An Eminently Debatable Issue: Lawyers Digest Practical Applications of Supreme Court's Kelo Ruling

by Gwen Moritz  on Monday, Aug. 1, 2005 12:00 am  

Few rulings by the U.S. Supreme Court are so momentous that their names enter the public conscience. Kelo v. New London seems to have the potential to join Roe v. Wade, Miranda, Dred Scott and Brown v. Board of Education.

The decision, handed down in June, upheld the Connecticut city of New London's right to forcibly acquire 15 homes in a strategically positioned neighborhood where the city wanted to foster economic development.

The exceptionally complex set of facts decided by a bare majority of the nine justices in Kelo is unlikely to be directly applicable to many — or any — other cases. But the idea that the Supreme Court has approved of a government taking property

from one private owner in order to make it available to another, more desirable private owner has grabbed the public's attention — even though legal experts disagree on whether Kelo represents any change at all.

"The specter of condemnation hangs over all property. Nothing is to prevent the State from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mal, or any farm with a factory," wrote Justice Sandra Day O'Connor in a dissenting opinion that was joined by Chief Justice William Rehnquist and Justices Antonin Scalia and Clarence Thomas.

But Annamary Dougherty, a Little Rock lawyer who advises municipal governments around the state, described the ruling as "good news" because it removed doubt about a governmental tool she believes already existed.

"The spin is that government can now take property for whatever reason, but I don't think the eminent domain law was expanded at all," Dougherty said. "You still have to pay just compensation; you still have to prove that (taking property) is for a public purpose."

Dougherty points to an article published by the Georgetown Environmental Law & Policy Institute called "The Myth That Kelo Has Expanded the Scope of Eminent Domain." Its author, John D. Esheverria, argues that the Kelo decision actually gave less authority to state and local governments in deciding what constitutes a "public use" for seized property than had earlier high court decisions.

Little Rock attorney Christopher O. Parker's practice has included eminent domain work for the Arkansas State Highway & Transportation Department and representation of businessman Gene Pfeifer in his dispute over the city of Little Rock's plan to take property for the Clinton Presidential Library grounds. Parker, too, views the Kelo case as primarily one of "federal deference to states' rights."

"If eminent domain is a means to an end, then you focus on whether the end is legitimate," Parker said. The majority of justices, then, concluded that New London's desire to capitalize on the arrival of a Pfizer Inc. research facility by creating more available commercial space in its vicinity was a legitimate use of eminent domain.

An important point, Parker said, is that the prevailing opinion among the justices did not — as some critics and the Kelo plaintiffs themselves have suggested — endorse transferring ownership from a specific owner to another specific owner simply to increase the taxes generated on the property.

"While such an unusual exercise of government power would certainly raise a suspicion that a private purpose was afoot, the hypothetical cases posited by (the plaintiffs) can be confronted if and when they arise," Associate Justice John Paul Stevens wrote in the majority opinion. "They do not warrant the crafting of an artificial restriction on the concept of public use."

That was an important point to Dougherty.

"More taxes alone is not enough to be a public benefit," she said. "I think if it was just Pfizer, the Supreme Court would never have bought it."

Parker said it seemed to matter to the Supreme Court justices that the city of New London didn't know exactly which new private party would end up owning the former homesites seized through eminent domain. And that might be an important distinction for the most recent incarnation of eminent domain authority in Arkansas, the tax increment financing district.

"To the extent that it matters, you aren't going to have that with a TIF," Parker said.

Under the state's TIF laws, the TIF districts designated by city or county governments do have the authority to condemn and acquire property through eminent domain. While not necessarily the case, TIF districts in Arkansas have generally been conceived for specific developments - The Shoppes at North Hills in North Little Rock or The Mall at Turtle Creek in Jonesboro, for instance.

In designated TIF districts, the additional property taxes generated by new construction is diverted to repay bonds that financed infrastructure on the site itself — a cost-savings for the developers and owners. But Parker pointed out that because of the eminent domain authority, "TIF may be a tool to consolidate land as much as a bond-issue tool."

No TIF district in the state has yet used eminent domain to force the sale of property, but Parker said the fact that the TIF district could do so changes the nature of private negotiations.

Chad Avery, a Little Rock attorney who has written extensively on tax increment financing, said the TIF law in Arkansas, as amended earlier this year, would make it harder — but not impossible — to use TIF for areas that are not blighted.

The New London neighborhood that was the subject of the Kelo case was not blighted, Avery said, so Arkansas law already makes it harder for a TIF district to do what New London did.

So does Kelo actually change anything in Arkansas?

"I think it creates a precedent that will cause city and county officials to carefully consider whether a TIF district is appropriate in certain situations," Avery said.

Dougherty said Kelo has not made her municipal clients any bolder.

"Even some of my clients have said, 'I don't like the decision. I know we have another tool, but I don't want my property taken away,'" Dougherty said. "I have had nobody call me and say, 'Yay, now we can take people's property.'"

What Is 'Public Use?'

The Fifth Amendment to the U.S. Constitution guarantees more than simply the right not to have to testify against oneself. It also includes the "takings clause," whose 12 words are the subject of renewed debate following a U.S. Supreme Court ruling on a local government's power of eminent domain.

The amendment reads, with emphasis added:

"No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation."

The Arkansas Constitution, written with the benefit of nearly a century of federal legal precedents, deals similarly with the concept of eminent domain in Article 2, Section 22:

"The right of property is before and higher than any constitutional sanction; and private property shall not be taken, appropriated or damaged for public use, without just compensation therefor."

In most legal challenges arising from the exercise of eminent domain, courts are asked to settle a dispute over the dollar figure that represents "just compensation." But there is a body of case law concerning an equally fundamental question: What is a public use?

In the recent U.S. Supreme Court ruling in Kelo v. New London, both the majority and minority opinions acknowledge that public use does not necessarily mean that the property must be used by the public. That question was effectively settled in the court's 1954 Berman v. Parker decision concerning an "urban renewal" project in Washington, D.C. In it, Justice William O. Douglas famously wrote:

"The concept of public welfare is broad and inclusive... The values it represents are spiritual as well as physical, aesthetic as well as monetary. It is within the power of the legislature to determine that the community should be beautiful as well as healthy, spacious as well as clean, well-balanced as well as carefully patrolled."

In a case out of Trumann in 1964, the Arkansas Supreme Court accepted the U.S. Supreme Court's approach when it came to urban renewal projects. But in 1967 and 1976, the court seemed to revert to a more conservative and traditional approach to the definition of a public use.

In the first, Little Rock v. Raines, the state's high court refused to allow the city of Little Rock to condemn agricultural land outside the city limits for a port and an industrial park. In the second, the State Highway Department was forbidden to condemn a portion of a White County man's property in order to build a new driveway for a neighbor whose house was going to be cut off by construction of a new highway. The court said saving tax money by acquiring part of the neighbor's property rather than all of it was not a good enough reason to force the transfer of ownership from one private party to another.



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