Eminent domain after Kelo v. City of New London: an argument for banning economic development takings.
I. INTRODUCTION II. HISTORY OF THE DOCTRINE A. Public-Private Takings in the Colonial and Revolutionary Eras B. Public-Private Takings in the Nineteenth Century C. Public-Private Takings in the Early Twentieth Century D. Public-Private Takings in the Latter Twentieth Century: Berman, Midkiff, and Poletown E. The Kelo Decision 1. The Majority Opinion 2. Justice Kennedy's Concurring Opinion 3. Justice O'Connor's Dissenting Opinion 4. Justice Thomas's Dissenting Opinion. III. JUSTIFICATIONS FOR EMINENT DOMAIN A. Overview of Common Justifications B. Coercion and Undercompensation 1. Subjective Premium 2. Surplus from Transfer 3. Mitigating Undercompensation: Reciprocity of Advantage 4. Efficiency Concerns IV. A BAN ON ECONOMIC DEVELOPMENT TAKINGS A. Reciprocity of Advantage B. Efficiency Concerns C. Capture and Oppressive Takings D. Broad Judicial Deference E. Proposed Modifications to the Public Use Framework F. Shortcomings of Proposed Modifications to the Public Use Framework G. Proposing a Legislative Ban on Takings for Economic Development H. Consequences of a Ban on Takings for Economic Development
When the New London Development Corporation (NLDC) embarked on an ambitious program to revitalize a ninety-acre parcel along the Thames River in southeastern Connecticut, it encountered formidable opposition from Susette Kelo and nine of her neighbors. NLDC, a non-profit development agency established by the City of New London, wanted to use its power of eminent domain (1) to take, with compensation, the homes and businesses occupying the proposed site of its new development. The goal of the project was to revitalize economically distressed New London, which had an unemployment rate twice that of the state average. (2) Plans called for developers to construct a mixed-use complex containing homes, a hotel, a marina, restaurants, shops, office space, and other amenities. Although the fee interest in the land would be owned by NLDC, the property would be occupied under long-term ground leases by the developers and operators of the new project. NLDC was able to purchase through negotiation most of the property in the proposed development site, but Susette Kelo and her neighbors refused to sell. When NLDC initiated condemnation proceedings to take the land through eminent domain, Kelo and her neighbors dug in their heels and sued, claiming that the proposed project was not a "public use," as required by the United States (3) and Connecticut (4) Constitutions, because the property would be occupied by private entities after the taking. Kelo and her neighbors lost in the Connecticut Supreme Court by a 4-3 margin, (5) but the U.S. Supreme Court granted certiorari in the case, (6) bringing the once-sleepy academic backwater of the public use requirement for the exercise of eminent domain to the fore.
After a long period of relative dormancy in the field of eminent domain generally, much recent attention has surrounded so-called "public-private" takings for economic development like the one at issue in Kelo. (7) Such public-private takings occur when the government uses its eminent domain power to transfer non-blighted property from a private individual or entity to another private individual or entity. The debate in these cases has centered on whether the proposed end-use of the condemned property properly can be considered "public" as is required by the Fifth Amendment's Takings Clause. The conceptions of public use can be generally divided into two categories: the "narrow" view and the "broad" view. Under the narrow view, the term "public use" means "use by the public." Under this approach, property is taken for "public use" only if the public has the right to use the property, or the property is owned by the government, after it is taken. Under the broad view, property is taken for "public use" if the taking results in some public advantage or benefit. Under this view, anything that enhances public welfare constitutes a "public use." (8) The broad view is almost universally accepted; indeed, throughout most of American history, it has been the dominant view. (9) Advocates of the use of eminent domain for economic development projects contend that the indirect benefits accruing to the public from these projects--job creation, an increased tax base and economic revitalization--constitute public uses because they produce a public benefit. Opponents contend that such projects primarily benefit the developers, provide uncertain public benefits, and, if considered public uses, could lead to unfettered use of the eminent domain power.
The question of whether the intended use of property marked for condemnation by eminent domain is a "public use" has not, until recently, been given serious consideration by federal courts. While it has frequently been stated that a law taking property from A and giving it to B for a purely private use is beyond the power of government, (10) for most of the history of the federal Takings Clause, and of the similar state constitutional provisions, most courts have adopted a policy of extreme deference to the decisions of government policy makers on the public use issue. The famous modern U.S. Supreme Court decisions in the area, Berman v. Parker (11) and Hawaii Housing Authority v. Midkiff, (12) adopted a rational basis standard of review, (13) which has been interpreted as requiring deference to a governmental public use determination "until it is shown to involve an impossibility." (14)
Usually included in the trio of public use cases granting extreme deference to the governmental taker is the Michigan Supreme Court's recently overturned decision in Poletown Neighborhood Council v. City of Detroit, in which the court upheld, over a public use challenge, the taking of a 465-acre neighborhood for the construction of a General Motors plant. (15) All three cases involved so-called "public-private" takings. Indeed, these cases and others have been so deferential in their analysis of the public use requirement that many scholars have concluded that the Public Use Clause is "moribund," effectively imposing no check on the use of the eminent domain power. (16) As a result, say critics, this awesome (some have said "despotic") (17) governmental power has been abused, overused, and sold to the highest-bidding special interest, breeding inefficiency and running roughshod over the property rights of untold numbers of citizens. (18)
Some scholars and property rights activists were hoping for relief from this state of affairs when the Supreme Court granted certiorari in Kelo in September 2004. (19) The Court's writ, coming as it did in the wake of several high-profile decisions from state supreme courts and lower federal courts employing unusually hard-nosed approaches to questions of "public use," (20) led some to believe that the Court was about to announce a new, tighter standard for judicial review of public use determinations. (21)
Those hopes were dashed when the Court, in a 5-4 decision, affirmed the Connecticut Supreme Court's finding that the New London economic development project constituted a public use for Fifth Amendment purposes. (22) Relying heavily on Berman and Midkiff, the Court reaffirmed its policy of extreme deference to governmental "public use" determinations. (23) Justice Kennedy's concurring opinion emphasized that courts should take seriously accusations of "impermissible favoritism to private parties" (24) and suggested "the possibility that a more stringent standard of review than that announced in Berman and Midkiff might be appropriate for a more narrowly drawn category of takings." (25) Other than this quiet hint at the theoretical possibility of a shift in the future, and the faint suggestion in the majority opinion that a "carefully considered" or "integrated" development plan would be strong, or perhaps essential, evidence that a taking was not a pretext for conferring a benefit on a private party, (26) those dissatisfied with the current legal regime found little to celebrate in Kelo.
The Kelo decision was correct as a matter of law, following naturally from Berman and Midkiff and consistent with American judicial and legislative approaches to the public use question that pre-date the U.S. Constitution. Yet the policy implications of the Kelo decision and the precedents underlying it are extremely troubling. As Justice O'Connor correctly noted in her dissent in Kelo, the majority's holding that the construction of economic development projects may constitute a public use means that "all private property is now vulnerable to being taken and transferred to another private owner, so long as it might be upgraded--i.e., given to an owner who will use it in a way that the legislature deems more beneficial to the public--in the process." (27) She declared that for the majority to hold that "incidental public benefits resulting from the subsequent ordinary use of private property render economic development takings 'for public use' is to wash out any distinction between private and public use of property." (28) The result, she contended, was "effectively to delete the words 'for public use' from the Takings Clause." (29)
For years, judicial acceptance of this broad view has, in fact, produced the kind of results Justice O'Connor warned of in her Kelo dissent. The result has been that the existing public use regime has failed to produce the two most important goals of a proper eminent domain regime: efficiency and justice. (30) "Efficiency" or "utility" occurs when societal resources are deployed so as to increase overall societal wealth. (31) "Justice," most commonly invoked in the context of eminent domain, is achieved when the government is prevented from "forcing some people alone to bear burdens which, in all fairness and justice, should be borne by the public as a whole." (32)
Rather than advancing the goals of efficiency and justice, modern eminent domain practices in the area of economic development are tainted by the abuse of existing property owners. (33) (particularly, but not exclusively, in the form of undercompensation for taken property), capture by special interests, and inefficiency. (34) Because the Kelo decision was well grounded in history and case law, right or wrong, this Article does not argue that the Kelo majority should have ruled otherwise. Nor would it be realistic to expect a change in the law any time soon. Instead, this Article calls for a pragmatic solution: a ban on takings for economic development, enacted either by state legislation or, preferably, by state constitutional amendment. (35)
This solution is desirable for several reasons. First, exercises of eminent domain are associated with systematic undercompensation of the dispossessed landowner. (36) Thus, the aggrieved owner essentially subsidizes the government (or private) project. This is not only unjust, it is also inefficient; the government, able to acquire property at a discount, does not have to consider the full costs of its plan in deciding whether the overall economic gains accruing to society from the project outweigh the overall costs. (37) For reasons that will be discussed, these dual problems arising from undercompensation--injustice and inefficiency--are potentially much more severe when the taking is a public-private taking for economic development.
Second, as has been widely noted, allowing takings for economic development imposes no structural limitations on the eminent domain power, because "[a]ny business enterprise produces benefits for society at large." (38) If the eminent domain power can be exercised without limitation, then no property is safe from condemnation. Third, most of the less drastic proposals for remedying the aforementioned justice and efficiency problems do not actually solve these problems.
Fourth, and most importantly, even accepting the questionable premise that economic development projects are the only or best way to revitalize economically distressed regions, there is a better way to foster such projects than through the exercise of eminent domain. (39) A ban on the use of eminent domain for economic development projects would effectively require that all property used in economic development projects be purchased on the open market. This solution would force the government and its proxies to consider the full cost of the property it acquires. Although this proposal would increase the cost of property acquisition to potential participants in economic development projects, the government, if it so desires, could offer tax breaks, grants, and other incentives to these businesses in order to offset these increased costs. The money to pay for these tax breaks and grants would, of course, come from the public treasury, meaning that the additional costs of property acquisition arising from the unavailability of eminent domain would be spread among all taxpayers. Spreading the cost is much more just than concentrating the burden of subsidizing economic development projects on the few people whose property would otherwise be marked for condemnation.
Significantly, removing eminent domain from the economic development process need not seriously hinder revitalization of depressed local economies, because economic development projects are not strictly necessary for this purpose. (40) Moreover, even assuming that such projects are indispensable, there is considerable evidence to suggest that the use of eminent domain for economic development takings is frequently unnecessary, because other less problematic options for acquiring the necessary property are readily available. Moreover, it is often possible for projects to be redesigned to work around properties that cannot be purchased on the open market. Though these alternative options are not perfect, and may sometimes fail to achieve the land acquisition necessary for a worthwhile project, risking a slight reduction of economic development projects is a reasonable price to pay for avoiding the problems caused by the present regime.
Part II of this Article briefly traces the history of the public use requirement in the United States from colonial times through the Supreme Court's decision in Kelo. Although this history reflects some ambivalence and inconsistency regarding the breadth of the public use requirement, the most common approach since colonial times has been to define "public use" to mean "public advantage or benefit," rather than literal "use by the public." Thus the so-called "broad view" of public use is so deeply entrenched in American case law that it would have required a radical break from history and precedent for the Kelo court to have ruled otherwise. Both Justice O'Connor's and Justice Thomas's dissents, while correct in their assessment of the negative consequences flowing from the majority's decision, do not provide plausible legal arguments for ruling otherwise.
Part III discusses the rationales for the eminent domain power, its use in the modern world, and the justice and efficiency concerns surrounding relatively unfettered use of the power by government.
Part IV sets forth the case for banning economic development takings, arguing that an outright ban on such takings is the best way to alleviate the serious concerns regarding justice and efficiency that they raise. This Article also sets forth proposed language for a constitutional amendment implementing such a ban.
II. HISTORY OF THE DOCTRINE
A. Public-Private Takings in the Colonial and Revolutionary Eras
Although the principle that private property could only be taken for public use did not become firmly entrenched in American law until after the Revolution, (41) actual practices prior to the ratification of the U.S. Constitution are highly relevant to the later debates over the scope of the "public use" requirement. Based on colonial land use practices, at least initially, there were virtually no limits on nonconsensual property transfers between private individuals. The taking of land to build dams and private roads and to drain private land was commonplace. (42) Today, many of these takings would be considered public-private takings, in that private individuals or entities, rather than the government, were permitted (literally or in effect) to condemn the property of others. Eminent domain transfers to the government were common as well: There were, for example, formal statutes authorizing local governments to take land to build roads as early as 1639. (43) But of greater interest to the study of the public use requirement are legislative schemes that, by limiting the traditional legal remedies available for trespass and other common-law actions, had the effect of facilitating nonconsensual transfers to private individuals or entities. (44) The most commonly cited examples of these schemes are the so-called "Mill Acts" (45) and various other legislative schemes permitting landlocked property owners to condemn ways of access over their neighbors' land. (46)
Under the Mill Acts, colonial governments dramatically limited the remedies available to upper riparian landowners for flooding caused by the construction of lower riparian mill dams. (47) One constructing a mill under the Mill Acts was liable only for annual or permanent damages and enjoyed a privileged status compared with his common-law forebears, whose aggrieved upper riparian neighbors could resort to the remedies of self-help, punitive damages, and injunctive relief. (48) The effect of this regime was that "the lower riparian had a right to condemn the lands of his upper neighbor by flooding." (49 In virtually all Mill Act states, the mills were heavily regulated and required to serve any paying customer. (50) Thus, although the Mill Acts permitted forced property transfers to private individuals, the mills constructed on property so transferred were, in Nathan Sales's words, "public utilities." (51) These takings would be considered to comport with the narrow view of public use. One important exception, however, was Maryland's Mill Act, enacted in 1719, which extended Mill Act protections to builders of private mills used for iron production, and which did not require that these mills be available for use by the public. (52) But even in states whose Mill Acts did require access to the mills by the public, some courts spoke of the mills in terms of the general benefits they would produce for the public at large, rather than the benefits provided to those who actually used the mills. (53) At the same time, many colonial legislatures authorized property owners lacking access to public roads to condemn, upon payment of compensation, rights of way over surrounding lands. (54) Thus, by the colonial era, "[a]lready eminent domain's exercise was split between governmental bodies and private parties." (55)
Other colonial land use practices would raise eyebrows among today's advocates of a strict public use requirement. John F. Hart, in his study of colonial land use practices, (56) catalogued numerous colonial statutes authorizing transfers from one private party to another if the original owner failed to make productive use of the land. In the Plymouth colony, for example, one who failed to begin productive operations within a year of discovering a mine would forfeit the mine and the government could appoint another person to operate that mine for his own profit. (57) Similar statutes in other colonies allowed private individuals to condemn sites suitable for mill construction if the present owner failed to build a mill (58) or to take property of owners who allowed sites amenable to forges and foundries to lay idle. (59) Several colonial acts threatened owners of undeveloped urban lots with forfeiture if they failed to develop the land within prescribed time periods or in a manner determined by law. (60) Thus, "antient proprietors" of land in James City, Virginia who failed to build on their holdings could lose their property interest if another person built a "decent house" on the undeveloped land. (61) None of these takings resulted in actual use by the public. Instead, they were intended to advance communities' needs for economic development and population growth.
Although a requirement of public use, narrow or broad, was not part of the forced-transfer regime at the time of the Revolution, (62) it is interesting to note that even before it was relevant as a matter of law, some common practices, such as those authorized by the Mill Acts, resulted in takings that would satisfy the modern narrow standard. Others, like those chronicled by Hart, would satisfy only the broad test.
