In the Matter of Eminent Domain Seizures of: SUSETTE KELO, ET AL., Appellants, v. CITY OF NEW LONDON, AND NEW LONDON DEVELOPMENT CORPORATION, Respondents.

UNITED STATES SUPREME COURT

Monday, March 17, 2008, Filed

PRIOR HISTORY: Appeal from the Supreme Court of Connecticut Docket No: 04-108. Date Filed: March 9, 2004.

DISPOSITION: Overturned

COUNSEL: For Appellants: Elizabeth M. Sher, Walla Walla, WA.

For Respondents: Lauren Adler, Walla Walla, WA.

 

Justices Roman E. Goerss and Griffith D Lambert delivered the opinion of the court. Chief Justice Jim Hanson delivered a dissenting opinion.

 

 

Facts of the Case: The respondent development agent, on behalf of the city of New London, attempted to employ eminent domain to seize nine homes in New London. The nine owners initiated court proceedings contesting that the seizure violated their Fifth Amendment rights by being insufficiently public in purpose and won, but the Connecticut Supreme Court overturned the verdict, holding that the legislature’s judgment that economic rejuvenation was a legitimate public purpose was entitled to deference.

 

Outcome: The judgment of the Connecticut Supreme Court was overturned.

 

 

Justices Roman Goerss and Griff Lambert, delivering the opinion of the court:

 

James Madison once wrote “Government is instituted to protect property of every sort; as well that which lies in the various rights of individuals, as that which the term particularly expresses. This being the end of government, that alone is a just government, which impartially secures to every man, whatever is his own”(Author’s italics).[1]

 

            The Bill of Rights recognizes the critical importance of property.  The fourth amendment protects the property on one's person, shielding citizens from government intrusion onto their private persons without just cause. The third amendment, written in a time when the government was in desperate need of places to house its soldiers, recognizes the property of the home as being so sacrosanct as to deserve special protection from government use.  But New London would have us hold that the very homes which the government is barred from employing for military purposes be paved over to build a parking lot for a pharmaceutical company.  To the contrary, the Fifth Amendment states that citizens may not be “deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation”[2].

            The jurisprudence regarding this amendment initially understood the phrase public use literally, the government could not seize property unless it was explicitly for use by the government for the public. Gradually, this interpretation lost ground as it became clear that it was too difficult to find precisely what public use meant, and the court ceded ground into permitting seizure for public purpose[3].

            Over the last 50 years, the definition of public purpose has grown broader and broader through such cases as Hawaii v. Midkiff[4], which allowed the breaking of oligopolies[5] into the definition of public use, and Berman v. Parker[6], which permitted it to correct blight. These expansions were considerable, but they were within our authority because the reasoning always grounded the purpose of seizure as benefiting the public when there was no other option, correcting a problem that was harming residents that could not be corrected through other means. Their indirect effect, however, was to steadily widen the types of rationales state courts would accept for eminent domain seizures. The case before us is a logical consequence of this process, but we must draw the line here.

 

I. Arbitrary Power and the Rule of Law

 

            One of the great virtues of the rule of law is that it allows citizens to predict how they will be treated in the future.  The law provides a shield against the arbitrary power the government could otherwise wield, providing a clearly defined set of circumstances within which the government will take action which assure citizens they know how they will be treated[7].

            Upholding a sustained economic downturn as a permissible criterion for the invocation of eminent domain would seriously undermine this assurance.  A certain ebb and flow of fortune is natural for business, and even the most prosperous areas will have periods of depression. Admittedly, the trend in this case took place for more than eight years, a significant period. But to accept long term economic downward trend would create significant problems in regards to a standard.

            It would be difficult for the court to define how long a trend was permissible before the state’s hands were unbound. Such trends will be highly contextual based upon the national economy, economic conditions of the area and will likely be more or less severe depending on who is permitted to define the borders of this imaginary neighborhood. Is it citywide? Countywide? A matter of neighborhoods or city blocks?

            Such a plethora of factors prevent the establishment of a predictable standard, and as a result could create significant anxiety and legal uncertainty. In theory, any neighborhood or city that was experiencing a bad year or two would be open to companies seeking land to seize for complexes like the one in question. This could have disastrous consequences for property markets and would cause no small amount of anxiety. In one Arizona city, the threat of eminent domain forestalled nearly $2 billion in development by unsettling the certainty of property titles[8]. Affirming would undercut the predictability and peace of mind which law is designed in part to provide.

