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We have been hearing a drum beat of complaints from around the country of the increasing use of the power of eminent domain to acquire property to turn it over to private developers in the name of economic progress. It has resulted in litigation over this issue in which Michigan’s highest court has now held that condemnation of private property in order to turn it over to another private party in the name of economic benefit to the community is not a “public use,” as that term is used in its state’s constitution. However, before one reads too much into that decision as a precedent for other states one must understand the context in which that decision was written. The court based its decision on the latest Michigan constitution, which was adopted in 1963. It defined the inquiry as to what was the common understanding among “sophisticated” persons as to the meaning of “public use” when the constitution was adopted in 1963. The matter is one of constitutional interpretation which has not been universally adopted. Overview During the months of August, September and October 1975, this column traced the evolution of the term “public use” into “public purpose” under New York condemnation jurisprudence. We explained how a taking of property by right of eminent domain, which originally contemplated the taking for the literal use of the public, over the years, case by case, evolved into a concept of a taking for the public benefit, virtually identical with anything that advanced the public’s health, safety and welfare, the basis for the exercise of the police power. That is a similar scenario to what happened in other states, including Michigan, at least until now. We revisited the subject in June 1989 on the occasion of the decision in Yonkers Community Agency v. Morris, 37 NY2d 478 (1975), where the acquisition of private property to convey to the Otis Elevator Co. was as an inducement for it to remain in Yonkers. The Court there found that the primary purpose was to clear “blight” and turning over the land to another private party was merely incidental. This was not an unusual decision, either in New York or anywhere else around the country. Since those articles, courts in New York and elsewhere have approved condemnations which do not depend on a “blight” finding, but merely that the project would be an economic benefit to the community. Where the condemning body made a fact finding that there was “blight” or there would be a community economic benefit, it was virtually unchallengeable. Absent a finding of fraud, error of law or abuse of discretion, the courts were not about to overturn such “legislative” determinations. With the expansion of what was deemed to be a “public use,” which now became synonymous with public benefit or purpose, virtually every determination to condemn became unassailable. Thus, we find, in New York, court approval for taking private property to turn it over to the New York Stock Exchange, in the 42nd Street area to the New York Times, the former based on an economic benefit and the latter on “blight.” Despite some cries of outrage from around the country, this became the law in many states. Literal Public Use Now, except Michigan. On July 20, 2004, the Michigan Supreme Court (its highest court) decided in County of Wayne v. Hathcock that under Michigan’s latest constitution, adopted in 1963, based on what was meant by the term “public use” in 1963, that acquisition of private property was to be only for a literal public use, with three exceptions, and that it was not sufficient that it be for the public’s economic benefit, same not being encompassed within the term “public use.” The language of the constitutional provision interpreted (Art 10, Sec 2) reads: “private property shall not be taken for public use without just compensation, therefore, being first made or secured in a manner prescribed by law.” As such, it is no different than most of the states’ constitutional provisions, including New York and probably no different than equivalent provisions in its earlier constitutions. In so ruling, the court overturned its prior decision in Poletown Neighborhood Council v. Detroit, 410 Mich 616, 304 NW2d 455 (1981), as wrongly decided and did so retroactively. The Poletown case approved the taking of a large swath of land to turn it over to General Motors to build a Cadillac plant based on the economic benefit to the area. As an aside, if Michigan’s interpretation of its constitution has been based on original intent, we wonder how by 1963, since the original concept was a literal public use, the three exceptions, hereafter set forth, ever came into being. We suspect an “original intent” interpretation is somewhat new. While the court stated that the case did not “require that this Court cobble together a single comprehensive definition of ‘public use,’ ” relating its decision to the discrete facts in the case before it, nonetheless, relying on pre-1963 decisions, the court described the exercise of the power as being limited to an actual public use such as roads, schools and parks except when it possessed one of three characteristics. The land could be transferred to a private entity generating public benefits “ whose very existence depends on the use of land that can be assembled only by the coordination central government alone is capable of achieving.” The examples given were “highways, railroads, canals, and other instrumentalities of commerce,” deeming such enterprises as “vital instrumentalities of commerce.” The second exception is, “when the private entity remains accountable to the public in its use of that property.” An example given was when the receiving entity was “subject to direction from the Public Service Commission” in that in such a way, “the public retained a measure of control over the property.” The third exception is “when the selection of the land to be condemned is itself based on public concern,” — – “meaning that the underlying purpose for resorting to condemnation, rather than the subsequent use of condemned land, must satisfy the constitution’s public use requirement.” The example given was the clearance of “blight,” where the subsequent resale of the land cleared of blight was “incidental” to this goal. Since this business and technology park fit none of the