Daniel M. Lehmann
Daniel M. Lehmann ()

If the government wants private property, the government can take the property using eminent domain. In New York, the private property owner can do little to stop the government.

However, on Aug. 5, 2016, the New Jersey Superior Court denied the government’s use of eminent domain. The court did not automatically approve the governmental attempt to exercise eminent domain without legitimate consideration.

The case, Casino Reinvestment Development Authority v. Birnbaum, Docket No. ATL-L-589-14 (Law Div. Aug. 5, 2016), highlights for the practitioner the difference between New York’s and New Jersey’s judicial treatment of a private property owner challenging the use of eminent domain. This case also alerts the practitioner to the possibility that New Jersey courts, unlike New York courts, are on a path toward providing the private property owner with greater constitutional protection.

Atlantic City Project

In Birnbaum, Judge Julio L. Mendez of the Superior Court of New Jersey denied the Casino Reinvestment Development Authority (CRDA)—a public corporate body of the State of New Jersey—from using its power of eminent domain to condemn residential property in Atlantic City, N.J., for the purposes of promoting tourism and constructing a mixed-use development project.

The CRDA tried to buy out the defendants Charles and Lucinda Birnbaum and offered $238,500. Almost all of the other property owners in the area sold their property to the CRDA. However, the Birnbaums rejected the offer. The CRDA decided that if it could not purchase the property, it would forcefully take it by eminent domain.

Initially, the court held that the CRDA was authorized to use eminent domain to take the Birnbaum property. However, the Birnbaums’ lawyers requested that the court reconsider, and the court changed its mind.

Instead of rubber-stamping the use of eminent domain, the court considered “the current unprecedented financial crisis in Atlantic City, the unique location of the Birnbaums’ property, the history of unsuccessful economic development projects in this area of Atlantic City, [and] the lack of any specific and viable plans of the use of this property[.]“

The court “was concerned that the Birnbaums’ property could sit vacant for many years before being put to a public use.” The court noted that there were already several blocks of undeveloped land that have been waiting for many years for the economic redevelopment project to occur.

In this Court’s view, the CRDA is not empowered to condemn a property only to have it sit idly, potentially for years on end, as they wait for [the] right project to present itself. This has already happened in many of the surrounding properties that sit vacant waiting for a project to come forward. While well intentioned, the South Inlet Mixed Use Development Project is only a conceptual plan. The likelihood of that plan becoming reality within a reasonable time period based on the current financial crisis in Atlantic City is remote. If such a viable plan comes along, nothing prevents the CRDA from renewing its efforts to take the Birnbaum property if necessary.

The CRDA was unable to provide the court with reasonable assurance that the Birnbaums’ property would not sit idle if condemned.

The court concluded that the CRDA’s decision to condemn the Birnbaums’ property was “a manifest abuse of the eminent domain power[.]“

This decision differs from the current judicial trend. Compare this decision to perhaps one of the most criticized eminent domain decisions from the U.S. Supreme Court, Kelo v. City of New London, 545 U.S. 469 (2005).

‘Kelo v. City of New London’

In 2005, the Supreme Court deferred to the government’s justification of the use of eminent domain and enabled courts nationwide to authorize more liberally the use of the eminent domain power.

The Fifth Amendment to the U.S. Constitution states that private property shall not be taken for public use without just compensation (U.S. Const. amend. V.). The Fifth Amendment was “designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.” Armstrong v. United States, 364 U.S. 40, 49 (1960).

Yet, in Kelo, which was a 5-4 decision, the Supreme Court allowed the city of New London, in Connecticut, to take private residential homes so that, in part, the Pfizer pharmaceutical company could build a $300 million research facility. In other words, the government forcefully took private property and gave it to a private corporation under the authority of the Fifth Amendment.

The Supreme Court interpreted the words “public use” and held that beliefs of future benefits or hopes to create jobs, increase tax revenues and revitalize economically distressed areas constituted a “public use” to take private residential homes.

