Share
The Supreme Court of the United States has considered whether a municipality could constitutionally exercise its power of eminent domain over nonblighted private property as part of an economic redevelopment plan.
The city of New London, Connecticut ("City") has suffered a long period of economic decline, partially caused by the U.S. Navy's closure of a submarine production facility. Because of this closure and other factors, the City has a very high unemployment rate. The State of Connecticut has designated the City a "distressed municipality".
In 2000, the City approved an economic redevelopment plan ("Plan"). The Plan covered 90 acres and involved the conversion of the Naval base and 115 privately owned properties into such things as a park, a research facility for Pfizer, Inc., a marina, a museum, a hotel, and other structures designed to create a "small urban village". The goal of the project was to create jobs, increase the City's tax base, and cause a revitalization of the downtown.
The City successfully negotiated the purchase for all but 15 of the privately-held properties. The remaining properties were owned by nine individuals ("Challengers"). Ten of the properties were residential properties occupied by the owner, some of which had been owned for years by the same family. The remaining five properties were held as investment properties.
The City condemned the remaining fifteen properties. The Challengers filed a lawsuit challenging the condemnation, arguing that the taking of their property would violate the "public use" provision of the takings clause found in the Fifth Amendment of the Constitution of the United States. The trial court entered a permanent restraining order prohibiting the government from taking the Challengers' property, but the Supreme Court of Connecticut reversed the trial court and ruled that the takings were valid. The state's highest court found that a state statute allowed the taking of private land as part of an economic development plan and such a taking is a "public use" and in the "public interest". The court further determined that the takings were "reasonably necessary" to achieve the City's economic development plan. The Challengers appealed to the Supreme Court of the United States.
The Supreme Court, by a 5-4 vote, affirmed the City's taking of the Challengers' properties. The Court set forth the two governing principles of regulatory takings under the Takings Clause of the Fifth Amendment. First, a government can never authorize the taking of private property for the sole purpose of transferring it to another private individual or entity, even if the owner is paid "just compensation" by the government. However, the government can take property from one private individual and transfer it to another if the taking is for a "public use", such as for the building of a railroad or a highway. Neither of these rules clearly covered the City's proposed taking, and so the Court further examined the proposed taking to see if it was Constitutional.
The Court stated that the case turned on the question of whether the City's proposed taking constituted a valid "public purpose". Looking at prior cases, the Court found it had construed the "public use" principle broadly in earlier cases. In one case, the Court had allowed a condemnation of a nonblighted department store in a part of Washington D.C. that Congress had ordered condemned for its overall blighted condition. In that case, the Court had stated that it was not necessary for the legislature to make a property-by-property determination of the area’s blighted condition but instead could pursue an overall development plan which could involve nonblighted properties.
In another case, the Court allowed the state of Hawaii to transfer property title from a small group of owners to a larger group. In that case, the state had determined that the concentration of property ownership in the hands of a few had caused property values to be artificially high. The Court deferred to the state's determination, finding that the elimination of the "economic evils" caused by the oligopoly constituted a public use which justified the taking.
Based on these earlier cases, the Court concluded that past precedent supported judicial deference to legislative judgments on what constituted a sufficient public good justifying the use of the takings power. Applying this principle to this case, the Court found that the City's determination that its economic distress necessitated the Plan was entitled to deference by the Court.
In order to effectuate the Plan, the City had exercised a state statute which specifically allows takings for economic development. Based on the cases discussed above, the Court found it was not required to evaluate the proposed takings on property-by-property basis, but instead the Court should evaluate the Plan in its entirety. Because the Plan served a public purpose, the Court ruled that the City's takings satisfied the public use requirement of the Fifth Amendment.
The Challengers argued that takings should never be used for economic development or, alternatively, only used when there is a reasonable certainty that the government will receive the expected public benefits resulting from the taking. The Court found that prior case law did not support the first argument, as earlier cases involved economic development takings. As to the second argument, the Court said that instituting such a high standard by requiring proof of something which would happen in the future would create a judicial impediment to all such development plans. Thus, the Court rejected both of these arguments.
In conclusion, the Court stated that its decision did not foreclose state legislatures from enacting laws defining what constituted an appropriate public use and these standards could be stricter than the federal standard. Indeed, the Court cited California as having a law which restricted takings for economic development to only blighted areas. Thus, the Court affirmed the rulings of the Connecticut Supreme Court.
Four justices filed a dissenting opinion in this case. The dissent argued that the government shouldn’t have power to take ordinary private property in order to convert the property from one use to another chosen by the government, even if the owners are compensated. The dissent expressed concern that wealthy developers would benefit the most from the Court's decision in this case, as they had the power to influence the legislature.
Kelo v. City of New London, No. 04-108, 2005 WL 1469529 (U.S. June 23, 2005). [This is a citation to a Westlaw document. Westlaw is a subscription, online legal research service. If an official reporter citation should become available for this case, the citation will be updated to reflect this information].
Editor's Note: NAR filed a joint amicus curiae brief with the National Association of Home Builders which argued for the use of a heightened standard of review in public use cases involving economic development, per the recommendation of NAR's Legal Action Committee. Click below to download NAR’s brief.