 

II. Discriminatory Nature Unconstitutional under Fourteenth Amendment

 

            The Equal Protection Clause of our 14th Amendment attacked the remnants of this nation’s most evil legacy. Today’s invocation of the same standard may not appear to be as obvious as the decision legislators faced in 1868, but the risks are serious.  Upholding the lower court’s ruling would inevitably hurt racial and ethnic minorities, as well as lower-wage, and politically disadvantaged members of communities throughout the United States.  Expanding the application of eminent domain to include “economic development,” at the cost of private ownership that does not pose direct risks to public health or safety is inconsistent with the strict scrutiny standard laid forth in United States v. Carolene Products Company, 304 U.S. 144 (1938),[9] as well as the Takings Clause of the Fifth Amendment.[10]  Moreover, the prospect of job creation and tax revenue forms the basis of support for many redevelopment projects, but past and present data shows the uncertainty of both goals in these initiatives.  Under the 14th Amendment, we cannot allow minority and poor communities to be disproportionately victimized by these uncertainties.

            While the Takings Clause of the Fifth Amendment does allow the government to claim private property, it is also intended to evenly distribute the “cost of condemnations,” and as a result, “prevents the public from loading upon one individual more than his just share of the burdens of government,” Monongahela Nav. Co. v. United States, 148 U.S. 312, 325 (1893).[11]  Using “economic development” as a standard for eminent domain systematically ensures that this requirement will not be met, and the burden not evenly balanced, but rather disproportionately concentrated in the same groups of people every time: racial and ethnic minorities, and more generally, people with feeble financial and political means.[12]      

While the appellant points to the apparent destruction public development projects create,[13] this case really questions the effect of eminent domain takings for private development.  Public development cases illustrate the sensitivity that should be given to all eminent domain decisions, as they, too, reflect the disproportionate burden that falls on minorities and the poor; however, to gain a better sense of what is at stake in this case requires examining how other eminent domain proposals for private development continue to disproportionately target these same groups.  This effect is seen in the Institute for Justice’s 2007 study, which used 2000 Census data to examine 184 areas where eminent domain for private development has been “used or designated” since 2003.[14]  When comparing the area intended for eminent domain within a municipality with the surrounding municipality, the results confirm our fears.  As Table 1 illustrates, the residents in the targeted areas are more likely to be minorities (racial and ethnic), with less formal education, lower income, living beneath the federal poverty line.[15]  Without the Court’s protection, areas like these will continue to be victimized, and the number of eminent domains takings for private development increased, as a less obstructed legal pathway combines with the substantial political and financial resources of private firms.

Table 1: Averages for Project Areas and Surrounding Communities[16]

                                                                                                Averages

 

Project Area

Community

Minority*

58%

45%

Median Income*

$18,935.71

$23,113.46

Poverty*

25%

16%

Children

25%

26%

Senior Citizens

13%

12%

Less than High School Diploma*

34%

24%

High School Diploma

28%

28%

Some College*

22%

25%

Bachelor's Degree*

9%

13%

Master's Degree*

3%

5%

Professional Degree*

1%

2%

Doctorate*

0.60%

0.90%

Renters*

58%

45%

*Difference between project areas and surrounding communities is statistically significant (p<.05, which means we can be sure with 95% confidence that the differences found here in the sample data will be true in the greater population)

 

            While fewer financial and educational resources would naturally suggest that these residents have less political power to begin with, an example from Norwood, Ohio illustrates the connection between political and financial clout nicely.  In this case, the developer who wanted to expand his real estate enterprise essentially funded the entire eminent domain process.  Not only did he pay for the acquisition of the properties, but also financed the report that found the area to be “blighted and deteriorating,” as well as covered the City’s legal fees.[17]  As the Castle Coalition report states, the developer essentially “leased the government’s power for his own gain.”[18]  While this is not to deny that the Norwood neighborhood may have very well been blighted, it does demonstrate how powerful money is in motivating the redevelopment process.  Furthermore, expanding eminent domain for private economic development would signal a broader standard for what is an acceptable use of the measure, meaning areas would not necessarily have to be “blighted” to constitute their taking.  The Kelo case shows how the opposite can be true, as well—where political influence allows one to avoid redevelopment.  In this case, the Italian Drama Club, a cultural organization with significant political influence avoided seizure, even though three of the plaintiffs had property in the same parcel.[19]  When eminent domain confiscation becomes about who has the wealth to ensure/avoid it, the poor will inevitably end up the victim.