This observation, however, is merely academic, as a public use requirement of any kind did not begin to emerge until later, under circumstances that remain to some extent unclear. Pennsylvania and Virginia were the first colonies to insert the phrase "public use" into their constitutions in 1776. (63) Pennsylvania's constitution provided that "no part of a man's property can be justly taken from him, or applied to public uses, without his own consent, or that of his legal representatives...." (64) Virginia's "public use" clause stated that citizens "cannot be taxed or deprived of their property for public uses, without their own consent, or that of their representatives so elected...." (65) However, the language of neither provision clearly states that eminent domain may only be exercised for public uses, and history does not reveal the drafters' exact intentions. (66) Errol E. Meidinger may provide a partial explanation for this ambiguity with his speculation:</p>
<pre> [I]t may be surmised that eminent domain had yet to emerge
distinctly from the complex of due process considerations flowing from the development of Magna Charta. Both the quoted provisions, for instance, emphasize the Lockean notions of representation and effective consent, rather than the substantive nature of the use. (67) </pre> <p>In any case, only after the outbreak of the Revolution did most of the other original thirteen states add public use language to their constitutions, beginning with Vermont in 1777 (68) and concluding with South Carolina in 1868. (69) These latter provisions, like the ones in Virginia and Pennsylvania, often did not specify the actual permitted uses and limitations of the eminent domain power. (70)
B. Public-Private Takings in the Nineteenth Century
As a result of the vagueness of limitations on the takings power, eminent domain doctrine developed piecemeal, decision by decision, in the state courts. (71) Lacking explicit direction from their respective state or colonial takings provisions, the courts turned to civil law, natural law, (72) and common law for guidance. (73) Among the key principles developed by the courts during this period was that eminent domain was a power inherent in government and that it "could be legitimately exercised by the state only for a 'public use' or 'public purpose." (74) William B. Stoebuck, in his classic A General Theory of Eminent Domain, noted that the early civil law theorists Grotius, Vattel, Pufendorf, and Bynkershoek all argued for limitations on the power of eminent domain, insisting, respectively, that the power should be used only for "public advantage," "public welfare," "necessity of the state," or "public utility." (75) Stoebuck further noted that these theorists, often quoted in American judicial opinions, "apparently influenced" the American development of the "public use" requirement. (76) Alternatively, Philip Nichols, Jr. concluded that</p> <pre> American courts seem to have evolved [the public use requirement] by reference to the "higher law," with some assistance from an implication by negative inference from the phrase in the Fifth Amendment to the Federal Constitution, and in many state constitutions, "nor shall private property be taken for public use without just compensation." (77) </pre> <p>In any case, even absent explicit legislative or constitutional provisions, many early decisions held that governments lacked the power to permit the nonconsensual taking of private property for private use. (78) Some such holdings were based on natural law theories, (79) while other courts reached the same result by concluding that state constitutional language implied that property could only be taken for a public use. (80)
Initially, the principle that private property could not be taken for a private use had little impact on the actual uses of the takings power. (81) Eminent domain practices changed little during the first decades following independence, focusing primarily on roads and dams. (82) In fact, even general exploitation of natural resources was widely seen by early nineteenth-century courts as a "public use." (83)
As the Nineteenth Century progressed, however, the use of eminent domain expanded dramatically. In an effort to foster investment and speed economic development, legislatures in every state granted the power of eminent domain to private corporations building or operating railroads, turnpikes, bridges, and canals. (84) Courts generally upheld these takings on the theory that the companies were what would today be called common carriers, obligated to provide service to any member of the public, (85) or on the theory that the ultimate uses of the taken property would produce a public benefit. (86) In addition, the number and scope of Mill Acts grew dramatically. (87) No longer limited to "public" grist mills for use by neighboring farmers, mills constructed under these later acts were increasingly devoted to processing lumber, cotton, and pulp, or to fueling foundries. (88) Despite the obvious lack of any "public use" of such mills, courts repeatedly upheld the private takings to foster their construction. In most cases, the courts echoed the reasoning applied to railroads, turnpikes, bridges, and canals: that the ultimate uses of the taken property would provide a "public benefit." (89)
In the 1840s and 1850s, however, a different view began to emerge: In some jurisdictions, actual use by members of the public became an essential element of "public use." (90) The impetus for this development was increasing concern among courts that the explosive growth in the use of eminent domain, made possible by wide judicial adoption of the broad view of public use, threatened the institution of private property, (91) and that legislatures had been co-opted into favoring powerful private interests over the public good. (92) Otherjudges feared that excessive support for private enterprise might bring additional government regulation. (93) There is some scholarly disagreement over how widespread this use-by-the-public view ever became. Philip Nichols, Jr. concluded that this "narrow view" eventually became the majority position. (94) Lawrence Berger, however, contended that</p> <pre> [w]hile the narrow view of public use held considerable sway, especially in the latter half of the nineteenth century, it never completely took over the field. The two doctrines competed, leaving the commentators in hopeless confusion as to what the "true rule" (for in those days they believed in such things) was. (95) </pre> <p>Meidinger agreed with Berger, arguing that "two separate positions, the 'broad" public benefit view and the 'narrow' use-by-the-public view, began to grow up beside each other." (96)
Nonetheless, adherence to a use-by-the-public standard, even where it existed, was often more rhetorical than actual, although some legislative acts were struck down under the rule. (97) Stoebuck described the use-by-the-public rule as "mostly fabeled [sic]." (98) Part of the problem was that the test was difficult to apply, requiring a court to determine the extent of, or conditions on, public access necessary to meet the use-by-the-public standard. (99) Philip Nichols, Jr. noted that</p> <pre> [m]ore important [than the stated doctrines in jurisdictions adopting the use-by-the-public test] were the loopholes, the limitations, and the evasions which courts giving lip service to the majority view were forced to sanction, in order to avoid bringing that view into irreconcilable conflict with the expanding industrialism of the times, and the quick exploitation of natural resources which
was felt to be necessary. (100) </pre> <p>The tendency to permit liberal use of the eminent domain power reached its peak toward the end of the Nineteenth Century. By the 1870s, it became routine for governments to delegate eminent domain powers to private interests. (101) The western states, in their eagerness to foster development, "followed Colorado's lead in handing out eminent domain to practically any source of capital that could use it." (102)
C. Public-Private Takings in the Early Twentieth Century
By the Twentieth Century it appeared that the narrow doctrine, where it still ostensibly existed, constituted at best a minor hindrance to liberal use of the eminent domain power. (103) On those rare occasions in the Nineteenth Century when the U.S. Supreme Court addressed public use cases, it did so under the Fourteenth Amendment's Due Process Clause on the theory that a taking for private use violated fundamental principles of justice. (104) The Court's limited case law tended to favor the "broad public benefit" view of public use: (105) In 1897, the Court
incorporated the Fifth Amendment's public use requirement against the States through the Fourteenth Amendment in Chicago, Burlington & Quincy Railroad Co. v. Chicago. (106) In 1905, the Court upheld a Utah law empowering an individual to condemn a neighbor's land in order to convey water. (107) Thereafter, in Hairston v. Danville & Western Railway Co., the Court emphasized "[t]he propriety of keeping in view by this court, while enforcing the Fourteenth Amendment, the diversity of local conditions and of regarding with great respect the judgments of the state courts upon what should be deemed public uses in that State." (108) In 1916, the Court, in upholding a power company's authority to condemn land and water rights in order to produce and sell hydroelectric power, formally rejected the use-by-the-public test, with Justice Holmes declaring, "The inadequacy of the use by the general public as a universal test is established." (109) A few years later in Rindge Co. v. Los Angeles County, the Court elaborated that it was "not essential that the entire community, nor even any considerable portion, should directly enjoy or participate in an improvement in order to constitute a public use." (110)
The next major development in the application of eminent domain law came in the first half of the Twentieth Century, with an increase in urban redevelopment programs. (111) The 1920s brought an upsurge in urban projects, aided by the newly prominent profession of "urban planner." (112) These programs, generally designed to eliminate slums and blight or to foster commercial development, (113) began in earnest during the Great Depression. (114) Some courts initially struck down attempts to use the eminent domain power to carry out some of these programs, because the projects as constructed would be either owned or occupied by private individuals. (115) But the majority trend was for courts to uphold these takings under the "public advantage" approach to the public use rule. (116) The United States Housing Act of 1937 (117) made funds available to local governments for slum removal and the development of affordable public housing, and the Housing Act of 1949 (118) provided a massive influx of funds for use by local agencies for urban redevelopment. (119) These acts led to a generation of additional public use litigation, with the courts again generally upholding takings under the public advantage test. (120)
D. Public-Private Takings in the Latter Twentieth Century: Berman, Midkiff, and Poletown
This frenzy of slum clearing and urban redevelopment set the stage for one of the most famous twentieth-century Supreme Court public use cases: Berman v. Parker. (121) In Berman, the District of Columbia, acting pursuant to congressional authorization, had embarked on an urban redevelopment plan in southwest Washington, D.C., an area which the city planning commission had determined suffered from blighted conditions. (122) The commission intended to embark on a comprehensive plan, including construction of housing and other facilities. (123) Under the terms of the plan, part of the property taken would be leased or sold to private entities to facilitate the project. (124) Appellants, owners of property on which a department store was located, objected to the taking of their property on the grounds that, while it fell within the parameters of the redevelopment area, it was not itself a blighted property. (125) Moreover, they complained that the property, once taken, would be managed by a private agency and developed for private use. (126) Thus, they contended, the taking was not for a public use as required by the Fifth Amendment. (127)
Justice Douglas, writing for a unanimous court, rejected the department store owners' claim. (128) He dismissed the contention that the taking was not for a "public purpose" by explaining,</p> <pre> We deal ... with what has traditionally been known as the police power. An attempt to define its reach or trace its outer limits is fruitless, for each case must turn on its own facts. The definition is essentially the product of legislative determinations addressed to the purposes of government, purposes neither abstractly nor historically capable of complete definition. Subject to specific constitutional limitations,
when the legislature has spoken, the public interest has been declared in terms well-nigh conclusive. In such cases, the legislature, not the judiciary, is the main guardian of the public needs to be served by social legislation. (129) </pre> <p>Justice Douglas explained that this principle applied even though the power of eminent domain was involved, for "[t]he role of the judiciary in determining whether that power is being exercised for a public purpose is an extremely narrow one." (130) After acknowledging that improving public health, welfare, and safety were clearly within the government's police power, he continued, "Once the object is within the authority of Congress, the right to realize it through the exercise of eminent domain is clear. For the power of eminent domain is merely the means to the end." (131) That private enterprise would be used in redeveloping the area did not mean the public use requirement was violated. The redevelopment project overall served a public use, and therefore "the means of executing the project are for Congress and Congress alone to determine, once the public purpose has been established." (132) Moreover, Justice Douglas rejected the appellants' claim that the taking of their property was unconstitutional because their property did not contribute to the blighted conditions, stating that "[o]nce the question of the public purpose has been decided, the amount and character of land to be taken for the project and the need for a particular tract to complete the integrated plan rests in the discretion of the legislative branch." (133)
The Court did not decide another major public use case for thirty years. Then, in Hawaii Housing Authority v. Midkiff, (134) the unanimous Supreme Court, in an opinion authored by Justice O'Connor, applied similar reasoning in rejecting a challenge to Hawaii's land reform plan. Because of the state's history of feudal land tenure under its early Polynesian settlers, in the mid-1960s forty-seven percent of the state's land (almost all of the privately owned land in the state) was held by seventy-two private owners, who leased land to many homeowner tenants. (135) Finding this situation to be contrary to public welfare, the legislature enacted a scheme to condemn much of this land, pay compensation to the owners, and then sell the fee interests to the present tenants. (136) The landowners sued, arguing that because their property would ultimately be transferred to private individuals, the plan violated the public use requirement of the Fifth and Fourteenth Amendments. (137)
In upholding the land reform plan, the Court cited Berman for the proposition that any permissible governmental purpose could be carried out using the eminent domain power. (138) Summarizing Berman's discussion of permissible uses of the taking power, Justice O'Connor declared, "The 'public use' requirement is thus coterminous with the scope of a sovereign's police powers." (139) Since "[r]egulating oligopoly and the evils associated with it is a classic exercise of a State's police powers," Hawaii's decision to use the eminent domain power so regulating was constitutionally permissible. (140) The Court acknowledged that "[a] purely private taking could not withstand the scrutiny of the public use requirement; it would serve no legitimate purpose of government and would thus be void." (141) But, "where the exercise of the eminent domain power is rationally related to a conceivable public purpose, the Court has never held a compensated taking to be proscribed by the Public Use Clause." (142) According to the Court, "[j]udicial deference is required because, in our system of government, legislatures are better able to assess what public purposes should be advanced by an exercise of the taking power." (143) The Court rejected suggestions that it consider whether the land reform project was likely to accomplish its goals, noting that "whether in fact the provision will accomplish its objectives is not the question: the [constitutional requirement] is satisfied if ... the ... [state] Legislature rationally could have believed that the [Act] would promote its objective." (144) The Court noted that Berman had cited Old Dominion Co. v. United States, (145) which required deference to legislative public use determinations "until it is shown to involve an impossibility." (146) While acknowledging a limited role for courts to review a legislature's public use judgment, (147) the Court declared, "When the legislature's purpose is legitimate and its means are not irrational, our cases make clear that empirical debates over the wisdom of takings--no less than debates over the wisdom of other kinds of socioeconomic legislation--are not to be carried out in the federal courts." (148)
In the interim between Berman and Midkiff, the Supreme Court of Michigan entered the debate, issuing one of the most notorious public use decisions. (149) Poletown Neighborhood Council v. City of Detroit involved Detroit's attempt to condemn an entire neighborhood to make way for the construction of a General Motors assembly plant. (150) Deferring to the government's view that the expected economic revitalization resulting from the plant--General Motors and the City of Detroit claimed the project would prevent the loss of 6,150 jobs and provide $15 million in tax revenue (151)--would be helpful to the public in the midst of an economic recession, the court found that a public use existed under the Takings Clause of the Michigan Constitution. (152) Because the use of eminent domain would benefit "specific and identifiable private interests," the court purported to inspect "with heightened scrutiny the claim that the public interest is the predominant interest being advanced." (153) While averring that "[t]he power of eminent domain is restricted to furthering public uses and purposes and is not to be exercised without substantial proof that the public is primarily to be benefited," the court declared that the projected benefit was "clear and significant." (154) Noting that a project with a smaller or less obvious public benefit might not meet with approval, (155) the court upheld the taking. (156)
Two decades later, the Michigan Supreme Court overturned Poletown in County of Wayne v. Hathcock, a case concerning whether the taking of property for the construction of an office park for economic development purposes constituted a public use under the Michigan Constitution. (157) Michigan's approach for interpreting the meaning of legal terms of art in its constitution is to discern the "common understanding" of the term "among those sophisticated in the law at the time of the constitution's ratification." (158) Applying this standard, and applying case law preceding the adoption of the 1963 constitution, the court concluded that a transfer of condemned property to a private entity meets the public use test if it possesses one of three characteristics: (1) the transfer involves "public necessity of the extreme sort otherwise impracticable"; (159) (2) "the private entity remains accountable to the public in its use of that property" (160) or (3) the land is selected for condemnation based on "'facts of independent public significance," meaning that the underlying purposes for resorting to condemnation, rather than the subsequent use of condemned land, must satisfy the Constitution's public use requirement." (161) The court explained that "public necessity of an extreme sort otherwise impracticable" referred to endeavors providing "public benefits whose very existence depends on the use of land that can be assembled only by the coordination central government alone is capable of achieving." (162) An example of property selected on the basis of "facts of independent public significance," the court explained, would be blighted property that is condemned and then sold to private persons. In such a case, the "controlling purpose in condemning the properties" is removal of the blight, and subsequent resale is merely incidental to that purpose. (163)
Applying these three tests to the office project at issue, the court concluded that the proposed taking was not for a public use. (164) The court reasoned that the very existence of the project did not depend on the use of eminent domain for assembling property:</p> <pre>
To the contrary, the landscape of our country is flecked with shopping centers, office parks, clusters of hotels, and centers
of entertainment and commerce. We do not believe, and plaintiff does not contend, that these constellations required the exercise of eminent domain or any other form of collective public action for their formation. (165) </pre> <p>Concluding that the project would not remain subject to public oversight, and that the property taken had not been selected based on facts of independent significance, the court found the proposed condemnations to be unconstitutional. (166)
E. The Kelo Decision
After Midkiff, the Supreme Court did not decide a major public use case until Kelo v. City of New London, (167) on certiorari to the Connecticut Supreme Court. (168) There, property owners sued the City of New London and the New London Development Corporation (NLDC), a nonprofit development corporation established by the city, to enjoin use of the eminent domain power in furtherance of a comprehensive economic development plan. (169) The plaintiffs asserted that the Connecticut and United States Constitutions prohibited the exercise of eminent domain power to allow for economic development by private entities, since the condemned properties would not be put to a "public use." (170)
The planned development, as conceived by the NLDC, would occupy ninety acres along the Thames River and consist of both residential and commercial areas. (171) It would include a waterfront hotel and conference center, marinas, a public walkway along the river, residences, a Coast Guard museum, space for high technology research and development office space, additional office and retail space, and parking. (172) Under the plan, the NLDC would own the land in the development area and enter into ground leases with various private developers, who would then develop the parcels in accordance with the plan. (173) The development plan was divided into seven parcels. (174) Four of the plaintiffs' properties were on parcel 3, slated for at least 90,000 square feet of research and development space immediately north of Pfizer Inc.'s recently constructed $300 million research facility. (175) Interestingly, the planners had decided to leave untouched a building owned by a private social organization, the Italian Dramatic Club, also located on parcel 3. (176) Eleven properties owned by four of the plaintiffs were located on parcel 4A, which was designated for "park support," either parking or retail services for the adjacent state park. (177) The NLDC estimated that the plan would create hundreds of construction jobs and roughly 1,200 to 2,300 permanent jobs. (178) Property tax revenues resulting from the plan were projected at between roughly $680,000 and $1,200,000 annually. (179)
In the U.S. Supreme Court, the Kelo property owner petitioners raised several arguments. (180) First, they argued that the proposed New London development was "not a public use under the Fifth Amendment to the U.S. Constitution." (181) The petitioners contended that a "public benefit" is not equivalent to a "public use," asserting, "[I]f nothing more is required to constitute a public use than listing expected tax revenue and job growth that might result from private development, then there is scarcely any private use or business for which the power of eminent domain could not be used." (182) The petitioners suggested that this is precisely what had happened to them: "Respondents--a local government and a private development corporation--seek to take Petitioners' 15 homes to turn them over to other private parties in the hope that the City may benefit from whatever trickle-down effects those new businesses produce." (183) They thus requested a "clear, bright-line rule that the trickle-down benefits of successful business do not make private business a public use." (184) The petitioners distinguished the holdings in Berman and Midkiff, noting that transfers to private parties had been permitted "in only limited and specific circumstances": elimination of urban blight in the former case, and elimination of Hawaii's "oligopolistic pattern of land-ownership" in the latter. (185) As a fallback argument, the petitioners asked the Court to hold that even if economic development can be a public use, the condemnations at issue were still unconstitutional because "there must at least be a reasonable certainty that the condemnations will result in [the alleged] public benefits." (186) Because the benefits of the proposed project were unreasonably speculative, and even some of the important details were left unspecified, they argued the Court should be loath to uphold eminent domain takings to advance the project. (187)
1. The Majority Opinion
A sharply divided Court rejected all of the petitioners' claims. (188) The Court cited Midkiff for the proposition that "the City would no doubt be forbidden from taking petitioners' land for the purpose of conferring a private benefit on a particular private party." (189) It further noted that a pretextual public use would also be forbidden. (190) Here, though, the Court explained, the development plan at issue was "carefully considered," and neither the trial judge nor any of the Connecticut Supreme Court justices saw any evidence of an illegitimate purpose. (191) Even though the city and the private developers would not keep the taken land open to the public, the proposed plan was a public use because the "Court long ago rejected any literal requirement that condemned property be put into use for the general public." (192) Such a rule was "difficult to administer" and had "proved to be impractical given the diverse and always evolving needs of society." (193)
Thus, according to the majority, the Court's earliest public use cases (decided after incorporation of the Fifth Amendment in the late 1800s) had "embraced the broader and more natural interpretation of public use as 'public purpose." (194) And in deciding whether a proposed use of land served a "public purpose," the Court stated that "[w]ithout exception, our cases have defined that concept broadly, reflecting our longstanding policy of deference to legislative judgments in this field." (195) The Court noted that in Berman, in which the individual department store at issue was not blighted, "Justice Douglas refused to evaluate this claim in isolation, deferring instead to the legislative and agency judgment that the area 'must be planned as a whole.'" (196) The majority also noted that the Midkiff Court had "[r]eaffirm[ed] Berman's deferential approach to legislative judgments in this field" in finding that "the State's purpose of eliminating the 'social and economic evils of a land oligopoly' qualified as a valid public use," despite Hawaii's plan for rapid transfer of the condemned properties to private parties. (197)
The Court unequivocally rejected the petitioners' proposed bright-line rule that economic development can never constitute a public use, and held that promoting economic development is a classic government function, indistinguishable from other public purposes upheld by the Court in the past. (198) The Court rejected the argument that a taking for economic development might "blur the boundary between public and private takings," noting that "the government's pursuit of a public purpose will often benefit individual private parties." (199) The Court declined to consider the possibility, urged by the petitioners, that failing to adopt the bright-line rule would leave nothing to "stop a city from transferring citizen A's property to citizen B for the sole reason that citizen B will put the property to a more productive use and thus pay more taxes." (200) Such facts, while "certainly rais[ing] a suspicion that a private purpose was afoot," were not before the Court; the majority noted, with apparent approval that "[c]ourts have viewed such aberrations with a skeptical eye." (201)
The Court also rejected the petitioners' argument for a rule requiring "reasonable certainty" that the claimed benefits of a project will actually occur. (202) This, the majority stated, "would represent an even greater departure from our precedent." (203) The Court quoted Midkiff's declaration that "[w]hen the legislature's purpose is legitimate and its means are not irrational ... empirical debates over the wisdom of takings--no less than debates over the wisdom of other kinds of socioeconomic legislation--are not to be carried out in the federal courts." (204) The majority noted that the realities of a comprehensive plan require</p> <pre> that the legal rights of all interested
parties be established before new construction can be commenced. A constitutional rule that required postponement of the judicial
approval of every condemnation until the likelihood of success of the plan had been assured would unquestionably impose a significant impediment to the successful consummation of many such plans. (205) </pre> <p>For similar reasons, the Court declined to adopt a rule requiring scrutiny of whether a particular parcel of land is necessary for the project. (206) Quoting Berman, the majority explained that "[o]nce the question of the public purpose has been decided, the amount and character of land to be taken for the project and the need for a particular tract to complete the integrated plan rests in the discretion of the legislative branch." (207)
It will be some time before the full implications of the Kelo decision are known. The case should not be read as approving all development projects for which the alleged public purpose is an enhanced tax base, job growth, and general economic improvement. The Court does not rule out the possibility that such a project could be a pretext for conferring a private benefit. (208) The Court concludes, however, that the New London project is not such a project, in large part because the condemnations involved would be "executed pursuant to a 'carefully considered' development plan." (209) In response to petitioners' charge that approving the takings at issue would leave nothing to prevent governments from transferring property from one private individual to another if the transferee could generate more taxes by putting the property to a more productive use, (210) the Court offered a similar rationale, stating that such transfers, "executed outside the confines of an integrated development plan," were not before the Court, and that such "hypothetical cases ... can be confronted if and when they arise." (211) In both instances, the Court seemed to assume that an integrated development plan would be considered strong evidence that a taking was not a pretext for conferring a benefit on a private party.
2. Justice Kennedy's Concurring Opinion
Justice Kennedy provided the fifth vote for the majority opinion. In a key concurring opinion, he declared that "meaningful rational basis review ... is required under the Public Use Clause." (212) He wrote that the reiteration of the rational basis standard of review in public use cases does not alter the fact that the Public Use Clause forbids "transfers intended to confer benefits on particular, favored private entities, and with only incidental or pretextual public benefits." (213) Justice Kennedy called on courts to take "plausible accusation[s] of impermissible favoritism" seriously and to review the record to evaluate such accusations, but "with the presumption that the government's actions were reasonable and intended to serve a public purpose." (214) He corrected petitioners' "incorrect assumption that review under Berman and Midkiff imposes no meaningful judicial limits on the government's power to condemn any property it likes." (215) Rather, he continued,</p>
<pre> a more stringent standard of review than that announced in Berman and Midkiff might be appropriate for a more narrowly
drawn category of takings. There may be private transfers in which the risk of undetected impermissible favoritism of private parties is so acute that a presumption (rebuttable or otherwise) of invalidity is warranted under the Public Use Clause. (216) </pre> <p>Under the facts presented in Kelo, he explained, there was no evidence of impermissible favoritism of any private parties. (217) He enumerated the many factors considered by the trial court indicating that this claim of public benefit was not a pretext: testimony from the government and business leaders involved in the plan, evidence of correspondence between the parties, that the NLDC was aware of the city's poor economic condition and that this condition was corroborated by evidence, that the state committed money to the project before particular developers were identified, that a variety of plans were considered, that the developer was chosen from a group of candidates, and that some of the private beneficiaries of the plan were still unidentified, because it was unclear who would occupy the anticipated office space. (218) At the same time, he pointed out, "the projected economic benefits of the project can not be characterized as de minimus." (219) Thus, a presumption of an impermissible public purpose was not justified. (220)
Justice Kennedy's concurrence is significant for two reasons. First, it suggests that, at least where a plausible claim of impermissible favoritism is asserted, the courts should undertake a more searching review of the government's decision-making process than was suggested in Berman. (221) Second, he appears to echo the majority's emphasis on an integrated plan as evidence of a legitimate purpose. (222)
3. Justice O'Connor's Dissenting Opinion
Justice O'Connor filed a dissenting opinion, joined by Chief Justice Rehnquist and Justices Scalia and Thomas. The dissenters accused the Court of abandoning the "long-held, basic limitation on government power" that property may not be taken from A and given to B. (223) Regarding the majority decision, Justice O'Connor wrote, "all private property is now vulnerable to being taken and transferred to another private owner, so long as it might be upgraded--i.e., given to an owner who will use it in a way that the legislature deems more beneficial to the public--in the process." (224) She stated that characterizing economic development takings as "for public use" whenever "incidental public benefits result from the subsequent ordinary use of private property" would "wash out any distinction between private and public use of property." (225) The result, Justice O'Connor concluded, was "effectively to delete the words 'for public use" from the Takings Clause." (226)
In the dissenters' view, the dual requirements that a taking be "for public use" and that "just compensation" be paid to the owner were intended to ensure "stable property ownership" by preventing arbitrary, abusive, and unfair use of the takings power. (227) The requirement that property may be taken only for a public use "promotes fairness as well as security," (228) while the just compensation requirement is intended to distribute the cost of takings fairly among the general population. (229) Such protections are particularly important, Justice O'Connor noted, for people who are "unable to protect themselves in the political process against the majority's will." (230)
While acknowledging a history of deference to the determinations of the political branches as to what government actions benefit the public, Justice O'Connor insisted that some "external, judicial check" is necessary for such decisions; otherwise, "the Public Use Clause would amount to little more than hortatory fluff." (231) She noted that the Court had previously approved three types of takings that amounted to public uses, "though it is in the nature of things that the boundaries between these categories are not always firm." (232) The two most "straightforward" categories involved transfer of private property to the government for some kind of public project and transfer to private parties, "often common carriers, who make the property available for the public's use." (233) But because these two categories "are sometimes too constricting and impractical ways to define the scope of the Public Use Clause," (234) the Court has classified certain takings as serving a "public purpose" even when the property ultimately would be put to a private use, as was the case in Berman and Midkiff. (235)
Justice O'Connor distinguished Berman and Midkiff on a key point: "In both those cases, the extraordinary, precondemnation use of the targeted property inflicted affirmative harm on society--in Berman through blight resulting from extreme poverty and in Midkiff through oligopology resulting from extreme wealth." (236) Elimination of the harm, she argued, was the public purpose of the taking. (237) Thus, the majority's decision expanded permissible public-private takings beyond the Court's previous "decisions sanctioning the condemnation of harmful property use," creating almost limitless opportunities for exercises of eminent domain. (238)
Justice O'Connor's dissent is striking for several reasons. First, it represents a dramatic retreat from the broad language Justice O'Connor herself employed in Midkiff. There, she had boldly asserted that virtually any permissible government goal could be accomplished through the use of eminent domain, proclaiming that "[t]he 'public use' requirement is ... coterminous with the scope of a sovereign's police powers." (239) In her Kelo dissent, however, she acknowledged that "[t]his language was unnecessary to the specific holdings of [Midkiff and Berman]." (240) In the dissenters' view, some permissible government goals, like fostering economic development, cannot constitutionally be accomplished through an eminent domain transfer to a private party unless the taken property is affirmatively harmful. (241) Moreover, according to Justice O'Connor, the affirmative harm requirement was not new, but consistent with the Court's precedents. (242) But as the majority opinion correctly notes, several of the Court's earlier decisions sanctioned transfers to private parties where the condemned property was in no way harmful. (243)
Justice O'Connor's rule would have the Court distinguish takings intended to eliminate affirmative harms from, presumably, those intended to confer benefits. Yet, as was once noted by Justice Scalia (who, notably, joined in Justice O'Connor's dissent), "the distinction between "harm-preventing' and 'benefit-conferring' regulation is often in the eye of the beholder." (244) It could be argued, for example, that the property taken in Kelo was being used in a harmful manner because continuing its past use would deprive the New London region of increased jobs and tax revenue.
