TCS Daily

Eminent Domain, Imminent Theft

By Pejman Yousefzadeh - March 1, 2005 12:00 AM

We believe that our homes are our castles, which is why it rightly angers us when someone invades the sanctity and privacy of our homes. Usually, we associate burglars and other criminals with this kind of invasion. But if you think that keeping your home and property safe from outlaws is your only concern, I have bad news for you. You also have to worry about whether the government can take your property away from you.

On Tuesday, February 22, the Supreme Court heard arguments in the case of Kelo v. City of New London. This bulletin gives a good accounting of the case, but to summarize, in November, 2000, petitioner Susette Kelo was informed of a notice posted on the door of her home that she had four months to vacate her home or else police would remove her and her belongings via the power of eminent domain -- a power that the city of New London had transferred to the New London Development Corporation (NLDC), a private non-profit organization.

Eminent domain power extends from the Fifth Amendment's statement that property shall not be "taken for public use, without just compensation." In addition, the Supreme Court ruled in Berman v. Parker that private property can be seized through eminent domain when the property is blighted and the government wants to institute an urban renewal project. New London claims that it has offered Susette Kelo and other petitioners a fair price for their land, a claim which they say satisfies the "just compensation" requirements of the Fifth Amendment.

But the "urban renewal" loophole is large enough to drive a truck through. Consequently, local governments have abused eminent domain by claiming that it is being done in the name of urban renewal. This editorial, written by lawyer and blogger Tim Sandefur (who wrote a brief in favor of Susette Kelo and the other petitioners), reveals just how far the abuse has spread:

". . . In the early 1980s, the General Motors Corp. persuaded the city of Detroit -- reeling from recession -- to condemn a neighborhood called Poletown (due to the many Polish immigrants there) and sell it cheap to GM to build an auto factory.

"The Michigan Supreme Court held the condemnation was legal: If the government declared a condemnation would benefit the public, the courts would not stand in the way. In a whirlwind of litigation that lasted only a few weeks, neighbors watched as their community was pulverized.

"The Poletown decision led to an epidemic of eminent domain abuse. In 1999, the city of Merriam, Kan., condemned a Toyota dealership to sell the land to a BMW dealer instead.

"That same year, Bremerton, Wash., condemned 22 homes to resell the land to private developers. In one notorious case, billionaire Donald Trump convinced Atlantic City, N.J., to condemn an elderly widow's home so he could build a limousine parking lot."

In Kelo, the attempted exercise of the NLDC's eminent domain power was spurred by the decision of Pfizer, Inc. to build a $270 million research facility in the city of New London -- a decision that caused the city of New London to adopt a redevelopment plan that would ultimately affect the land currently owned by Kelo and the other petitioners. But as University of Chicago law professor Richard Epstein (who also wrote a brief on behalf of Susette Kelo and the other petitioners) informs us, "New London still hasn't found any viable projects to put on the nearly 90 acres of prime property it already owns." This -- as law professor Stephen Bainbridge points out -- means that it is not certain what the petitioners' land will be used for. Additionally, Susette Kelo has refurbished her home, and her neighborhood -- while depressed in value -- is not "blighted."

As such, the NLDC is not trying to take land for a "public use" such as a public works project, but rather, it is taking land that is not blighted in order to institute vague and unformed businesses and development projects that will generate higher revenues for the city. If this is not an abuse of the eminent domain power, it is difficult to conceive of a situation that is.

But conceive of a situation the Justices did during oral arguments in Kelo. At one point Justice Sandra Day O'Connor asked the attorney representing the city of New London whether eminent domain could be exercised in a situation where the government takes the property of a smaller business in order to give it to a larger one. The city attorney answered that under such a hypothetical, the government could indeed exercise eminent domain. Under this reasoning, not only will you have to lose your homes for development plans that are still up in the air, the local coffee shop may have to give way to a Starbucks, the local bookstore may have to surrender its property to the creation of the latest Borders outlet, and the local video store may have to vacate in favor of the creation of yet another Blockbuster franchise -- all because a Starbucks, a Borders and a Blockbuster could give local governments more tax revenue. In none of these hypothetical situations is the "public use" requirement satisfied. In none of these situations is an "urban blight" finding required. All that is required under the argument of the New London city attorney is that a local government must find that a current and existing business would yield less tax revenue than a potential incoming business would, and that government could exercise its power of eminent domain.

While the public seizure of private real property is scary enough, the power of eminent domain can be abused still further. This article calls for the exercise of eminent domain by local governments to take away the patents drug companies own on their products and give those patents to companies that will agree to sell pharmaceutical products at lower prices. Never mind the already heavy financial burden on pharmaceutical companies to perform the necessary research and development on their products. And never mind that drug companies will be less inclined to engage in research, justly worried that their inventions could be appropriated under this newfangled vision of eminent domain abuse. After all, what incentive is there for drug companies to come out with new products and engage in costly and time-consuming research if their property rights are not respected? Millions of Americans will have their lives negatively impacted by additional barriers against pharmaceutical research, development and distribution.

Blogger and attorney Marty Lederman reports that the oral argument session in Kelo appear to have gone poorly for the petitioners and that this could be the tiding of bad things to come when the Supreme Court ultimately rules. We should all hope that Lederman's impressions are incorrect. The abuse of eminent domain has reached worrisome levels, and if unchecked, will lead to disastrous policy consequences. It is heartening to see that a vigorous fight is being waged against such abuse, but such abuse can only be stopped by victories in cases like Kelo.


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