One might argue that the figures from Table 1 suggest that those displaced by redevelopment projects are also the ones that are going to benefit the most from the jobs, tax dollars, and new housing it will afford. Redevelopment does not ensure any of these things.  Setting aside the subjective value that a home, business, or community has for an individual or family, there are many financial uncertainties in the transference of property for “just compensation.”  Local officials have been found to use a number of tactics to minimize the amount they have to “justly” pay, such as: employ appraisers to underestimate property values, use eminent domain to threaten property owners into accepting below-market valuations of their property, and pay property owners at the assessed value when the market value is significantly higher,[20] or offer a price that is reflective of the fair market price, but not of the new real estate market the individual or family is about to enter.[21]

In terms of jobs and tax dollars, some redevelopment projects live up to their promise to create more of both, while others do not.  In the Poletown case, the mayor of Detroit and General Motors promised 6,000 new jobs, but only created 2,500.  After accounting for the 4200 people and 140 businesses (one third of which closed immediately, according to the City) that were displaced, it is estimated that the project brought about a net loss of jobs. [22]  The promise of tax dollar creation seems even more uncertain.  In Costa Mesa, CA economic redevelopment was supposed to generate $1 million annually, but in 2004, the City accumulated only $200,000.[23]  In New York City, the City lost $109 million in tax dollars on a redevelopment project that stripped owners of their homes, but fell through when the developer and buyer backed out.[24]  Similar cases have occurred in Chicago,[25] Pittsburgh,[26] and Indio, CA,[27] as well as many other cities around the country.[28]  Again, though these are merely illustrations, they exemplify how redevelopment is a gamble like any other economic venture.  In this case, however, we are gambling with the lives of the poor and politically weak, and that is plainly unacceptable.

Furthermore, not only are differences between this and other cases where the Public Purpose Clause has been used great enough to make its invocation unconvincing here, relying upon the Clause is inconsistent with the Court’s standards for judicial review.  In this case, where the disproportional burden will likely fall upon racial and socioeconomic minorities, deference should be granted to this Court’s ruling in Carolene.[29]  As Justice Stone expounded in Carolene, “prejudice against discrete and insular minorities may be a special condition, which tends seriously to curtail the operation of those political processes ordinarily to be relied upon to protect minorities, and which may call for a correspondingly more searching judicial inquiry.”[30]  As I have already shown, a historical analysis of eminent domain used for private economic development illustrates how the burden consistently falls on minorities and lower-income individuals.  Clearly, under strict scrutiny standards, a more probing job must be done to evaluate the costs and benefits of this decision with respect to these affected groups.    

Violation of the Fourteenth Amendment is both morally and constitutionally unacceptable.  The Fourteenth Amendment has continually been called upon to right grave injustices in this nation’s history—notably attacking institutionalized racism in Brown v. Board of Education of Topeka, 347 U.S. 483 (1954) and gender discrimination in United States v. Virginia, 518 U.S. 515 (1996), as well as providing equal protection under the Constitution in court cases and legal traction in legislation for other individuals and groups, such as homosexuals and persons with disabilities.  Moreover, the fact that this Court hears several 14th Amendment cases each terms speaks to the importance of this statue in U.S. law.[31]   

