Supreme Court Reviewing Uses, Limits of Eminent Domain

Published on: January 22, 2005

Eminent domain – the governmental authority to take private property for public purposes – and the right of property owners to be compensated for those “takings,” are well-established legal principles, grounded firmly in Constitutional law and reflected in the policies and practices of state and local governments. These legal concepts are not new, nor is the dynamic tension that has long existed between them. But it appears that attitudes about how and where to strike the balance between private property rights and governmental authority are beginning to change.

The U.S. Supreme Court this month will consider a question that has galvanized property rights activists and divided the state courts: What standard must a governmental entity satisfy to justify taking private property? The suit posing this question, Susette Kelo et al. v. City of New London, involves that city’s plan to redevelop a stretch of waterfront along the Thames River. The renewal plan, which called for upscale residences, hotels, and office buildings, required the taking and removal of numerous homes and businesses located in the area. A few of the affected owners refused to accept the compensation the city offered for their properties, arguing that the “public benefit” the city claimed – the tax revenue and jobs the development would generate – did not justify taking their property and turning it over to a developer who would profit from the transaction.

A Fundamental Question

A lower court agreed with the protesting property owners, but a divided (4-3) Connecticut Supreme Court sided with the city and upheld the taking. The owners, represented by the non-profit Institute for Justice and backed by legions of property rights advocacy groups, have taken their fight to the U.S. Supreme Court. Although the High Court has considered other eminent domain cases in recent years, those cases have focused on whether a “taking,” in the legal sense of that term, had occurred, and if so, how, if at all, the property owners should be compensated. Kelo raises the more fundamental question of whether governmental entities are abusing their eminent domain authority by stretching the notion of a “public benefit” too far.

The takings clause, contained in the Fifth Amendment to the U.S. Constitution, says that government cannot take private property for “public use” without compensation. The Supreme Court broadened that Constitutional standard in 1954, ruling (in Berman v. Parker) that the taking of property in a blighted Washington, D.C. neighborhood was justified, because the urban renewal planned for the area fulfilled a legitimate “public purpose.”

State and local governments have used that more elastic “public purpose” standard as the legal foundation for taking property needed to spur urban renewal and economic development initiatives in “blighted neighborhoods (or neighborhoods that were said to be blighted) all over the country. Although the private developers involved in those projects necessarily benefited from the governmental takings, the courts have accepted that overlapping of public and private interests as long as a legitimate “public purpose” could be shown.

An Evolving Standard

But the criteria used to justify takings has continued to evolve – critics would say, erode — over the years. “Public purpose” has morphed into “public benefit” as local governments In New London and elsewhere have asserted that the tax revenue and jobs generated by new developments outweigh the rights of the owners whose properties stand in the way.

The progression from “public use” to “public purpose” to “public benefit” has taken us down a slippery and dangerous legal slope, in which the promise of additional tax revenue alone can justify the transfer of property from one private owner to another, who plans a “higher and better use.” As the Institute of Justice notes in its Kelo brief, “Every business generates more taxes than a home and every big business generates more taxes than a small one.”

If we let government take private property any time a group of politicians thinks it would like to see something new or better done with a property, every piece of property in the country becomes fair game, at risk of being taken to make way for a Costco, or a race track, or a hotel, or any other use from which private owners will gain. This scheme may leave property owners a little better off here than in a Communist country, where government takes your property and doesn’t compensate you, but it’s not much better. If government can force you to accept compensation and leave your home or business, even if you want to stay, simply because another owner will pay more in taxes than you do, then the very concept of private property and the civil liberties underlying it are at risk.

That argument, at the heart of the plaintiffs’ case in Kelo, did not persuade the Connecticut Supreme Court, a majority of which accepted the “public benefit” standard for takings. However, in a decision earlier this year, Michigan’s highest court came down forcibly on the other side of this question. Reversing its own landmark 1981 decision (Poletown Neighborhood Council v. Detroit), the Michigan court ruled unanimously that state and local governments may not take private property solely to promote economic development, even if the public will benefit from that development in some way. “We overrule Poletown,” the court said, “in order to vindicate our constitution, protect peoples’ property rights, and preserve the legitimacy of the judicial branch as the expositor, not the creator, of fundamental law.”

Massachusetts Decisions

In the few cases in which they have addressed the eminent domain issue, the Massachusetts courts have generally held that a state statute must authorize the public purpose a local government uses to justify taking private property. A Superior Court used that legal framework in Albano v. City of Springfield, rejecting the city’s use of eminent domain to take property a developer planned to use to construct a minor league baseball stadium. The taking wasn’t justified, the court said in that 2000 decision, because no state enabling statute specifically identified baseball as an industry the state wanted to foster.

Following the same general reasoning, a Massachusetts Appeals Court ruled in a 2001 decision (HTA Limited Partnership vs. the Massachusetts Turnpike Authority) that the Massachusetts Turnpike Authority could take property to establish a “park and ride” area, because that project furthered a public use the Legislature recognized in the statute establishing the authority. (The court went on to reject the taking, however, because of evidence of “bad faith” on the part of the state officials involved.)

Although Kilo has attracted most of the press coverage as its Supreme Court hearing date nears, eminent domain and takings battles are being waged on several other legal fronts. The U.S. high court will consider a different aspect of the eminent domain issue in March when it hears arguments in San Remo Hotel v. City and County of San Francisco. At issue here is a legal ‘catch 22’ created because owners contesting a taking must bring their claim in state court before they can pursue a federal action. But the federal courts have consistently refused to hear takings cases, arguing that the issues have already been litigated in state court. One federal district court recently accepted a takings case, however, setting up the judicial conflict the Supreme Court has agreed to resolve.

Separately, in a development that has terrified environmental groups and delighted property owners, Oregon voters in November approved a ballot initiative under which owners who can prove that development restrictions have reduced the value of their property can either force the government to compensate them for the loss or obtain a waiver from the restrictions. The new requirement, which takes effect this month, is retroactive, applying to land use restrictions enacted over the past 30 years.

The approval of what amounts to a sweeping repudiation of development restrictions in a state recognized as a leader in land use planning, underscores just how much the legal ground in this area has shifted. But the continuing and escalating debate over the reasonable use of and limitations on eminent domain also indicates that judicial guidance on these questions is sorely needed. The Supreme Court’s acceptance of two cases dealing with eminent domain in a single term indicates that the justices are aware of the need for guidance and are prepared to provide it.