The Supreme Court declined to question the city’s development corporation and stated that the development corporation was entitled to deference because there was no evidence of an illegitimate purpose. According to Justice Sandra Day O’Connor’s dissent in Kelo, the majority effectively created a license for government to take private property based on incidental or pretextual tentative future public benefits.

Presently, more than 11 years since Kelo, there is still no Pfizer-built facility for which the city of New London hoped and on which it based its public purpose. Many legal scholars argue that it is because of the condemnation that the project area became blighted and the Kelo property is still vacant. See, e.g., Richard A. Epstein, “‘Kelo v. City of New London’ Ten Years Later” (National Review Online, June 23, 2015); see also, generally, Ilya Somin, “The Grasping Hand: ‘Kelo v. City of New London’ and the Limits of Eminent Domain” (University of Chicago Press, 1st Ed. 2015).

In a Nov. 16, 2011, lecture, Justice John Paul Stevens, who wrote the Kelo majority decision, called it “the most unpopular opinion that I wrote during my 34-year tenure on the Supreme Court. Indeed, I think it is the most unpopular opinion that any member of the court wrote during that period.” (John Paul Stevens, “Kelo, Popularity, and Substantive Due Process,” Albritton Lecture, University of Alabama School of Law, Nov. 16, 2011, at 1.) Additionally, Stevens “admitted that his ruling was in part based on an ‘embarrassing to acknowledge’ error: conflating nineteenth—and early twentieth-century Due Process Clause cases with Public Use Clause precedents.” Somin, supra, at 8 (citing Stevens, supra, at 16).

Justice Antonin Scalia described Kelo as one of the Supreme Court’s rare “mistakes of political judgment, of estimating how far…it could stretch beyond the text of the Constitution,” just like the Supreme Court did in Dred Scott v. Sandford, 60 U.S. 393 (1857), the decision upholding slavery. Jess Bravin, Justice Stevens on His ‘Most Unpopular Opinion,’ Wall St. J., Nov. 11, 2011.

‘Kelo’s’ New York Progeny

Considering Kelo, in Matter of Goldstein v. New York State Urban Development Corporation, 13 N.Y.3d 511 (2009), the New York State Court of Appeals permitted the use of eminent domain power that took private residential homes in downtown Brooklyn for the Atlantic Yards development —which includes the Barclays Center indoor arena—and gave the private properties to a private developer.

Today, the original private developer no longer owns a majority stake in the Atlantic Yards development. Instead, the primary stakeholder is The People’s Republic of China.

Less than a year after Goldstein, and again considering Kelo, in Matter of Kaur v. New York State Urban Development Corporation, 15 N.Y.3d 235 (2010), the Court of Appeals again permitted the development corporation to take private properties in the Manhattanville area of West Harlem by eminent domain and transfer them to Columbia University even though it would only benefit “a private elite education institution” for the development of its new 17-acre campus, Matter of Kaur v. New York State Urban Development Corporation, 72 A.D.3d 1, 2 (1st Dept. 2009).

Birnbaum, Kelo, Goldstein, and Kaur share the following key facts. A development corporation took private property and gave it to a private developer for a mixed-use development project. The development corporation issued a study that found that the private property was blighted. The development corporation financed and issued the blight justification in order to take the property. The public use was intention, projection, and hope of future benefit. The court (except for Judge Mendez in Birnbaum) deferred to the development corporation’s public purpose and approved eminent domain use.

Judge Robert Smith, who was the sole Court of Appeals dissenter in Goldstein, stated that the court gave too much deference to the development corporation’s “self-serving determination” that the property was “blighted.”

The good news from today’s decision is that our Court has not followed the lead of the United States Supreme Court [(Kelo)] in rendering the “public use” restriction on the Eminent Domain Clause virtually meaningless. The bad news is that the majority is much too deferential to the self-serving determination by Empire State Development Corporation (ESDC) that petitioners live in a “blighted” area, and are accordingly subject to having their homes seized and turned over to a private developer.