4. Justice Thomas's Dissenting Opinion
Justice Thomas filed a separate dissenting opinion, denouncing the majority's decision as "simply the latest in a string of our cases construing the Public Use Clause to be a virtual nullity." (245) He contended that "the Public Use Clause, originally understood, is a meaningful limit on the government's eminent domain power," (246) and further stated that previous Court decisions had "strayed from the Clause's original meaning" and should be reconsidered. (247) Justice Thomas argued that the most natural reading of the Public Use Clause is the narrow view, permitting a taking "only if the government owns, or the public has a legal right to use, the property, as opposed to taking it for any public purpose or necessity whatsoever." (248) He rested this argument partly on the theory that adopting the majority's broad view of public use renders the Public Use Clause redundant to the Necessary and Proper Clause. (249) He contended that "a taking is permissible under the Necessary and Proper Clause only if it serves a valid public purpose. Interpreting the Public Use Clause likewise to limit the government to take property only for sufficiently public purposes replicates this inquiry." (250) He further contended that the most common definition of the word "use" at the time of the Founding, and the most natural reading of the term in the context of the Constitution, required the narrowest reading of "public use." (251) He asserted that eminent domain practices existing in early America "largely" supported his call for a narrow reading of public use, relying primarily on the Mill Acts as examples, (252) Justice Thomas complained that many of the Court's public use precedents had been adopted "blindly, with little discussion of the [Public Use] Clause's history and original meaning." (253) He observed that interpreting "public use" to mean "public purpose" left the Court without a coherent principle for limiting the scope of eminent domain. (254) It also put the Court in a position of having to second-guess governmental policy decisions in order to protect against purely private takings, a difficult role the Court should be reluctant to undertake. (255) He argued that "[i]t is far easier to analyze whether the government owns or the public has the legal right to use the taken property than to ask whether the taking has a 'purely private purpose'--unless the Court means to eliminate public use scrutiny of takings entirely." (256) Finally, Justice Thomas noted that the consequences of the majority's decision were easy to predict:</p> <pre> Allowing the government to take property solely for a public purpose is bad enough, but
extending the concept of public purpose to encompass any economically beneficial goal guarantees that these losses will fall disproportionately on poor communities. Those communities are not only systematically
less likely to put their lands to the highest and best social use, but are also the least politically powerful. If ever there
were justification for intrusive judicial review of constitutional provisions that protect "discreet and insular minorities," surely that principle would apply with great force to the powerless groups and individuals the Public Use Clause protects. (257) </pre> <p>Justice Thomas's analysis, though correct in its assessment of the problematic consequences of the majority's decision, suffers from several flaws. Most notably, his dissent misreads the Court's own public use precedents and selectively invokes the history of American practices. He argues, for example, that the majority's reliance on language in Fallbrook Irrigation District v. Bradley (258) supporting the broad view of public use is misplaced because that language was dictum, (259) as the law at issue in Bradley allowed actual use by the public of water to be produced by the irrigation district. (260) But this interpretation misreads Bradley. There, plaintiff Bradley contended that an assessment to fund an irrigation district (and the resulting confiscation of plaintiff's land for failing to pay the assessment) was unconstitutional because, among other things, the irrigation ditches to be constructed by the district would be for private use. (261) In upholding the validity of the irrigation district scheme, Justice Peckham wrote broadly about the public advantages accruing from irrigation of arid land, stating at one point, "To irrigate, and thus to bring into possible cultivation, these large masses of otherwise worthless lands, would seem to be a public purpose, and a matter of public interest, not confined to the landowners, or even one section of the state." (262) Justice Thomas contends that this language is dictum, because the public use issue could have been resolved on the ground that the irrigation act provided for actual use of the water by the public, because "all similarly situated members of the public--those who owned lands irrigated by the ditch--had a right to use it." (263) But it is not clear that the use of the water by those few landowners whose lands were subject to the irrigation district assessment constitutes an actual public use. In fact, section 11 of the law in question specifically allocated water to landowners in proportion to their contribution to the overall assessments levied upon the entire district, clearly indicating that non-landowners, or people outside of the district, could not draw water as a matter of right. (264) Thus, the water was not, as Justice Thomas suggests, available for actual use by the general public; instead, it was only available for use by a discrete set of landowners who benefited from the taking. (265) Thus, the act at issue in Bradley actually effected a public-private taking, whereby private property was taken for the benefit of an identified and limited set of private individuals, on the basis of the broad general advantage that would accrue from the resulting irrigation.
Justice Thomas makes a similar argument regarding Clark v. Nash, (266) another irrigation ditch case. There, the Court upheld a state statute authorizing a landowner to condemn an irrigation ditch over a neighbor's land where necessary to gain access to public waters. (267) The Court held that the use to be made of the ditch was public, even though only one landowner would benefit. (268) Justice Peckham, again writing for the majority, mentioned in passing that "[o]ther landowners adjoining the defendant in error, if any there are, might share in the use of the water by themselves taking the same proceedings to obtain it." (269) From this statement, Justice Thomas presumably concludes that the case involved actual use by the public because "it involved condemnation for the purpose of ensuring access to a resource to which similarly situated members of the public had a legal right of access." (270) But, as in Bradley, the general public did not have a right to use the flow produced by the condemnation; that theoretical benefit was reserved to a discrete set of landowners within a geographically confined area. Justice Thomas seems to confuse a right to use by members of the public who are similarly situated to the condemnor with a general right of use by the public. In fact, where only similarly situated members of the public are permitted to use condemned property, the taking is most likely a public-private taking: that is, a taking from one private individual to benefit a limited set of private individuals. (271)
Justice Thomas's attempt to dismiss as dictum the broad language in Strickley v. Highland Gold Boy Mining Co. (272) is even less plausible. There, the Court upheld a Utah statute under which a mining company had been permitted to condemn a right of way over private property in order to construct an aerial bucket line. (273) Citing Clark, the Court noted that "there might be exceptional times and places in which the very foundations of public welfare could not be laid without requiring concessions from individuals to each other upon due compensation, which, under other circumstances, would be left wholly to voluntary consent." (274) Justice Thomas contends that this language was dictum because the facts of the case state that, "'the plaintiff [mining company] [was] a carrier for itself and others." (275) From this language, Justice Thomas concludes that "the bucket line was legally open to the public." (276) Yet there is nothing in Strickley to indicate the terms under which the mining company was carrying raw materials for others, or remotely suggesting that it was in any way legally required to open itself to the public. Although left to speculation, the most plausible scenario is that the aerial line was not open to the public; instead, the mining company was providing its service for a fee to those nearby with whom it wished to deal. Justice Holmes could have disposed of the case without citing to or relying upon Clark. It does not follow, therefore, that Justice Holmes's observation that Clark had recognized "the inadequacy of use by the general public as a universal test" (277) was mere dictum. In Bradley, Clark, and Strickley, the clear basis for a finding of public use was the overall public advantage resulting from the schemes at issue, not actual use by the public. They are good precedent for the majority's proposition that public advantage or benefit constitutes public use under the Takings Clause.
Justice Thomas also relies on selective use of history for his argument that prevailing practices prior to ratification show that the Framers intended "public use" to have a narrow meaning. Although it is true that prior to ratification, most mills constructed pursuant to the Mill Acts were required to be open to the general public, were subject to extensive regulation, and thus were comparable to modern "public utilities," (278) Maryland's Mill Act contained no such requirements. (279) Assuming, as Justice Thomas does, that practices at the time of ratification provide insight into the original meaning of the Public Use Clause, (280) then we should consider all of the practices then existing. Admittedly, the practices of a single outlier do not suggest a great diversity of opinion on the meaning of public use. But Maryland's law presumably would have been known to the Framers and the members of the ratifying conventions, which were comprised of educated and politically aware men, including many lawyers and legislators.
Arguably, had the ratifying generation held strong convictions that Maryland's approach was wrong, they very well could have drafted and approved a more explicit public use clause, thereby removing all doubt about its scope. (281) This assumes a premise that is by no means self-evident: That the Framers and Adopters had a single, congruent intention regarding the meaning of public use. Yet the Adopters of the Constitution consisted of those voting in the majority in Congress and the ratifying conventions. (282) As Paul Brest has observed, it is likely that, with respect to any provision of the Constitution, the intentions of the Framers and Adopters varied among individuals. (283) According to Brest, the likelihood of differing intentions regarding any specific provision of legislation increases when multiple provisions are adopted at once, as was the case with the Bill of Rights. (284) Thus, drawing any inference regarding the Adopters' intent with respect to a particular provision is precarious. Such inference drawing depends, to some extent, on speculation regarding what possible "instances of the rules' application ... passed through [the Adopter's] mind during the process of adopting it." (285) To the extent the Adopters voted based on these "subjective exemplary applications" of a rule, existing practices at the time of ratification become relevant.
Of course, the Adopters may have had different "instances of the rule's application" in mind when they voted. Some members of the Maryland delegation, which was the tenth state to ratify the Constitution, may well have had their own state's Mill Act (which did not require mills constructed under its authority to act as public utilities or provide public services) in mind when considering whether a public use required actual use by the public or general public advantage--that is, if the Maryland delegates even considered the issue at all. When it comes to the Takings Clause, there is an unusual paucity of contemporaneous evidence regarding the Adopters' intent. The Takings Clause is the only provision of the Bill of Rights that was not specifically requested by the state ratifying conventions. (286) Nor is there any evidence that the clause was ever debated either in Congress or the conventions. (287) James Madison's original draft of the Takings Clause read, "No person shall be ... obliged to relinquish his property, where it may be necessary for public use, without a just compensation." (288) The final, ratified version of the Takings Clause, "[N]or shall private property be taken for public use, without just compensation," suggests, of course, that a requirement of necessity was intentionally discarded. From that, one might conclude that a taking that is simply "useful" or "advantageous" to the public was thought permissible at the time of ratification. But that does not resolve whether the taken property had to be actually used by the public or merely contribute some benefit to the public. (289)
More significant, though, is the abundant evidence of takings during the colonial era that would satisfy only the modern, expansive public benefit test. (290) These, too, would have been part of the political and legal worldview that the Framers and ratifying convention participants brought to their understanding of public use. Aware of this history of transfers to private individuals justifiable only by the resulting public benefit, they could have, and presumably would have, been more explicit in their drafting of the Takings Clause had they wished to require a strict "use by the public" standard.
Justice Thomas's textual argument regarding the Takings Clause may make sense as a matter of literal interpretation. But the assumption that the drafters of the Constitution wrote with such precision and forethought that the Constitution must in all cases be interpreted with the rigid logic of a philosopher would, if generally applied, lead to consequences that could not have been consistent with the Framers" intent. For example, one plausible reading of the phrase "[N]or snail private property be taken for public use without compensation" is that private property may be taken for private use. (291) Another plausible reading is that the taking of property for public requires compensation, while a taking for private use does not. (292)
But even assuming that Justice Thomas is correct, it does not follow that the intent of the Framers and Adopters of the Constitution should be the single controlling factor in interpreting the Public Use Clause. While the ongoing and contentious debate over strict constructionism and original intent is beyond the scope of this article, it should be noted that the U.S. Constitution was adopted by a select group of property-owning males who were citizens of a largely agrarian, pre-industrial society. If the strictures of the public use requirement have been loosened over time to spur the growth of the economy and allow the government to achieve desirable social goals, it may be one of many examples of subordinating formerly absolute property fights to changing societal needs and values. (293)
III. JUSTIFICATIONS FOR EMINENT DOMAIN
To understand the reasons for a bright-line rule prohibiting the use of eminent domain for economic development, it is important first to explain the justifications for and criticisms of modern eminent domain practices generally as applied to true public use takings as well as to private takings. The many concerns surrounding eminent domain in general are frequently elevated when the power is being used for an economic development project.
A. Overview of Common Justifications
When the government wishes to acquire property for itself, it has at least two options: purchase the property on the open market (an option it often takes), or exercise the power of eminent domain. (294) When the government wishes to facilitate acquisition by a private entity, the government may leave that entity to its own devices, requiring it to acquire property on the open market. Often, though, the private entity will want assistance from the government as an enticement for undertaking the project. In that case, the government may offer a package of tax breaks, grants, and other incentives in order to lower the ultimate cost of property acquisition. Alternatively, the government might itself use the eminent domain power with the intent of transferring the acquired property to the private entity, or it might delegate its eminent domain power to those beneficiaries. (295)
What, then, are the supposed advantages of using the eminent domain power, as opposed to purchasing on the open market? The most important justification of eminent domain is to facilitate the acquisition of property in what scholars call "thin markets," (296) in which the property necessary for a proposed project is scarce or uniquely suited to the project. (297) Without the power of eminent domain, thin markets may make the acquisition of property prohibitively expensive, because of monopoly pricing by sellers (298) who "hold out," (299) realizing they control a rare and essential commodity, (300) or because of the increased transaction costs that naturally arise from hard bargaining for scarce resources. (301) As a result, socially useful projects may not be completed. (302) In contrast, when the market for a particular property is "thick," that is, there are many suitable properties available and therefore no holdout problems, the government is likely to purchase the property on the market because purchasing is a cheaper option than using the power of eminent domain. (303)
Drawing on Guido Calabresi and A. Douglas Malamed's famous distinction between property rules and liability rules, (304) Thomas Merrill observes that resorting to eminent domain imposes a liability rule regime on the owner of condemned property by depriving him of the property-rule right to hold out. (305) By eliminating this holdout option, eminent domain eliminates potential monopolies and reduces transaction costs, thereby lowering the total cost of assembling necessary parcels. (306) Thus, "eminent domain is designed to increase social wealth by facilitating certain transactions that otherwise would not take place, or that would take place only at an inefficiently high cost." (307)
B. Coercion and Undercompensation
The obvious problem with eminent domain is its coercive nature. (308) The power of eminent domain exists to prevent individuals from thwarting theoretically beneficial projects by forcing those individuals to sell when they otherwise would not, either because they wish to retain the property for personal reasons or because the condemnor is offering less than the owner's asking price. (309) Indeed, eminent domain practices typically require the would-be condemnor first to attempt to purchase the property through free negotiation on the open market before resorting to condemnation. (310) Thus, before a condemnation proceeding begins, the owner of the property will usually have refused to sell on the terms sought by the government.
The coercive nature of eminent domain is sometimes justified on the grounds that the government must pay "just compensation" when it takes property. (311) As a result of the just compensation requirement, eminent domain, in theory, represents "an equitable compromise between the needs of the public and the rights of the individual." (312) One unfamiliar with eminent domain might even ask why property owners guaranteed "just compensation" would complain when their property is condemned. (313)
But the constitutionally required just compensation that courts routinely award property owners when the government condemns their property is generally viewed as undercompensatory. (314) The Supreme Court has decided that just compensation equals "fair market value," (315) that is, "'what a willing buyer would pay in cash to a willing seller' at the time of the taking." (316) The shortcomings of this formula for determining "just compensation" are obvious. The owners of a condemned property are, by definition, not willing sellers. (317) They may be unwilling to sell because the "fair market value" offered does not match the value of the property to them, (318) either because they value the property more highly for sentimental reasons or because they are denied compensation for increments of value that willing sellers would probably insist upon, or at least bargain hard for, before entering into a transaction. (319)
Scholars have attached a variety of labels to the types of increments of value that are routinely uncompensated when the state takes property through eminent domain. Lee Anne Fennell, for example, has dubbed these uncompensated elements in aggregate the "uncompensated increment." (320) The most common uncompensated increments discussed in the literature are the "subjective premium," sometimes also called "consumer surplus," and the loss of a chance to gain from any increase in the value of the property arising from the transfer. (321) Fennell also notes that eminent domain fails to compensate a property owner for his loss of the autonomy to refuse to sell at any price, even at a price exceeding his own valuation of the property. (322)
1. Subjective Premium
The terms "subjective premium" and "consumer surplus" refer to the value an owner places on his property that exceeds its opportunity cost. (323) This premium may include sentimental attachment, unique suitability of the property to the owner's needs, relocation costs, replacement costs of the land and improvements, consequential damages to retained property, attorneys" fees, lost business revenue, goodwill or going-concern value, and the aggravation of having to move. (324) Some commentators have included in the subjective premium such factors as the "search costs of finding shops and services in the new location." (325) The Supreme Court has justified the rule limiting compensation to "fair market value" on the basis of the "serious practical difficulties in assessing the worth an individual places on particular property at a given time." (326)
2. Surplus from Transfer
In addition to being denied compensation for subjective premium, eminent domain condemnees are routinely denied "the chance of reaping a surplus from trade." (327) When property is taken in order to assemble a larger parcel for some post-condemnation use, substantial surpluses are frequently realized in the hands of the ultimate transferee. (328) Such assembly-driven exercises of eminent domain are common, generating a large percentage of the litigation over "public use." (329) Yet the typical eminent domain award involves "fair market value" of the condemned property assessed at the time of the taking without regard to any value increases occurring after the transfer. (330) The effect is that all surplus from transfer is typically assigned to the transferee. (331) While allowing the transferee to reap the full benefits of the transfer surplus is not unfair in all cases, (332) as a general matter the result is that the condemnee is denied a right enjoyed by most other property owners: the chance to benefit from the possibility that the potential value of the property to the buyer may drive up the price that the buyer is willing to pay for the property.