The Fourteenth Amendment’s promise to not “deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws”[32] is clearly not being met in this case.  As the previously noted facts suggest, expanding the definition of what is an acceptable use of eminent domain to include developments by private firms will become a tool of the rich that will consistently be used at the expense of the poor.  The use of eminent domain in any situation remains a difficult decision.  Even in the case of a blighted area, where conditions pose serious health and safety risks to its residents, such as Washington D.C. in Berman, taking property through eminent domain exposes the residents to a whole new set of risks.  In such cases, these risks must be weighed, and the targeted community placed at the forefront of the conversation.  If there is a genuine concern for the well-being of an area’s residents (as is always professed in these cases), then a genuine concern should be made apparent by the governing body.  Unfortunately, cases such as Costa Mesa, CA, New York City, and Poletown demonstrate where this has not happened, where cities have played into the private interests of developers, without ensuring a commitment to their residents.  As long as these risks remain possibilities, so will the possibility of 14th Amendment claims against eminent domain.  If the advance of private business initiatives was not as often required as a prerequisite for giving “distressed” and “blighted” areas attention, the Equal Protection Clause would not need to be summoned as frequently, and our minority and poor communities not victimized as often. Until the well-being of these New London residents is being adequately addressed in this way, as well as the best interests of the others around the country, whose fate similarly hangs in the balance at this juncture, we must respectfully object to the ruling of the lower court.  

III. Due Process

 

            Upholding this case would, in effect, write the words “for public use” out of the Fifth Amendment. As alluded to earlier, the founders deeply prized the property rights of individuals.  Indeed, half the Bill of Rights safeguards the property of citizens from government power[33]. This Court has long held that employing eminent domain to transfer property from one owner to another for private purposes was unconstitutional[34]. If we accepted a benefit to the public that was merely incidental as sufficient to fulfill the public use requirement, we would be deviating from the property rights guaranteed citizens in the Constitution.

            The case before the Court would seem to function as a natural extension of the breaking of an oligopoly in Hawaii v. Midkiff and the response to blight in Berman v. Parker, but there is one dimension to the question which has been largely overlooked. Our ruling in Hawaii v. Midkiff was issued to correct the specific evils of a large concentration of land in the hands of the few which was, among other things, “injuring the public tranquility and welfare. [35]” In the case of Berman v. Parker we upheld the use of eminent domain to correct blight, noting that “certain areas within the District of Columbia were injurious to public health.”[36] In each case there existed a threat to the public welfare that the exercise of domain was designed to rectify. Berman notes that eminent domain falls within a very broad discretionary area for the legislature under the police power and notes of such power “The role of the judiciary in determining whether that power is being exercised for a public purpose is an extremely narrow one”[37]. The court went as far as to note that even a project to beautify the city would constitute a legitimate public purpose[38]. Were the public purpose clause the only applicable aspect of the Fifth Amendment, this might be Constitutional.

            However, the Fifth Amendment also states “No person shall be ... deprived of life, liberty, or property, without due process of law”[39]. This right is essentially replicated in the Fourteenth amendment’s guarantee that “No State shall deprive any person of life, liberty, or property, without due process of law”[40]. While these amendments garner a passing mention as one of the claims made in earlier court proceedings of Berman, the Court confined itself almost entirely to the Public purpose question and did not specifically address the due process concerns the seizure raised[41].

            This court cannot simply assume that one portion of the amendment was meant to trump the other. Indeed, conflicts within the Constitution such as those between the free exercise clause and the establishment clause within the First Amendment provide a nuanced legal tension that requires the careful weighing of Constitutional principles[42]. The significant deference demonstrated by the Framers towards property rights as noted in our introduction, in combination with the fact that the public use clause was initially restricted to literal public use, clearly delineates a right to property in the Constitution that conflicts with the state’s taking power. As previous cases have overlooked this tension, it falls to this court to negotiate a standard.

            Hawaii and Berman clearly illustrate that there exist occasions where eminent domain is necessary to provide for the public welfare. In both cases, there was no available solution which did not involve the redistribution of land.[43] This case is different. There are a variety of methods of protecting the public from economic downturns available to a government, and indeed whether or not saving citizens from economic difficulties is the government’s role at all is a subject of much disagreement[44]. To rescue the public from monopoly or ghettoization is fundamentally different from defending the pocketbooks of some citizens at the expense of the homes and businesses of others. Property rights should not be set aside so casually, nor the reach of the state lengthened.

IV. Criteria

            As such, we establish the following additional criteria beyond the public use clause standards and strict scrutiny standards cited from Carolene[45] to create a test that reflects the higher standard which the due process clause necessitates[46].  One of the following is necessary for a transfer of property between private entities via eminent domain to be constitutional. First, when the transfer involves “public necessity of the extreme sort otherwise impracticable.” A classic example is the need to seize land to build railroad tracks which could otherwise be thwarted by a single recalcitrant. Secondly, in cases where the transfer is based upon “facts of independent public significance.” This criterion refers to instances like Berman or Hawaii where seizure of the land is necessary for the public welfare regardless of its subsequent owner. See County of Wayne v. Hathcock 471 Mich. 445 (2004)[47]. 

