T Nation

Emminent Domain

I don’t know how many people on here are legal geeks or Constitutional afficianados, but there is an important case in the area of Emminent Domain law being argued before the Supreme Court right now.

For those who care about the “little guy,” there is one aspect to the case – there’s another for those who just don’t like the idea that the government can take property (and pay “just compensation”, though that tends to be very low compared to market value).

It gets extremely tricky for Constitutional Originalists, because it seems on the face of things that the Takings Clause was only meant to apply to the Federal government.

Here’s a good article from Forbes summarizing the case:

Supreme Court Takes On The Public
Dan Ackman, 02.23.05, 9:42 AM ET

NEW YORK - Home owners in New London, Conn., have been ordered to sell their homes near Long Island Sound so the state, exercising public domain, can build what it contends is a version of industrial paradise. The home owners say that they should not be forced to sell and that the law gives no favor to grand development plans. So far they have lost, but yesterday the U.S. Supreme Court gave them another shot.

The case, known as Kelo v. City of New London, has been closely watched because it affects the traditional right of cities and states to condemn land and pay “just compensation” for “public use.” In this case, the “public use” is parking lots, office blocks and a luxury hotel as well as a park, all of which would complement a Pfizer (nyse: PFE - news - people ) research facility and lead to revitalization of the waterfront. With the possible exception of the park, the home owners say that this use isn’t public and that they shouldn’t have to sell even if the compensation is just.

The Connecticut Supreme Court denied this claim, saying it was up to public officials to decide what uses are public, and it threw the wrecking ball back into the court of the private, nonprofit development corporation that is promoting the project. The Connecticut case was close, though–the vote was 4 to 3. On appeal, 25 “friends of the court,” an unusually large number, have filed briefs.

The city says its plan does benefit the public because office parks and hotels will generate more tax revenue than do the middle-class homes that are now on the site. But the home owners say the public benefit, assuming it occurs at all, is only by virtue of the private gain for Pfizer and other businesses that may wind up on the land.

The Institute for Justice, which describes itself as a “libertarian public interest law firm” and is arguing the home owners’ case, called the Connecticut ruling “an invitation to disaster because every business generates more taxes than a home does, and every big business generates more taxes than a small one. If the ruling stands, any property can be taken through eminent domain.” The institute contends that “public use” should mean a road or a public building, not a private business, even if that business generates public tax revenue.

The lawyers also say that state and local governments are “abusing the power of eminent domain” increasingly to “to take private homes and businesses for the benefit of other, more politically favored private businesses who promise more jobs and taxes.” In just five years, they say, governments filed or threatened condemnation of more than 10,000 properties for private parties.

In a companion case also heard by the Supreme Court yesterday, the state of Hawaii appealed a ruling it had lost in the 9th U.S. Circuit Court of Appeals. The appeals court decision had overturned a state law that limited the rent that oil companies could charge to independent gasoline dealers who lease their stations. In a case brought by ChevronTexaco (nyse: CVX - news - people ), the appeals court said that a rent cap amounted to an unconstitutional “taking” of property without, in this case, the explicit use of eminent domain or the paying of just compensation.

The appeals court also found that the state had not proved that lower gas station rents would result in lower retail gasoline prices. Without such proof, the appeals court judges would not defer to the judgment of legislators, as they normally might.

The question of who decides is at the heart of both cases, making the Supreme Court battle an uphill fight for Connecticut home owners. What makes this case unusual is that there was no argument by the city that the land was a “slum” or “blighted,” which is the traditional justification for urban development schemes.

The home owners say that if higher taxes can justify the move, taking the land would effectively allow the state to displace any private home so long as it says it will put up an office or even a larger private home. In fact, in this case there is no specific plan for some of the land parcels that would be taken.

“How can you have a ‘public use’ for taking someone’s property, which the Constitution demands, when you don’t know what that use will be?” lawyers for the home owners ask. But the Connecticut court rejected this argument, too. “While there was no development commitment or formal site plan in place for parcel 4A, this is not necessarily indicative of bad faith, unreasonableness or abuse of power,” the court concluded.

The question again came down to who decides, and the Connecticut judges answered by saying “not us.” Look for the U.S. Supreme Court justices to reach the same conclusion. But the mere fact that Susette Kelo and her neighbors have gotten as far as they have will give the state-sanctioned developers some second thoughts the next time around.


Here’s a link to a Washington Post article that does a good job summarizing the arguments of the two sides:

http://www.washingtonpost.com/wp-dyn/articles/A45249-2005Feb22.html

Professor Bainbridge of UCLA law school gets more into the nitty gritty:

http://www.professorbainbridge.com/2005/02/will_leviathan_.html

February 22, 2005
Will Leviathan Prevail?

Today the Supreme Court will hear argument in a case that, as lawyer Martin Garbus put it in the LA Times ( http://www.latimes.com/news/opinion/commentary/la-oe-garbus21feb21,0,6775860.story?coll=la-news-comment-opinions ), will decide the question “Is Your Stuff Yours?” Garbus apparently thinks your stuff is yours only so long as the government doesn’t want it and, moreover, that the reasons the government wants it are irrelevant.

But there is this little thing called the Takings Clause of the 5th Amendment:

Nor shall private property be taken for public use, without just compensation.

