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subjected themselves to a legal regime that provides protection for property, so even here we see that the rule of law strategy has room to work.
• Explicit Takings
The government, or entities exercising power delegated by the government, often engages in compulsory acquisitions of property, generally known in the United States as the power of condemnation or eminent domain. The most common uses of the power are for public infrastructure projects such as roads, sewers, power lines, and airport expansions. The power can also be used to acquire sites for government facilities such as courthouses, schools, or prisons. More controversially, the power has been used to reconfigure aging urban centers. Starting in the 1950s, eminent domain was used for massive urban renewal projects that bulldozed entire neighborhoods for redevelopment projects, a policy now widely discredited as destroying community ties and targeting minority groups. Most controversially, the power has sometimes been used to acquire sites for private business firms, as in the Poletown case,31 which approved condemnation of a tract of land in Detroit for a General Motors assembly plant.
The U.S. Constitution and parallel provisions of state constitutions directly address explicit takings of property by the government. The Fifth Amendment provides: “nor shall private property be taken for public use without just compensation.” This has been construed as imposing two limits on explicit takings. First, any such taking must be for a “public use.” Second, such a taking requires the payment of “just compensation.” Both of these requirements limit government interference with property rights, and hence promote forbearance.
31.Poletown Neighborhood Council v. City of Detroit, 304 N.W.2d 455 (Mich. 1981), overruled by County of Wayne v. Hathcock, 684 N.W.2d 765 (Mich. 2004).
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Public Use
The public use limitation promotes the security of property rights by limiting the use of compulsory acquisitions to circumstances of public need. The government cannot force an exchange of property from A to B merely because B has more friends in the government, or because government officials harbor a dislike for A. The public use requirement also presumably means the government cannot set itself up as an all-purpose property acquisition service, forcing the transfer of property to any person willing to put up the money for the taking. By limiting the scope of compulsory acquisitions, the public use requirement promotes the stability of ownership, and allows people to make long-range plans for the development and use of their property.
Notwithstanding this important function, the U.S. Supreme Court has always given the public use requirement a weak interpretation. Although some state courts have flirted with the idea that public use means public ownership or a public right of access, the Supreme Court never explicitly adopted such a narrow definition, and beginning in the twentieth century, it has been increasingly explicit in its view that “public use” means public interest. Thus, government can take property as long as it can cite some publicregarding rationale for the taking, whether or not the property ends up in the hands of the government and whether or not the public can actually use it. Moreover, the Court has given great deference to legislative and administrative determinations of when property should be taken, suggesting that these decisions should be subject to only the requirement of minimum rationality as to the ends of the taking and whether the taking is an appropriate means to those ends.32
32.Hawaii Hous. Auth. v. Midkiff, 467 U.S. 229 (1984); Berman v. Parker, 348 U.S. 26 (1954).
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The Court’s highly deferential approach to public use was tested by Kelo v. New London,33 a decision that sparked intense controversy about the use of eminent domain. At issue in Kelo was a project designed to revitalize the economy of New London, Connecticut, an economically depressed port city. Pfizer, the drug company, had purchased an abandoned factory on the waterfront, and was using the site to build a new research facility. The New London authorities decided to acquire a large tract of land next to the Pfizer facility. The plan was to level virtually all the buildings in the area, and retransfer the land to a private developer for a mixeduse project. The project would include some traditional public uses, such as a marina, a walkway, and a Coast Guard Museum. But most of it would be used for a hotel, commercial office buildings, and 80 new residences, which would be built and marketed by the developer.
Most property owners in the redevelopment area reached negotiated agreements to sell to the New London authorities. But ten owners of fifteen properties, many of which were owner-occupied residences, refused to sell, and the city instituted eminent domain proceedings against these owners. The dissident property owners argued in the state courts that the taking was not for a public use as required by the United States and Connecticut Constitutions, because the primary beneficiary would be an as-yet-to-be- determined real estate developer, and because there was uncertainty about whether the project would ever achieve its stated goal of revitalizing the New London economy. The city prevailed in the state supreme court, over a dissent.
The U.S. Supreme Court also held that the project was for a public use, although by a surprisingly close vote of five to four. Justice Stevens’s opinion for the majority reaffirmed that the Takings Clause prohibits takings for a purely private purpose. The majority held there is no categorical constitutional rule against using
33. 545 U.S. 469 (2005).
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eminent domain to promote economic development, even if the properties taken have not been found to be blighted.34 Following prior decisions, the Court said that economic development is a legitimate government purpose, and that the decision whether to use eminent domain to achieve any legitimate government objective is largely left to the people’s elected representatives. Justice Stevens concluded that the record showed the project was a bona fide effort to promote local economic development, and was not merely a pretext for private gain.35
The notion of pretext figured centrally in Justice Kennedy’s concurrence.36 According to Justice Kennedy, courts should strike down takings that are primarily meant to benefit a private party and have only incidental public benefits. He did not favor a remand, because he read the record in Kelo to include sufficient evidence for the conclusion that the exercise of eminent domain in New London was not pretextual. What exactly this potentially more robust standard of review would mean in practice is unclear, but courts may need to figure it out, because not unusually, Justice Kennedy supplied the crucial fifth vote for the result in Kelo.
