Inc., 34 S.W.3d 245, 249 (Mo.Ct.App.2000); see also Rice v. James, 844 S.W.2d 64, 69 (Mo.Ct.App.1992); King v. Moorehead, 495 S.W.2d 65, 77 (Mo.Ct.App.1973) ("The general rule is that any act forbidden by a legislative enactment, if passed for the protection of the public and which provides for a penalty, cannot be the foundation of a valid contract."). "Because [courts] value the freedom to contract so highly, [courts] will not find that a contract contravenes a statute unless the language of the implicated statute is clear and unambiguous that the legislature intended that the courts not be available for either party to enforce a bargain made in violation thereof." State Farm Mut. Auto. Ins. Co. v. D'Angelo, 875 N.E.2d 789, 798 (Ind.Ct.App.2007).
Plaintiffs primarily rely on the Supreme Court of Missouri's decision in Farmers' Elec. Co-op., Inc. v. Missouri Dept. of Corrections, 977 S.W.2d 266 (Mo.1998), for the proposition that "a contract that purports to confer rights which exceed an electric cooperative's statutory powers is illegal." [Doc. 245-1, at p. 29]. In Farmers', an electric cooperative signed a contract with a correctional facility to serve as the sole provider of electric energy to that facility, which was located outside the city limits. While the twenty-year contract was still in place, the correctional facility was annexed into the city limits. A new facility was built in addition to the existing structures and the city provided the electric energy to that facility rather than the electric cooperative. The cooperative sued the facility alleging breach of contract and the facility filed a counterclaim requesting that the court find the original contract between the parties illegal and void pursuant to §§ 386.800.2 and 394.315.1(2) RSMo. Farmers', 977 S.W.2d at 268. The cooperative argued that pursuant to § 394.080, it had the authority to provide service to structures it was serving before the land was annexed into the city limits. However, the Supreme Court of Missouri cited to § 394.315.1(2), which contained "plain language" that "a rural cooperative may not serve `new structures' on a particular tract of land merely because it was serving an existing structure on that tract of land." Id. at 270. The Missouri Supreme Court, quoting Union Elec. Co. v. Platte-Clay Elec. Co-op., Inc., 814 S.W.2d 643, 647
There is no "plain and clear" language prohibiting Sho-Me and KAMO from having a commercial telephone easement. While they have no authority to operate a telephone company, directly or indirectly (an ultra vires act), there is no statute that directly states that that activity is prohibited (an illegal act). In contrast, the statute in Farmers' expressly stated that new structures could not be serviced by a rural electric cooperative merely because the cooperative was previously providing electricity to that property. It is a modest distinction but provides a clear line between illegal and ultra vires acts.
Even so, courts have still refused to enforce agreements that are otherwise contrary to the declared public policy of the state. Nonetheless, "courts will not go out of their way to discover an illegality in a contract, and they proceed with great caution when determining whether the contract must be voided due to public policy issues." Frishman v. Maginn, 75 Mass.App.Ct. 103, 912 N.E.2d 468, 478 (2009). The Supreme Court of Indiana lists five factors to be considered in determining whether a contract not prohibited by statute or clearly tending to injure the public, but nevertheless alleged to contravene public policy, should be enforced: "(i) the nature of the subject matter of the contract; (ii) the strength of the public policy underlying the statute; (iii) the likelihood that refusal to enforce the bargain or term will further that policy; (iv) how serious or deserved would be the forfeiture suffered by the party attempting to enforce the bargain; and (v) the parties' relative bargaining power and freedom to contract". Fresh Cut, Inc. v. Fazli, 650 N.E.2d 1126, 1130 (Ind.1995) (internal citations omitted).
Further, Chapter 394 is not the type of law or regulation which has as its purpose the protection of the safety and health of the public. See King v. Moorehead, 495 S.W.2d 65, 77 (Mo.Ct.App.1973) (identifying housing code as a regulation which promotes "order, safety, health, morals, and general welfare"); Déjà Vu of Missouri, Inc. v. Talayna's Laclede's Landing, Inc., 34 S.W.3d 245, 250 (Mo.Ct.App. 2000) ("These liquor laws and regulations have as their purpose the protection of the safety and health of the public."); Rice v. James, 844 S.W.2d 64, 69 (Mo.Ct.App. 1992) (ordinance allowing only licensed contractors to obtain permit "obviously has as its purpose the protection of the safety
Id. at 202. The Supreme Court of Missouri further remarked that while the plaintiffs could bring a lawsuit for the purpose of determining whether the devises were void,
Id. at 202-03.
Though it is questionable whether Sho-Me Power and KAMO Electric have the authority under Chapter 394 RSMo. to secure easements with language allowing use of the Plaintiffs land for external, commercial telecommunications purposes or to license their wholly-owned subsidiaries to use and sell excess fiber optic capacity for commercial purposes, the easements themselves are not illegal.
