The U.S. Supreme Court’s 2005 decision in Kelo v. City of New London generated a backlash on both sides of the political spectrum. The left feared that the ruling privileged large developers who use their political clout to run roughshod over small and disorganized homeowners with little political power. And they were correct. The right saw in the untrammeled exercise of eminent domain power an increase in the size of government and a compromising of private property rights. They were correct, too. Many of the rear-guard defenders of this ill-conceived decision insisted that abusive condemnations are an aberration in an otherwise sound planning process. They, it turns out, were wrong. Didden v. Village of Port Chester, a most unfortunate decision out of the 2d U.S. Circuit Court of Appeals, helps demonstrate the shortcomings of their optimistic view.
In 1999, the village of Port Chester, N.Y., established a “redevelopment area” and gave its designated developer, Gregg Wasser, a virtual blank check to condemn property within it. In 2003, property owners Bart Didden and Dominick Bologna approached Wasser for permission to build a CVS pharmacy on land they own inside the zone. His response: Either pay me $800,000 or give me a 50% partnership interest in the CVS project. Wasser threatened to have the local government condemn the land if his demands weren’t met. When they refused to oblige, their property was condemned the next day.
Didden and Bologna challenged the condemnation in federal court, on the grounds that it was not for a “public use,” as the Fifth Amendment requires. Their view, quite simply, was that out-and-out extortion does not qualify as a public use. Nonetheless, the 2d Circuit, in a brief and unsatisfactory decision, upheld this flexing of political muscle. At present, Didden and Bologna are working against the odds to persuade the U.S. Supreme Court to hear the case. If the 2d Circuit’s reasoning prevails, private developers everywhere could follow Wasser’s example to extort money from property owners in thousands of development zones, which while created for noble purposes, can easily be turned to ugly ones.
Conventional Supreme Court doctrine affords government planners wide discretion in land use matters. As noted above, public acceptance of such judicial indifference took a body blow after Kelo, when the court, by a bare 5-4 vote, allowed New London, Conn., to wipe out a cluster of private homes for a badly conceived “economic development” plan. Didden offers the court a much-needed opportunity to affirm that some constitutional limits on the condemnation power survive Kelo. Kelo only confers wide discretion for condemnations for “economic development” purposes if they are part of an “integrated development plan.” Courts are not supposed to “second guess” the quality of the plan. But Kelo still forbids “pretextual” takings, where the stated public-interest rationale is just a cover for the true purpose of funneling goodies to a private party. Indeed Justice Anthony M. Kennedy’s decisive vote came with this caveat: Beware of condemnations where “favoritism” toward a private party rears its ugly head.
Didden is a particularly egregious example of pretextual condemnation and “favoritism.” The owners’ property was condemned only because they refused to pay Wasser the $800,000 he demanded. Yet what public benefit would follow if they had succumbed to Wasser’s threats by putting the big bucks in his pocket, not the village treasury? Wasser planned to build a Walgreens pharmacy on the property-exactly the same type of use as the original owners’ planned CVS. The community gained nothing from the change in ownership, while having to bear all the costs of condemnation. Didden and Bologna in effect were forced to turn over all the value gained from their site evaluation to Wasser without so much as a dime in compensation. Kelo urged courts to defer to the supposed expertise of local governments in deciding which takings are needed to satisfy “public needs.” But local governments are not using any expertise when they simply delegate the power of eminent domain to self-interested private parties such as Wasser who then piggyback for free on the business expenditures of others.
Two disturbing trends
Didden also illustrates two disturbing trends in modern takings law. One is the excessive delegation of public authority to private interests. Port Chester could not have made this kind of threat if it had taken direct control over condemnation proceedings. No public body can act as a hold-up artist. Why then should it be allowed to delegate to a private party the right to make threats that it could not make itself? Second, the entire public use issue has been clouded by procedural shenanigans with an Alice-in-Wonderland quality. New York law allows challenges to a redevelopment plan only within the first three years after its announcement. Yet Wasser’s offer took place four years after the redevelopment area was created. The 2d Circuit held that the owners’ challenge came too late because it did not come within the three-year period, even though the underlying wrong occurred only one year later. This procedural obstacle would never be tolerated in ordinary personal injury cases; the same principles should apply here.
At every turn, the courts have allowed government agencies greater discretion over the lives and fortunes of citizens. And in too many cases, they have responded by taking things one step too far. That trend needs to be reversed. Didden is a good place to start.
Richard A. Epstein is a professor of law at the University of Chicago and a senior fellow at the Hoover Institution. Ilya Somin is assistant professor of law at George Mason University. Both specialize in eminent domain law and have helped co-author an amicus brief in Didden urging the Supreme Court to hear the case.