3. Mitigating Undercompensation: Reciprocity of Advantage
Despite the apparent abuses entailed in essentially confiscating the uncompensated increment, many scholars contend that this injustice is mitigated if the condemnee receives an "average reciprocity of advantage." (333) This term refers to the possibility that the property owner may derive some reciprocal benefits from the condemnation. In other words, he might directly or indirectly benefit from the taking. Reciprocity of advantage can work on at least two levels. On the narrow level a property owner may enjoy reciprocity of advantage if he enjoys some advantages from the actual project for which his property is taken that are "not enjoyed by the community as a whole." (334) On the broader level the term implies that individuals who are undercompensated in a given exercise of eminent domain might still benefit from the overall scheme if this scheme, applied evenly across the board over time, leads to overall societal wealth enhancement. (335) Richard Epstein describes these advantages as "implicit in-kind compensation." (336)
Moreover, even if the reciprocity of advantage does not fully compensate the injured landowner, it still may justify an undercompensatory taking on the theory that the landowner, because she benefits from living in a orderly, civilized society, is morally obligated to give something back to that society. (337) As Hanoch Dagan argues,</p> <pre> As long as the disproportionality in the distribution of the burden of the public action is not too extreme, and as long as the political and economic power of the injured party is not disproportionately low ... there should be no difficulty if a particular landowner (who has not been arbitrarily singled out) incurs a disproportionate
share of the public burden. (338) </pre> <p>4. Efficiency Concerns
If part of the reciprocity of advantage enjoyed by the landowner is the overall societal wealth enhancement resulting from the eminent domain regime, then the validity of the reciprocity of advantage justification depends on the regime's actually enhancing wealth. Yet, the scholarly literature suggests that undercompensation has a strong propensity to lead to inefficiency, not wealth enhancement. (339) To fully understand the efficiency consequences of undercompensation, it is helpful to consider the reasons for requiring any compensation at all. In the words of Richard Posner, "The simplest economic explanation for the requirement of just compensation is that it prevents the government from overusing the taking power." (340) The compensation requirement is said to provide an essential check on government power: by forcing local officials to internalize the cost of a taking, the just compensation requirement is said to prevent abuse (341) and overconsumption of property. (342) The just compensation requirement is also thought to encourage efficiency, at least in some cases, by forcing officials to consider whether the proposed project for which the property is taken will produce more value than the amount of compensation that must be paid. (343) It also enables private investment in property as such investment would be unlikely if the government could freely take private property without "just compensation." (344)
Most of the justifications for the just compensation requirement provide insights into the problems of undercompensation. Some commentators contend that undercompensation allows the government to avoid internalizing the full cost of a taking, operating under the "fiscal illusion" that the property is worth less than it actually is. (345) Thus, when the government is permitted to undercompensate, it is likely to disregard the uncompensated increment in weighing the true costs of the taking against the projected gain, leading to potential inefficiencies. (346) For example, because the government need not consider subjective value in determining its cost for acquiring a given property, it may embark on projects in which the wealth created in the hands of the transferee pales in comparison to the subjective value of the property in the hands of the original owner. (347) Because subjective value is by definition non-transferable, (348) us it is destroyed upon transfer. (349) Thus, a government entity disregarding subjective value may actually destroy more wealth than it produces. (350) Even absent such blatant inefficiencies, Lawrence Blume and Daniel Rubinfeld contend that "if compensation is offered only at market value, the government does not have the appropriate incentive to avoid regulating or taking properties that are highly valued for 'unique' reasons." (351)
The failure to allow the property owner to enjoy any of the surplus from transfer poses a different kind of problem. (352) In many eminent domain cases, the value of the property should increase dramatically after the transfer. (353) This situation, in the context of a public-private taking, creates a strong incentive for rent-seeking behavior (354) by a party or parties seeking to become the ultimate transferee of the property. (355)
IV. A BAN ON ECONOMIC DEVELOPMENT TAKINGS
As serious as fairness and efficiency concerns are with respect to many kinds of takings, economic development takings are particularly problematic. The only way to mitigate these concerns sufficiently is by banning economic development takings altogether. In enacting such a ban, a legislature must be careful to adequately target "economic development" so as to avoid loopholes and prohibitions against less harmful uses of the eminent domain power. Accordingly, this Article also sets forth model language that seeks to achieve this result.
As previously explained, if the supposed public benefits of an economic development project can amount to a "public use," then there is virtually no limit to the potential reach of the eminent domain power. As Justice O'Connor observed in her Kelo dissent,</p> <pre> [N]early any lawful use of real private property can be said to generate some incidental benefit to the public. Thus, if predicted (or even guaranteed) positive side-effects are enough to render transfer from one private party to another constitutional, then the words "for public use" do not realistically exclude any takings, and thus do not exert any constraint on the eminent domain power. (356) </pre> <p>This lack of constraint is problematic, as economic development takings are particularly susceptible to inefficiency, unfairness, capture, and abuse.
A. Reciprocity of Advantage
As noted in Part III, undercompensation is sometimes justified by reference to so-called reciprocity of advantage. From this justification follows the first major argument for curtailing economic development takings. Reciprocity of advantage is, to a large extent, non-quantifiable. But there is no doubt that at least some of the benefits assumed to accrue to the landowner are the advantages that flow back to her, either directly as a result of the actual project for which her property is taken, or indirectly, from the wealth-producing effects of the general eminent domain regime. It has frequently been noted that concerns over undercompensation are at their lowest when the proposed public use for the condemned property is "public" in the broadest sense. (357) This relationship is true because the more that the benefits of a public use inure to the public as a whole, the more likely it is that the condemnee is reaping some reciprocity of advantage from the taking. (358)
But in the case of a public-private taking, the risk that little or no benefit will accrue to the public is also a risk that implicit, in-kind benefits will not materialize. (359) Because of the extremely deferential judicial scrutiny of the public use requirement, there is always a risk that the claimed public benefit relied upon to justify the taking is "merely incidental" to the true benefits accruing to the benefited private transferee; in other words, "that the underlying program is ... a ruse." (360) Indeed, among those states that permit takings for economic development, none, including Connecticut, imposes any requirement that the condemning authority or the transferee provide any legally binding assurances that the projected economic benefits actually will occur. (361) Nonetheless, the Supreme Court in Kelo explicitly rejected petitioners' call for a public use test requiring reasonable certainty that the claimed benefits of an economic development project actually will occur. (362)
The absence of any requirement that the purported benefits of an economic development project be established in advance encourages overstated projections by would-be condemnors. (363) Even where backers of an economic development project are acting in good faith, the possibility that there will be no benefit to the public, or much less benefit than anticipated, is always present. Indeed, in the famous Poletown case, the actual benefits provided by the General Motors plan fell far short of the 6,150 jobs projected. (364) Seven years after displacing 4,000 residents, destroying 1,400 homes and between 140 and 600 businesses, the plant employed only about 2,500 people. (365) In fact, Ilya Somin speculates that Detroit may have sustained a net job loss as a result of the General Motors project. (366) Thus, the argument that undercompensated eminent domain condemnees benefit from reciprocity of advantage is particularly weak in the realm of economic development takings. (367)
B. Efficiency Concerns
Another concern arising from undercompensation is the possibility that a government entity seeking to exercise eminent domain may not fully consider the value destroyed as a result of a proposed project in assessing whether the project will be wealth-enhancing. Undercompensation leads to the "fiscal illusion" that the costs of a project are lower than they actually are. As serious as this concern may be with respect to truly public takings, it is magnified in the case of economic development takings. With a truly public taking, the government may be presumed to be acting in the public interest in making efficiency determinations about the acquisition of property. But takings in which the ultimate transferee is a private entity raise the specter of "capture" of the political process by powerful special interests. In such cases, the decision to take property may be motivated more by the special interests' desire to capture the surplus for personal profit and the government entities' desire to placate these special interests, than by a desire to enhance societal value.
Indeed, concerns about a breakdown of the democratic process are among the most potent criticisms of public-private takings generally, and economic development takings in particular. Donald Kochan has written that because of the extremely deferential standard of review of "public use" determinations,</p> <pre> [a] public use is now whatever the legislature says is public. Legislators can sell the eminent domain power to special interests for almost any use, promising durability in the deal given the low probability that the judiciary will invalidate it on the grounds that the condemnation is private
in nature. (368) </pre> <p>Other commentators agree; as Somin wrote recently, economic development takings</p> <pre> allow politically powerful interest groups to "capture" the condemnation process for the purpose of enriching themselves at the expense of the poor and politically weak. While economic development takings are not the only type of condemnation subject to this kind of abuse, they are
especially vulnerable to it because "economic development" can justify almost any condemnation that transfers property to a commercial
enterprise. (369) </pre> <p>Given this danger of political capture, public-private takings seem particularly prone to producing inefficient outcomes.
C. Capture and Oppressive Takings
The prospect of interest group capture raises another concern that is especially troubling in the area of economic development takings. One enduring concern surrounding the Takings Clause has been the risk of "majoritarian oppression": that is, abuse of the political process by a powerful majority that exerts sufficient control over the government such that it can co-opt the eminent domain power to confiscate the property of a less powerful minority. (370) As Neil Komesar has noted, however, the opposite can also occur: a politically powerful minority can capture control of governmental processes, using these processes for its own enrichment at the expense of the majority. (371) Public-private transfers raise this second concern. Where the number of transferees is relatively small, as is usually the case in a public-private transfer, there is the danger that a concentration of politically powerful interests will manipulate the political process. (372) When, as in a case like Kelo, the number of transferors is relatively small there is the further danger that powerful interests are enriching themselves by burdening a powerless minority. (373)
Indeed, much has been written about the particular travails suffered by the poor and by African-Americans in some of the most expansive eminent domain campaigns in our country's history: the massive urban renewal programs that began around the turn of the Twentieth Century. Nicole Stelle Garnett notes that urban renewal programs were sometimes referred to as "Negro Removal," (374) and that African-Americans and the poor were the primary victims of such programs. (375) Many African-American communities were destroyed and, because of pervasive housing discrimination, their former residents were shunted into other black neighborhoods that quickly became overcrowded and expensive. (376) As a result, many of the supposed beneficiaries of urban renewal ended up paying higher prices for housing that was as bad as what they had left. (377) Most scholarly analyses of these urban renewal programs have concluded that they consistently fell short of their goals of job creation and increased investment, and today these programs are widely discredited. (378) It is no surprise then, that both dissenting opinions in Kelo emphasized that the primary victims of the majority's decision would be the poor and politically powerless. (379)
Indeed, the appearance that a powerful minority has taken control of the machinery of eminent domain for its own enrichment at the expense of a powerless minority could very well explain the outrage that followed the announcement of the Kelo decision. In the wake of Kelo, legislation to study, curtail, or prevent the use of eminent domain for economic development has been introduced in more than forty states and in Congress. (380) Such popular resistance likely derives from several factors. Kelo was the first of the three major modern public use cases to sanction the taking of people's homes. (381) As a result, people realized with fear that their homes could be sacrificed to benefit commercial interests. (382) This fear appeared to some to be well founded. Where the effect of a transfer is to produce indirect economic benefits that would not be realized without the transfer, there is a natural inference that the government is transferring property to an entity that will make more profitable use of it: that is, in the words of Justice O'Connor, that the property is being "upgraded." (383) If the government may use the eminent domain power simply to transfer property to one who will use it more profitably, than almost any property is vulnerable. As Justice O'Connor queried in her Kelo dissent, "Who among us can say she already makes the most productive or attractive possible use of her property? The specter of condemnation hangs over all property." (384) Such transfers are problematic because, if permitted at the will of the government, the security of property ownership is undermined. So too is respect for the legal system and political process, as most citizens would intuitively (and correctly) conclude that the beneficiaries of such a regime would be rich and powerful interests profiting at the expense of ordinary property owners. (385) If the government can use the eminent domain power as a tool for revenue enhancement or job growth, the temptation and the opportunity to overuse the power may be too great.
At the same time, some popular outcry no doubt derives from traditional notions of the "sanctity of the home" and the deeply personal role that homes play in people's lives. As such, it represents an expression of Margaret Jane Radin's suggestion that some property may be too "personal" to be subject to a governmental taking under any circumstances. (386) She postulates that "hypothetically, if some object were so bound up with me that I would cease to be 'myself' if it were taken, then a government that must respect persons ought not to take it." (387)
D. Broad Judicial Deference
Thus, the ready availability of eminent domain for economic development projects poses grave risks of unfairness, inefficiency, and abuse. The current regime of broad deference, under which "public use is ... whatever the legislature says is public," (388) provides virtually no judicial protection against these abuses and inefficiencies. The risks to justice and efficiency posed by economic development takings underscore the seriousness of the claim that economic development as a theory of public use is virtually unlimited in its potential application.
Thomas Merrill, in his influential article The Economics of Public Use, attributes the courts' extreme deference on questions of public use to "a historical focus on ends rather than means. Public use analysis has traditionally examined the ends of a government taking--the purpose or use to which property will be put once acquired." (389) As governments have replaced natural-rights-based laws with more pervasive socio-economic regulations, however, courts have grown increasingly deferential (390) to legislative determinations of the proper ends of government. (391) "[S]uch questions," according to Merrill, "demand an exercise in high political theory that most courts today are unwilling (or unable) to undertake." (392) This reticence naturally flows from separation of powers concerns; modern courts tend to believe that the more democratic branches of government should do most of the political theorizing. (393) In any case, courts have become almost adamant in their unwillingness to substitute their own judgment for that of the condemning governmental entity on the issue of whether a proposed use of condemned property is "public" (that is, one that may be constitutionally achieved through the exercise of eminent domain). (394)
E. Proposed Modifications to the Public Use Framework
Most recent eminent domain scholarship, however, has tended to eschew analysis of whether a given land acquisition scheme is a permissible end of government. In the modern era, most eminent domain projects will be found to be in pursuit of a permissible governmental goal. Instead, scholars have preferred to focus on whether eminent domain is the appropriate "means" for achieving the government's stated purpose. (395)
Frank Michelman, for example, proposed that the public use question be determined by employing a cost-benefit analysis. (396) Other scholars have also proposed weighing the benefits resulting from the proposed taking against the costs to the owners of condemned property. (397) Other approaches require a showing of necessity for the use of eminent domain. (398) Some have proposed increased compensation for condemnees as a way of addressing the efficiency and fairness concerns arising from the fair market value standard. (399) Garnett, in an innovative approach that was the basis for an amicus brief in Kelo, (400) called for an inquiry into whether the exercise of eminent domain is "'reasonably necessary' to advance or, put differently, 'related in nature and extent' to the public purpose used to justify it." (401) Merrill called for heightened scrutiny of cases involving high subjective losses and cases where the government either transfers condemned property to a small number of parties or delegates the power of eminent domain to a small number of parties. (402) Epstein proposed a radically narrow test for public use. He would allow the exercise of eminent domain for only those acquisitions that would produce benefits that could be characterized as "public goods," that is, benefits from which no one can be excluded and that can be extended to additional people at no additional cost. (403)
F. Shortcomings of Proposed Modifications to the Public Use Framework
The theories just discussed are either unworkable or have the potential to produce more negative consequences than they alleviate. Michelman's approach, while provocative and influential among academics, suffers from the fatal flaw shared by almost all efficiency theories: the impossibility of measuring, at the time of the eminent domain proceeding, the projected benefits of the project. (404) This is particularly true with respect to economic development projects, which like other business ventures are inherently speculative and subject to what Christopher Serkin describes as "development risks." (405) Among those risks are "permit denials, environmental hazards, cost overruns, unscrupulous contractors, unanticipated pitfalls, and the basic risk that the project will not be a commercial success." (406) Moreover, to the extent an efficiency theory calls for an analysis of the loss to the condemnee, similar problems result. Because subjective value is inordinately difficult to estimate, a court faced with such a task is unlikely to reach a correct result. (407) This may explain why pure efficiency theories, in practice, seem to leave the courts cold. (408) As Serkin has observed, "Leading commentators have ... pointed out that the demands of economic efficiency are so far removed from existing takings doctrine that viewing the Takings Clause in exclusively economic terms should remain an academic exercise." (409)
Theories that turn on an inquiry into whether exercise of eminent domain is "necessary" are problematic for other reasons. Necessity tests basically ask whether the project is likely to be stymied by holdout behavior. (410) These tests are of limited benefit, as litigation over a proposed taking is unlikely to occur except when property owners hold out. (411) Where property owners are willing to sell at the prices offered by the government, there is no need to litigate. Indeed, while the theories on this matter conflict, leading commentators argue that employing eminent domain is actually more expensive than purchasing properties in open market transactions. (412) This makes governments reluctant to invoke the eminent domain power except in thin markets where holdout behavior is likely or has actually occurred. (413) Therefore, in a given eminent domain lawsuit, the requirement of necessity will almost always be met.
Moreover, the notion that eminent domain ought to be available to overcome holdout behavior in the economic development context is not self-evident. As explained below, the use of eminent domain should not be necessary to overcome holdout behavior when a proposed taking is for economic development.
Proposals for increased compensation are also problematic. As a general principle, because of the difficulties associated with assessing subjective values and projecting potential gains, it is impossible to arrive at a correct level of compensation. There are dangers associated with overcompensating as well as undercompensating. Overly generous awards may lead to inefficient overinvestment by property owners. (414) A property owner, knowing he was entitled to 150% of fair market value, might make improvements to his property in pursuit of a 50% return on his investment. (415) Some property owners might go out of their way to increase their chances of condemnation in order to receive their bonuses. (416)
Garnett's proposal to analogize the public use inquiry to the rough proportionality tests of Dolan and Nollan for government exactions suffers from several problems. Most important, any such proposal would require protracted litigation employing vague standards and so is likely to deter property owners from asserting their rights. As already noted, eminent domain is frequently used against poor and politically powerless groups. Moreover, because property owners frequently lack the resources, political clout, or sophistication to contest an attempt to take their property by eminent domain, the mere threat of eminent domain is often enough to cause a targeted owner to sell, despite the unfairness and inefficiencies that might result. A bright-line rule preventing the use of eminent domain for economic development would rob the condemning powers of the ability to make such threats. The same criticism can be leveled at Merrill's call for special scrutiny where subjective values are high, when the property will be transferred to a small number of people, or when the eminent domain power is delegated to a small number of people. Each proposal has the potential to lead to protracted litigation, which means, as a practical matter, that most targeted property owners will simply sell under threat of eminent domain without litigating to a decision. (417)
Epstein's public goods approach is exceedingly narrow; only a small percentage of presently routine takings would pass his test. (418) Although that approach would most certainly prohibit economic development takings, it might also screen out other worthwhile projects. As it allows no exceptions for monopoly or necessity, it disallows the social benefits that actually may accrue in properly motivated exercises of eminent domain.
G. Proposing a Legislative Ban on Takings for Economic Development
A legislatively enacted ban on economic development projects, properly delimited, would solve the unfairness and efficiency concerns that this Article has raised. To be sure, simply banning takings for economic development, without a clear and generally applicable definition of "economic development," would only generate protracted litigation yielding inconsistent results at great cost to the private litigants seeking to protect their property. Such a consequence is neither fair nor efficient; a more precise and carefully considered approach is necessary. In formulating such an approach it is helpful to examine some of the many approaches adopted, under both existing and proposed legislation, to prevent economic development takings, or takings having the potential to produce the injustice and inefficiency threatened by economic development takings. (419)
One common governmental tactic is to forbid takings for the purpose of increasing tax revenues, fostering employment, or improving the general state of the economy. For the sake of brevity, this Article refers to these prohibited goals as "indirect economic benefits." Some proposals ban outright all takings for the purposes of achieving these indirect economic benefits. (420) Other approaches prohibit takings that aim "solely" or "principally" to produce these indirect economic benefits. (421) The focus on prohibiting takings designed to produce indirect economic benefits reflects concerns about unfettered use of the eminent domain power.
Another common approach, reflected in the constitutions of several states, is simply to prohibit the use of eminent domain for "private use." (422) A related approach involves preventing transfers that are designed to confer a private benefit on a private party. (423)
Still other proposals address the issue by simply preventing transfers to private entities, including businesses. (424) Other approaches attempt to distinguish between uses that produce direct public benefits, and those that produce merely incidental public benefits. (425) Some proposals combine several approaches. (426) Several existing and proposed provisions explicitly reject the view that determination of whether something is a public use is a political question entitled to judicial deference. (427)
This variety of approaches to preventing private-public takings for the purposes of economic development (428) underscores the difficulty of identifying precisely the characteristics of a potentially unfair or inefficient taking, and describing these characteristics in language that will reliably produce the intended result. Some of the proposals may be as pliable in application as the traditional doctrine requiring a "public use." As such, they may fail to produce their intended results if government authorities adjust their policies, arguments, and justifications in order to capitalize on this pliability. To minimize this risk, one principle that should be included in any legislative approach is an express statement that the question of whether a proposed use is permissible is to be decided by the courts without deference to the condemning authority. Thus, unlike courts applying existing federal takings doctrine, courts operating under the new legislative directives will not be required or inclined to give government the benefit of any doubt.
A clause like that contained within the Oklahoma Constitution, providing that the question of public use is a "judicial question," (429) does not go far enough to produce a meaningful change. In fact, without more, such a statement produces no change at all. It has long been the case under the Fifth Amendment that the question of whether a taking is for public use is ultimately one for the courts. (430) The problem is that courts, in answering this question, have shown enormous deference to government public use claims. Under the current regime, any taking that "is rationally related to a conceivable public purpose" is to be upheld. (431) An effective change requires language providing, as do the pertinent clauses in the constitutions of Arizona, Colorado, and Mississippi, that the court is to make a public use determination "without regard to any legislative assertion that the use is public." (432)
Even assuming that courts are free to make an independent, non-deferential determination of whether a taking is for a public use, several of the proposals described above would pose daunting, if not impossible, challenges in their application. For example, the measures that would prohibit the use of eminent domain "solely" or "primarily" for the purpose of producing indirect economic benefits would put the courts in the difficult position of having to ascertain the motives of government officials. Furthermore, the expenditure of judicial resources and legal fees to resolve this issue is unnecessary, as the motivations of the government should not be relevant in determining whether a taking is permissible. The legally determinative issue is whether the taking produces a public benefit. The effect of a taking, not the intent underlying it, determines its validity. (433)
A better approach, one that eliminates the need to determine the purpose motivating a proposed taking, is simply to specify that indirect economic benefits do not constitute a public use. Even then, government officials may seek to circumvent the restriction by claiming that some other feature or benefit of the project constitutes the required public use. For example, if a local government seeks to condemn land for the construction of a giant retail store, it might claim that the resulting public benefit will be more diverse shopping opportunities, more retail competition, and thus lower prices for its residents. Similarly, backers of a mixed-use development project like the one at issue in Kelo might claim that the benefit resulting from the construction of, say, a marina, public walks, and housing is the aesthetic improvement and the social cohesion and sense of community resulting from a concentrated, optimally located residential community. (434) They might further argue that for such a community to succeed, retail establishments and hotels would be necessary. Then, too, it might be necessary to include office development in order to make the economics of the project attractive to potential developers. Courts, no longer required to defer to the government's assertions, would have to decide whether the alleged aesthetic improvements and social benefits would in fact result and, if so, whether they would constitute sufficient public advantages to justify use of the eminent domain power. The result would be unguided decision-making, inconsistency, and a tendency for judges to apply their own subjective views to the question. Thus, simply declaring that indirect public benefits do not constitute a public use, without more, does not definitively prevent economic development from occurring; rather, it simply complicates the inevitable legal battles that would ensue.
