Restraining eminent domain through just compensation: Kelo v. City of New London.

• Jurisdiction: United States
• Date: 22 March 2006
• Author: Talley, Brett

The Fifth Amendment provides the legal standard for eminent domain: "nor shall private property be taken for public use, without just compensation." (1) Thus, there are two constitutional requirements for the exercise of eminent domain: that the use be public, and that the owner receive just compensation. These restrictions were intended to deter the legislature from applying this "despotic power" (2) with undue frequency. Beginning with Berman v. Parker (3) and continuing in Hawaii Housing Authority v. Midkiff, (4) the Court granted great deference to legislative determinations of valid public uses. (5) In fact, such deference extends even to forced private-to-private transfers of property. After the Court handed down these decisions, a debate ensued over whether the Public Use Clause of the Fifth Amendment retained any deterrent effect. Many commentators called on the Court to take a second look at the deferential standard, which it did, to those commentators' great chagrin. (6) Last Term, in Kelo v. City of New London, (7) the Supreme Court reiterated and expanded Berman and Midkiff, holding that economic development constituted a valid public purpose and that the government may legitimately take and transfer private property to another private entity to accomplish that end. (8) This ruling decisively rejected calls to limit eminent domain to transfers from private owners to a public authority. (9) Although the Kelo Court extensively examined the public use requirement, it barely discussed the just compensation requirement. (10) If the Court is determined to persist in granting great deference to the public use determinations of legislatures, the Court should reexamine just compensation, lest the Fifth Amendment Takings Clause cease to deter improper uses of eminent domain.

Since 1990, the State of Connecticut has considered the city of New London a distressed municipality. (11) By 1998, the federal government had closed a military installation employing 1,500 people and the city's population of 24,000 was its lowest since 1920. (12) In light of these circumstances, the state gave the New London Development Corporation (NLDC), a private, nonprofit entity, authority and support to implement development strategies meant to encourage economic development in the area. (13) The final integrated development plan approved by the state included eighty new residences, a $300 million Pfizer, Inc. research facility, a pedestrian riverwalk, a state park, a U.S. Coast Guard Museum, a "small urban village" including a waterfront hotel, and enough parking and infrastructure to support the new project. (14) The NLDC intended that the development plan generate tax revenue, create jobs, and improve both the aesthetic quality of the city and the leisure opportunities available for its citizens. (15) The NLDC divided the development into several parcels, most of which were acquired without incident. (16) However, the owners of fifteen properties in the development, four in Parcel 3 and eleven in Parcel 4A, refused to sell; the NLDC then initiated eminent domain proceedings against these holdouts. (17) In December 2000, Susette Kelo, along with other local property owners, brought an action in the New London Superior Court alleging that the takings violated the Public Use Clause of the Fifth Amendment. (18) In a lengthy decision, the court granted permanent injunctive relief against the demolition of homes in Parcel 4A, (19) ruling that the intended use of the property could be accomplished without demolishing the plaintiffs' homes. (20) The court refused to grant a permanent injunction in regard to Parcel 3, but temporarily enjoined the NLDC pending final resolution of the matter. (21) In both cases, the court rejected the plaintiffs' allegations that the transfer of property to a private entity violated the Public Use Clause of the Fifth Amendment. (22) On appeal, Justice Norcott, writing for the Connecticut Supreme Court and relying heavily on Berman and Midkiff, concluded that economic development did indeed constitute a public use. (23) The court, noting the deferential standard of review granted to planning decisions in eminent domain cases, upheld the lower court's ruling on Parcel 3 and overturned the permanent injunction granted to the Parcel 4A plaintiffs. (24)

The United States Supreme Court, in a 5-4 decision, affirmed. (25) Writing for the majority and citing the Court's "traditionally broad understanding of public purpose," (26) Justice Stevens declared that there existed "no principled way of distinguishing economic development" from the public purposes recognized in Berman and Midkiff. (27) The majority also brushed aside the plaintiffs' objections that permitting economic development to fulfill the public purpose requirement would result in the transfer of property from one private party to another. (28) Relying once again on Berman and Midkiff, the Court concluded that advancing the public interest often benefits private parties. (29) Although leaving open the possibility that one-to-one transfers of property might "raise a suspicion that a private purpose was afoot," (30) the Court concluded that integrated development plans, so long as they served a public purpose, would not merit such scrutiny. (31) Given the Court's great deference to legislative determinations of public use, this ruling effectively declared all development plans legitimate, irrespective of how those plans are enacted.

Justice Kennedy concurred in the judgment, (32) noting the similarity between the deferential standard of review applied to eminent domain cases and the rational basis test used in evaluating a challenge to economic regulation. (33) Applying this standard of review, Justice Kennedy reserved the right to strike down takings that benefit a particular party with only "incidental or pretextual public benefits." (34) Justice Kennedy argued that any review of the exercise of eminent domain should be done with "the presumption that the government's actions were reasonable and intended to serve a public purpose." (35) Because the primary motivation for the New London development plan was to benefit the public, and not Pfizer or any other private entity, Justice Kennedy concluded that the use of eminent domain in this case was legitimate. (36) Justice Kennedy augmented the majority opinion by recognizing the potential need for a more stringent standard of review in cases where the "risk of undetected impermissible favoritism of private parties" is particularly severe. (37) The benefits to the public embodied in the New London development plan, however, led Justice Kennedy to conclude that the Connecticut Supreme Court had acted properly in this case. (38)

Justice O'Connor delivered a stinging dissent, writing that according to the majority's rule, no property is safe from transfer to another private owner "under the banner of economic development." (39) Criticizing the great deference granted to the legislature by the majority, Justice O'Connor argued that, "were the political branches the sole arbiters of the public-private distinction, the Public Use Clause would amount to little more than hortatory fluff." (40) Justice O'Connor distinguished the situation in New London from that in Berman and Midkiff, noting that, in the latter two cases, the takings were effected to remedy extraordinary situations that had inflicted affirmative harm on the public. (41) By authorizing the condemnation of well maintained property for the sole purpose of generating economic development, the Court had so greatly expanded the definition of public use as to include virtually all exercises of eminent domain. (42) Justice O'Connor also indicated her regret that this result followed from the Court's errant language in Berman and Midkiff regarding the relationship between the police and takings powers. (43) She recognized, in the light of New London's use of eminent domain, that the two powers were not coterminous. (44) Such expansive language in earlier decisions had led to a situation where "[t]he specter of condemnation hangs over all property." (45)

Justice Thomas filed a separate dissenting opinion, (46) agreeing with Justice O'Connor's assessment that approving economic development as a public use effectively removes any constitutional impediment to the use of eminent domain. (47) Justice Thomas disagreed, however, with Justice O'Connor's defense of Berman and Midkiff, arguing that those cases legitimized "the boundlessly broad and deferential conception of 'public use."' (48) Justice Thomas therefore pressed for a return to an originalist and...