Ohio high court reins in eminent domain.

Applying a controversial U.S. Supreme Court ruling on property rights, the Ohio Supreme Court has held that municipalities may not invoke the doctrine of eminent domain to take private property solely for economic development.

The U.S. Supreme Court's highly publicized decision last year in Kelo v. New London upheld a Connecticut city's authority to take private property for economic development, but it left the door open for states to restrict such takings. (545 U.S. 469 (2005).) The Ohio Supreme Court was the first state high court to hear a case on this issue since Kelo.

In Norwood v. Horney, the Ohio court held 7-0 that municipalities may consider economic factors, but "the fact that the appropriation would provide an economic benefit to the government and community, standing alone, does not satisfy the public-use requirement" of the Ohio constitution, wrote Justice Maureen O'Connor. (2006 WL 2096001 (Ohio July 26, 2006).)

States' definitions of "public use" vary. "People forget that eminent domain was used to build railroad tracks," said Erwin Chemerinsky, a Duke Law School professor. "If it's used to build a Pfizer factory or a Wal-Mart, they are a lot more concerned."

Since Kelo, 31 states have passed bills to restrict takings or establish groups to study the issue. They include Ohio, which placed a moratorium on takings under certain circumstances and formed a task force; Arizona and New Mexico, whose governors vetoed bills that restricted takings; and Louisiana, Michigan, and South Carolina, whose legislatures passed constitutional amendments that will be on the ballot for voter approval in November.

The City of Norwood wanted to build a housing, retail, and office complex and two city-owned parking garages. When the developer tried to buy the land from its owners, some--including Carl and Joy Gamble and Joseph Horney and his wife, Carol Gooch--refused.

The Norwood code allowed the city to acquire land for redevelopment if it conducted an urban-renewal study and found that the area was a slum or a blighted or deteriorated area--or a deteriorating area in danger of becoming blighted. The study found that the neighborhood was a deteriorating area.

"Almost all courts, including this one, have consistently upheld takings that seized slums and blighted or deteriorated private property for redevelopment, even when the property was then transferred to a private entity, and continue to do so," O'Connor wrote.

But the court held that Norwood's use of "deteriorating area" as a standard for appropriation is void for vagueness and unconstitutional, because it speculates about the area's future condition. The city's criteria for a deteriorating area include lack of adequate parking facilities, faulty street arrangement, and diversity of ownership.

"But all of those factors exist in virtually every urban American neighborhood," the court said. "In essence, 'deteriorating area' is a standardless standard."

Dana Berliner, who represents the homeowners, noted, "The reason 'void for vagueness' applies is that people need to know they're subject to it. They can't be condemned for conditions beyond their control." Berliner is a senior attorney with the public-interest law firm Institute for Justice in Arlington, Virginia.

The court called for heightened scrutiny when statutes regulating eminent domain are under review. It also held that a provision of Ohio law that prohibited courts from enjoining a taking--after the landowner is compensated but before appellate review--violates the separation-of-powers doctrine and is unconstitutional.

Timothy Burke, a Cincinnati lawyer who represents Norwood, explained that, like the community in Kelo, Norwood once had a strong industrial base, but companies have left, the population has declined, and the city has had to cut back its services. "This project brought new tax sources and badly needed jobs," he said. "If that's not a public purpose, I don't know what is."

Burke said the decision "will make it much more difficult for older urban centers and first-ring suburbs--which are almost as old as the cities--to do urban redevelopment." He added that it will discourage developers and encourage more urban sprawl.

The court acknowledged that it had to "balance two competing interests of great import in American democracy: the individual's rights in the possession and security of property, and the sovereign's power to take private property for the benefit of the community."

Why have so many states reacted to Kelo by limiting takings? "The vast majority of Americans, including legislators, were appalled by the decision on a moral level," Berliner said. "People recognized that it's wrong to take working-class people's houses so someone wealthier can move in and generate more tax revenue."

In an amicus brief filed in support of the Norwood homeowners, the Ohio chapter of the NAACP and the National Institute for Urban Entrepreneurship argued that eminent domain takings disproportionately affect minorities and the economically disadvantaged.

Berliner said that most states "have not looked at eminent domain in 20 to 50 years." She added that she expects more of them to revisit the issue and that the Norwood decision "has persuasive value to other state supreme courts."

Meanwhile, she said, "cities took Kelo as a green light to move as rapidly as they could" and are "using the threat of eminent domain as a club to get people to sell" in growing numbers.

Burke noted that Kelo was "a huge political firestorm, and politicians reacted to the public reaction."

Chemerinsky agreed. "The public outcry explains what's happening in state legislatures and state courts," he said, adding that Kelo was "one of the most misreported cases" he has seen.

Kelo was not surprising, Chemerinsky said. "It was absolutely in accord with what the Supreme Court has said for decades," and the difference between building a highway and a shopping mall shouldn't matter, he said. Municipalities can use eminent domain "as long as they have a reasonable belief that the taking will benefit the public."