In 1998, the small town of New London, Connecticut saw a dramatic turnaround in its economic fate when pharmaceutical giant Pfizer announced its development of a waterfront global research facility in the city's Fort Trumbull area. New London created a development corporation to revitalize the area around the new facility, and granted this entity the power of eminent domain. This power has long enabled governments to condemn–essentially take–private property for "public use," so long as they conform to due process and provide just compensation. In this case, the development corporation filed condemnation proceedings against the petitioners in an attempt to condemn their homes–some of which had been in their families for over a century. This property was to be used to create an office park, a parking lot, and a new park. This case tests the limits of the government's power to take private property for "public use" under the Fifth Amendment of the United States Constitution in circumstances when the "use" is largely commercial.
Questions as Framed for the Court by the Parties
What protection does the Fifth Amendment's public use requirement provide for individuals whose property is being condemned, not to eliminate slums or blight, but for the sole purpose of "economic development" that will perhaps increase tax revenues and improve the local economy?
New London, Connecticut is a small historic whaling port comprising six square miles and providing a home to approximately 25,000 residents. See City of New London website at http://ci.new-london.ct.us/index.html (last checked on February 7, 2005).
It is situated midway between Boston and New York City and bordered by the Thames River and the Long Island Sound. See id. The seven petitioners, among them Susette Kelo and Wilhemina and Charles Dery, together own fifteen homes in the Fort Trumbull neighborhood of New London. See Brief of Petitioners at 9, Kelo v. City of New London (No. 04-108). The families of the Kelos and the Derys have owned their homes for over a century, and both Wilhemina Dery and her son were born in their family home and have lived in it during their entire lives. See id. at 1—2.
New London's economic conditions declined dramatically in the late 1980s and early 1990s when it lost the military facility that provided one third of the region's jobs. See Connecticut Works Career Center, New London, Connecticut: One-Stop Profile, available at http://wdr.doleta.gov/research/rlib_doc.cfm?docn=5811 (last checked on February 7, 2005). But, in 1998, pharmaceutical giant Pfizer Inc. announced its development of a waterfront global research facility in the Fort Trumbull area. See Kelo v. City of New London, 843 A.2d 500, 508 (Conn. 2004). Pfizer's arrival provided much-needed jobs and tax revenue to the city. See id. at 507.
To encourage further revitalization of the area, the city delegated the task of devising a development plan for ninety acres adjacent to Pfizer's facility to the New London Development Corporation ("NLDC"). See id. at 508. The plan would incorporate the global research facility and comply with Pfizer's demands, such as new employee housing and overall "redevelopment" of the Fort Trumbull area. See id. at 536—39. The NLDC's development plan divided the area into seven parcels, with seven different uses. See id. at 509—10. Two parcels encompass the properties of Susette Kelo and the Derys: Parcel 3 is slated for office space and parking while Parcel 4A is slated for as-of-yet undefined uses that support a new state park created by the state. See id. at 508. The other parcels are slated for a waterfront hotel and conference center (primarily to serve Pfizer's clients and business activities), a museum, office space, and water-dependent commercial use. See id. at 509—10, 536—39.
New London also delegated to NLDC the constitutional authority of eminent domain, which allows governmental entities to take properties from homeowners for public use, so long as homeowners are granted due process and are justly compensated. The process is generally referred to as "condemnation." The government's eminent domain powers are granted by the Fifth Amendment of the United States Constitution. Almost all fifty state constitutions, including that of Connecticut, include similar eminent domain clauses. U.S. Const. Amend. 5; C.G.S.A. Const. Art. 1, § 11; C.G.S.A. § 8-128; C.G.S.A. § 8-186.
In October of 2000, NLDC initiated condemnation actions against the petitioners and filed the requisite statement of compensation with the New London Superior Court. See Brief of Petitioners at 6—7. The statement of compensation described the properties to be taken and also stated the amount of compensation to the homeowners. Id. In response, the homeowners initiated a civil action seeking a declaration that New London's use of eminent domain was unconstitutional, as well as an injunction that would prevent New London from taking their property. See id. The homeowners claimed that their rights to equal protection and due process were violated.
