Supreme Court’s Decision in Kelo vs. New London Reaffirms City’s Right to Use Eminent Domain Authority to Facilitate Economic Redevelopment

On June 23, 2005, in a divided 5 to 4 decision, the U.S. Supreme Court (“Court”) reaffirmed a century’s worth of precedent regarding whether a governmental entity may use its eminent domain authority to condemn private property for a public use.

The case, Kelo v. City of New London, 125 S. Ct. 2655, No. 04-108, 2005 U.S. LEXIS 5011, involved the New London Development Corporation’s (NLDC’s) efforts to condemn 15 homes in the Fort Trumbull neighborhood of New London, CT. After decades of decline, the state of Connecticut had designated New London as a “distressed municipality” in 1990. State and local officials later formed the NLDC to assist the city in its economic redevelopment planning efforts. NLDC convened a series of neighborhood meetings and later submitted its plans to the relevant state agencies for review. Upon state approval, the NLDC finalized its integrated development plan for 90 acres in the Fort Trumbull area. The city council approved the redevelopment plan in January 2000 and authorized the NLDC to acquire property, exercising eminent domain in the city’s name if needed.

Nine property owners owning 15 properties in the Fort Trumbull area resisted the City’s eminent domain proceedings. They were successful in Superior Court, where the lower court issued a permanent restraining order prohibiting the taking of their land. The Connecticut Supreme Court, however, ruled that the Connecticut municipal development statute, pursuant to which the takings had occurred, expressed a clear legislative intent and that the taking of land as part of an economic development project was a “public use” that was in the “public interest.” The taking, according to the Connecticut Supreme Court, was valid under both the state and federal constitutions.

Justice Stevens’ opinion for the majority stated that the Connecticut Supreme Court’s decision was consistent with 100 years worth of judicial precedent, citing often to the Court’s prior decisions in Berman v. Parker, 348 U.S. 26 (1954) and Hawaii Housing Authority v. Midkiff, 467 U.S. 229 (1984). He emphasized that the taking before the Court was being done pursuant to a “carefully considered” economic development plan and that there was no evidence of an “illegitimate purpose” in that plan. He reiterated that the Court had previously determined that “public use” meant “public purpose,” and had rejected long ago any requirement that the property be put to use for the general public.

Justice Stevens also emphasized that the Court had a longstanding policy of deferring to legislative judgments in this field. The only question, then, was whether the City’s development plan served a “public purpose.” “For more than a century, our public use jurisprudence has wisely eschewed rigid formulas and intrusive scrutiny in favor of affording legislatures broad latitude in determining what public needs justify the use of the takings power.” Kelo v. City of New London, No. 04-108, 2005 U.S. LEXIS 5011, at *25. The Court concluded that the City had carefully formulated its economic development plan, believing that the plan would provide substantial benefits to the community. Looking at the plan as a whole, the Court concluded that the plan served a public purpose and thereby satisfied the public use requirements of the Fifth Amendment. The Court declined to second guess the City’s determinations about what land should be acquired. Justice Stevens reiterated that the states could place more stringent requirements on what constitutes a “public use” under their constitutions, as some have already done.

Justice Kennedy, writing a concurring opinion, supported the majority’s deferential standard of review, but opined that he could see certain circumstances where a more stringent standard of review would be appropriate. “There may be private transfers in which the risk of undetected impermissible favoritism of private parties is so acute that a presumption (rebuttable or otherwise) of invalidity is warranted under the Public Use Clause. This demanding level of scrutiny, however, is not required simply because the purpose of the taking is economic redevelopment.” Id. at *40.

The dissenting justices, on the other hand, argued for greater judicial involvement and stricter scrutiny. Justice O’Connor sounded the alarm by stating that, “[u]nder the banner of economic development, all private property is now vulnerable to being taken and transferred to another private owner, so long as it might be upgraded ... .” Dissenting opinion, slip at 1. She asserted that the Court’s prior cases had identified three categories of cases where the taking complied with the public use requirement: (1) transfers of private property to public ownership, for roads, hospitals or military bases; (2) transfers of private property to common carriers like railroads who made the property available for public use, and (3) transfers of private property to eliminate a public harm, such as blighted neighborhoods or an oligopoly in land ownership. Justice O’Connor argued that the majority had substantially expanded the “public use” concept in its opinion. “Nothing is to prevent the State from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory.” Id. at *61. “If legislative prognostications about the secondary public benefits of a new use can legitimate a taking, there is nothing in the Court’s rule ... to prohibit property transfers generated with less care, that are less comprehensive, that happen to result from less elaborate process, whose only projected advantage is the incidence of higher taxes, or that hope to transform an already prosperous city into an even more prosperous one.” Id. at *63.

In a separate dissenting opinion, Justice Thomas argued for a total reconsideration of the Court’s takings jurisprudence, arguing that the Court had strayed far from the Clause’s original intent. He argued that the government or its citizens must be able to “employ” or “use” the taken property. He took issue with the majority’s almost complete deference to the legislature: “Something has gone seriously awry with this Court’s interpretation of the Constitution. Though citizens are safe from the government in their homes, the homes themselves are not.” Kelo v. City of New London, No. 04-108, 2005 U.S. LEXIS 5011, at *87.

Reaction to the opinion has been swift and vocal. Members of the House have already won passage of an amendment to the 2006 HUD appropriations budget to prohibit the use of federal funds to “enforce the judgment of the United States Supreme Court” in Kelo. Other legislation has been introduced (H.R. 3135) that would prohibit any state or locality from using eminent domain authority whenever federal funds are involved with a project. At least eight states (Arkansas, Florida, Illinois, Kentucky, Maine, Montana, South Carolina and Washington state) currently forbid the use of eminent domain authority for economic development unless the purpose is to eliminate blight, and other states are expected to follow suit. Texas and California, for example, have already proposed constitutional amendments to bar the government from taking private property for economic redevelopment purposes. Connecticut is considering imposing a moratorium on its cities’ use of their eminent domain authority until its legislature can act. Despite having a strict eminent domain law, the legislature in Illinois is evaluating whether to make its statute more stringent. Similarly, the Speaker of the House in Florida has appointed a select committee to determine whether the Florida Constitution, and related state laws and regulations, adequately protect private property rights. Taking a different approach, the CEO of Freestar Media has sent a letter to the board of selectmen in Justice Souter’s hometown of Weare, NH, suggesting that Justice Souter’s farmhouse be condemned and turned into a hotel.

Litigation in state courts is expected to increase in the wake of the Kelo decision. Other questions that are likely to be raised in the coming months include how comprehensive does the city’s planning process need to be to pass constitutional muster? Will a taking be found legal if the city knows in advance which private developer is likely to benefit from its redevelopment plans? How should fair market value be determined – on the basis of the property’s use at the time of the taking, or should the property owner be able to share in the anticipated increase in the value to his property? How will this decision (and the Congressional reaction) affect federal funding for brownfields redevelopment projects? Stay tuned for further developments.