***

The whole point of the public use limitation is to prevent takings even when a state agency deems them desirable. To let the agency itself determine when the public use requirement is satisfied is to make the agency a judge in its own cause. I think that it is we who should perform the role of judges, and that we should do so by deciding that the proposed taking in this case is not for public use.

Goldstein, at 546, 552.

But, in Kaur, Smith stated in a concurrence that he was bound by the Goldstein precedent even though he believed the “blight” finding was “strained and pretextual.” Kaur, 15 N.Y.3d at 262.

The Kaur court overruled the decision by New York Appellate Division Judge James Catterson, who held that taking private property and giving it to Columbia University for the private institution’s sole benefit was unconstitutional and abusive.

Shortly after Kaur, Judge Catterson, like Judge Smith in Kaur, concurred with the court majority that approved the use of eminent domain when the city of New York authorized the use of eminent domain to take private property in East Harlem because it determined that the area was “blighted.” Matter of Uptown Holdings v. City of New York, 77 A.D.3d 434 (1st Dept. 2010).

Catterson stated in his concurrence:

In my view, the record amply demonstrates that the neighborhood in question is not blighted, that whatever blight exists is due to the actions of the city and/or is located far outside the project area, and that the justification of underutilization is nothing but a canard to aid in the transfer of private property to a developer. Unfortunately for the rights of the citizens affected by the proposed condemnation, the recent rulings of the Court of Appeals in [Goldstein] and [Kaur] have made plain that there is no longer any judicial oversight of eminent domain proceedings. Thus, I am compelled to concur with the majority.

Id., at 436-37.

Conclusion

Under the current precedent of Kelo, Goldstein, and Kaur, there is little that the private property owner can do to fight the government’s use of eminent domain. This is because of the broad interpretation of the words “public use” stated in the Fifth Amendment of the U.S. Constitution and Article I, Section 7, of the New York State Constitution.

However, considering Birnbaum, it is possible that the courts in New Jersey are on a path toward more narrowly interpreting Kelo and “public use” and providing the private property owner with greater constitutional protection.

If the government wants private property, the government can take the property using eminent domain. In New York , the private property owner can do little to stop the government.

However, on Aug. 5, 2016, the New Jersey Superior Court denied the government’s use of eminent domain. The court did not automatically approve the governmental attempt to exercise eminent domain without legitimate consideration.

The case, Casino Reinvestment Development Authority v. Birnbaum, Docket No. ATL-L-589-14 (Law Div. Aug. 5, 2016), highlights for the practitioner the difference between New York ‘s and New Jersey’s judicial treatment of a private property owner challenging the use of eminent domain. This case also alerts the practitioner to the possibility that New Jersey courts, unlike New York courts, are on a path toward providing the private property owner with greater constitutional protection.

Atlantic City Project

In Birnbaum, Judge Julio L. Mendez of the Superior Court of New Jersey denied the Casino Reinvestment Development Authority (CRDA)—a public corporate body of the State of New Jersey—from using its power of eminent domain to condemn residential property in Atlantic City, N.J., for the purposes of promoting tourism and constructing a mixed-use development project.

The CRDA tried to buy out the defendants Charles and Lucinda Birnbaum and offered $238,500. Almost all of the other property owners in the area sold their property to the CRDA. However, the Birnbaums rejected the offer. The CRDA decided that if it could not purchase the property, it would forcefully take it by eminent domain.

Initially, the court held that the CRDA was authorized to use eminent domain to take the Birnbaum property. However, the Birnbaums’ lawyers requested that the court reconsider, and the court changed its mind.

Instead of rubber-stamping the use of eminent domain, the court considered “the current unprecedented financial crisis in Atlantic City, the unique location of the Birnbaums’ property, the history of unsuccessful economic development projects in this area of Atlantic City, [and] the lack of any specific and viable plans of the use of this property[.]“

The court “was concerned that the Birnbaums’ property could sit vacant for many years before being put to a public use.” The court noted that there were already several blocks of undeveloped land that have been waiting for many years for the economic redevelopment project to occur.