The New London Superior Court dismissed the eminent domain actions and granted a permanent injunction for the four petitioners living on would-be Parcel 4A. See Kelo v. City of New London, 2002 WL 500238, at *74—90, 2002 Conn. Super. LEXIS 789, at *222—66 (Conn. Super. Ct. Mar 13, 2002) (NO. 557299). The injunction for Parcel 4A, which was slated for undefined park support, was based on the grounds that the condemnations were not reasonably necessary and that future use of the parcel was uncertain. See id. The court ruled against the three petitioners living on would-be Parcel 3, the parcel slated for office space and parking, but allowed these petitioners to remain in their homes during the appeal process. Id. See Kelo, 2002 WL 500238, at *106—12, 2002 Conn. Super. LEXIS 789, at *323—41.
On appeal and cross-appeal, the Connecticut Supreme Court found that New London's use of eminent domain for the purpose of "economic development" did not violate the constitutions of either Connecticut or the United States. Kelo v. City of New London, 843 A.2d 500, 520—47 (Conn. 2004). First, the court held that economic development was a constitutionally valid public use because the legislature rationally determined that the taking was reasonably necessary to implement a development plan that increased tax revenue, created jobs, and improved the local economy. See id. at 531. Moreover, the court found that any private benefit from the economic development was "secondary to the public benefit that results from significant economic growth and revitalized financial stability in a community." See id. at 532. The court also held that the taking of the property on Parcel 3 for office space and parking were not impermissibly speculative, and that the lower court erred when it did not defer to the legislative finding that the taking of Parcel 4A was reasonably necessary to the development plan. See id. at 569.
The language of the Fifth Amendment's Takings Clause, which provides that "private property [shall not] be taken for public use, without just compensation," makes it clear that the government's eminent domain power centers on two words: "public use." U.S. Const. amend V. During the past two centuries, the definition of "public use" has evolved from "public ownership" (such as a public highway, which is owned by the government and used by the public), to "use-by-the-public" (such as a railroad, which is owned by a private entity but used by the public), to its current prevailing definition, "public purpose or benefit." See Thomas W. Merrill, The Goods, the Bads, and the Ugly, Legal Affairs, Feb 2005, at 16. This most recent definition gives the state nearly limitless power to take private property for uses that are arguably both private and public. See id.
After having avoided the "public use" question for twenty years, the United States Supreme Court granted certiorari in this case to decide the limits of a government's authority to take private property–specifically to decide whether a justifiable "public use" exists when property owned by private homeowners is condemned and transferred to a private redevelopment agency, which will, in turn, transfer the property to private developers and long-term tenants in an area still struggling to emerge from the economic recession of the 1990s.
This case addresses the meaning of the term "public use" in the
Fifth Amendment. The homeowner petitioners do not believe that the definition of "public use" can include the development of land for private economic purposes. If the Supreme Court upheld such a use of the state's eminent domain power, it would be an extension of the Court's prior holdings. This is a slippery slope, and depending on how the Court framed its reasoning, such a decision might open the door for the permissible use of compensated taking in any situation where the property could be used in a more economically productive way. However, if the Court instead holds that this property cannot be taken through eminent domain, it would reaffirm the security of private property and signal a limit to the extent of government police power.
Two modern Supreme Court cases represent the upper limits for expansively defining public use. In Berman v. Parker, the Supreme Court upheld the District of Columbia's use of eminent domain to develop slum areas for possible sale to private interests. See 348 U.S. 26 (1954). The purpose of the act in question was to improve areas of Washington that were "injurious to the public health, safety, morals, and welfare" of the community. See id. at 28. Landowners argued that (1) their specific buildings neither imperiled health or safety nor contributed to the making of a slum, and that (2) the project amounted to "taking from one businessman for the benefit of another businessman." See id. at 33-34. Relying heavily upon judicial deference to the legislature in areas properly within the state's police power, the Court held that the legislature could define the means by which it attained its valid purpose. See id. Additionally, it found that "if owner after owner were permitted to resist these redevelopment programs on the ground that his particular property was not being used against the public interest, integrated plans for redevelopment would suffer greatly." See id. at 35.