Because trespass occurs only when an easement holder exceeds the scope of its usage rights, no trespass has occurred where the easements expressly allow Sho-Me Power or KAMO Electric to use and lease Plaintiffs' land for commercial telecommunications purposes. It follows, then, that Sho-Me Tech's and K-PowerNet's lease of the excess fiber optic capacity for commercial purposes is also not a trespass where the right to use the easements is derived from the license agreements with their parent companies. See Eureka Real Estate & Inv. Co. v. S. Real Estate & Fin. Co., 355 Mo. 1199, 200 S.W.2d 328, 332 (1947).
Plaintiffs argue that even if the easements permit use for commercial telecommunications purposes and are not illegal, Sho-Me Power's and KAMO Electric's easements are not exclusive and thus not apportionable to their subsidiaries. In other words, Plaintiffs argue Sho-Me Power and KAMO Electric cannot license any of their easement rights to Sho-Me Tech
Category 1E easements are classified by Plaintiffs as "hybrid" easements because they contain individual deletions of some but not all references to communications, include individual additions that limit the scope of the holder's use, or contain a title inconsistent with rest of the easement. Plaintiffs contend that "[i]f for any reason the Court does not grant summary judgment in Plaintiffs' favor with respect to the Category 1E easements, then the 51 easements in this category will need to be individually reviewed because they all contain handwritten edits that further' limit the rights KAMO has under the easement." [Doc. 245-1, at p. 36]. The KAMO Defendants, [Doc. 304, at p. 50], and the Sho-Me Defendants, [Doc. 335, at p. 21], agree individual analysis is required and summary judgment is not appropriate.
Because the Court has found that Plaintiffs have no standing to challenge the ultra vires acts of the Defendants and because of the individualized language in the Category 1E easements, summary judgment cannot be granted in anyone's favor at this time. The Court will leave for another day whether Category 1E easements can be organized into subcategories making summary judgment possible, or whether decertification is the appropriate remedy.
Plaintiffs argue in support of their motion for summary judgment and in opposition to Defendants' motions for summary judgment that if Defendants have committed trespass by exceeding the scope of their easements, then Defendants have unjustly enriched themselves at the Plaintiffs' expense, and eligible Plaintiffs are entitled to equitable restitution. [Doc. 245-1, at p. 39]; [Doc. 317, at p. 48]. "Plaintiffs seek restitution under their unjust enrichment claim in the alternative to receiving damages under their trespass claim." [Doc. 317, at p. 48 n. 50].
Plaintiffs argue Defendants were enriched when they appropriated commercial telecommunications easement rights over Plaintiffs' land, which have a recognized commercial value, and then used those appropriated rights to sell commercial telecommunications services. Defendants argue summary judgment against Plaintiffs' unjust enrichment claim is appropriate because "Missouri law has rejected unjust enrichment as a remedy for a trespass," [Doc. 293, at p. 3; Doc. 304, at p. 51], and there is no implied agreement on the part of a trespasser to pay for the use and occupation of land. [Doc. 295, at p. 44].
Unjust enrichment occurs when a person retains and enjoys a benefit conferred on that person without paying the benefit's reasonable value. Archway Kitchen & Bath, Inc. v. Lands Dev. Corp., 838 S.W.2d 13, 14 (Mo.Ct.App.1992). The elements of unjust enrichment are (1) the defendant was enriched by the receipt of a benefit; (2) the enrichment was at the
Because the Category 1D, 2A, 2B, and 3 easements permit use for commercial telecommunications purposes, it is not unjust to allow Defendants to retain the benefits of those easements. Further, a plaintiff cannot recover under an unjust enrichment theory when the plaintiff has entered into an express contract for the very subject matter for which he seeks recovery. Howard v. Turnbull, 316 S.W.3d 431, 436 (Mo.Ct.App.2010). The issue, then, is whether Plaintiffs may recover under an unjust enrichment theory for Defendants' unauthorized use of the Category 1A-C easements.
