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A review of the cases decided by the U.S. Supreme Court during the 2004-2005 term discloses no overriding theme from the perspective of the business community. The court’s controversial interpretation of the public-use clause in a high-profile takings case represents good news for big businesses, which often benefit from economic development projects, though not for the small enterprises that sometimes are shunted out of the way in the process. The business community dodged a proverbial bullet when the court overturned Arthur Andersen LLP’s conviction for its destruction of Enron-related documents and rejected a 5th U.S. Circuit Court of Appeals decision that called into question the legality of document-retention policies that are nearly ubiquitous in large corporations. But-in perhaps the most significant case for business decided this term-the court narrowly interpreted a federal statute’s pre-emption clause, increasing businesses’ exposure to a patchwork of state laws. Kelo v. City of New London, 125 S. Ct. 2655 (2005), arose when New London, Conn., sought to condemn the plaintiffs’ property, which was not located in a blighted neighborhood, for use in an economic development project that included a hotel and conference center, marinas, retail stores and restaurants, and research and development office space. The nature of the project meant that the public would be denied access to much of the condemned property. Owners of the condemned land sued, claiming that the condemnation was not for “public use” under the Fifth Amendment’s takings clause and was therefore unconstitutional. In an opinion by Justice John Paul Stevens that has proved unpopular with the general public, the court held, by a 5-4 vote, that New London’s economic development plan was rationally related to a conceivable public purpose and thus satisfied the Fifth Amendment’s public- use requirement. The court rejected the property owners’ arguments that economic development does not qualify as a public use and that the Fifth Amendment “require[s] a reasonable certainty that the expected public benefits will accrue.” The court concluded that the existence of a public purpose ended the inquiry; the “wisdom of the takings,” the “amount and character of the land to be taken” and the “need for a particular tract to complete the integrated plan” are not subject to review in federal court. While he joined Stevens’ opinion, Justice Anthony M. Kennedy authored a concurring opinion that narrowed the court’s categorical holding. In his view, “transfers intended to confer benefits on particular, favored private entities, and with only incidental or pretextual public benefits, are forbidden by the Public Use Clause.” In a discussion that likely will be viewed as controlling by lower courts, Kennedy instructed that courts should treat “a plausible accusation of impermissible favoritism to private parties” as “serious” and engage in a degree of factual review that typically is not required in traditional rational-basis review. The principal dissent by Justice Sandra Day O’Connor accused the court of turning the public-use requirement into “hortatory fluff.” The four dissenters would permit governments to transfer condemned property to private parties in only two circumstances: when (as with common carriers) the property is to be opened to the public’s use, and when the condemnation is necessary to eliminate an existing use of the property that “inflict[s] affirmative harm on society.” Based on this standard, the dissenters concluded that economic development takings are flatly unconstitutional. ‘Arthur Andersen’ decision
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