            We respectfully reject Justice Young’s proposed criteria of subsequent public oversight of the transferred property[48]. We believe it could lead to unwarranted violations of property rights, and that the idea of “public oversight” is too nebulous to ensure the property continuers to operate for a public purpose. Only a state owned property can maintain that assurance.

            Taking property for direct state use remains permissible, and we continue to affirm the longstanding understanding of the Fourteenth Amendment as prohibiting discrimination against minorities. The case is overturned.

 

Chief Justice Jim Hanson, dissenting

As I wrote just two years ago (Jim Hanson, New London 2006, Dissenting) “ensuring good for the greater public can be more important” (ante) than private ownership. Indeed, this is the very core of the takings clause—that individual claims should not be able to prevent a community from bettering itself particularly in a situation where that community has faced years of economic downturn and is trying to improve its lot. As Lauren Adler’s brief noted:

In a study done of New London in 1990 by a state agency of Connecticut, the city was defined an official “distressed municipality.” By this definition, their economy and standard of living is significantly below the average of the rest of the state, with unemployment rates much higher as well. They are in clear need of economic stimulation, and it is the legislative responsibility of the state to address that . . . problem. (Adler, Legal Brief submitted to the Court).

That is exactly what the purpose of eminent domain is: to serve the public good over the wishes of a few individuals and that is exactly what the City of New London has done and which, sadly, the Court has stopped today.

While we should acknowledge that this case is a public project relying on private development, the city already carefully considered this and a review of the facts demonstrates that this project is indeed for a public purpose—not for private interests and the city’s actions are entirely consistent with what this Court wrote in Berman: "the acquisition and the assembly of real property and the leasing or sale thereof for redevelopment pursuant to a project area redevelopment plan . . . is hereby declared to be a public use." Berman v. Parker, 348 U. S. 26 (1954).

As a public use, we should still not permit a city to use eminent domain just because it makes a claim of a desire to economically develop; it must be in the context of a sustained economic downturn. Real need must be demonstrated. As the majority writes, there is no bright line for determining sustained economic downturn but that should not be an obstacle anymore than questions about how blighted an area must be nor how much of an area must be owned by a few people before we will permit eminent domain to be utilized. When a city makes a reasonable determination, subject to court review, that a sustained economic downturn justifies a public action for redevelopment, then eminent domain may be invoked. If not, a city has no recourse. As I wrote previously:

Dealing with a long term economic downturn justifies action, if for no other reason, that it would prevent the area from becoming a blighted area and it would prevent monopolistic land takeovers that are not necessarily in the public’s best interest. (Hanson Court, 2006 decision)

The majority’s reasoning would lock cities and states into an endless cycle of failing economic decline with no way out until finally they hit so low, they could finally claim they were blighted. This is short-sighted and it tremendously interferes with our nation’s leaders as they try to grapple with the struggles of entrenched economic problems.

Finally, eminent domain should not be used as means to violate 14th amendment rights. This is true for cases involving public takings just as much as it is private takings and so the majority’s sweeping language invites some troubling implications that I hope will not slow good public projects critical to our nation’s infrastructure and to our communities. If the majority means to say that no project should be undertaken with undue or discriminatory burden upon particular ethnic groups, then I agree and I agree regardless of whether the projects are with private or public development. Aside from a very muted claim by the majority about the Italian Drama Club (whose purpose, contrary to claims of “political influence,” was demonstrated to be consistent with the new project[49]), there is no demonstration of a violation of such rights in this case. Denying this project on the basis of such a claim without any real evidence about the New London project specifically is highly speculative. Instead, we should reject projects that actually do violate 14th amendment rights rather than imagining that each project entails such a risk.

I therefore respectfully dissent.

 

 



[1] James Madison Vol 1 Chap 16 Doc 23

[2] U.S. Constitution, amend 5.