In the second case, Hawaii Housing Authority v. Midkiff, the Court upheld Hawaii's use of eminent domain to take titles from landlords and resell them to tenants in an attempt to reduce the concentration of land ownership resulting from the historical system of oligopoly. See 467 U.S. 229, 233 (1984). This case confirmed the ability of the state to use eminent domain to transfer property outright to a private party, so long as the "exercise of the eminent domain power is rationally related to a conceivable public purpose." See id. at 241. Both Midkiff and Berman favorably cited an earlier case, Old Dominion Co. v. United States, which held that judicial deference is due to the legislature for their determination of public use "until it is shown to involve an impossibility." 269 U.S. 55, 66 (1925).
The Court will thus grant a great deal of deference to legislatures using eminent domain for purposes that are legitimately part of the state's police power. And while "economic development" might not be as important a purpose as protecting "the public health, safety, morals, and welfare," the Court in Berman conspicuously noted that it did not intend to delimit the scope of legitimate purposes. See 348 U.S. at 32. In fact, the Court also implied that it might be permissible to exercise eminent domain where housing was "an ugly sore, a blight on the community which robs it of charm." See id. at 32. If restoring a city's charm constitutes a legitimate public use, restoring a city's economy must also satisfy this requirement. Moreover, because Berman affirmed deference to Congress and Midkiff affirmed deference to a state legislature, there is no reason to believe that such deference will not also be extended to city councils. See Midkiff, 467 U.S at 243—44.
The precedents set by Midkiff and Berman make it seem likely that the Court will approve the City of New London's use of eminent domain. However, the petitioners in this case present a powerful argument: if the state is allowed to take property for the purposes of economic development, are there any purposes that wouldn't constitute a valid public use? They claim that while "the sky will not fall if this court rules in favor of petitioners,  a ruling affirming the Connecticut supreme court will open the floodgates." See Brief of Petitioners at 48. An Amicus Curiae put it slightly stronger: "The Connecticut court's decision allows limitless governmental intrusion upon the right of persons to retain private property." See Amicus Curiae Brief of the Rutherford Institute in Support of Petitioners at 9, Kelo v. City of New London (No. 04-108).
Several state supreme courts have already held that the use of eminent domain for economic development is not a valid public use. For instance, in County of Wayne v. Hathcock, the Michigan Supreme Court ruled that Wayne County could not use eminent domain to condemn 19 parcels for a new commercial center. See 684 N.W.2d 765, 770 (Mich. 2004). The purpose of the center was strikingly similar to the case at hand: it was "intended to reinvigorate the struggling economy of southeastern Michigan by attracting businesses, particularly those involved in developing new technologies." See id. The Illinois Supreme Court reached a similar conclusion in a case where an Illinois development agency similar to NLDC attempted to use eminent domain to expand a racetrack in Southwestern Illinois. See Southwestern Ill. Dev. Auth. v. Nat'l City Envtl., 768 N.E.2d 1, 3 (Ill. 2002).
The Counsel for the homeowner petitioners have a map on their website that illustrates just how divided an issue this is. The map depicts "State Supreme Court Rulings On Eminent Domain for Private Development," with six states coming out in favor of the City of New London, and nine states coming out in favor of petitioners. The petitioners thus have a slight lead in state courts, and they also have the rhetorical lead: the petitioner's conception of private property is likely much more in line with the conception of property and "public use" held by the framers. With that said, it will be difficult for the Court to rule for petitioners in the face of the Midkiff and Berman decisions. These cases clearly establish that (1) state legislatures should be granted a high degree of deference in making decisions of what constitutes public use, and (2) there is nothing unconstitutional about using eminent domain to transfer property to another private property holder. In light of these decisions, it is unlikely that petitioners will be successful.