Laws stating that property shall not be taken for "private use" also pose a problem: They afford little more protection from economic development takings than the existing doctrine limiting the use of eminent domain to public uses. The terms "public use" and "private use" are equally pliable. If public use can mean public advantage or benefit, then it follows that a taking producing a public benefit or advantage is not a taking for "private use." Thus, a prohibition of takings for "private use," without more, does not prevent the expansion of permissible uses of eminent domain to encompass takings that produce public benefits. A taking like the one at issue in Kelo, then, might not be precluded even in a jurisdiction purporting to eliminate takings for "private uses."
Rules that prevent the use of eminent domain to benefit a private individual or group, where the "primary" or "sole" purpose is to benefit a private individual or group, or where the claimed use is a "pretext" for conferring a benefit on a private party are also problematic. As a preliminary matter, a law prohibiting the use of eminent domain to benefit a private individual or group (as opposed to laws prohibiting condemnation where the "sole" or "primary" purpose is to confer a private benefit) is simply nonsensical. Any exercise of eminent domain benefits at least one private individual in some way. Even an uncontroversial taking of property for use by the government benefits the government attorney who earns his living by managing the procedure for exercising eminent domain. Thus, taken literally, this rule would outlaw eminent domain of any kind.
A rule preventing condemnations where the "primary" or "sole" purpose is to benefit an individual or group is better, but also problematic. As already stated, the effect of the taking, not the intention behind it, is what matters. And, even if the primary effect is that an individual or group is benefited, the taking should not necessarily be prohibited. Some people who are not the intended beneficiaries might nonetheless benefit incidentally, and there is no clear rule for how many people must benefit in order for a taking to pass muster. On the other hand, where the "sole" effect is a private benefit, "a truly private taking" (435) has occurred. This would be a classic scenario of "a law that takes property from A, and gives it to B." (436) Such a taking "could not withstand the scrutiny of the public use requirement; it would serve no legitimate purpose of government and would thus be void." (437) Thus, a taking that "solely" benefits an individual or small group is already prohibited; a taking that "primarily" benefits an individual or small group might not be prohibited. What is necessary in the latter case is a standard for determining how many beneficiaries is too few for a public use to be found. But it would be difficult, if not impossible, to formulate a generally applicable rule that would serve this function. A similar analysis applies to provisions that would prohibit takings providing only "incidental" public benefits. Such rules raise several questions: How is a non-economic public benefit quantified? How little of such a benefit is considered incidental? These laws direct the courts to apply rules without any standards for doing so.
Provisions barring the use of eminent domain in order to transfer private property to private ownership or control would have the effect of preventing Kelo-type takings. But unless they include exceptions, such laws are overbroad: They also would prohibit benign (438) and even beneficial takings. For example, such laws would prevent the use of eminent domain to facilitate construction of a performing arts center, sports arena, (439) not-for-profit hospital, or museum if, as would likely be the case, any one of these were to be owned or controlled by a non-public entity.
Ultimately, in arriving at a legislative or constitutional approach to preventing the kind of problematic takings associated with economic development projects, it is important to remember how eminent domain works in the real world. Typically, officials of a condemning entity first attempt to acquire targeted property without resort to eminent domain, but with the implicit or explicit threat that eminent domain will be used if voluntary exchanges cannot be negotiated. Frequently, the owner of the targeted property does not understand the condemnation process or his rights and, even if he does, lacks the resources to resist through a protracted legal battle. As a result, a large number of property owners who are threatened with eminent domain sell their property to the government outside the eminent domain process. (440) Because uncertainty disadvantages property owners, a rule that is simple and straightforward is preferable to one that is unpredictable and difficult to apply. A straightforward rule can be explained clearly to potential condemnees, putting them on notice as to the limits of the government's power. Moreover, litigating a straightforward rule, which is likely to generate consistent and straightforward precedents, is likely to be less expensive than litigating an ambiguous rule. Thus, with a simple rule, a community or neighborhood association is more likely to be able to muster the resources to defend their property in court.
In the final analysis, the simplest and most effective way to prevent a taking like the one in Kelo is simply to ban takings where the ultimate transferee will be any non-governmental entity or individual. However, it is desirable to provide a mechanism for making exceptions for those rare cases where it might be desirable to use the power of eminent domain for beneficial and benign projects that would likely be owned by a non-government entity, such as museums, zoos, stadiums, arenas, and not-for-profit hospitals. As a safety valve for the possibility that a project not contained on the list might become desirable in the future, the law could provide that the eminent domain power could be used to transfer power to a nongovernmental entity only if the entity was not operated for profit and voters approved the use of eminent domain for the project in a public referendum.
Thus, my proposed constitutional amendment would read as follows:</p>
<pre> The State or its subdivisions shall not exercise the power of eminent domain for the purpose of acquiring property that will be transferred to a non-governmental entity or individual. Notwithstanding the preceding sentence, the State or its political subdivisions may exercise the power of eminent domain for the purpose of acquiring property that will be transferred to and used as the site for a not-for-profit museum, public performing arts center or other cultural venue, stadium, sports arena, or hospital. Should it become desirable to exercise the power of eminent domain to acquire
property that will be transferred to and become the site of a type of not-for-profit entity not enumerated in this provision, the State or the relevant subdivision shall do so only upon a majority vote of the people held at public referendum. However, a public referendum may not authorize the use of the power of eminent domain to transfer, property to any business or other organization operated for profit or to any individual. </pre> <p>H. Consequences of a Ban on Takings for Economic Development
Governments may still, and no doubt will, undertake economic development projects, but under this Article's approach they may not use the taking power to acquire property. Instead, if the government believes it must subsidize the acquisition of property for the project, it must use an alternative approach that does not implicate the risks of inefficiency, unfairness, and abuse inherent in the use of eminent domain. The government must buy the property on the open market, or if it wishes the property to be acquired directly by the developers participating in the project, it must use tax incentives and grants to subsidize that acquisition.
Requiring that economic development projects rely on the open market in acquiring property serves several functions. Primarily, it assures fuller and fairer compensation to property owners whose property is acquired. This guarantee eliminates many of the ills this Article has discussed: the unfairness and efficiency concerns caused by undercompensation, the risk that rent-seeking special interests will "hijack" the political process in order to capture the uncompensated surplus for their own profit, the risk of oppression of weak minorities by politically powerful interest groups, and the risk of inefficient over-acquisition fueled by fiscal illusion.
The most obvious objection to this proposal is that removing eminent domain from the political process potentially deprives the government and its proxies of the most potent weapon for overcoming holdouts, which might deprive an economically distressed region of the benefits of a needed economic development project. If no alternative remedy is supplied, a useful tool for economic revitalization may be lost. Fortunately, there are well established alternatives that, in most cases, provide solutions to the holdout problem.
One common practice is the use of the so-called "pre-commitment" contract, whereby a developer signs contracts with all potential sellers in a targeted area, promising to pay each owner the same price. (441) As a negotiating strategy, this allows the developer to argue convincingly that he cannot pay a substantially higher price to a holdout without incurring ruinous expenses in the form of higher payments that would thereby be owed to every other seller. (442) Kochan has described a similar strategy analogous to corporate tender offers. (443) Of course, such a strategy, while possibly effective against strategic holdouts, would have no effect on sincerely motivated holdouts.
Still, as the Hathcock court observed, "the landscape of our country is flecked with shopping centers, office parks, clusters of hotels, and centers of entertainment and commerce" that were constructed without the benefit of eminent domain. (444) Part of the reason economic development projects are not dependent on the eminent domain power is that, unlike railroads or canals, they are able to modify plans to work around holdouts, perhaps by minor relocation, redesign of buildings, or even building around a holdout. (445) This possibility allows a developer to minimize the obstacles posed by a sincere holdout, while giving pause to someone motivated solely by greed. If a monopolistic seller sets her price too high, the developer may work around her, or go somewhere else.
Of course, some economic development projects may be so site-dependent or fixed in their goals that this will not be an option, but intuition, and the presence of those development projects described by the Hathcock court, suggests such projects would be rare. Risking the infrequent derailment of an economic development project in order to eliminate the injustice and inefficiency herein described seems to be not only a smart choice, but a necessary one.
(1.) "Eminent domain ... is the legal right to acquire property by forced rather than by voluntary exchange." Patricia Munch, An Economic Analysis of Eminent Domain, 84 J. POL. ECON. 473, 473 (1976).
(2.) Kelo v. City of New London, 125 S. Ct. 2655, 2658 (2005).
(3.) U.S. CONST. amend. V ("[N]or shall private property be taken for public use, without just compensation.").
(4.) CONN. CONST. art. I, [section] 11 ("The property of no person shall be taken for public use, without just compensation therefor."). Several other state constitutions contain provisions with similar requirements. See Adam Mossoff, The Death of Poletown: The Future of Eminent Domain and Urban Development After County of Wayne v. Hathcock, 2004 MICH. ST. L. REV. 837, 837 n.3.
(5.) Kelo v. City of New London, 843 A.2d 500, 574-75 (Conn. 2004), aff'd, 125 S. Ct. 2655 (2005).
(6.) Id., cert. granted, 542 U.S. 965 (2004).
(7.) See, e.g., Jeffery W. Scott, Public Use and Private Profit: When Should Heightened Scrutiny Be Applied to "Public-Private" Takings?, 12 J. AFFORDABLE HOUSING & COMMUNITY DEV. L. 466, 466 (2003) (defining and using term "public-private taking").
(8.) 2A JULIUS L. SACKMAN, NICHOLS ON EMINENT DOMAIN [subsection] 7.02-7.02 (3d ed. 2005) [hereinafter NICHOLS] (discussing broad and narrow views).
(9.) See infra Parts II.A-D.
(10.) Kelo v. City of New London, 125 S. Ct. 2655, 2671 (2005) (O'Connor, J., dissenting) (noting the "long-held, basic limitation on government power" that property may not be taken from A and given to B (citing Calder v. Bull 3 U.S. (3 Dall.) 386, 388 (1798))).
(11.) 348 U.S. 26 (1954).
(12.) 467 U.S. 229 (1984).
(13.) See Berman, 348 U.S. at 33-36; Midkiff, 467 U.S. at 241-43.
(14.) Midkiff, 467 U.S. at 240 (quoting Old Dominion Co. v. United States, 269 U.S. 55, 66 (1925)).
(15.) 304 N.W.2d 455 (Mich. 1981), overruled by County of Wayne v. Hathcock, 684 N.W.2d 765, 800 (Mich. 2004).
(16.) Wendell E. Pritchett, The "Public Menace" of Blight: Urban Renewal and the Private Uses of Eminent Domain, 21 YALE L. & POL'Y REV. 1, 2 (2003); see also RICHARD A. EPSTEIN, TAKINGS: PRIVATE PROPERTY AND THE POWER OF EMINENT DOMAIN 162 (1985) ("Scholarly commentators have rivaled each other in their efforts to read the [public use] limitation out of the Constitution.").
(17.) E.g., James W. Ely, Jr., Can the "Despotic Power" Be Tamed?: Reconsidering the Public Use Limitation on Eminent Domain, PROB. & PROP., Nov.-Dec. 2003, at 30, 32 (quoting Vanhorne's Lessee v. Dorrance, 28 F. Cas. 1012, 1015 (Paterson, Circuit Justice, C.C.D. Pa. 1795) (No. 16, 857)).
(18.) See DANA BERLINER, PUBLIC POWER, PRIVATE GAIN: A FIVE YEAR, STATE-BY-STATE REPORT EXAMINING THE ABUSE OF EMINENT DOMAIN (2003), available at http://www.castlecoalition.org/report/pdf/ED_report.pdf (reporting more than 3,722 private condemnations filed, and more than 6,500 threatened during the period from 1998 to 2002).
(19.) Kelo v. City of New London, 843 A.2d 500 (Conn. 2004), cert. granted, 542 U.S. 965 (2004).
(20.) See Daniels v. Area Plan. Comm'n, 306 F.3d 445, 463 (7th Cir. 2002) (holding that exercise of eminent domain was unconstitutional where claim of economic development was "conclusory and largely unsupported"); 99 Cents Only Stores v. Lancaster Redev. Agency, 237 F. Supp. 2d 1123, 1129 (C.D. Cal. 2001) (holding that exercise of eminent domain was for impermissible private use where motivated solely by desire to satisfy retailer's wish to expand); Sw. Ill. Dev. Auth. v. Nat'l City Envtl., 768 N.E.2d 1, 10-11 (Ill. 2002) (holding that condemnation for racetrack expansion was not a public use, even though it would contribute to economic growth in the region); County of Wayne v. Hathcock, 684 N.W.2d 765, 783-84 (Mich. 2004) (overruling Poletown Neighborhood Council v. City of Detroit, 304 N.W.2d 455 (Mich. 1981), and holding that construction of an office park for economic development was not a public use).
(21.) See, e.g., James E. Krier & Christopher Serkin, Public Ruses, 2004 MICH. ST. L. REV. 859, 860 ("[H]owever unexpectedly, the subject of public use is back on the table, with a good chance of substantial change in the law across the country.").
(22.) Kelo v. City of New London, 125 S. Ct. 2655, 2669 (2005).
(23.) See id. at 2663-64.
(24.) Id. at 2669 (Kennedy, J., concurring).
(25.) Id. at 2670.
(26.) Id. at 2666-67 (majority opinion).
(27.) Id. at 2671 (O'Connor, J., dissenting).
(30.) See Michael A. Heller & James E. Krier, Deterrence and Distribution in the Law of Takings, 112 HARV. L. REV. 997, 998 (1999) ("In a vast and otherwise contentious literature, whether judicial opinions or scholarly books and articles, there appears to be virtual consensus that the purposes of just compensation are essentially two[:] ... 'efficiency' and 'justice'...."); Frank I. Michelman, Property, Utility, and Fairness: Comments on the Ethical Foundations of "Just Compensation" Law, 80 HARV. L. REV. 1165, 1214-24 (1967) (Michelman, in this enormously influential work on the subject, preferred the terms "utility" and "fairness").
(31.) See Heller & Krier, supra note 30, at 998--99. Michelman defines "efficiency" as "augmentation of the gross social product where it has been determined that a change in the use of certain resources will increase the net pay-off of goods (however defined or perceived) to society 'as a whole.'" Michelman, supra note 30, at 1173. He goes on to add that "[a]n 'efficient' process is one which maximizes the total amount of welfare, of personal satisfaction, in society, and not all satisfaction is material." Id.
(32.) Armstrong v. United States, 364 U.S. 40, 49 (1960).
(33.) See infra text accompanying notes 245-69, 282-92, 307-15.
(34.) See Krier & Serkin, supra note 21, at 867 ("Condemnation for ... non-public uses gives rise to concerns with fairness and efficiency alike.").
(35.) A handful of state supreme courts have already enacted such a ban under their state constitutions. See, e.g., City of Little Rock v. Raines, 411 S.W.2d 486, 493-95 (Ark. 1967); Baycol, Inc. v. Downtown Dev. Auth., 315 So. 2d 451, 455 (Fla. 1975); Sw. Ill. Dev. Auth. v. Nat'l City Envtl., 768 N.E.2d 1, 10-11 (III. 2002); City of Owensboro v. McCormick, 581 S.W.2d 3, 7 (Ky. 1979); County of Wayne v. Hathcock, 684 N.W.2d 765, 770 (Mich. 2004). In recent academic literature, Ilya Somin has also called for a categorical ban on the use of eminent domain for economic development. Ilya Somin, Overcoming Poletown: County of Wayne v. Hathcock, Economic Development Takings, and the Future of Public Use, 2004 MICH. ST. L. REV. 1005, 1007.
(36.) See infra text accompanying notes 248-69, 282-92.
(37.) See infra text accompanying notes 276-92, 305-06.
(38.) Poletown Neighborhood Council v. City of Detroit, 304 N.W.2d 455, 464 (Mich. 1981) (Fitzgerald, J., dissenting), overruled by Hathcock, 684 N.W.2d at 787.
(39.) See infra text accompanying notes 351-54.
(40.) See INSTITUTE FOR JUSTICE, KELO V. CITY OF NEW LONDON: WHAT IT MEANS AND THE NEED FOR REAL EMINENT DOMAIN REFORM 5 (Sept. 2005), http://www.castlecoalition.org/pdf/Kelo-White_Paper.pdf.
(41.) Errol E. Meidinger, The "Public Uses" of Eminent Domain: History and Policy, 11 ENVTL. L. 1, 16 (1980).
(42.) 2A NICHOLS, supra note 8, at [section] 7.0113] (citing Meidinger, supra note 41, at 2).
(43.) Meidinger, supra note 41, at 13.
(44.) See Lawrence Berger, The Public Use Requirement in Eminent Domain, 57 OR. L. REV. 203, 206 (1978) (discussing limitations on the property rights of upper riparian property owners under the Mill Acts).
(45.) For a complete listing of the early Mill Acts, see generally Head v. Amoskeag Mfg. Co., 113 U.S. 9, 17 n.2 (1885).
(46.) See Meidinger, supra note 41, at 14-15.
(47.) Berger, supra note 44, at 206 (citing Morton J. Horwitz, The Transformation in the Conception of Property in American Law, 1780-1860, 40 U. CHI. L. REV. 248, 272 (1973)).
(48.) Id.; see also Meidinger, supra note 41, at 14-15; Harry N. Scheiber, Property Law, Expropriation, and Resource Allocation by Government: The United States, 1789-1910, 33 J. ECON. HIST. 232, 239 (1973).
(49.) Berger, supra note 44, at 206. In many southern colonies and states, the Mill Acts even permitted mill builders to exercise eminent domain to take land on the opposite side of the river, on which the mill could situate part of the dam. 1 NICHOLS, supra note 8, [section] 1.22.
(50.) See Nathan Alexander Sales, Classical Republicanism and the Fifth Amendment' s "Public Use" Requirement, 49 DUKE. L.J. 339, 372-77 (1999).
(51.) See Head v. Amoskeag Mfg. Co., 113 U.S. 9, 18-19 (1885) ("The principle [sic] objects, no doubt, of the earlier acts were grist-mills, and it has been generally admitted, even by those courts which have maintained the most restricted view of the legislative power, that a grist-mill which grinds for all corners, at tolls fixed by law, is for a public use."); see generally Sales, supra note 50, at 374-75.
(52.) See An Act for the Encouragement of Iron Manufacturing, Within This Province (June 8, 1719), in 33 ARCHIVES OF MARYLAND 467 (1913) (cited in Sales, supra note 50, at 373 n.162).
(53.) See Skipwith v. Young, 19 Va. (5 Munf.) 276 (1816) (upholding condemnation under the state's Mill Act on the basis of the general public benefit accruing from the existence of a mill) (cited in Sales, supra note 50, at 374).
(54.) Berger, supra note 44, at 207; see also 1 NICHOLS, supra note 8, [section] 1.2217].
(55.) Meidinger, supra note 41, at 16.
(56.) John F. Hart, Colonial Land Use Law and Its Significance for Modern Takings Doctrine, 109 HARV. L. REV. 1252 (1996).
(57.) Id. at 1265. Connecticut law allowed such a transfer even if the miner was actually operating the mine, if the pace of production fell below a statutorily determined level. Id. at 1265-66.
(58.) Id. at 1267.
(60.) See generally id. at 1276-79 (describing statutes in Virginia, New York City, and New Jersey, and mentioning statutes in Rhode Island and South Carolina).
(61.) Id. at 1276-77.
(62.) Meidinger, supra note 41, at 16.
(63.) Berger, supra note 44, at 204 (citing William B. Stoebuck, A General Theory of Eminent Domain, 47 WASH. L. REV. 553, 591 (1972)).
(64.) PA. CONST. of 1776, art. VIII, reprinted in 8 SOURCES AND DOCUMENTS OF UNITED STATES CONSTITUTIONS 278 (William F. Swindler ed., 1979).
(65.) VA. CONST. of 1776, [section] 6, reprinted in 10 SOURCES AND DOCUMENTS OF UNITED STATES CONSTITUTIONS, supra note 64, at 49.
(66.) See Meidinger, supra note 41, at 17; see also Stoebuck, supra note 63, at 591-92.
(67.) Meidinger, supra note 41, at 17.
(68.) VT. CONST. of 1777, ch. I, art. II, reprinted in 9 SOURCES AND DOCUMENTS OF UNITED STATES CONSTITUTIONS, supra note 64, at 489.