[3] Headline notes of Kelo v. City of New London, 545 U.S. 469 (2005)

[4]Hawaii v. Midkiff, 467 U.S. 229 (1984)

[5] An oligopoly is a market wherein there are so few sellers that the group may dominate the market to the detriment of competition. The Hawaiian oligopoly was one of land.

[6] Berman v. Parker 348 U.S. 26 (1954)

[7] Carter, Leif. “Reason in Law.” Argument in the Law and Politics. Ed. Jim Hanson. Whitman College, 2008. 324-325

[8] Castle Coalition, “Myths and Realities of Eminent Domain Abuse.” 2006, 11

[9] Thomas’ dissent in Kelo v. City of New London, 545 U.S. 469 (2005)

[10] O’Connor’s dissent, 545 U.S. 469 (2005)

[11] O’Connor’s dissent, 545 U.S. 469 (2005)

[12] Thomas’ dissent, 545 U.S. 469 (2005)

[13] Sher, Elizabeth, Appellant’s brief in Kelo v. City of New London.

[14] Carpenter and Ross, Victimizing the Vulnerable. Institute for Justice 2007, 8.

[15] Carpenter and Ross, 2007, 7.

[16] This is a statistically complete reproduction of the same table printed in Carpenter and Ross, 2007, 6. Carpenter and Ross, 2007, 6.

[17] Castle Coalition, “Myths and Realities of Eminent Domain Abuse.” 2006, 4.

[18] Ibid., 4.

[19] Berliner, Dana, “Public Power, Private Gain; a Five-Year, State-by-State Report Examining the Abuse of Eminent Domain.” Castle Coalition, 2003, 48.

[20] Staley, Samuel R., and John P. Blair, “Eminent Domain, Private Property, and Redevelopment: an Economic Development Analysis.” Reason Foundation, 2005, 3.

[21] Berliner, 2003, 6.

[22] Castle Coalition, “Redevelopment Wrecks: 20 Failed Projects Involving Eminent Domain Abuse.”  2006, 5-6.

[23] Ibid., 4.

[24] Ibid., 12.

[25] Ibid., 3.

[26] Ibid., 14.

[27] Ibid., 8.

[28] Ibid.

[29] Thomas’ dissent , 545 U.S. 469 (2005)

[30] United States v. Carolene Products Company, 304 U.S. 144 (1938)

[31] Abboud, Alexandra, “Equal Protection Essential Component of Rule of Law.” http://www.america.gov/st/washfile-english/2006/January/20060120153524maduobbA0.5853845.html

[32] FindLaw, “U.S. Constitution: Fourteenth Amendment” http://caselaw.lp.findlaw.com/data/constitution/amendment14/

[33] U.S. Constitution, Bill of Rights amend 2, 3, 4, 5 and 7.

[34] Hawaii Housing Authority Et Al v. Midkiff Et Al. No. 83-141 Supreme Ct. of the US. 30 May 1984, in header notes.

[35] Sic, Overview

[36]  Berman v. Parker 348 U.S. 26 (1954), Overview

 

[37] Ibid, Justice Douglas delivering the opinion of the court

[38] Ibid

[39] U.S. Constitution, amend 5

[40] U.S. Constitution, amend 14

[41] Berman v. Parker 348 U.S. 26 (1954), Justice Douglas delivering the opinion of the court

[42] U.S. Constitution, amend 1

[43] The buildings in Berman were noted to be beyond repair in many instances, preventing economic revitalization that did not involve demolition. This necessitated seizure. The impossibility of solving Oligopoly when the owners will not sell through any other means should be obvious. 

[44] Again, this is different from intervention in Berman because that case was partially premised on the  area’s conditions being so severe as to threaten the welfare, health and safety of the public. Correcting such a situation is a fairly uncontroversial government function.

[45] United States v. Carolene Products Company, 304 U.S. 144 (1938)

[46] These standards were adapted from “County of Wayne v. Hathcock” 471 Mich. 445 (2004). Direct quotes are noted and the citation follows the paragragh. Robert P. Young Jr. delivering the opinion of the court.

[47] Ibid

[48] Ibid

[49] See COSIM JOHN SAYID, PROPERTY AND CITIZENSHIP: WHAT KELO LEAVES BEHIND;  Second Working Draft as of January 15th, 2005; p. 8, http://law.bepress.com/cgi/viewcontent.cgi?article=4471&context=expresso