In this Court’s view, the CRDA is not empowered to condemn a property only to have it sit idly, potentially for years on end, as they wait for [the] right project to present itself. This has already happened in many of the surrounding properties that sit vacant waiting for a project to come forward. While well intentioned, the South Inlet Mixed Use Development Project is only a conceptual plan. The likelihood of that plan becoming reality within a reasonable time period based on the current financial crisis in Atlantic City is remote. If such a viable plan comes along, nothing prevents the CRDA from renewing its efforts to take the Birnbaum property if necessary.

The CRDA was unable to provide the court with reasonable assurance that the Birnbaums’ property would not sit idle if condemned.

The court concluded that the CRDA’s decision to condemn the Birnbaums’ property was “a manifest abuse of the eminent domain power[.]“

This decision differs from the current judicial trend. Compare this decision to perhaps one of the most criticized eminent domain decisions from the U.S. Supreme Court, Kelo v. City of New London , 545 U.S. 469 ( 2005 ) .

‘Kelo v. City of New London’

In 2005, the Supreme Court deferred to the government’s justification of the use of eminent domain and enabled courts nationwide to authorize more liberally the use of the eminent domain power.

The Fifth Amendment to the U.S. Constitution states that private property shall not be taken for public use without just compensation (U.S. Const. amend. V.). The Fifth Amendment was “designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.” Armstrong v. United States , 364 U.S. 40, 49 ( 1960 ) .

Yet, in Kelo, which was a 5-4 decision, the Supreme Court allowed the city of New London, in Connecticut, to take private residential homes so that, in part, the Pfizer pharmaceutical company could build a $300 million research facility. In other words, the government forcefully took private property and gave it to a private corporation under the authority of the Fifth Amendment.

The Supreme Court interpreted the words “public use” and held that beliefs of future benefits or hopes to create jobs, increase tax revenues and revitalize economically distressed areas constituted a “public use” to take private residential homes.

The Supreme Court declined to question the city’s development corporation and stated that the development corporation was entitled to deference because there was no evidence of an illegitimate purpose. According to Justice Sandra Day O’Connor’s dissent in Kelo, the majority effectively created a license for government to take private property based on incidental or pretextual tentative future public benefits.

Presently, more than 11 years since Kelo, there is still no Pfizer-built facility for which the city of New London hoped and on which it based its public purpose. Many legal scholars argue that it is because of the condemnation that the project area became blighted and the Kelo property is still vacant. See, e.g., Richard A. Epstein, “‘Kelo v. City of New London’ Ten Years Later” (National Review Online, June 23, 2015); see also, generally, Ilya Somin, “The Grasping Hand: ‘Kelo v. City of New London’ and the Limits of Eminent Domain” (University of Chicago Press, 1st Ed. 2015).

In a Nov. 16, 2011, lecture, Justice John Paul Stevens, who wrote the Kelo majority decision, called it “the most unpopular opinion that I wrote during my 34-year tenure on the Supreme Court. Indeed, I think it is the most unpopular opinion that any member of the court wrote during that period.” (John Paul Stevens, “Kelo, Popularity, and Substantive Due Process,” Albritton Lecture, University of Alabama School of Law , Nov. 16, 2011, at 1.) Additionally, Stevens “admitted that his ruling was in part based on an ‘embarrassing to acknowledge’ error: conflating nineteenth—and early twentieth-century Due Process Clause cases with Public Use Clause precedents.” Somin, supra, at 8 (citing Stevens, supra, at 16).

Justice Antonin Scalia described Kelo as one of the Supreme Court’s rare “mistakes of political judgment, of estimating how far…it could stretch beyond the text of the Constitution,” just like the Supreme Court did in Dred Scott v. Sandford , 60 U.S. 393 ( 1857 ) , the decision upholding slavery. Jess Bravin, Justice Stevens on His ‘Most Unpopular Opinion,’ Wall St. J., Nov. 11, 2011.

