Sprint, Qwest, Level 3, Williams May Face $3 Billion In Class Action Suits
Sprint, Qwest, Level 3 and Williams asked the 7th U.S. Appeals Court, Chicago, on Fri. to stay a decision that could expose them to more than $3 billion of liability in federal and state class actions pending across the country. The Appeals Court’s order, handed down last week, reversed a controversial nationwide class action settlement favored by the telecom companies and lifted an injunction to allow other class action lawsuits to go forward (CD Dec 16 p11). Several are certified and set for trial. The 4 defendant companies said they had installed fiber on more than 36,000 miles of railroad rights of way, comprising their core infrastructure. But more than 30 class actions nationwide claim that the subsurface rights belong to the landowners, and that the telecom companies are intentional trespassers.
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The cases go back to the 1980s when several phone companies -- including Sprint, MCI and AT&T -- built their fiber networks on railroad rights of way without obtaining the legal permission to use them, claimed attorney Nels Ackerson, who represents land owners in several cases. But he said “the landowners were concerned that their land was just taken from them. They considered that to be a theft.” After more than 30 suits were filed nationwide, the 4 companies decided to settle all claims with a “different set of lawyers who were willing to accept much smaller compensation to the landowners,” Ackerson said: “We opposed that low settlement and intervened on behalf of the landowners” in U.S. Dist. Court, Chicago, in Smith v. Sprint, which involves all the 4 defendants. The district court agreed that greater compensation was required and the defendants agreed to improve the settlement, which covered all railroad rights of way where the companies had their 36,000 miles of fiber networks nationwide.
However, land owners continued to seek “more improvements in that settlement because landowners were entitled to more protection,” Ackerson said. The 2 sets of landowners appealed that Dist. Court’s decision to the 7th Circuit, which determined the land owners hadn’t received adequate representation and reversed the lower court’s decision. The dist. court had combined all the class actions against the 4 companies nationwide for purposes of the settlement. But a 3-member appeals court panel, and later the full court, reversed that decision last week, giving the land owners nationwide a green light to proceed with their litigation.
Sprint faces the highest exposure, Ackerson said. “Our experts have pegged the value of the real estate as greater than $20 per foot for future use alone,” Ackerson said: “Sprint has 16,000 miles of fiber. Like the other telecom companies, Sprint will have to pay for both past and future use, as well as punitive damages. So, if it’s $40 per foot times 5,280 feet per mile,” that means Sprint may end up paying up to $211,200 per mile in compensation. But Ackerson noted: “I don’t know if we'll achieve the $40 amount, but from our experts opinions, between $20 and $40 is a reasonable amount. It’s up to the jury to decide how much the use of the land in the network is worth.” He said Qwest, Level 3 and Williams had fewer miles involved and presumably would have to pay less. Sprint and Qwest had no comment and Level 3 didn’t return a call.
The telephone companies’ request for a stay of the 7th circuit decision to reverse the settlement and lift injunctions is “just another attempt by the companies to delay the effectiveness of the decision,” Ackerson said. The companies said in the request they were considering whether to appeal the 7th Circuit decision to the Supreme Court. The court is expected to decide whether to grant the stay the next few days.
Meanwhile, the negotiations on the appropriate compensation between the companies and the land owners will continue, Ackerson said. “If the stay is not granted, we will be free to go forward with litigation in several courts around the country and our first trial in the Sprint case is set for May in Illinois,” he said: “The others will follow.” The only case that’s certified as a nationwide class action is against Sprint, and Ackerson said he expected it to cover similar cases in all states except Tenn. and possibly Kan. Qwest is defending the 2nd largest certified class action, which covers 8 states. Other cases are pending against Qwest in other states.
AT&T had settled its cases with land owners separately by agreeing to pay the requested compensation. The company paid an average $60,000 per mile to occupy abandoned railroad rights of way in about 10 states. With respect to the active railroad lines, the average was $2.40 per foot plus administrative costs. The payment varied state by state, with about 20 states involved. MCI is included as a defendant in other cases for its use of rights of way land after coming out of bankruptcy.