exceptions, the court struck down the attempted condemnation. Project Background To understand the import of this decision, one has to understand the underlying project to which it was applied. With the building of a new airport and with a $22 million FAA subsidy in hand, the county began buying property for a clear zone under the flight paths. It purchased 500 acres in non adjacent scattered plots in a checker board pattern. Since the FAA subsidy required the land acquired to be put to an economically productive use, the county decided to make it part of a business and technology park and then expanded it to include 1,300 acres which assumedly would produce 30,000 jobs and $350 million annually in tax revenue. The county then began to purchase additional property and bought an additional 500 acres, for a total of 1,000 acres out of the 1,300 acres needed. Missing were another 46 parcels distributed helter skelter throughout the area. Out of those 46 parcels, another 27 parcels were bought after it was determined to use the power of eminent domain to finish the project. So out of the 1,300 acres for the project all but 19 properties had been purchased when this case came before the court. The plan was that the county would sell plots to individual private owners thus reinvigorating the economy. When Alan Ackerman, the attorney for the successful defendants, called and faxed a copy of this decision to us, he described it as a major blow for property owners’ rights. It probably is if municipal officials forget to use the magic words “slum clearance” or “blight,” fail to invoke the wide open exemptions described by the court and other courts adopt the original intent methodology in interpreting their state constitutions. Even then some facts go beyond the pale and some courts have looked behind the “legislative findings.” Recently, in St. Louis, Target Stores, a lessee of property, decided it wanted to own the property it leased. It reportedly threatened to move unless the city condemned the property and turned it over to it. Being concerned for the effect on the neighborhood, and on the basis the property was in disrepair, despite Target Stores allegedly being responsible for the repairs under its lease, a blight finding was made and a resolution adopted to condemn and turn the project over to Target Stores. Challenged in federal district court by the property owner, it was set aside only to be overturned by the circuit court on the basis that the district court should have refused to take the case, invoking the abstention doctrine. And, recently, in Mesa, Arizona, an appellate court struck down an attempted condemnation where it found the public benefit was only incidental to the private benefit. As a test of the potential impact of this decision, if generally applied, we look to see whether it would have changed the result in some of the more recently decided cases in New York. Would the 42nd Street taking for the New York Times occurred? How about the proposed taking for the New York Stock Exchange? We believe not. We believe that this decision, outside of the immediate case, will change very little. The taking for the Stock Exchange, subject to SEC regulation and 42nd Street, based on “blight” findings, would assumedly fit within the stated exceptions, albeit the former’s approval was actually based on its economic benefit to the city and its economy. Does any one doubt that with the crucial role the Stock Exchange plays in the city’s economy, plus the wide open exceptions the Michigan court recognized, coupled with the imagination of municipal attorneys, a way would have been found to justify the project. We assume that had this decision been the law when the Michigan project was in the planning stage, the plaintiff would either have made different findings to justify a taking or would have retained title and have given a long term lease instead, accomplishing the same project. This decision is throwing the baby out with the bath water, it does not solve the real problem. Is economic benefit to a community not a true public purpose? While the New York Stock Exchange expansion never happened for other reasons, where the New York City economy is so dependent on its continuing to do business here in New York is not its retention a true public use? If the abuses of the use of power of eminent domain are to be effectively contained, we believe the answer lies elsewhere, i.e., the courts have to be given a broader role in the process. Until a relatively short time ago, the power was exclusively exercised by elected officials. They knew there could be a day of retribution by an angry electorate if the power were abused (except if the power were used against a minority in furtherance of the prejudices of the majority or where in large metropolitan areas the relatively small number of people involved are rarely listened to, i.e. New York City). Try to use the power in a small community and see how far you get if it goes against the grain. Part of the problem is in the proliferation of public authorities, which do not answer directly to the public. Another part is public officials who are in bed with developers, even if with good intentions. This is not to suggest they not have the power, merely that the courts should have a larger role in preventing abuse and that applies across the board. The fence is too high to climb in attempting to attack the fact findings leading to condemnation. With this diffusion of the power and the lack of public accountability the courts must be given a greater power of review. Yes, it is a legislative function, in the sense it is a power delegated by the legislature, and the courts in dealing with legislative findings have a very circumscribed function, but that power, in more and more cases, has been abused, with no effective recourse. The Michigan court has made a statement, but will it really change anything, except to unfairly burden Wayne County, Mich., which has made a huge investment based on then existing decisional law and may find the lands acquired unuseable for the purposes for which they were acquired. If something is not done to fix the abuses, there may be more cases like this one. M. Robert Goldstein and Michael Rikon are partners of Goldstein, Goldstein, Rikon & Gottlieb.

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