‘Kelo’s’ New York Progeny

Considering Kelo , in Matter of Goldstein v. New York State Urban Development Corporation , 13 N.Y.3d 511 ( 2009 ) , the New York State Court of Appeals permitted the use of eminent domain power that took private residential homes in downtown Brooklyn for the Atlantic Yards development —which includes the Barclays Center indoor arena—and gave the private properties to a private developer.

Today, the original private developer no longer owns a majority stake in the Atlantic Yards development. Instead, the primary stakeholder is The People’s Republic of China.

Less than a year after Goldstein , and again considering Kelo , in Matter of Kaur v. New York State Urban Development Corporation , 15 N.Y.3d 235 ( 2010 ) , the Court of Appeals again permitted the development corporation to take private properties in the Manhattanville area of West Harlem by eminent domain and transfer them to Columbia University even though it would only benefit “a private elite education institution” for the development of its new 17-acre campus, Matter of Kaur v. New York State Urban Development Corporation , 72 A.D.3d 1, 2 ( 1st Dept. 2009 ) .

Birnbaum, Kelo, Goldstein, and Kaur share the following key facts. A development corporation took private property and gave it to a private developer for a mixed-use development project. The development corporation issued a study that found that the private property was blighted. The development corporation financed and issued the blight justification in order to take the property. The public use was intention, projection, and hope of future benefit. The court (except for Judge Mendez in Birnbaum) deferred to the development corporation’s public purpose and approved eminent domain use.

Judge Robert Smith, who was the sole Court of Appeals dissenter in Goldstein, stated that the court gave too much deference to the development corporation’s “self-serving determination” that the property was “blighted.”

The good news from today’s decision is that our Court has not followed the lead of the United States Supreme Court [(Kelo)] in rendering the “public use” restriction on the Eminent Domain Clause virtually meaningless. The bad news is that the majority is much too deferential to the self-serving determination by Empire State Development Corporation (ESDC) that petitioners live in a “blighted” area, and are accordingly subject to having their homes seized and turned over to a private developer.

***

The whole point of the public use limitation is to prevent takings even when a state agency deems them desirable. To let the agency itself determine when the public use requirement is satisfied is to make the agency a judge in its own cause. I think that it is we who should perform the role of judges, and that we should do so by deciding that the proposed taking in this case is not for public use.

Goldstein, at 546, 552.

But, in Kaur, Smith stated in a concurrence that he was bound by the Goldstein precedent even though he believed the “blight” finding was “strained and pretextual.” Kaur, 15 N.Y.3d at 262.

The Kaur court overruled the decision by New York Appellate Division Judge James Catterson, who held that taking private property and giving it to Columbia University for the private institution’s sole benefit was unconstitutional and abusive.

Shortly after Kaur, Judge Catterson, like Judge Smith in Kaur, concurred with the court majority that approved the use of eminent domain when the city of New York authorized the use of eminent domain to take private property in East Harlem because it determined that the area was “blighted.” Matter of Uptown Holdings v. City of New York , 77 A.D.3d 434 ( 1st Dept. 2010 ) .

Catterson stated in his concurrence:

In my view, the record amply demonstrates that the neighborhood in question is not blighted, that whatever blight exists is due to the actions of the city and/or is located far outside the project area, and that the justification of underutilization is nothing but a canard to aid in the transfer of private property to a developer. Unfortunately for the rights of the citizens affected by the proposed condemnation, the recent rulings of the Court of Appeals in [Goldstein] and [Kaur] have made plain that there is no longer any judicial oversight of eminent domain proceedings. Thus, I am compelled to concur with the majority.

Id., at 436-37.

Conclusion

Under the current precedent of Kelo, Goldstein, and Kaur, there is little that the private property owner can do to fight the government’s use of eminent domain. This is because of the broad interpretation of the words “public use” stated in the Fifth Amendment of the U.S. Constitution and Article I, Section 7, of the New York State Constitution.

However, considering Birnbaum, it is possible that the courts in New Jersey are on a path toward more narrowly interpreting Kelo and “public use” and providing the private property owner with greater constitutional protection.