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In a stinging defeat for the property rights movement, the Supreme Court on Thursday ruled that the U.S. Constitution does not prevent government agencies from taking private property by eminent domain and turning it over for another private use. The Fifth Amendment says government may take private property for “public use,” but a 5-4 majority ruled that it is up to local governments, by and large, to define that term. A city’s carefully formulated economic development plan is entitled to deference, Justice John Paul Stevens wrote for the majority, even if it mainly benefits private entities. “The government’s pursuit of a public purpose will often benefit individual private parties,” Stevens wrote. In an unusually sharp dissent, Justice Sandra Day O’Connor wrote, “The specter of condemnation hangs over all property. Nothing is to prevent the state from replacing a Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory.” The beneficiaries of the ruling, she said, “are likely to be those citizens with disproportionate influence and power in the political process.” The decision in Kelo v. City of New London came as the Court prepared to end its term. A few hours after issuing its decisions Thursday, the Court announced that next Monday will be the final day before its summer recess. Pending decisions involving Ten Commandments displays on public property and the copyright implications of Internet file-sharing can be expected Monday, and the possibility of a retirement announcement also looms. Also Thursday, the Court issued an opinion that makes it easier for plaintiffs with small claims to join in class actions in federal court based on diversity jurisdiction.But the eminent domain case dominated the spotlight, dashing the hopes of a group of Connecticut homeowners who resisted a New London economic development plan to take their property as part of a multiuse parcel that would complement a Pfizer Inc. research facility. “I was in this battle to save my home and, in the process, protect the rights of working-class homeowners throughout the country,” lead plaintiff Susette Kelo said in a statement issued Thursday. “I am very disappointed that the Court sided with powerful government and business interests.” Kelo’s case was taken up by the Institute for Justice, which, along with other conservative groups, viewed the homeowners’ sympathetic plight as a good vehicle for getting the Supreme Court to reconsider its precedents in the area, which have generally deferred to government. “No home is safe,” institute senior attorney Dana Berliner said Thursday. “Everybody’s home can produce more tax revenue if it is turned into a shopping center or office building. This decision makes sense to big corporations and to the Court, but everyone else will hate it.” The Kelo case represents the third defeat this term for property rights advocates in the Supreme Court, the other two being Lingle v. Chevron and San Remo Hotel v. San Francisco, said Roger Pilon of the libertarian Cato Institute. “It’s a disaster. This is the government’s court,” Pilon said. Real estate practitioners on both sides of the issue said the ruling at last gave clear guidance on the limits of eminent domain power. “This is a big stamp of approval for local governments,” said David Snyder of Philadelphia’s Fox Rothschild law firm, who has litigated for clients on both sides. “Whether you are in the class of winners or losers, you have definitive rules.” The ruling does indicate there might be some circumstances in which a government eminent domain taking might be so egregious that it would fail the “public purpose” test. Stevens said a city could not transfer a property outright directly to a private company “under the mere pretext of a public purpose, when its actual purpose was to bestow a private benefit.” But in reviewing the record, Stevens concluded that what happened in New London had no “illegitimate purpose.” Given state officials’ determination that New London was in economic distress, Stevens said the city’s “carefully formulated” plan deserved deference. Fox Rothschild’s Snyder said he interprets the decision to mean that “if, as a city, you cross your t’s and dot your i’s, the fact that you take private property and sell it to another private owner, it’s not dispositive” of any constitutional violation. Justice Anthony Kennedy, in a concurrence, also stressed that not all eminent domain transfers to private owners would be constitutional. There might, he said, be some occasions when “the transfers are so suspicious, or the procedures employed so prone to abuse,” that courts could presume an impermissible private purpose. Property rights advocates said they would press their fight against so-called eminent domain abuse in state courts. Most state constitutions have provisions similar or identical to the U.S. Constitution’s Fifth Amendment, but have interpreted the public-use factor differently. For example, last year the Michigan Supreme Court overturned a prior ruling in which it had allowed the “Poletown” neighborhood in Detroit to be leveled to allow construction of a General Motors plant. In addition to O’Connor, Chief Justice William Rehnquist and Justices Antonin Scalia and Clarence Thomas also dissented. Thomas asserted that if New London’s “economic development” plan can be counted as a public use, then “the Court has erased the public use clause from our Constitution.” In a notable sidelight, Thomas’ dissent also refers to a Court decision that has not been issued yet: Castle Rock v. Gonzales, which is likely to be handed down next Monday. The case asks whether a restraining order issued to keep a husband from his wife creates a “property interest” protected by the due process clause of the Fifth Amendment. Thomas’ reference to the case suggests that, at least as of the time Thomas wrote his dissent, the Court was about to determine that there is a property interest in enforcement of a restraining order. Glitches like this occur occasionally as the Court rushes its opinions to print in the last few days before the term ends, and it suggests that the Castle Rock ruling was pulled back at the last minute. In the other business-related ruling on Thursday, the Court said that in civil litigation that gets to federal court based on diversity jurisdiction�parties living in different states�the court can also exercise jurisdiction over plaintiffs whose claims are too small to meet the current $75,000 amount-in-controversy requirement. The 5-4 ruling came in Exxon Mobil Corp. v. Allapattah Services, consolidated with Ortega v. Star-Kist Foods. A class of Exxon dealers, in the first case, and a girl whose finger was cut on a tuna can, in the other, sued under diversity jurisdiction. But their claims were challenged because some of the plaintiffs�some of the dealers as well as the girl’s family�could not claim injury over $75,000. The Court interpreted a 1990 law giving federal courts supplemental jurisdiction in diversity cases to mean that the smaller-claim plaintiffs should be included. “When the well-pleaded complaint contains at least one claim that satisfies the amount-in-controversy requirement,” Justice Kennedy wrote, the District Court has jurisdiction over all others involved in the same incident. Donald Ayer, a partner at Jones Day who represented the girl in the Star-Kist incident, said the decision benefited plaintiffs and defendants alike�at least those defendants who want cases to be litigated in one federal court, rather than in federal and several state courts. “This further expands the reach of federal court jurisdiction, and it is what Congress enacted.” Ayer said the recently enacted Class Action Fairness Act does not affect the high court’s ruling. Tony Mauro can be contacted at [email protected].

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