(69.) S.C. CONST. of 1868, art. I, [section] 23, reprinted in 8 SOURCES AND DOCUMENTS OF UNITED STATES CONSTITUTIONS, supra note 64. For a list of public use provisions in the constitutions of the 13 original states and their years of enactment, see 2A NICHOLS, supra note 8, [section] 7.0113] n.15.
(70.) See Scheiber, supra note 48, at 234-35.
(71.) See id. at 235; Pritchett, supra note 16, at 9. The federal courts played almost no role in this early development because, from independence until the late Nineteenth Century, almost all eminent domain battles were fought at the state level. It was common practice throughout most of the Nineteenth Century for state governments to condemn property on behalf of the United States in state courts. See Mark C. Landry, Note, The Public Use Requirement in Eminent Domain--A Requiem, 60 TUL. L. REV. 419, 423 & n.21 (1985). Not until 1875, after the Michigan Supreme Court prohibited this practice in People ex rel. Trumbley v. Humphrey, 23 Mich. 471 (1871), did the United States seek to exercise eminent domain in the federal courts. See Landry, supra, at 423 n.21 (citing Kohl v. United States, 91 U.S. 367 (1875)). Moreover, after the ratification of the Constitution, a handful of state courts applied the Fifth Amendment to state exercises of eminent domain, see Harry N. Scheiber, The Road to Munn: Eminent Domain and the Concept of Public Purpose in the State Courts, in LAW IN AMERICAN HISTORY 327, 360 (Donald Fleming & Bernard Bailyn eds., 1971), but in 1833 the U.S. Supreme Court held that the Fifth Amendment did not apply to the States. See Barron v. City of Baltimore, 32 U.S. (7 Pet.) 243 (1833). Thus, while some states adopted principles derived from the Fifth Amendment, see Schieber, supra, at 362, a study of eminent domain, and the public use requirement in particular, during most of the Nineteenth Century must involve the study of numerous state court decisions applying state law.
(72.) See 2A NICHOLS, supra note 8, [section] 7.01; Scheiber, supra note 71, at 235.
(73.) See Scheiber, supra note 71, at 235.
(75.) Stoebuck, supra note 63, at 586.
(76.) Id. at 589.
(77.) Philip Nichols, Jr., The Meaning of Public Use in the Law of Eminent Domain, 20 B.U.L. REV. 615, 616 (1940) (citations omitted).
(78.) 2A NICHOLS, supra note 8, [section] 7.0114].
(79.) See id. [section] 7.0114].
(80.) See id. [section] 7.0115].
(81.) See Nichols, supra note 77, at 617.
(82.) Meidinger, supra note 41, at 18.
(83.) See Nichols, supra note 77, at 617 & n.13; see, e.g., Scudder v. Trenton Del. Falls Co., 1 N.J. Eq. 694 (1832); Boston & Roxbury Mill Corp. v. Newman, 29 Mass. (12 Pick.) 467 (1832); see also Meidinger, supra note 41, at 23-24 (discussing cases).
(84.) Scheiber, supra note 48, at 237. In addition to granting these enterprises eminent domain rights, state courts adopted what Scheiber calls "expediting doctrines": interpretations of the law designed to facilitate economic expansion by shifting costs away from, and granting other advantages to, these companies. See generally id. at 235-40.
(85.) Meidinger, supra note 41, at 27-28.
(86.) See Pritchett, supra note 16, at 9.
(87.) See Meidinger, supra note 41, at 23.
(88.) See id.
(89.) See id. at 24.
(90.) See Berger, supra note 44, at 208; Donald J. Kochan, "Public Use" and the Independent Judiciary: Condemnation in an Interest-Group Perspective, 3 TEX. REV. L. & POL. 49, 67 (1998); Meidinger, supra note 41, at 24; Nichols, supra note 77, at 617.
(91.) See Berger, supra note 44, at 208.
(92.) See Pritchett, supra note 16, at 10; see also MORTON J. HORWITZ, THE TRANSFORMATION OF AMERICAN LAW 1780-1860, at 260 (1977) (stating that "[a] widespread fear of legislatively authorized redistribution of wealth began to overshadow the enthusiasm for eminent domain as an important instrument of cheap economic growth").
(93.) Pritchett, supra note 16, at 10.
(94.) Nichols, supra note 77, at 619 (stating that a "respectable minority of decisions" supported the view of Michigan Supreme Court Justice Thomas Cooley that public benefit or advantage constituted public use). But see Stoebuck, supra note 63, at 589 n.123 (criticizing Nichols for "assum[ing] the courts took the pure form of the public-use doctrine more seriously than they probably did"). Moreover, Nichols is almost certainly misinterpreting Cooley's view on the public use issue, as Cooley was actually a strong advocate for the narrow view. See generally James W. Ely, Jr., Thomas Cooley, "Public Use," and New Directions in Takings Jurisprudence, 2004 MICH. ST. L. REV. 845, 846-50.
(95.) Berger, supra note 44, at 209.
(96.) Meidinger, supra note 41, at 24.
(97.) See Stoebuck, supra note 63, at 590 (citing Loughbridge v. Harris, 42 Ga. 500 (1871)).
(98.) Id. at 589.
(99.) Kochan, supra note 90, at 67.
(100.) Nichols, supra note 77, at 619. For a more detailed discussion of the evasions, see id. at 618-24. Accord Meidinger, supra note 41, at 24 (stating that the "practical consequences [between the narrow and broad views] appear rather minor.... Many courts, while formally embracing the use-by-the-public view, developed elaborate methods of evading its implications").
(101.) See Meidinger, supra note 41, at 28.
(102.) Id. at 29.
(103.) See Nichols, supra note 77, at 624; see also Scheiber, supra note 48, at 243 ("No longer did judges or framers of state constitutions rely so much upon sophistries about 'public use.' Instead, they now merely paused to assert prescriptively that one private interest or another--mining, irrigation, lumbering or manufacturing--was so vitally necessary to the common weal as to be a public use by inference.").
(104.) See, e.g., Mo. Pac. Ry. Co. v. Nebraska, 164 U.S. 403 (1896) (holding that a Nebraska order requiring a railroad to permit a private individual to build a grain elevator on the railroad's land was an unconstitutional taking of private property for the private use of another).
(105.) See Meidinger, supra note 41, at 30.
(106.) 166 U.S. 226, 228 (1897).
(107.) Clark v. Nash, 198 U.S. 361 (1905).
(108.) 208 U.S. 598, 607 (1908).
(109.) Mt. Vernon-Woodberry Cotton Duck Co. v. Ala. Interstate Power Co., 240 U.S. 30, 32 (1916).
(110.) 262 U.S. 700, 707 (1923).
(111.) See Berger, supra note 44, at 214; Meidinger, supra note 41, at 33; see generally Pritchett, supra note 16.
(112.) See Pritchett, supra note 16, at 14-15.
(113.) See Berger, supra note 44, at 215.
(114.) See Meidinger, supra note 41, at 33.
(115.) See Pritchett, supra note 16, at 24.
(116.) See, e.g., N.Y. City Hous. Auth. v. Muller, 1 N.E.2d 153 (N.Y. 1936); see also Berger, supra note 44, at 215 (explaining that courts generally adopted the public advantage approach in upholding enabling acts).
(117.) Pub. L. No. 75-412, 50 Stat. 888 (codified as amended at 42 U.S.C. [subsection] 1437-1437f (2000)).
(118.) Pub. L. No. 81-171, 63 Stat. 413 (codified as amended in scattered sections of 12 U.S.C. and 42 U.S.C.).
(119.) See Berger, supra note 44, at 215; Meidinger, supra note 41, at 33-34.
(120.) See Berger, supra note 44, at 215; Meidinger, supra note 41, at 34.
(121.) 348 U.S. 26 (1954).
(122.) Id. at 28-32.
(123.) Id. at 30.
(125.) Id. at 34.
(126.) Id. at 31.
(128.) Id. at 36.
(129.) Id. at 32; see also Thomas W. Merrill, The Economics of Public Use, 72 CORNELL L. REV. 61, 70 (1986) ("'Police power' is here synonymous with the extent to which government may constitutionally regulate private activity. It defines those issues with which government may properly concern itself."). For a well regarded treatment of the history, parameters, and significance of the police power, see generally ERNST FREUND, THE POLICE POWER: PUBLIC POLICY AND CONSTITUTIONAL RIGHTS (1904).
(130.) Berman, 348 U.S. at 32.
(131.) Id. at 32-33.
(132.) Id. at 33.
(133.) Id. at 35-36.
(134.) 467 U.S. 229 (1984).
(135.) Id. at 232.
(136.) Id. at 232-34.
(137.) Id. at 234-35.
(138.) Id. at 239-40.
(139.) Id. at 240.
(140.) Id. at 241-42.
(141.) Id. at 245.
(142.) Id. at 241.
(143.) Id. at 244.
(144.) Id. at 242 (quoting W. & S. Life Ins. Co. v. State Bd. of Equalization, 451 U.S. 648, 671-72 (1981)).
(145.) 269 U.S. 55 (1925).
(146.) Midkiff, 467 U.S. at 240 (quoting Old Dominion Co. v. United States, 269 U.S. 55, 66 (1925)).
(148.) Id. at 242-43.
(149.) See Somin, supra note 35, at 1006 (describing Poletown as "notorious" and "the most visible symbol of eminent domain abuse"); see also Ely, supra note 17, at 35 ("To many observers of differing political viewpoints, the Poletown case was a poster child for excess condemnation."); Lee Anne Fennell, Taking Eminent Domain Apart, 2004 MICH. ST. L. REV. 957, 958 (noting "the near-unanimous scholarly applause" that Poletown had been "smashed into oblivion").
(150.) 304 N.W.2d 455, 457 (Mich. 1981). For detailed discussions of Poletown, its history and consequences, see generally Somin, supra note 35, and William A. Fischel, The Political Economy of Public Use in Poletown: How Federal Grants Encourage Excessive Use of Eminent Domain, 2004 MICH. ST. L. REV. 929.
(151.) Poletown, 304 N.W.2d at 467 (Ryan, J., dissenting).
(152.) Id. at 457-59 (majority opinion) (citing MICH. CONST. of 1963, art. 10, 2).
(153.) Id. at 459-60.
(154.) Id. at 459.
(155.) Id. ("If the public benefit was. not so clear and significant, we would hesitate to sanction approval of such a project.").
(156.) Id. at 460.
(157.) 684 N.W.2d 765, 769-70, 787 (Mich. 2004). For a general discussion and analysis of the Hathcock decision, see generally Somin, supra note 35.
(158.) Id. at 779-81.
(159.) Id. at 781 (quoting Poletown, 304 N.W.2d at 478 (Ryan, J., dissenting)).
(160.) Id. at 782 (citing Poletown, 304 N.W.2d at 479 (Ryan, J., dissenting)).
(161.) Id. at 783 (quoting Poletown, 304 N.W.2d at 480 (Ryan, J., dissenting)).
(162.) Id. at 781 (quoting Poletown, 304 N.W.2d at 478 (Ryan, J., dissenting)).
(163.) Id. at 783.
(164.) Id. at 770, 784, 788.
(165.) Id. at 783-84.
(166.) Id. at 784.
(167.) 125 S. Cr. 2655 (2005).
(168.) Kelo v. City of New London, 843 A.2d 500 (Conn. 2004), aff'd, 125 S. Ct. 2655 (2005).
(169.) Id. at 507-08.
(170.) Id. at 519.
(171.) Id. at 509.
(172.) Id. at 509-10.
(173.) Id. at 510.
(174.) Id. at 509.
(175.) Id. at 508-09; Kelo v. City of New London, 125 S. Ct. 2655, 2659-60 (2005).
(176.) Kelo, 843 A.2d at 509.
(178.) Id. at 510. Specifically, the NLDC projected between 518 and 867 construction jobs, between 718 and 1,362 direct jobs, and between 500 and 940 indirect jobs. Id.
(179.) Id.; see also id. at 598 (Zarella, J., concurring in part and dissenting in part) (noting that the projected tax figures are annual). Specifically, the NLDC projected that between $680,544 and $1,249,843 in tax revenue would result from the project. Id. at 510. The court noted that 54% of the land area in New London was exempt from property taxes, and that the city had recently suffered dramatic job losses as the result of losing roughly 2,900 government sector positions, in part due to the closure of the United States Naval Underseas Warfare Center. Id. As a result, the court noted, the state of Connecticut had designated New London a "distressed municipality." Id.
(180.) For a detailed discussion of the parties' briefs in the case, see generally Alan T. Ackerman, The Changing Landscape and Recognition of the Public Use Limitation: Is Hathcock the Precursor of Kelo?, 2004 MICH. ST. L. REV. 1041.
(181.) Brief of Petitioners at 9-10, Kelo v. City of New London, 125 S. Ct. 2655 (2005) (No. 04-108).
(182.) Id. at 10.
(183.) Id. at 9.
(184.) Id. at 27.
(185.) Id. at 24-27.
(186.) Id. at 27.
(187.) Id. at 37-39.
(188.) Kelo v. City of New London, 125 S. Ct. 2655, 2665-68 (2005).
(189.) Id. at 2661 (citing Haw. Hous. Auth. v. Midkiff, 467 U.S. 229, 245 (1984)).
(191.) Id. (quoting Kelo v. City of New London, 843 A.2d 500, 536 (Conn. 2004)).
(192.) Id. at 2662 (quoting Midkiff, 467 U.S. at 244).
(193.) Id. at 2662.
(195.) Id. at 2663.
(196.) Id. (quoting Berman v. Parker, 348 U.S. 26, 34 (1954)).
(197.) Id. at 2664 (quoting Midkiff, 467 U.S. at 241-42).
(198.) Id. at 2665-67.
(199.) Id. at 2666.
(200.) Id. at 2666-67.
(201.) Id. at 2667 n.17 (citing Cincinnati v. Vester, 281 U.S. 439, 448 (1930) and 99 Cents Only Stores v. Lancaster Redev. Agency, 237 F. Supp. 2d 1123 (C.D. Cal. 2001)).
(202.) Id. at 2667-68.
(203.) Id. at 2667.
(204.) Id. (quoting Haw. Hous. Auth. v. Midkiff, 467 U.S. 229, 242 (1984)).
(205.) Id. at 2668.
(207.) Id. (quoting Berman v. Parker, 348 U.S. 26, 35-36 (1954)).
(208.) See id. at 2661.
(209.) Id. (quoting Kelo v. City of New London, 843 A.2d 500, 536 (Conn. 2004)).
(210.) Id. at 2666-67.
(211.) Id. at 2667.
(212.) Id. at 2670 (Kennedy, J., concurring).
(213.) Id. at 2669.
(215.) Id. at 2670.
(217.) See id. at 2669-70.
(219.) Id. at 2670.
(220.) Id. at 2670-71.
(221.) Id. at 2669-70.
(223.) Id. at 2671 (O'Connor, J., dissenting).
(227.) Id. at 2672.
(229.) See id.
(231.) Id. at 2673.
(236.) Id. at 2674.
(237.) See id.
(238.) Id. at 2675.
(239.) Haw. Hous. Auth. v. Midkiff, 467 U.S. 229, 240 (1984).
(240.) Kelo, 125 S. Ct. at 2674 (O'Connor, J., dissenting).
(241.) See id.
(242.) See id. at 2675 ("In moving away from our decisions sanctioning the condemnation of harmful property use, the Court today significantly expands the meaning of public use.").
(243.) See id. at 2666 n.16 (majority opinion); see also Clark v. Nash, 198 U.S. 361 (1905) (upholding condemnation of land where condemned land was not affirmatively harmful); Fallbrook Irrigation Dist. v. Bradley, 164 U.S. 112 (1896) (same).
(244.) Lucas v. S.C. Coastal Council, 503 U.S. 1003, 1004 (1992).
(245.) Kelo, 125 S. Ct. at 2678 (Thomas, J., dissenting).
(248.) Id. at 2679.
(249.) Id. at 2680-81.
(250.) Id. at 2681.
(251.) See id.
(252.) Id. at 2682.
(253.) Id. at 2682.
(254.) See id. at 2686.
(255.) See id.
(257.) Id. at 2686-87 (citation omitted) (quoting United States v. Carolene Prods. Co., 304 U.S. 144, 152 n.4 (1938)).
(258.) 164 U.S. 112 (1896).
(259.) Kelo, 125 S. Ct. at 2683 (Thomas, J., dissenting).
(261.) Bradley, 164 U.S. at 121-23, 154.
(262.) Id. at 161.
(263.) Kelo, 125 S.Ct. at 2683 (Thomas, J., dissenting).
(264.) Bradley, 164 U.S. at 116 n.1.
(265.) Kelo, 125 S. Ct. at 2683 (Thomas, J., dissenting).
(266.) 198 U.S. 361 (1905).
(267.) Id. at 370.
(268.) Id. at 369-70.
(269.) Id. at 370.
(270.) Kelo, 125 S. Cr. at 2683 (Thomas, J., dissenting).
(271.) See Minn. Canal & Power Co. v. Koochiching Co., 107 N.W. 405, 414 (Minn. 1906) ("[A] use which, by physical conditions, is restricted to a very few persons who must use it within a very restricted area, is not a [narrow view] public use.").
(272.) 200 U.S. 527 (1906).
(273.) Id. at 529, 532.
(274.) Id. at 531.
(275.) Kelo v. City of New London, 125 S. Cr. 2655, 2684 (2005) (Thomas, J., dissenting) (quoting Strickley, 200 U.S. at 531-32).
(277.) Strickley, 200 U.S. at 531 (citing Clark v. Nash, 198 U.S. 361 (1905)).
(278.) See supra notes 40-45, 47.
(279.) See supra note 46.
(280.) See Kelo, 125 S. Ct. at 2681 (Thomas, J., dissenting). Justice Thomas, of course, is by no means the only person to assume this. See Paul Brest, The Misconceived Quest for the Original Understanding, 60 B.U.L. REV. 204, 210 (1980).
(281.) See Brest, supra note 280, at 214; see also U.S. CONST. art. VII ("The ratification of the conventions of nine states, shall be sufficient for the establishment of this constitution between the states ratifying the same.").
(282.) See Brest, supra note 280, at 214.
(284.) Id. at 210.
(286.) William Michael Treanor, The Original Understanding of the Takings Clause and the Political Process, 95 COLUM. L. REV. 782, 791 (1995).
(287.) Id. See also Stoebuck, supra note 63, at 594 ("[W]hile there was a popular groundswell [in the ratifying conventions] for a bill of rights, we must frankly conclude there is no evidence that eminent domain limitations were given much attention."); Meidinger, supra note 41, at 17 ("If the available evidence demonstrates anything, it is that eminent domain was not high among the concerns of those debating the Bill of Rights. Indeed, there is little evidence that it was a concern at all.").
(288.) See Stoebuck, supra note 63, at 595 (quoting 1 ANNALS OF CONG. 451-52 (Joseph Gales ed., 1834)).
(289.) See generally id. (speculating, without resolution, on the significance of the change from Madison's original language); Meidinger, supra note 41, at 17 (same).
(290.) See generally supra notes 52-54, 57-61 and accompanying text.
(291.) See Berger, supra note 44, at 205.
(292.) See Jeb Rubenfeld, Usings, 102 YALE L.J. 1077, 1080 (1993).
(293.) See generally Laura S. Underkuffler, On Property: An Essay, 100 YALE L.J. 127 (1990) (describing the evolution from a conception of property rights as absolute to one recognizing these rights as subject to the collective needs of society).
(294.) See Nicole Stelle Garnett, The Public-Use Question as a Takings Problem, 71 GEO. WASH. L. REV. 934, 964 (2003) (describing a government's options in acquiring property as including open market purchase and condemnation).
(295.) See id. (describing a government's choices about how to exercise eminent domain).
(296.) See Merrill, supra note 129, at 65, 76; see also Fennell, supra note 149, at 971-72.
(297.) See Merrill, supra note 129, at 74-76 (discussing a basic economic model for eminent domain); see also Fennell, supra note 149, at 971-72 (describing thin and thick markets). A common example of a thin market is one in which it is necessary to acquire numerous contiguous parcels in order to complete, say, a pipeline or highway that must traverse a particular path. Such a scenario is typically referred to in the eminent domain literature as an "assembly problem." See, e.g., Merrill, supra note 129, at 75. Thin markets also exist when the location or attributes of a single desired parcel render it essential for a project. Merrill cites a "promontory for a lighthouse or a narrows for a bridge" as properties representing "thin" markets. Id. at 76.
(298.) See RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 49 (3d ed. 1986) (discussing eminent domain and monopoly); Berger, supra note 44, at 224-25 (discussing same); see also Merrill, supra note 129, at 76 (explaining that the seller's monopoly allows "the seller to seek economic rents, that is, to charge a price higher than the property's opportunity cost" and defining "any situation where a seller can extract economic rents from a buyer as a 'thin market'").