Note that the Takings Clause has two independent requirements: (1) just compensation must be paid; (2) the property must be taken for a “public use.” This second requirement means that the government may not take away your property to give it to some other private individual (or company) who will then devote it to their own personal or business use.

As the facts of the case at bar, Kelo vs. City of New London, illustrate, however, Government increasingly makes use of its eminent domain power to take property for what are really private purposes:

[i]At issue is whether governments can forcibly seize homes and businesses, for private economic development. Under a practice known as eminent domain, a person's property may be condemned and the land converted for a greater "public use." It has traditionally been employed to eliminate slums, or to build highways, schools or other public works.

The New London case tests the muscle of local and state governments to raise what they see as much-needed revenue, which they argue serves a greater "public purpose." (Link http://www.cnn.com/2005/LAW/02/21/scotus.eminent.domain/index.html ) [/i]

The Economist puts the problem quite succinctly ( http://www.economist.com/World/na/displayStory.cfm?story_id=3672769 ):

Put simply, cities cannot take someone’s house just because they think they can make better use of it. Otherwise, argues Scott Bullock, Mrs Kelo’s lawyer, you end up destroying private property rights altogether. For if the sole yardstick is economic benefit, any house can be replaced at any time by a business or shop (because they usually produce more tax revenues). Moreover, if city governments can seize private property by claiming a public benefit which they themselves determine, where do they stop? If they decide it is in the public interest to encourage locally-owned shops, what would prevent them compulsorily closing megastores, or vice versa? This is central planning.

Exactly. The government’s taking’s power is a necessary evil that, if used broadly, can destroy the entire concept of private property rights. As Russell Kirk pointed out, doing so will have devastating affects on society:

[i][F]reedom and property are closely linked. Separate property from private possession, and Leviathan becomes master of all. Upon the foundation of private property, great civilizations are built. The more widespread is the possession of private property, the more stable and productive is a commonwealth.[/i]

The case here is a particularly egregious example of how the takings power can be abused:

[i] The day before Thanksgiving 1998, Susette Kelo, a registered nurse, got an unwelcome holiday gift: an eviction order. Her house, and those of six other families living on an abandoned submarine base called Fort Trumbull, had been compulsorily purchased. She had five months to get out.

What is unusual about this is that her house is no rat-infested health hazard. She bought and spruced it up three years before. Nor is it being seized by a branch of government: the evictor is the New London Development Corporation (NLDC), a private non-profit body. The land is not going to be used for a public works project, such as a bridge or school. [b]Indeed, it is not certain what her land is wanted for.[/b][/i] 

The Supreme Court has held that private property can be seized via eminent domain as part of an urban renewal project when the property is blighted, a loophole that local authorities have greatly abused to seize private property. Yet, in this case, the government doesn’t even bother trying to hide behind that fig leaf. They assert baldly the power to seize private homes because they think some other user can put them to a higher tax generating use. Except, in this case, they don’t even know what the land will be used to do!

This is no minor technical dispute. Kirk’s dicta is confirmed by the brilliant work Richard Epstein did in his classic book Takings ( http://www.amazon.com/exec/obidos/ASIN/0674867297/corporatilawa-20 ), which makes a compelling case that the power to take private property is the critical and central power of government that must be constrained if liberty is to have any substance.

After news of Napoleon’s victory in the Battle of Austerlitz was conveyed to British Prime Minister William Pitt’s, Pitt pointed to a map of Europe and said: “Roll up the map; it will not be wanted these ten years.” If the Supreme Court sides with New London, we might just as well roll up the Bill of Rights, for we won’t need it any longer.

Update: Regretably, SCOTUS blog reports that “based on the impression left by the oral arguments, the government-side is going to win today’s property rights cases overwhelmingly.” ( http://www.scotusblog.com/movabletype/archives/2005/02/marty_lederman.html ) Get ready to roll it up.


http://www.professorbainbridge.com/2005/02/new_london_old_.html

February 22, 2005
New London = Old Moscow

In the Kelo case argued before the Supreme Court today, dealing with whether a city can take private property and give it to some other private actor, the city’s legal counsel recognized no bounds on the power of government to take property:

[i]Justice Antonin Scalia ... describes Horton's position as: "You can always take from A and give to B, so long as B is richer." And O'Connor offers this concrete example: What if there's a Motel 6 but the city thinks a Ritz-Carlton will generate more taxes? Is that OK?

Yes, says Horton. ( http://slate.msn.com/id/2113868/ )[/i]

Wow. The arrogance is breathtaking. Other than his presumably grudging acceptance of the Constitutional requirement that the city pay fair market value for the land, the city’s counsel - one Wesley W. Horton - would make the creators of the old Soviet kolkhozy proud.

Note, by the way, that the requirement to pay fair market value is a grossly inadequate safeguard on government power for two reasons in Kelo. First, it fails to take into account the subjective valuations placed on the property by people whose families have lived on the land, in at least one case, for a 100 years. In other words, if the Supreme Court rules for the city, the government will be able to seize land at a price considerably below the reservation price of the owners. Second, unlike the prototypical eminent domain case, in which the land is seized to build, say, a school or road, in this case the city is using eminent domain to seize property that will then be turned over to a private developer. If this new development increases the value of the property, all of that value will be captured by the new owner, rather than the forced sellers. As a result, the city will have made itself richer (through higher taxes), and the developer richer, while leaving the forced sellers poorer in both subjective and objective senses. As I opined this am, it’s a moral outrage.