Federal Circuit Rejects Takings Claims in Indiana Rails-to-Trails Dispute
Earlier this year, the U.S. Court of Appeals for the Federal Circuit affirmed the Court of Federal Claims’ dismissal of takings claims brought by a group of Indiana landowners. ATS Ford Drive Investment, LLC v. United States, 136 F.4th 1066 (Fed. Cir. 2025). The case centered on whether the federal government’s facilitation of a recreational trail conversion under the National Trails System Act Amendments of 1983 (“Trails Act”) constituted a compensable taking under the Fifth Amendment. At the heart of the dispute was whether the plaintiffs—landowners adjacent to the former Nickel Plate Line—retained any property interest in the land underlying the rail corridor.
The Trails Act permits the conversion of abandoned railroad corridors into public recreational trails. In ATS Ford Drive Investment, LLC v. United States, the plaintiffs alleged that the issuance of Notices of Interim Trail Use (NITUs) by the Surface Transportation Board in 2018 blocked the reversion of their property interests and, thus, amounted to a Fifth Amendment taking. The plaintiffs’ claims hinged on whether the Peru and Indianapolis Railroad Company, which constructed the Nickel Plate Line in the 1850s, had acquired fee simple title or merely easements over the land. If the railroad held only easements, then upon abandonment, the land would revert to the plaintiffs or their predecessors-in-interest. If the railroad held title in fee simple, then the plaintiffs had no remaining interest and no basis for a takings claim. The original conveyances were made through written “Releases” signed by landowners in the 1850s. These Releases used language such as, “release and relinquish to the Peru and Indianapolis Railroad Company the right of way for so much of said road as may pass through or cut.” Plaintiffs argued that this language conveyed merely an easement.
The Federal Circuit rejected plaintiffs’ arguments and affirmed the lower court’s grant of summary judgment to the United States. The Court relied heavily on two 19th-century Indiana Supreme Court decisions—Newcastle & Richmond Railroad Co. v. Peru & Indianapolis Railroad Co. (1852) and Indianapolis, Peru, & Chicago Railway Co. v. Rayl (1880)—which interpreted the same legislative charter and similar release language. In Newcastle, the Indiana Supreme Court held that the railroad’s charter declared that land acquired through releases or condemnation conveyed fee simple title. Similarly, in Rayl, the court reaffirmed that a release with nearly identical language conveyed a fee simple estate. The Federal Circuit found these cases to be directly on point.
The Court also rejected the plaintiffs’ argument that Indiana law had evolved to presume the conveyance of an easement in these situations. Although present-day Indiana law generally presumes that “right of way” language conveys an easement, the Federal Circuit emphasized that state law in effect at the time of the original conveyances governs the analysis. Under 19th-century Indiana law, as set forth in Newcastle and Rayl, the Releases conveyed fee simple title.
Plaintiffs urged the Federal Circuit to certify the question of the scope of the Releases to the Indiana Supreme Court. The Federal Circuit declined, citing the presence of clear and controlling precedent. The Court noted that such a certification is appropriate only when there is “real doubt” about state law.
In sum, the Federal Circuit’s decision serves as a reminder that the viability of a takings claim may depend not only on the language of the original conveyance, but also on the legal context in which it was executed. That is, federal courts must apply state law as it existed at the time of the original property transaction, even if modern interpretations might differ. By affirming that the plaintiffs lacked a compensable property interest, the Federal Circuit closed the door on any Fifth Amendment takings claims.
One of the easiest ways for a property owner to begin the fight against eminent domain is to retain experienced counsel as early as possible. For over 55 years, McKirdy, Riskin, Olson & DellaPelle, P.C. has concentrated its practice in this special area of the law and has earned a reputation for persistently defending its clients’ constitutionally-recognized property rights. If you are confronted with the threat of eminent domain, please feel free to contact us for a free consultation.