(299.) See Merrill, supra note 129, at 75; see also Steve P. Calandrillo, Eminent Domain Economics: Should "Just Compensation" Be Abolished, and Would "Takings Insurance" Work Instead?, 64 OHIO ST. L.J. 451, 468--69 (2003) (describing the holdout problem); Fennell, supra note 149, at 971-72 (same); Munch, supra note 1, at 474 (same). Errol Meidinger describes the holdout problem as follows:</p> <pre> Stated in lay terms it is the possibility that an owner of property necessary to the completion of a substantial project either will refuse to
sell and thus entirely thwart the project's possible benefits or will hold out for an exorbitant price and thereby "blackmail" society for a higher than fair price. In economic terms the problem is defined as a seller holding out for a higher price from a buyer known to be "assembling" properties for a particular configuration (e.g., a railroad right-of-way) than the seller would ask from
a buyer not suspected of planning such an assembly. Where hold-out behavior occurs, fewer projects requiring assembly will be carried out than if sellers sold at their true-"atomistic"--prices, and the net production available to society will be lower than if goods were compared, bought, and sold at their true opportunity costs. Production is thus expected to be sub- or at least nonoptimal. </pre> <p>Meidinger, supra note 41, at 49; see also Munch, supra note 1, at 476 n.7 (defining "atomistic market reservation price" as "the reservation price of a seller to a buyer whom he did not suspect of planning an assembly"); RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 6 (6th ed. 2003) (describing opportunity cost as "the benefit forgone by employing a resource in a way that denies its use to someone else").
(300.) See Calandrillo, supra note 299, at 469; Merrill, supra note 129, at 75-77.
(301.) See Merrill, supra note 129, at 74-77. See also Michelman, supra note 30, at 1174; Munch, supra note 1, at 474.
(302.) See Meidinger, supra note 41, at 49; Munch, supra note 1, at 474; POSNER, supra note 299, at 49.
(303.) See Merrill, supra note 129, at 77, 80 (describing the "due process" costs of eminent domain, including the costs of persuading the government to authorize or use the power, complying with eminent domain procedural requirements, appraisal, litigation and settlement).
(304.) See generally Guido Calabresi & A. Douglas Melamed, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, 85 HARV. L. REV. 1089 (1972). According to Calabresi and Melamed, an entitlement is protected by a "property rule" when it can only be obtained from the owner with the owner's consent at a price agreed upon by the owner. Id. at 1092. An entitlement is protected by a "liability rule" if it can be acquired without the owner's consent by paying compensation objectively determined by an organ of the state, such as a court. Id.
(305.) See Merrill, supra note 129, at 74-75.
(306.) See id. at 75.
(307.) Id. at 82.
(308.) See Munch, supra note 1, at 474 (stating that eminent domain "is effectively a reassignment of property rights: the seller is deprived of his right to refuse to sell and constrained in his right to bargain over price").
(309.) See Gideon Kanner, Condemnation Blight: Just How Just Is Just Compensation?, 48 NOTRE DAME L. REV. 765, 772 (1973) (stating that "the open use of the power of eminent domain is involved to deprive the owner of an otherwise legally protected economic advantage").
(310.) See Munch, supra note 1, at 473.
(311.) See James Geoffrey Durham, Efficient Just Compensation as a Limit on Eminent Domain, 69 MINN. L. REV. 1277, 1277 (1985).
(313.) See JESSE DUKEMINIER & JAMES E. KRIER, PROPERTY 1113 (5th ed. 2002); see also Krier & Serkin, supra note 21, at 865.
(314.) See Ely, supra note 94, at 855 & n.66; see also Eric R. Claeys, Public-Use Limitations and Natural Property Rights, 2004 MICH. ST. L. REV. 877, 924-28; Michael DeBow, Unjust Compensation: The Continuing Need for Reform, 46 S.C.L. REV. 579, 580 (1995); Durham, supra note 311, at 1285; Fennell, supra note 149, at 962 & n.17; Garnett, supra note 294, at 943-44, 945 & n.71, 947 & n.86; Krier & Serkin, supra note 21, at 865-66.
(315.) United States v. 564.54 Acres of Land, 441 U.S. 506, 511 (1979).
(316.) Id. (quoting United States v. Miller, 317 U.S. 369, 374 (1943)).
(317.) See Krier & Serkin, supra note 21, at 866; see also Fennell, supra note 149, at 963 ("Most property owners value their property above fair market value; if they did not, they likely would have sold it already.").
(318.) See Munch, supra note 1, at 479 ("Just compensation is defined as 'fair market value' exclusive of the value to this particular seller.").
(319.) The increments of value mentioned here are generally increases in value resulting from the transfer or from the demand that gives rise to the transfer.
(320.) Fennell, supra note 149, at 961.
(321.) See Garnett, supra note 294, at 948 ("[T]he condemnee does not share in any increased value that the condemnation adds to the property, despite the fact that an exercise of eminent domain almost always raises the value of the property."). The value of the property may increase as a result of the assembly of multiple parcels into a larger unit worth more than the combined pre-transfer value of its constituent parts. See Fennell, supra note 149, at 965 (also noting that "eminent domain typically assigns the entire surplus to the condemning authority (or to that authority's transferee)").
(322.) See Fennell, supra note 149, at 966-67. Fennell analogizes this autonomy to "holding an option--the capacity to wait on unfolding conditions to decide when one wishes to sell." Id. at 967.
(323.) See Robert C. Ellickson, Alternatives to Zoning: Covenants, Nuisance Rules, and Fines as Land Use Controls, 40 U. CHI. L. REV. 681, 735 (1973) ("There is a minimum price at which any person would voluntarily exchange any item of his property. The excess of this subjective value over market value is termed 'consumer surplus.'"); Merrill, supra note 129, at 83 (defining subjective premium as the value an owner "might attach to his property above its opportunity cost").
(324.) See DeBow, supra note 314, at 582-83; Durham, supra note 311, at 1305; Fennell, supra note 149, at 963-64; Merrill, supra note 129, at 83. 325. Fennell, supra note 149, at 963.
(326.) United States v. 564.54 Acres of Land, 441 U.S. 506, 511 (1979).
missing (327.) Fennell, supra note 149, at 958-59.
(328.) See id. at 965; see also Krier & Serkin, supra note 21, at 870 ("Assembling property should create a surplus, because the value of each individual parcel is likely less than its value as part of a larger whole put together by the government."); Merrill, supra note 129, at 85.
(329.) See Merrill, supra note 149, at 98 (finding that, in a small study of contested public use cases, sixty-nine percent of the clearly classifiable cases involved assembly).
(330.) See, e.g., Olson v. United States, 292 U.S. 246, 255-56 (1934) (stating that compensation "is the market value of the property at the time of the taking" and does not include "any element resulting subsequently to or because of the taking"); United States v. Miller, 317 U.S. 369, 375 (1943) (stating that property's "special value to the condemnor as distinguished from others who may or may not possess the power to condemn, must be excluded as an element of market value").
(331.) Fennell, supra note 149, at 965; see also EPSTEIN, supra note 16, at 164.
(332.) See Merrill, supra note 129, at 86 (arguing that "[t]he active agent, the supplier of the idea and initiative, is the condemnor.... [A]s between a condemnor and a condemnee, the condemnor is typically more responsible for, and hence arguably deserving of, the surplus generated by the project").
(333.) See Hanoch Dagan, Takings and Distributive Justice, 85 VA. L. REV. 741, 768 n.84 (1999) (noting that the term "average reciprocity of advantage" was first used by Justice Holmes in Jackman v. Rosenbaum Co., 260 U.S. 22, 30 (1922), and later in Penn. Coal Co. v. Mahon, 260 U.S. 393, 415 (1922)).
(334.) Id. at 769.
(335.) Id. ("[R]eciprocity of advantage also has been read in a much broader sense, requiring only that the injured landowner be a member of the benefited community and, as such (rather than in her role as the regulated party), that she enjoy a share of the general welfare-enhancement generated by the public action at issue or by other beneficial public actions, even if this benefit is outweighed by the burden she sustains.").
(336.) EPSTEIN, supra note 16, at 195.
(337.) See Dagan, supra note 333, at 771.
(339.) See Durham, supra note 311, at 1300-01; Fennell, supra note 149, at 961 & n.16; see also EPSTEIN, supra note 16, at 165 (discussing increased costs of legislative solutions to land acquisition due to rent-seeking behavior).
(340.) RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 58 (4th ed. 1992).
(341.) See Heller & Krier, supra note 30, at 999 (contending that "the obligation to pay compensation can constrain government inclinations to exploit politically vulnerable groups and individuals"); see also Garnett, supra note 294, at 951; Glynn S. Lunney, Jr., Compensation for Takings: How Much Is Just?, 42 CATH. U. L. REV. 721, 723 (1993).
(342.) See William A. Fischel & Perry Shapiro, Takings, Insurance, and Michelman: Comments on Economic Interpretations of "Just Compensation" Law, 17 J. LEGAL STUD. 269, 269-70 (1988) (arguing that the compensation requirement has the effect of "disciplining the power of the state, which would otherwise overexpand unless made to pay for the resources that it consumes"); see also Garnett, supra note 294, at 951; Christopher Serkin, The Meaning of Value: Assessing Just Compensation for Regulatory Takings, 99 NW. U. L. REV. 677, 725 (noting "the assumption that forcing the government to pay compensation will have some deterrent effect on its willingness to act"). Public choice theorists, however, contend that the compensation requirement does not deter overconsumption of property. Under public choice theory, legislators are said to respond to political incentives, including political support, votes, contributions, and less legitimate benefits, rather than fiscal constraints. See Garnett, supra note 294, at 956 (quoting Daryl J. Levinson, Making Government Pay: Markets, Politics, and the Allocation of Constitutional Costs, 67 U. CHI. L. REV. 345, 349 (2000)); Kochan, supra note 90, at 79-80. As a result, governments may not internalize any of the costs in acquiring property by eminent domain. This is particularly true given the intense competition among municipalities seeking to attract developers. See Garnett, supra note 294, at 956-57. The desire to lure investment may more than overcome any brake imposed by the prospect of compensation. If so, this suggests even greater risks of abuse and inefficiency, as even the minimal limitations imposed by the present undercompensatory scheme would seem to have little impact on land acquisition.
(343.) See Heller & Krier, supra note 30, at 1001 ("[T]o relieve the government of any obligation to pay is to forgo an opportunity to test whether the benefits of a government program are truly worth its costs."); see also Serkin, supra note 342, at 705-06.
(344.) See Dagan, supra note 333, at 748; Fischel & Shapiro, supra note 342, at 269-70. Hanoch Dagan and others, however, have argued that a full-compensation regime is also potentially inefficient, as it might encourage excessive investment by property owners who disregard the risk that their property might be taken. Dagan states that "[w]hen there is uncertainty about the government's needs, a full-compensation rule provides incentives for excessive private investment, including improvements that will be of no use in the event that the land in question is subjected to public use." Dagan, supra note 333, at 749.
(345.) Lawrence Blume & Daniel L. Rubinfeld, Compensation for Takings: An Economic Analysis, 72 CAL. L. REV. 569, 621 ("Fiscal illusion arises because the costs of governmental actions are generally discounted by the decisionmaking body unless they explicitly appear as a budgetary expense.").
(346.) See Serkin, supra note 342, at 705.
(347.) See Fennell, supra note 149, at 964; Merrill supra note 129, at 83-84.
(348.) See Fennell, supra note 149, at 964.
(349.) See id.
(350.) See id. at 964-65; see also Merrill, supra note 129, at 83-84.
(351.) Blume & Rubinfeld, supra note 345, at 619.
(352.) Surplus occurs only if the property is more valuable in the hands of the transferee than it was in the hands of the transferor. Fennell, supra note 149, at 965. In some cases, where subjective value is high and the value of the property in the transferee's hands is low, there will be no surplus from transfer. Id.
(353.) Krier & Serkin, supra note 21, at 870 ("Assembling property should create a surplus, because the value of each individual parcel is likely less than its value as part of a larger whole put together by the government.").
(354.) "Rent seeking" refers to the expenditure of resources by private parties to "capture" political entities for the purpose of obtaining economic gain. See Somin, supra note 35, at 1021. The economic gain obtained by the rent-seeking party is generally not due to wealth creation, but comes at the expense of another party or group. See generally Anne O. Krueger, The Political Economy of the Rent-Seeking Society, 64 AM. ECON. REV. 291 (1974).
(355.) See Fennell, supra note 149, at 964-65.
(356.) Kelo v. City of New London, 125 S. Ct. 2655, 2675 (2005) (O'Connor, J., dissenting).
(357.) See, e.g., Krier & Serkin, supra note 21, at 866 (arguing that benefits produced by true public uses "provide some amount of implicit compensation to the erstwhile owners whose property has been taken to enable the government project in question"); see also Fennell, supra note 149, at 960 n.14.
(358.) Fennell, supra note 149, at 960 n.14; Krier & Serkin, supra note 21, at 866 (noting that implicit compensation is more certain in classic public uses "precisely because the benefits so clearly accrue to the public at large (and not to private interests for their own sake)").
(359.) See Krier & Serkin, supra note 21, at 867.
(360.) Id. at 863.
(361.) Somin, supra note 35, at 1013-14; accord Thomas Ross, Transferring Land to Private Entities by the Power of Eminent Domain, 51 GEO. WASH. L. REV. 355, 375 (1983) ("In an ordinary taking, the state retains title and can ensure the continued use of the land in the way desired by society; a private transferee has no obligation to use his property in the societally desired way."). Some courts, however, do require assurances that condemned property will actually be used for the "public use" put forth as the justification for the taking. For jurisdictions that require assurances that the property taken will be put to the asserted "public use," see Somin, supra note 35, at 1011 n.27.
(362.) Kelo v. City of New London, 125 S. Ct. 2655, 2667-68 (2005).
(363.) Somin, supra note 35, at 1011.
(364.) Id. at 1012-13.
(365.) Id. at 1013, 1017 & n.52.
(366.) Id. at 1017.
(367.) See Krier & Serkin, supra note 21, at 867 (noting that as the use becomes less public, implicit compensation declines, possibly to zero in extreme cases).
(368.) Kochan, supra note 90, at 52.
(369.) Somin, supra note 35, at 1008.
(370.) Fennell, supra note 149, at 967 (citing NEIL KOMESAR, LAW'S LIMITS: THE RULE OF LAW AND THE SUPPLY AND DEMAND OF RIGHTS 60-70 (2001)).
(371.) See KOMESAR, supra note 370, at 60-70.
(372.) See Fennell, supra note 149, at 970.
(373.) See id.
(374.) Garnett, supra note 294, at 952.
(375.) See id. at 952-54; see also BERNARD J. FRIEDEN & LYNNE B. SAGALYN, DOWNTOWN, INC.: HOW AMERICA REBUILDS CITIES 28-30 (1989); Garnett, supra note 294, at 945 n.74.
(376.) Garnett, supra note 294, at 954.
(378.) Id. at 953.
(379.) See Kelo v. City of New London, 125 S. Ct. 2655, 2677 (2005) (O'Connor, J., dissenting) ("The beneficiaries are likely to be those with disproportionate influence and power in the political process.... As for the victims, the government now has license to transfer property from those with fewer resources to those with more."); id. at 2687 (Thomas, J., dissenting) ("[E]xtending the concept of public purpose to encompass any economically beneficial goal guarantees that these losses will fall disproportionately on poor communities."). Justice Thomas also observed that "[u]rban renewal projects have long been associated with the displacement of blacks.... Regrettably, the predicable consequence of the Court's decision will be to exacerbate these effects." Id.
(380.) See Castle Coalition, State Legislative Actions, http://maps.castlecoalition.org/legislation.html (last visited Feb. 8, 2006).
(381.) See D. Benjamin Barros, Home as a Legal Concept, 46 SANTA CLARA L. REV. (forthcoming 2006).
(382.) See id.
(383.) Kelo, 125 S. Ct. at 2671 (O'Connor, J., dissenting); see also S.J. Res. 24, 93d Gen. Assemb. (Mo. 2005) (proposed constitutional amendment) (preventing transfers to private businesses for economic development or for private use, and further providing that "[p]roperty shall not be taken from one owner and transferred to another on the grounds that the public will benefit from a more profitable private use").
(384.) Kelo, 125 S. Ct. at 2676 (O'Connor, J., dissenting).
(385.) See id. at 2677.
(386.) See Margaret Jane Radin, Property and Personhood, 34 STAN. L. REV. 957, 1005 (1982).
(387.) Id. Thus, she notes that "one might expect to find that a special class of property like a family home is protected against the government by a 'property rule' and not just a 'liability rule.'" Id. at 1005--06. Radin calls for a "substantive due process limitation on the eminent domain power" for situations in which the government would force people to sell their homes to a corporation, requiring a showing of a "compelling state interest" before the government could proceed. See Margaret Jane Radin, The Liberal Conception of Property: Cross Currents in the Jurisprudence of Takings, 88 COLUM. L. REV. 1667, 1690-91 (1988).
(388.) Kochan, supra note 90, at 52.
(389.) Merrill, supra note 129, at 64.
(390.) See, e.g., Berman v. Parker, 348 U.S. 26, 33 (1954) ("Once the object is within the authority of Congress, the right to realize it through the exercise of eminent domain is clear. For the power of eminent domain is merely the means to the end. Once the object is within the authority of Congress, the means by which it will be attained is also for Congress to determine.") (citations omitted); Haw. Hous. Auth. v. Midkiff, 467 U.S. 229, 241 (1984) ("[W]here the exercise of eminent domain power is rationally related to a conceivable public purpose, the Court has never held a compensated taking to be proscribed by the Public Use Clause.").
(391.) Merrill, supra note 129, at 64.
(392.) Id. at 67.
(393.) See id. at 68.
(394.) See id. at 64.
(395.) See, e.g., id. at 65.
(396.) Michelman proposed what is by far the most famous eminent domain efficiency theory. Although he was primarily concerned with determining "just compensation," his theory also includes scenarios in which efficiency concerns would render a project unconstitutional as lacking a public use. See Merrill, supra note 129, at 72-73 (explaining efficiency outcomes which, under Michelman's theory, would lead to a finding of an unconstitutional private use).
Michelman coined the term "demoralization costs" to describe an uncompensated loss to the condemnee. He defined these costs as</p> <pre> total of (1) the dollar value necessary to offset disutilities which accrue to losers and their sympathizers specifically from the realization
that no compensation is offered, and (2) the present capitalized dollar value of lost future production (reflecting either impaired incentives or social unrest) caused by demoralization of uncompensated
losers, their sympathizers, and other observers disturbed by the thought that they themselves may be subjected to similar treatment on some other occasion. </pre> <p>Michelman, supra note 30, at 1214 (citations omitted). Put simply, demoralization costs are the costs necessary to compensate demoralized property owners and those who sympathize with them for the bad feelings they suffer as a result of an undercompensated taking, and the consequences (namely, reluctance to invest or "social unrest") of those feelings on future behavior. See id.; see also WILLIAM A. FISCHEL, REGULATORY TAKINGS: LAW, ECONOMICS, AND POLITICS 145 (1995) ("Demoralization costs, in short, are the bad (for a utilitarian) things that happen if you don't pay.").
Drawing on his perception of the "responses we must impute to ordinarily cognizant and sensitive members of society," Michelman identifies particular takings scenarios in which demoralization costs are most likely to occur. Michelman, supra note 30, at 1215-16. A key overriding indicator is where there is a "visible risk of majoritarian exploitation," because such exploitation is likely to be "self-determining and purposive." Id. at 1216-17. The sense that one is being "systematically imposed upon" is more distressing than the sense that one is subject to risks "randomly generated" by "other loss-producing forces." Id. at 1217 (emphasis added). Randomly generated risks can be "conveniently dismissed from consciousness on the ground that, being uncontrollable, it is not worth thinking about"; but systemic actions imposing "strategically determined losses" put the property owner in the position of having to expend energy and resources to fight back. Id. Thus, a property owner is likely to "remain on edge" when facing the possibility of loss from majoritarian exploitation. Id. Or, as Fischel has written, interpreting Michelman, "People can adjust to strategic loss, but these adjustments are more costly (or involve greater disutility) than adjustments to random loss." FISCHEL, supra, at 149.
Michelman further identifies specific types of government actions that are likely to generate demoralization costs. They include situations in which compensation would have been easy and inexpensive; where the property owner feels he has suffered disproportionately compared to others; where the taking does not appear to be plausibly motivated by efficiency concerns, suggesting corrupt redistribution; where the property owner is unlikely to enjoy reciprocal benefits from the project for which his property is taken; where the type of taking does not appear to be "rare or peculiar" and lacks the "illusion of long-term indiscriminateness," suggesting that the demoralized property owner may be victimized again; and where the property owners lacked sufficient influence to have obtained "some compensatory concession 'in kind.'" Michelman, supra note 30, at 1218.
Michelman also attached the label "settlement costs" to "the dollar value of the time, effort, and resources which would be required in order to reach compensation settlements adequate to avoid demoralization costs." Id. at 1214. Settlement costs include "the costs of settling not only the particular compensation claims presented, but also those of all persons so affected by the measure in question or similar measures as to have claims not obviously distinguishable by the available settlement apparatus." Id. Though admitting that the definition of settlement costs is "vague," he nonetheless suggested that they would include, essentially, the costs of bargaining to reach settlements, the judicial costs associated with resolving unsettled claims and the costs of disposing, in a similar manner, of other claims arising from similar measures if those other claims arose because the original claims were recognized. Id. at 1214 n.99. Put more succinctly, "Settlement costs correspond roughly to the administrative costs of determining compensation." Blume & Rubinfeld, supra note 345, at 578 n.49.
Putting those terms together, Michelman argued that if either demoralization costs or settlement costs would exceed efficiency gains, the project is impermissible. Michelman, supra note 30, at 1215; see also Heller & Krier, supra note 30, at 1003 (interpreting Michelman).
