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In the public backlash following the 2005 U.S. Supreme Court decision that allowed cities to use eminent domain to take “blighted” land from one private property owner and give it to another, roughly 40 states imposed new restrictions on the practice through legislation and citizen initiatives. But the reforms may be more smoke than fire, according to one recent study critical of private takings for economic purposes. As many as 21 of 35 state statutes enacted since 2005 may provide little or no protection for property owners, according to the study by Ilya Somin, a professor at George Mason University School of Law. Somin contends that the weakest statutes defined “blight” so broadly that nearly any property could be defined as blighted. While state lawmakers may have watered down some restrictions on private-to-private takings, some judges seem to have heard the public’s message. As judges wade through the new laws, more rulings sympathetic to property owners are cropping up. And the new laws have stirred up eminent domain litigation, with two significant cases decided in Missouri in the past eight months, and other appeals pending in Texas and New Jersey. More states have suits moving along in early stages. The Supreme Court’s decision in Kelo v. City of New London, 505 U.S. 469 (2005), affirmed a state’s power to condemn private homes and transfer the property to developers to revitalize local economies. Some cities rely on “blight” designations to condemn areas and take over properties. Others allow condemnation for “economic redevelopment,” whether or not areas were blighted. The public outcry that ensued after Kelo prompted 35 state legislatures to reform eminent domain laws. Ten voter referendums have been approved as well, and California has two competing measures on its June ballot. Propositions 98 and 99 both would restrict use of eminent domain for private purposes. “Under many state laws, blight is so broadly defined that anything can be declared blighted,” said Somin. “The majority of new state reform laws will have little effect . . . precisely because of the broad definition of blight,” he said. Somin argues that only seven of the 20 states that most frequently used private-to-private condemnations between 1998 and 2002 passed tough “blight” reforms: Arizona, Florida, Kansas, Michigan, Minnesota, Pennsylvania and Virginia. And of the 35 new state statutes, just 14 ban or restrict “economic development” takings, he said. But the findings may be skewed, according to John Shirey, California Redevelopment Association executive director. “Many states made it illegal to use eminent domain for economic development, but that has never been allowed in California in the first place,” he said. States that banned private development-related condemnations imposed draconian restrictions that will hurt redevelopment in the long run, Shirey said. “Some states didn’t really shoot themselves in the foot; they shot themselves in the head,” said Shirey. Florida can use eminent domain only for public works projects, and in Texas the only way to use it “is if you’re building a stadium for the Dallas Cowboys. That’s an exception in the law,” Shirey said. Too little time has passed since most reforms were adopted to make a real assessment of the impact, according to Larry Morandi, director of policy research for the National Conference of State Legislatures. “We’re not even three years out. Anyone making an assessment . . . doesn’t have enough data.” Meanwhile, judges have been keenly aware of the public outcry after the Kelo decision. In June 2007, the New Jersey Supreme Court invalidated a “redevelopment” designation by the city of Paulsboro on a 63-acre parcel on the Delaware River. It held that a municipality can’t condemn property as blighted by saying it is “not fully productive” and thus needs development. Gallenthin Realty Development Inc. v. Paulsboro, 191 N.J. 344 (2007). “The Gallenthin case reiterated the state’s standard on blight � clear and convincing evidence � and that had a big ripple effect,” said William J. Ward of Carlin & Ward in Florham Park, N.J., who represents a retired couple in their 80s whose current challenge to a blight designation will be heard on May 14 in New Jersey’s Appellate Division. Louis and Lillian Anzalone have had an ocean side bungalow in Long Branch, N.J., since 1960. It is slated to be bulldozed as part of a townhouse and condominium project based on a 1996 city designation of the area as blighted and in need of redevelopment. The Anzalones and other property owners in a 25-acre beachfront area are challenging the trial court’s refusal to dismiss the condemnation action. At its core, the case is about defining blight under New Jersey law. City of Long Branch v. Anzalone, No. A-0067-06Y2. Long Branch attorney Paul Fernicola of Bowe & Fernicola in Red Bank, N.J., is confident the city will prevail. But he acknowledges the Kelo effect on courts. “In New Jersey, the outcry over Kelo has had an effect,” he said. “Between 1950 and Kelo in 2005, there were only two cases concerning redevelopment that property owners won. Since the Gallenthin case there have been five or six in favor of property owners. Courts are taking a closer look at condemnation and what constitutes blight,” he said. “The Gallenthin case at least serves notice on the trial judges and municipalities that, if they are going to use the redevelopment law, they are going to have to follow it and not expect courts to rubber-stamp them,” said Peter H. Wegener of Bathgate, Wegener & Wolf of Lakewood, N.J., who represents a large group of property owners in the Long Branch appeal. In Texas, another state appeal is pending in a dispute over whether the state’s new limits on eminent domain can be applied retroactively in two cases pending when the law took effect. The 5th U.S. Circuit Court of Appeals dodged ruling on the retroactivity of the Texas eminent domain reform law in 2006, sending property owners back to the trial court. Western Seafood Co. v. U.S., City of Freeport, 202 Fed. Appx. 670 (2006). But two Texas state court actions about the same land overtook the federal case and now await a decision from the Texas 1st District Court of Appeals in Houston. Briefing ended in December 2007 and a ruling could be a year away. A shrimp-trawling business that owned waterfront land on the Old Brazos River challenged the city of Freeport’s plan to take over the property and transfer it to a neighboring owner for development as a private marina. “It is clear that, if the [reform] statute was in effect at the time of the eminent domain, it would not have permitted the taking,” said John Hightower of Olson & Olson in Houston, who represents Freeport. “We conceded it would have been prohibited,” he said, but the central question is whether the new law can be imposed retroactively. Hightower believes that the state statute changes will breed more litigation. “People representing landowners are more likely to challenge public use, no matter what the purpose. I expect people will be trying to expand the law beyond what was intended,” he said. In June 2007, the Missouri Supreme Court, for the first time in its history, overturned a finding of blight in an effort by the city of Clayton, a suburb of St. Louis, to declare a prime downtown corner blighted. Centene Plaza Development v. Mint Properties, 225 S.W.3d 431 (2007). The court said to find a property as blighted requires a two-fold analysis: The area must be both an economic and social liability to the city, said Gerald T. Carmody, who represented three property owners. Carmody of Carmody MacDonald in St Louis represents both developers and property owners and served on the Missouri governor’s task force to study eminent domain law reform after Kelo. “We spent a lot of time on it and we didn’t touch the definition of blight,” Carmody said. “There was no one on the task force that thought we should change it.” Not all recent cases have gone in favor of property owners. On March 18, the Missouri Supreme Court, in a 6-1 decision, held that state law allows nonchartered cities, such as the small town of Arnold, to exercise eminent domain power over blighted property. City of Arnold v. Tourkakis, No. SC88647. The decision reinstated the city’s condemnation efforts under a redevelopment plan to take over a former residential building that the owners had converted to a dental office. Timothy S. Sandefur, Pacific Legal Foundation senior staff attorney in Sacramento, Calif., argued the case on behalf of the Missouri property owners. “In Missouri they passed an ineffectual law,” he said. “What is going on now is that the state constitution needs to be amended. There is a ballot initiative in Missouri. That may be the only hope the citizens of Missouri have,” he said. But Carmody, who represented the city of Arnold, disagreed. “The reform measures in Missouri have had an impact on the use of eminent domain. I do not think most developers want to get embroiled in a battle over eminent domain these days,” he said.

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