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Transmission Rights Row

Fiber optic lines expose grid companies to class action lawsuits.

Fortnightly Magazine - March 2008

properties’ visibility, or cause any drainage problems. It does not increase taxes or maintenance costs. Its presence and use does not alter, impair, or diminish the value of abutting plaintiff properties adjacent to the easements. Notably, the presence of the new static or ground wire with fiber optics does not reduce each plaintiff’s reversionary interest in the property they own. The transmission company must continue to use the easement for electric transmission purposes or lose its easement.

Unjust Enrichment?

Assuming the transmission company did violate plaintiffs’ rights by depriving them of the opportunity to say “no” to uses that go beyond those granted in the original easements, then the appropriate remedy may be monetary damages. If plaintiffs contend unjust enrichment and it is determined that the appropriate remedy is to disgorge the defendant of any profit it may have achieved through the alleged unauthorized use of an easement, then profitability must be the basis for any assertion of damages.

The fiber-optics communication industry has been faced with tremendous competitive pressures. Meanwhile, capital outlay requirements are substantial and challenge the current and future profitability of a large segment of the industry. More than fifty percent of the fiber in this country remains dark and unused, and the utility industry rarely generates any profit or cash flow from it. For those utility companies that took an equity or earn-out interest in fiber ventures, the results have ranged from unimpressive to disastrous. To the extent profits in the form of rents or license fees exceed the transmission company’s capital and operating costs, disgorgement is an option.

Weighing Potential Damage

The ultimate decision as to whether the plaintiffs have been damaged belongs to the courts. In cases where the plaintiff’s right to say “no” to the additional use of the ground wire is found to be violated, then technically the plaintiff has been damaged. The bigger question is what is the appropriate monetary compensation? A reasonable and probative methodology for assessing the potential damage includes a few critical concepts.

First, the value of a corridor is greater than the sum of its parts. If one mile of a corridor is worth $1,000, it does not follow that each and every tenth of a mile is worth $100. Conversely, it is necessary to look at each individual parcel that makes up the assembled corridor to determine its contributory value to the whole. There is no simple way to measure damages to each and every potential party to a claim without valuing each claimant’s property separately.

Plaintiffs often argue the corridor should be valued and then allocated to the individual plaintiffs. Of course, the fallacy is that the plaintiffs would have an allocated interest in a corridor value. As explained previously, the plaintiffs do not own the rights to a corridor. Thus, it would be unfair to award them damages for a portion of something that is legally owned by another party.

Since the plaintiffs’ properties are individual and not a unified corridor, they must be analyzed separately for damages. The properties differ from each other in terms