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In our last column, we discussed County of Wayne v. Hathcock, a decision by the Michigan Supreme Court in July of this year overturning Poletown Neighborhood Council v. Detroit, 410 Mich. 616, 304 NW2d 455 (1981). Therein, the court held that there could not be a condemnation based upon an economic benefit to the community as this was not a “public use” such as is contemplated in the Michigan Constitution. That constitutional language echoes constitutional provisions in most, if not all, states as well as the Fifth Amendment to the U.S. Constitution. In the opening sentence to that column (The New York Law Journal, Aug. 25, 2004, at p. 3), we stated: “We have been hearing a drumbeat of complaints from around the country [about] the increasing use of the power of eminent domain to acquire property and turn it over to private developers in the name of economic benefit to the community as it is not a ‘public use’ . . . .” Apparently we were not the only ones hearing that complaint. Since the writing of that column, the U.S. Supreme Court granted a writ of certiorari in the case of Kelo, et al. v. City of New London, et al. based on the decision of the Connecticut Supreme Court at 843A2d 500 (Conn. 2004). The ‘Kelo’ Case The City of New London had adopted a Municipal Development Plan as prepared by the New London Development Corp. The plan covered 90 acres divided into seven different parcels. The appellants owned homes in two of those parcels. The taking was to create private office space and parking. While the development corporation would own the land, it was to be leased to a private developer under a 99-year lease, the developer paying a rent of $1 per year. The condemnation proceedings were brought not as an urban renewal, but as a Municipal Development Project pursuant to a statute providing for same. The Connecticut Supreme Court, by a 4-3 decision, upheld the right to condemn with the dissenting justices holding that private economic development was not a public use in that case. In the appellants’ view, the court, rather than giving carte blanche deference to the municipality, should have given heightened scrutiny to the proposed taking and having done so, rejected the proposed project as not being a “public use.” Interestingly enough, the Poletown case (above), called for a heightened scrutiny test and was overturned by the recent Michigan Supreme Court decision which flat out rejected any condemnation for economic benefit as not being for a public purpose. The petition for the writ of certiorari was based upon the dissenting justices’ opinion. Dana Berliner, senior attorney at the Institute for Justice in Washington, D.C., one of the two law firms in the case, provided us with a copy of the petition for a writ of certiorari. This article relies heavily upon it. Petition for Writ of Certiorari The petition describes the issue as one not only of national importance, but one as to which the courts in the various states are divided. While it points out that the court had upheld condemnations in the name of urban renewal or blight removal in which private developers were the instrumentality in the removal of blight � Berman v. Parker, 348 US 26 (1954) � the Court had never before addressed the specific issue of the use of the power of eminent domain “to help a government increase its tax revenue and to create jobs.” Its argument was: Urban renewal condemnations are limited to slums and blighted areas. But economic development condemnations can occur in any area. As long as the [c]ity can conceive of a possibly more profitable use of the property that might therefore produce more tax dollars, any home can be condemned because few if any houses generate as much tax revenue or as many jobs as an office building; any small or medium-sized business can be condemned because the land will always produce more taxes as a larger business. The petition then went on to quote from the decision of the dissenting justices (843 A2d at 574-5): [A]s an incident to its sovereignty, the Government has the authority to take private property for a public purpose. At the time that our federal constitution was written, a government taking meant just that, namely, a taking for a government purpose such as for a public building. As the population grew and the collective needs of our society changed, however, the takings power was construed more broadly. Government authorities condemned private properties not just for a ‘public use,’ but also to achieve a ‘public benefit’ such as the elimination of urban blight. Today, an even more expansive interpretation of public use in certain jurisdictions permits the taking of property for private economic development. To many, this represents a sea change in the evolution of the law of takings because it blurs the distinction between public purpose and private benefit and cannot help but raise the specter that the power will be used to favor purely private interests. This case therefore presents the court with a rare and timely opportunity to address a constitutional issue of great significance, that is, whether there are limits to the government’s authority to take private property by eminent domain when the public purpose is private economic development, and, if so, how those limits should be defined and enforced. The petition then went on to provide the Court with statistics that in a study done by the Institute of Justice itself, which was based on newspaper reports, indicated that between 1998 and 2002 there “were over 10,000 filed or contemplated condemnations that involved private-to-private transfers of property in 41 States.” And, that “news reports throughout the country also document rampant takings of homes and businesses for use by other private parties, including developers and big box retail stores.” States’ Positions What is of interest in this petition is the recounting of where the various states stand with respect to this issue. Being insular, we have always believed there are two areas in this country, New York and an area which exists west of the Hudson River. But apparently a lot has been going on in the world of condemnation west of the Hudson. While the petition in some instances speaks of the various court decisions in absolute terms, it is clear from a review of the discussion relating to them that many of them are nuanced. According to the petition, seven states allow condemnations for private business development alone. (Connecticut, Kansas, Maryland, Minnesota, Michigan, New York and North Dakota). (The petition was filed prior to the most recent Michigan case). Eight states (Arkansas, Florida, Illinois, Kentucky, Maine, Montana, South Carolina and Washington) definitively forbid the use of eminent domain to transfer property to private parties when the purpose is not the elimination of slums or blight. (It is now nine, with the Michigan decision). Three states (Delaware, New Hampshire and Massachusetts) “have indicated they probably will find such condemnations unconstitutional.” ‘Heightened-Scrutiny’ Test Other courts apply a “heightened scrutiny” to determine whether the public purpose is primary or incidental (Michigan, Delaware and North Dakota). With respect to this, the petition alleges the Connecticut Supreme Court declined to adopt such a test, which was the position of the dissenting justices. Since our choice would be to adopt a heightened-scrutiny test, as we have indicated in prior columns, we find of interest the four-step test proposed by the dissent: (1) whether the statutory scheme is facially constitutional; (2) whether the primary intent of the particular economic development plan is to benefit public interests; (3) whether the specific economic development contemplated by the plan will, in fact, result in public benefit; and (4) whether the condemnation is reasonably necessary to implement the plan. In the August 2004 column, in discussing the Michigan decision, we pointed to the proposed condemnation of properties on Wall Street as one approved by the New York courts based on the economic benefit to the city. New York City’s economy would clearly suffer a devastating blow if the New York Stock Exchange were to relocate, say, to New Jersey. Under a heightened-scrutiny test such a condemnation would assumedly pass muster. It probably would not with an absolute prohibition. It appears to us an absolutist position does not serve the public interest. The petition also points out other approaches by various states in which the public benefit occurs only as an indirect or derivative effect of the private development. In those cases, it would not be sufficient to sustain a funding of public use. Some states do a balancing test and weigh the net public and private benefits to determine the primary purpose. Conclusion How the Supreme Court will decide this issue we cannot tell. Will it go the way of Michigan and flat out deny the right to condemn in the name of economic development or will it go the way of New York where virtually anything goes with a virtually impossible test to challenge it. Or will it go with what appears to be a fair number of states who have a middle ground between these extremes. We should find out before too long. M. Robert Goldstein and Michael Rikon are partners of Goldstein, Goldstein, Rikon & Gottlieb.

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