Justice O’Connor, writing for four dissenting justices, viewed the decision with alarm. If economic development, without more, is a sufficient rationale for eminent domain takings, she wrote, then all properties are at risk of condemnation. All that is needed is a plausible argument that someone other than the current owner will put the property to a more valuable use.37 She suggested limiting the use of eminent domain for economic development to circumstances where the precondemnation use of the property is
34.Kelo, 545 U.S. at 484.
35.Id. at 478.
36.Id. at 490 (Kennedy, J., concurring).
37.Id. at 503 (O’Connor, J., dissenting).
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imposing affirmative harm on society, as where the property has been found to be blighted.38
In a separate dissent, Justice Thomas objected to the decision on two grounds.39 He argued that a natural reading of the Takings Clause at the time it was adopted (1791) would have required that the property either be retained in government ownership or used by the public. Adverting to more recent history, Justice Thomas also pointed out that eminent domain has often been used against vulnerable groups such as African Americans, the poor, and the elderly, especially in the urban renewal era of the 1950s.
The lessons of early history alluded to by Justice Thomas are potentially instructive but in the final analysis ambiguous. The records of the Constitutional Convention and the ratification debates in the states provide very little guidance. The prohibitory word “without” appears before “just compensation,” not before “public use.” The words “public use” themselves may have been a paraphrase for “eminent domain,” as if the Clause read, “nor shall private property be taken by eminent domain without just compensation.” Would that mean that a government-sponsored private seizure (a taking from A to give to B) would not even require compensation? It has been almost universally assumed that taking from A merely to give to B is not permitted. Or would uncompensated A-to-B takings be prohibited by some other clause, such as the Due Process Clause? Even if the public use language meant only that takings by eminent domain require compensation, this still requires that we identify what it means to take by eminent domain (as opposed to take for some other purpose, such as to satisfy a tax liability). And eminent domain has always included some notion of publicness, so perhaps we circle back to the need to identify some public purpose, even if the Takings Clause is not read as directly prohibiting takings for private use.
38.Id. at 500.
39.Id. at 505 (Thomas, J., dissenting).
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Early eminent domain practice is likewise ambiguous. Compensation was often not given for land taken for roads, but in early American history being close to a road was considered a benefit and undoubtedly increased the value of the land retained. Mill acts were also enacted that allowed private owners to build dams that flooded upstream lands, upon paying just compensation to the upstream owner. Grist mills were open to the public, and therefore satisfied the public access test. But other mills were private factories, and state laws granting them what amounted to a private right of eminent domain were also sustained, at least sometimes.40 Some mill acts required the prospective mill builder to apply to an official and justify the taking, but others did not. Much of the litigation over mills also occurred in the nineteenth century and therefore sheds only indirect light on original understandings of the Takings Clause.
The analytical problem in determining the limits of eminent domain has always been that there are innumerable situations in which a forced exchange of rights can be useful in overcoming transaction-cost problems. Any project that requires the assembly of multiple contiguous parcels of land (think of a highway or an urban renewal project) will run into problems with holdouts, where some owners either behave strategically to exact a high price, or have an intense subjective attachment to their land, or just resent being forced to move. Even if only two parties are involved, as in the landlocked parcel problem mentioned in Chapter 8, this will be a bilateral monopoly and bargaining may break down. Moreover, any use of eminent domain to overcome transaction-cost problems has at least some public-interest justification—the assembly of land or the new access to land obtained through forced exchange presumably makes the community at least a little bit better off, and the additional wealth can be seen as a public good that redounds in some small degree to the benefit of everyone in the community,
40. See, e.g., Head v. Amoskeag Mfg. Co., 113 U.S. 9 (1885).
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if only in the form of more jobs and more tax revenues. So, practically any exercise in eminent domain can be described as satisfying a public-interest standard.
Yet few would advocate a universal right of eminent domain. This would undermine incentives to invest and would interfere with the market’s ability to establish prices. The courts, however, have been singularly unsuccessful in drawing a line in the sand between permissible and impermissible uses of eminent domain. The U.S. Supreme Court, by holding public use to mean public interest, has effectively left the matter to the state courts and local political processes.
Given the Supreme Court’s interpretation of public use as public interest and the reaffirmation of that interpretation in Kelo, one might think that the public use requirement would do little to promote forbearance. But this would be misleading, for two reasons.
First, although the Supreme Court has been very deferential about enforcing the public use requirement in the federal Constitution, state courts, where most condemnation cases are tried, have been more willing to hold that exercises of eminent domain do not satisfy the public use requirement in state constitutions. If we look only at reported appellate decisions, about one in six state appeals court decisions addressing a contested public use holds that the taking is not permitted.41 These decisions suggest that state courts are not just rubber stamps approving any and all exercises in eminent domain. Cases in which property owners attach a high subjective value to property, or where eminent domain is being used to capture an assembly value for a private developer, appear to be particularly vulnerable to invalidation.
Second, the Kelo decision provoked a large backlash about the misuse of eminent domain. The result is that many states have amended their constitutions or statutes to tighten limits on the use
41.Thomas W. Merrill, The Economics of Public Use, 72 Cornell L. Rev. 61 (1986).