First, the Court must determine if under Missouri law, a party may recover under an unjust enrichment theory rather than under a trespass claim. Case law in Missouri is sparse. However, case law throughout the United States suggests a plaintiff may recover under an unjust enrichment theory if the plaintiff proves the defendant has wrongfully secured a benefit by exceeding the scope of an easement. See Drawhorn v. Qwest Commc'ns Int'l, Inc., 121 F.Supp.2d 554, 563 (E.D.Tex. 2000) (The plaintiffs sued for trespass and unjust enrichment, claiming easements owned by a railroad did not permit a fiber optic telecommunications network to install a fiber optic network. Deciding only whether the case should be removed to federal court, the Texas court held that "in order to succeed on their claim for unjust enrichment, the plaintiffs must demonstrate that [the defendant] wrongfully secured a benefit by installing its fiber optic cables on the easements it has acquired from the railroad companies," an analysis which would require an inquiry into federal railroad statutes.); see also In re AT & T Fiber Optic Cable Installation Litig., 2001 WL 1397295, at *12 (S.D.Ind.2001). For instance, in Melton v. Carolina Power & Light, 2012 WL 2401635, at *3 (D.S.C. 2012), the United States District Court for the District of South Carolina, held that "when an easement holder's actions exceed the authority granted by that easement, or center around a point not covered by the express easement, a cause of action for unjust enrichment may be available." In Melton, the plaintiff sued a power company alleging that the company exceeded the scope of the easements it had over her property when the company allowed telecommunication companies, for a fee, to use the fiber optic cable installed in its easements for general telecommunications. Id. at *1. The plaintiff asserted claims for unjust enrichment, trespass, injunction, and declaratory judgment. The defendant filed a motion for partial summary judgment arguing that the plaintiff's unjust enrichment claim failed as a matter of law because an express contract governed the rights of the parties. The South Carolina district court disagreed:
Id. at *2 (internal citations omitted). Cases finding no liability for unjust enrichment claims paired with trespass claims have denied liability not on the basis that a plaintiff cannot recover under both trespass and unjust enrichment, but because the plaintiff did not provide evidence that
A finding that Plaintiffs in this case may recover the amount gained by the Defendants for their trespass under a theory of unjust enrichment is also supported by the Restatement (Third) of Restitution and Unjust Enrichment. Section 40, subsection c, states:
Illustration 2 of section 40, subsection c, is instructive.
Id. at 237-38. The Virginia court held that while the plaintiff could not prove damage to his land, he was entitled to the
Defendants cite to Young v. Home Tel. Co., 201 S.W. 635 (Mo.Ct.App.1918), in support of their argument that Missouri has rejected unjust enrichment as a remedy for a trespass. In Young, a telephone company installed poles on the plaintiffs' land without obtaining the right to do so through eminent domain or other agreement. Id. at 636. The plaintiffs sent the telephone company a letter indicating the company did not have permission to have its poles on their land and stated the company would be charged a fee per pole per month going forward if the company kept its poles on their land. The plaintiffs alleged the company agreed to the terms of the letter by remaining silent and were therefore liable for the fee per pole. Id. Plaintiffs brought an action for recovery of damages under the theory of trespass and implied contract. The Missouri Court of Appeals determined based on technical pleading rules that plaintiffs had not sufficiently pleaded trespass because the complaint "makes no allegations as to damages except on the basis of a monthly sum fixed and agreed upon." Id. The Missouri court further determined plaintiffs could not recover under an implied contract theory for use and occupation of land because "no agreement, express or implied, to pay rent" existed between the parties and plaintiffs could not create a contract by the defendants' silence. Id. The Missouri court remarked that
Id. at 637. The court distinguished an action in trespass from an action for implied contract:
Id. (quoting Edmonson v. Kite, 43 Mo. 176 (Mo.1869)) (emphasis in original).
Young is factually distinguishable from this case in an important way. Plaintiffs in Young sought compensation for use of the land itself under a theory of implied contract for use and occupancy. The plaintiffs did not seek damages for benefits conferred to the defendants by their allegedly unlawful use of plaintiffs land in conjunction with their telephone company.
Young stands for the principle that under Missouri law, a party cannot be made a tenant without his consent, even if he occupies land without authorization. Id. at 637. But Defendants may at any time cease using the land burdened by Category 1A-C easements for commercial telecommunications purposes if they do not wish to renegotiate the scope of their easements with plaintiffs, and nothing in this Court's Order suggests a new, renegotiated agreement has otherwise been impliedly created.
Having found that Plaintiffs may, under Missouri law, recover damages under a theory of unjust enrichment, the Court must next determine whether Plaintiffs whose land is burdened by Category 1A-C easements are entitled to summary judgment on their unjust enrichment claims. By leasing their easement rights to their wholly-owned subsidiaries, and by selling excess fiber optic capacity for commercial telecommunications purposes, there is no genuine issue of material fact as to whether the Defendants have retained a benefit. The subsidiary Defendants do not dispute that they profit as a result of the sale of excess fiber optic capacity for commercial purposes and the Electric Cooperative Defendants do not dispute that as a result of the commercial telecommunications enterprise and their agreement with the subsidiaries, that their operation costs are substantially less than if the commercial telecommunications business did not exist. See [Doc. 295-1, at p. 14-15, ¶ 10-13] (Sho-Me); [Doc. 304, at p. 11]. There is also no genuine issue of material fact as to whether Defendants' enrichment was at the expense of the Plaintiffs. Defendants used Plaintiffs' land for their commercial telecommunications business and had no authority to do so. It would be unjust for the Defendants to retain this benefit. Accordingly, Plaintiffs whose land is burdened by Category 1A-C easements are entitled to restitution under their unjust enrichment claim in the alternative to recovering damages under their trespass claim.
Plaintiffs whose land is burdened by Category 1A-C easements, including the Biffles and Robertson, are entitled to summary judgment on their trespass and unjust enrichment claims. Defendants are entitled to summary judgment against the trespass and unjust enrichment claims by Plaintiffs whose land is burdened by Category 1D, 2A-B, and 3 easements. Summary judgment is denied as to Category 1E easements. Therefore,