(397.) See, e.g., Berger, supra note 44, at 235-36, 240; Meidinger, supra note 41, at 45-47. Meidinger proposed that a condemnor be required to show that its plan was formulated to maximize the benefit of the taking and minimize its cost, but explained that "[t]he question is not simply whether a taking's benefits exceed its costs, but whether the taking is optimal to carrying out the project." Meidinger, supra note 41, at 46. Because it is difficult to estimate costs and benefits, Meidinger allowed that "the courts necessarily will have some latitude in deciding how closely to second-guess condemnations." Id. Berger proposed that for a taking to be permissible, "the increase in values as a result of the change should exceed the total cost of making it." Berger, supra note 44, at 240. By this, he appears to mean that the value of the property, after subtracting construction and transaction costs, should be higher than its value before the taking. See id. at 235-36; see also Meidinger, supra note 41, at 51 & n.182 (interpreting Berger). In addition, according to Berger, the benefit to the public must outweigh harms suffered by the condemnee. See Berger, supra note 44, at 241-43.
(398.) See, e.g., Berger, supra note 44, at 240; Meidinger, supra note 41, at 45. Meidinger proposed a public use test requiring that the taking "be necessary to carrying out a public purpose." Under his test, condemnors would be required to show that the use of eminent domain was reasonably necessary to the realization of the public project. Situations in which the condemnor could obtain on the open market similar property on comparable terms would fail this test. Meidinger, supra note 41, at 45. Berger set forth a test whereby no taking could occur absent a showing of "condemnee monopoly." Berger, supra note 44, at 240.
(399.) See, e.g., EPSTEIN, supra note 16, at 173-75 (approving of New Hampshire Mill Act scheme compensating owners at 150% of fair market value); Berger, supra note 44, at 245 (advocating compensation of 120% to 125% of fair market value for public takings); see also FISCHEL, supra note 396, at 173-74 (interpreting Epstein); Merrill, supra note 129, at 87 n.90 (interpreting Epstein).
(400.) See Brief of Professors David L. Callies et al. as Amicus Curiae Supporting Petitioners, Kelo v. City of New London, 125 S. Ct. 2655 (2005) (No. 04-108), 2004 WL 2803192.
(401.) Garnett, supra note 294, at 939 (quoting Dolan v. City of Tigard, 512 U.S. 374, 390-91 (1994)). Garnett's argument analogizes the public use inquiry to the "means-ends" analysis discussed, until recently, by the U.S. Supreme Court in determining whether exactions demanded by governments as a condition of granting development permits are constitutional. See Agius v. City of Tiburn, 447 U.S. 255 (1980); Dolan, 512 U.S. at 390-91; Nollan v. Cal. Coastal Comm'n, 483 U.S. 825 (1987). The Court recently rejected the means-end test in Lingle v. Chevron U.S.A., Inc., 125 S. Ct. 2074 (2005). Thus, Garnett's theory is no longer analogous to any existing takings doctrine. Nonetheless, it is worthy of analysis. She is forthright in acknowledging that her test, if adopted, might not result in many attempted exercises of eminent domain being struck down. See Garnett, supra note 294, at 969.
(402.) See Merrill, supra note 129, at 87-88.
(403.) See EPSTEIN, supra note 16, at 166-69; see also Fischel, supra note 150, at 933 ("Private goods are ... 'excludable,' in that those not willing to pay [for them] can be excluded from receiving their benefits. Public goods, however, are 'nonexcludable,' meaning that there is no practical way to exclude those who do no [sic] pay from receiving the benefits if the good is provided at all."). Epstein explains that "[t]he purest of all public goods are those where the marginal cost of any extra unit of protection is zero." EPSTEIN, supra note 16, at 166. According to Epstein, a rule based on "public goods" is helpful in addressing the problem of unfair surplus distribution, because the "universal access and nondiscrimination provisions are designed to ensure that no single individual or small group of individuals (be it franchisee or user) is able to capture the entire surplus to the exclusion of others." Id. at 168. Thus, Epstein's model eliminates the possibility of rent seeking. See Merrill, supra note 129, at 87 ("[Under Epstein's approach] no one person could capture a taking's entire surplus for himself to the exclusion of all others.").
Epstein acknowledges that limiting the eminent domain power to "public goods" would be "too narrow for constitutional purposes." EPSTEIN, supra note 16, at 167. He allows that other benefits, like parks and highways, also constitute public uses, even though providing these benefits to additional people increases the cost of the benefits, thus taking them out of his definition of "public goods." Id. He justifies this additional category of "public uses" on the basis that parks and highways are analogous to common carriers: anyone meeting minimal requirements is entitled to use them. Id. at 168. He explains, "So long as all individuals have the right to use the facility ... then the public use requirement is satisfied, even if all individuals cannot simultaneously use it." Id.
Epstein also examines the distribution of the surpluses arising from eminent domain transactions as a way of assessing whether a particular taking is for a "public use." Id. at 163-64. Takings involving things other than public goods might be permissible, but for a public-private transfer to satisfy the public use requirement, the forced transfer must arise from true necessity, and any surplus produced by the transaction must be divided evenly. Id. at 173; see also Claeys, supra note 314, at 885 ("In the private-on-private assembly transfers ... Epstein applies an understanding of 'public use' that requires the government to prove that there exists a bona fide hold-out problem and that the ousted owners get above-market compensation."); Dagan, supra note 333, at 757 ("[Epstein's] rule of proportionality dictates that the claimant not sustain a burden that is disproportionately heavy in comparison to that sustained by other beneficiaries of the public action, taking into account the respective benefits to all parties involved.... Thus, this rule bars any public actions that make some owners worse off by transferring some of their economic value to the public or to other individuals."). As mentioned supra note 399, Epstein suggests that property owners be paid 150% of fair market value to insure fair distribution. EPSTEIN, supra note 16, at 173-75 (approving of New Hampshire Mill Act compensation scheme); see also Merrill, supra note 129, at 87 n.90 (interpreting Epstein); FISCHEL, supra note 396, at 173-74 (interpreting Epstein).
(404.) See Merrill, supra note 129, at 73 ("How can courts accurately measure a taking's projected benefits, many of which will be intangible and speculative?"); see also Kochan, supra note 90, at 87 ("[D]etermining whether an action is utility-maximizing is a difficult task.").
(405.) Serkin, supra note 342, at 690-91.
(407.) Merrill's argument for special scrutiny where subjective values are high, see Merrill, supra note 129, at 82-85, is problematic, since determining subjective value is so difficult. In fact, he acknowledges that this proposal "runs into all the difficulties of measurement and comparative institutional advantage associated with judicial cost-benefit analyses generally." Id. at 85. Nonetheless, assuming we can identify the scenarios where subjective losses appear high, Merrill would call for special judicial scrutiny or perhaps cost-benefit analysis in those cases. Id. at 84-85.
Meidinger's test is somewhat less objectionable from a judicial review perspective than the typical cost-benefit test, because it requires merely a showing that the condemning authority has "attempted" to maximize benefits and minimize costs, not that such a result will actually occur. See generally Meidinger, supra note 41, at 45-47. The problem with the test, of course, is that in order to address reciprocity of advantage and fairness concerns, an actual benefit must be realized and an actual efficient outcome must result. Meidinger's test provides no assurances that this will occur. An economic development project might pass judicial scrutiny under Meidinger's test (for presumably all economic development projects are designed to appear profitable in the planning stage), yet the projected benefits might fail to materialize. Moreover, because subjective values are difficult to assess, it would be extremely difficult for courts to determine whether, in fact, loss has been minimized. Similar criticisms apply to Berger's requirement that the total value of the project exceed the total cost in constructing it. See generally Berger, supra note 44, at 235-36.
(408.) See Heller & Krier, supra note 30, at 998 n.5 ("[M]ost commentators think about the Takings Clause in terms of efficiency and justice.") (emphasis added).
(409.) Serkin, supra note 342, at 707.
(410.) See, e.g., Berger, supra note 44, at 240 (arguing for a prohibition on the use of eminent domain absent a showing of "condemnee monopoly"); Garnett, supra note 294, at 967 (theorizing that courts might require the government to show that it could not acquire the property on the open market free of the rent-seeking and monopolistic behaviors eminent domain is meant to prevent); Meidinger, supra note 41, at 45-47 (explaining that where a would-be condemnor could obtain comparable properties on the open market under similar terms, use of eminent domain would not be "reasonably necessary").
(411.) See supra note 299 and accompanying text.
(412.) See Fischel, supra note 150, at 934; see also supra note 303 and accompanying text.
(413.) See Garnett, supra note 294, at 969 (noting that governments frequently attempt to purchase property on the open market before resorting to eminent domain in order to avoid the high costs of the eminent domain process, and that the government therefore usually employs eminent domain in "thin markets" in which it is easy to demonstrate the presence or risk of holdout behavior); see also Merrill, supra note 129, at 77-81 (arguing that because of the administrative costs and bureaucratic delays associated with taking through eminent domain, in thick markets governments are more likely to acquire properties through ordinary market exchange).
(414.) Fennell, supra note 149, at 993.
(415.) Id. at 993 n.118.
(416.) See Merrill, supra note 129, at 92.
(417.) Merrill does argue that the prospect of close court scrutiny might provide a potential condemnee with greater bargaining power against the government. See id. at 85. The close scrutiny he advocates, however, involves a cost-benefit analysis, which is problematic for reasons stated earlier. See supra notes 396-97 and accompanying text.
(418.) See Merrill, supra note 129, at 74.
(419.) The number of permutations existing among proposals in many states prohibits consideration of every approach that has been suggested. This Article attempts to discuss the most common approaches. Moreover, most approaches to banning public-private takings for economic development exclude from the ban public-private takings for the purpose of transferring property to common carriers or to private entities for the purpose of eliminating blight. Because this Article is concerned with addressing the problems associated with economic development takings, it does not attempt to address the efficiency and fairness implications of the blight and common carrier exceptions. Transfers to common carriers and to private entities for the purpose of eliminating blight are factually and analytically distinct from transfers of non-blighted property to private entities for the purposes of economic development, and are therefore beyond the scope of this Article.
(420.) See, e.g., H.R. No. 1835, 2005 Gen. Assemb. (Pa. 2005) (prohibiting use of eminent domain "to add to or increase the tax base of the municipality"); S.R. 611, 2006 Gen. Assemb. (Mo. 2006) (prohibiting takings for "economic development," defined as "any activity performed to increase tax revenue, tax base, employment rates, or general economic health, when the activity does not result in the transfer of property to: (1) public ownership; (2) a private entity that is a common carrier; (3) a public utility, rural electric cooperative, or municipally-owned utility").
(421.) See, e.g., H.R. 114, 2006 Leg. (Ky. 2006) (preventing "condemnation of private property for transfer to a private owner solely for the purpose of economic development that benefits the public only indirectly, such as by increasing the tax base, tax revenues, employment, or by promoting the general economic health of the community"); H.R. 2426, 2005 Gen. Assemb. (Tenn. 2005) (prohibiting use of eminent domain "solely or principally for the purpose of improving tax revenue or the tax base or for the purpose of economic development"); H.R. 2431, 2005 Gen. Assemb. (Tenn. 2005) (providing that property may not be "sold, leased or otherwise transferred to a private developer, corporation, or other nongovernmental entity solely or principally for the expansion of tax revenue, a perceived increase in the taxable value of the property, or the promotion of economic development").
(422.) See, e.g., ALA. CONST. art. I, [section] 3 ("[N]or shall private property be taken for private use, or for the use of corporations, other than municipal, without the consent of the owner."); ARIZ. CONST. art. II, [section] 17 ("Private property shall not be taken for private use."); COLO. CONST. art. H, [section] 14 ("Private property shall not be taken for private use unless by consent of the owner, except for private ways of necessity, and except for reservoirs, drains, flumes or ditches on or across the lands of others, for agricultural, mining, milling, domestic or sanitary purposes."). A proposed California bill would provide, among other things, "In the exercise of eminent domain, 'public use' does not include the taking or damaging of property for private use, including, but not limited to, the condemnation of property for economic development." H.R. 590, 2005 Gen. Assemb. (Cal. 2005).
(423.) See, e.g., S.R. 7, 2005 Leg. (Tex. 2005) (banning takings for "economic development" while also prohibiting any use of eminent domain that "confers a private benefit on a particular private party through the use of the property"; or that "is for a public use that is merely a pretext to confer a private benefit on a particular private party"); S.R. 693, 2005 Leg. (Mich. 2005) (providing that "[a] taking of private property for public use ... does not include a taking for a public use that is a pretext to confer a private benefit on a known or unknown private entity"); S.R. 1035, 2005 Leg. (Okla. 2005) ("Notwithstanding any other provision of law, no governmental entity may take private property by eminent domain and sell, lease, or otherwise transfer it to a private person, partnership, corporation, business, or other private entity with the primary purpose being the benefit of such private entity."); H.J.R. 10, 126th Gen. Assemb. (Ohio 2005) (proposed constitutional amendment) ("[P]rivate property shall not be taken for economic development purposes by an exercise of eminent domain when the sole or primary driving force behind the acquisition of the private property is a private individual or business entity that seeks the private property of another for its own economic benefit.").
(424.) See, e.g., H.R. 4091, Gen. Assemb. 2005 (Ill. 2005) (limiting exercise of eminent domain to "qualified public use," defined to include transfers to ownership by the government and to exclude transfers to private ownership or control unless for a public use, and then only if explicitly approved by the state legislature); H.R. 1835, 2005 Gen. Assemb. (Pa. 2005) (prohibiting use of eminent domain if property is to be turned over "to a nonpublic interest"); H.R. 2054, 2005 Gen. Assemb. (Pa. 2005) ("[T]he exercise of any condemnor of the power of eminent domain to take private property in order to use it for private commercial enterprise is prohibited."). H.R. 4091 (Ill. 2005), supra, provides that "'private ownership or control' shall be liberally construed to prevent the use of long-term leases, options to purchase, and other mechanisms intended to defeat the purpose of this section, which is to limit the acquisition of property by eminent domain when it is primarily for the benefit and use of private entities."
(425.) See, e.g., H.R. 4295, 116th Gen. Assemb., 2d Reg. Sess. (S.C. 2006) (defining "public purpose" or "public use" to mean "a purpose or use that results in a significant and direct benefit to the public. It does not mean a secondary benefit to the public which is merely incidental, indirect or pretextual when the primary benefit inures to a private person or entity"); H.R. 1806, 2005 Gen. Assemb., Reg. Sess. (Va. 2005) (prohibiting condemnation of property that (i) is made with the intent of making the property available for ownership or use by a private entity unless any benefits that will accrue to the private entity as a result of its ownership or use of the property are merely incidental when compared to the benefits that will accrue to the public or (ii) is otherwise predominantly for a private purpose).
(426.) See, e.g., Private Property Protection Act of 2005, H.R. 4138, 109th Cong. [section] 8(1) (2005) (defining economic development as "taking private property, without the consent of the owner, and conveying or leasing such property from one private person or entity to another private person or entity for commercial enterprise carried on for profit, or to increase tax revenue, tax base, employment, or general economic health"); ALA. CODE [section] 11-47-170(b) (2005) (preventing the use of eminent domain "for the purposes of private retail, office, commercial, industrial, or residential development; or primarily for enhancement of tax revenue; or for transfer to a person, nongovernmental entity, public-private partnership, corporation, or other business entity").
(427.) See, e.g., ARIZ. CONST. art. II, [section] 17 ("Whenever an attempt is made to take private property for a use alleged to be public, the question whether the contemplated use be really public shall be a judicial question, and determined as such without regard to any legislative assertion that the use is public."); COLO. CONST. art II, [section] 23 (identical language); OKLA. CONST. art. II, [section] 24 ("In all cases of condemnation of private property for public or private use, the determination of the character of the use shall be a judicial question.").
(428.) Many of the proposals are obviously derived, to varying degrees, from model language promulgated by the Castle Coalition. For example, the coalition proposes the following language for state constitutional amendments:</p> <pre> With just compensation paid, private property may be taken only when necessary for the possession, occupation, or enjoyment of land by the public at large, or by public agencies. Except for privately owned common carriers, private property shall not be taken for use by private commercial enterprise, for economic development, or for any other private use, except with the consent of the owner. Property shall not be taken from one owner and transferred to another, on the grounds that the public will benefit from a more profitable private use. Whenever an attempt is made to take private property for a use alleged to be public, the question whether the contemplated use be really public shall be a judicial question, and determined as such without regard to any legislative assertion that the use is public. </pre> <p>Castle Coalition, Model Language for State Constitutional Amendments, http://www. castlecoalition.org/legislation/model/state_constitution.html (last visited Feb. 8, 2006). The coalition's model legislation for prohibiting use of eminent domain for economic development contains the following definition:</p> <pre> Economic Development--The term "economic development" means any activity to increase tax revenue, tax base, employment, or general economic health, when that activity does not result in (1) the transfer of land to public ownership; (2) the transfer of land to a private entity that is a common carrier, such as a railroad or utility; or (3) the transfer of property to a private entity when eminent domain will remove a threat to public health or safety, such as the removal of public nuisances, removal of structures that are beyond repair or that are unfit for human
habitation or use, or acquisition of abandoned property; (4) the
lease of property to private entities that occupy an incidental
area within a public project. </pre> <p>Castle Coalition, Model Language for State Statutes Limiting Eminent Domain Abuse, http://www.castlecoalition.org/legislation/model/state statute.html (last visited Feb. 8, 2006). For other examples of model proposals, see Castle Coalition Legislative Center, http://www.castlecoalition.org/legislation/ (last visited Feb. 8, 2006).
(429.) See OKLA. CONST. art. II, [section] 24.
(430.) See, e.g., City of Cincinnati v. Vester, 281 U.S. 439, 446 (1930) ("It is well established that, in considering the application of the Fourteenth Amendment to cases of expropriation of private property, the question what is a public use is a judicial one.").
(431.) See Haw. Hous. Auth. v. Midkiff, 467 U.S. 229, 241 (1984).
(432.) ARIZ. CONST. art. II, [section] 17; COLO. CONST. art II, [section] 23; MISS. CONST. art. III, [section] 17.
(433.) See Kelo v. City of New London, 125 S. Ct. 2655, 2676 (2005) (O'Connor, J., dissenting) (noting that the government officials' motive "has no bearing on whether an economic development taking will or will not generate secondary benefit for the public").
(434.) See id. at 2659 (majority opinion) (noting that the plan at issue "was also designed to make the City more attractive and to create leisure and recreational opportunities on the waterfront and in the park").
(435.) See Midkiff, 467 U.S. at 245.
(436.) Calder v. Bull 3 U.S. (3 Dall.) 386, 388 (1798).
(437.) Midkiff, 467 U.S. at 245.
(438.) The term "benign" is used because such takings are unlikely to result from capture and rent seeking. As a result, governments are more likely to make correct, good-faith assessments in determining whether to take property for such projects. Moreover, these undertakings are less likely than other takings to produce substantial surpluses in the hands of transferees. Thus, the potential injustice of denying condemnees a share of this surplus is greatly lessened. Increments of subjective value may still go uncompensated, but the reciprocity of advantage justification is more persuasive where the resulting project actually produces public benefits, which is more likely to occur in the case of museums, hospitals, and recreational facilities than in the case of a speculative, profit-driven development project.
(439.) Although a sports arena might be owned by the government, it is likely to be leased to one or more privately owned sports franchises. Thus a taking for the construction of a sports arena would result in a transfer of private property to private control.
(440.) See INSTITUTE FOR JUSTICE, supra note 40, at 5.
(441.) See Somin, supra note 35, at 1027 (describing practices).
(442.) See id. (same).
(443.) Kochan, supra note 81, at 88. But see Merrill, supra note 129, at 81 (describing private sector assembly relying on "buying agents, option agreements, straw transactions, and the like," but arguing that they can not be relied upon to work in all cases).
(444.) County of Wayne v. Hathcock, 684 N.W.2d 765, 783 (Mich. 2004).
(445.) See Fennell, supra note 149, at 974 (describing strategies for working around holdouts).
CHARLES E. COHEN, Assistant Professor of Law, Capital University Law School; J.D., University of California, Hastings College of Law, 1999; B.A., Harvard University, 1987. I am grateful to Capital University Law School for its generous financial support, and to the members of the Ohio Legal Scholarship Workshop for their helpful feedback. I am also indebted to Professors William Arraiza, James Beattie, Mark Brown, Dennis Hirsch, Donald Hughes, David Levine, Susan Looper-Friedman, David Mayer, Adam Mossoff, Susan Rozelle, Shelley Ross Saxer, Mark Strasser, and Richard Wood for their invaluable suggestions and observations. Thanks, too, to my intrepid and hard-working research assistants Braden Angel, Amy Kramb Botos, Nicholas Grilli, and Kelly Ann Sabo for their first-rate contributions. I would also like to thank my parents and brother for their unwavering encouragement and support.
|Printer friendly Cite/link Email Feedback|
|Author:||Cohen, Charles E.|
|Publication:||Harvard Journal of Law & Public Policy|
|Date:||Mar 22, 2006|
|Previous Article:||Seeing government purpose through the objective observer's eyes: the evolution-intelligent design debates.|
|Next Article:||Defining the contours of the emerging fraudulent misjoinder doctrine.|