Federal Court Dismisses Railroads' Challenge to Va. ISP Access Law

Virginia broadband providers applauded a federal court for tossing a railroad association’s challenge of a 2023 state law that gave ISPs access rights to railroad property. In an opinion Monday, U.S. District Court for Eastern Virginia Judge David Novak dismissed a lawsuit by the Association of American Railroads (AAR) against state officials including Virginia State Corporation Commission Judge Jehmal Hudson (case 1:23-cv-00815-DJN-WEF). The court rejected two counts for lack of standing, two for failure to state a claim and two as barred by sovereign immunity.

The contested Virginia law allows broadband providers to get a license to cross and occupy railroad property for a one-time $2,000 fee and direct expenses, paid to the railroad, of not more than $5,000. Also, it requires railroad companies to approve ISP applications within 35 days unless it seeks relief from the Virginia commission. The law adds a $1,000 fee if the crossing lies at a legally abandoned section of the track, while requiring no license fee if crossing the railroad within a public right of way. The law lets railroads seek relief from the commission for reasons including inadequate compensation, undue hardship and likely imminent danger to public health or safety. Also, it allows commission decisions to be appealed to the Virginia Supreme Court.

Dismissal pleased the Virginia Cable Telecommunications Association, which was an amicus in the case. The judge applied a “fair-and-balanced legal rationale” in his 78-page decision, VCTA President Ray LaMura said in an interview Wednesday. The state law stemmed from long-standing challenges deploying broadband to unserved areas, including delays and high costs for accessing railroads, he said. ISPs were concerned that the delays could mean losing federal grants that carried clawback provisions for when projects aren’t completed in time, the cable industry official said.

Deploying broadband across railroads has been a “top conversation” at the governor’s Virginia Broadband Advisory Council for the past four years, said LaMura, who is a council member. Railroads never addressed the issue despite making assurances, he said. Now the federal court case has frozen VCTA members’ ability to take advantage of the state law, said LaMura, who noted that the railroad group could still appeal Monday’s decision or try to get fresh legislation passed.

The railroad association has “nothing to add on this issue,” a spokesperson said Wednesday. The Virginia commission "has no comment on pending litigation,” its spokesperson said.

The district court said AAR lacks standing to claim, on behalf of its railroad members, that Virginia’s law is preempted by the Interstate Commerce Commission Termination Act (ICCTA), the 1995 statute that set exclusive federal regulation of railroad transportation. "Because Plaintiff fails to plausibly allege that ICCTA categorically preempts [the state law] or that no set of circumstances exists where [it] could coexist with ICCTA, Plaintiff may only raise ICCTA preemption on an as-applied basis,” wrote Novak: Individual railroad members would have to make such a claim, not their association.

Novak similarly dismissed another count, which claimed that the Virginia law violates the Fifth Amendment's takings clause by failing to justly compensate railroads. "Individual railroads would … have to demonstrate the unavailability of just compensation for particular crossings,” Novak said. “With railroad property in Virginia ranging from public rights-of-way to legally abandoned track to heavily used corridors with no existing rights-of-way, determining just compensation would necessarily qualify as a fact-specific inquiry.” The judge added, “Nothing about the establishment of a presumptive licensing fee (pursuant to a statute that authorizes railroads to seek additional compensation) lies in inherent tension with the Takings Clause's just-compensation requirement."

AAR has standing to claim that the state law violates the Fifth Amendment by allowing a taking of private property for private -- rather than public -- use, allowed Novak. However, he said that claim fails on the merits. "The scheme” enacted by the state law “is rationally related to a conceivable public purpose: rapid expansion of telecommunications access to residents of the Commonwealth."

The railroad group also has standing to claim a 14th Amendment violation of due process rights, said Novak, but that too fails on the merits. “That railroads must petition the [commission] when they allege unjust compensation rather than bring tortious interference claims against state officials does not plausibly deprive railroads of 'due process,'” he wrote. “And railroads remain free to initiate inverse-condemnation claims under an ‘implied contract’ theory in Virginia state courts." Also, he said the Virginia law provides "meaningful procedures, permitting railroads to receive fast-track review from the SCC regarding allegations of inadequate compensation."

Sovereign immunity bars two other counts claiming that the defendants violated state law, the judge ruled. An exception to the sovereign immunity defense covers claims about violating federal -- not state -- laws, he said. While AAR argued that sovereign immunity doesn’t cover actions by defendants in individual rather than official capacities, Novak disagreed they were individual actions. "Plaintiff's purportedly individual-capacity state claims are in substance official capacity claims barred by state sovereign immunity,” he wrote.

The exception to sovereign immunity could have applied to the railroad groups’ federal law claims against the commission’s Hudson, though not other state defendants who don't enforce the ISP railroad access law, said the judge. But the judge dismissed the counts that would have applied to Hudson for reasons mentioned above. In addition, Novak said that even if the state law claims weren't dismissed on sovereign immunity grounds, the court “declines to exercise supplemental jurisdiction over them, given the dismissal of all federal claims.”