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Backgrounder

Legal History Behind Eminent Domain

Eminent domain is the power of government to take away a person’s home or business. It has rightly been called a “despotic” power of government. Because of the vast potential for abuse of such a serious and drastic power, the 5th Amendment to the U.S. Constitution clearly states that private property shall not be “taken for public use, without just compensation.” This constitutional provision imposes two important limits on the taking of private property: The use must be public, and just compensation must be paid. If private property could be taken for any use at all, the term “public” would not have been included.

Originally, “public use” was understood by just about everyone—courts, governments and the general public—to have its ordinary meaning. Eminent domain was used only for projects that would be owned by or open to the public, such as roads, public buildings, and, eventually, so-called common carriers, like railroads and public utilities. Courts further explained that the government was limited to taking only that property “necessary” for the public use. It could not simply grab additional land to increase its holdings.

But in 1954, the U.S. Supreme Court drastically expanded the power of eminent domain. In Berman v. Parker, the Court upheld the constitutionality of “urban renewal”—misguided efforts by the federal government and local officials to revitalize urban areas to supposedly remove slums and eliminate blight. The case originated in Southwest Washington, D.C., in a poor area populated largely by minorities. The U.S. Congress granted the District government the ability to acquire tracts of land through eminent domain for the purpose of redevelopment, including the resale of the land to private developers. A department store owner objected to his land being taken and given to another private party.

In this decision, the Court transformed the words “public use” to mean “public purpose” as defined by a legislature or administrative agency. Many state courts followed the Supreme Court’s lead and started to uphold virtually any use of eminent domain, even for private parties. What was once a an exception to the Constitution’s public use requirement born in a time of concern about urban decline became a means for governments to take property from one private owner to transfer to another private party for his or her financial gain.

The Supreme Court continued down the slippery slope with its 1984 decision of Hawaii Housing Authority v. Midkiff. The Court evaluated an eminent domain program designed to end Hawaii’s “oligopoly” land ownership system, which originated from the days before it was a state. Lessors were allowed to seek condemnation of their land and then buy the property back from the government. Holding that the condemnations were rationally related to the state’s legitimate goal of breaking the land oligopoly, the Court approved the condemnations as constitutional and reiterated Berman’s deference to the legislature’s determination of public use.

For over half a century, unrestrained local and state governments ran roughshod over the Constitution and took private property for private businesses in the name of “urban renewal” or “economic development.” Private homes and businesses were bulldozed, and entire neighborhoods uprooted, all to benefit politically powerful individuals and corporations.

Institute for Justice Scores Early Wins Against Eminent Domain Abuse

The Institute for Justice began its fight against eminent domain abuse by standing up to Donald Trump and a state agency and successfully defending Vera Coking, an elderly widow from Atlantic City, N.J. A New Jersey government agency sought to take Vera’s property and transfer it (at a bargain-basement price) to Trump, who wanted to build a limousine parking lot for his customers—hardly a public use. Vera’s case drew outrage from across the country. Ultimately, a New Jersey court stopped the state from taking her property in 1998.

Two years later, IJ pledged to defend 60 buildings and more than 120 small businesses in downtown Pittsburgh. Mayor Tom Murphy planned to take the properties through eminent domain, so he could hand the land over to a Chicago developer to construct a private mall.

Along with its announcement to defend the property owners in court, IJ launched an ambitious public affairs campaign. In June 2000, IJ took its public interest tactics to new heights—literally—posting 10 billboards (each measuring 12 feet high by 25 feet wide) calling the public’s attention to Pittsburgh’s plan to abuse eminent domain. Six different messages appeared in the ads, including one that was located only blocks away from Mayor Murphy’s office. That billboard read, “Murphy’s Law: Take from Pittsburgh Families. Give to a Chicago Developer.”

As a result of this campaign and the threat of litigation by IJ, Mayor Murphy was forced to once and for all take off the table eminent domain as a threat against property owners in the Fifth and Forbes neighborhood.

Building on these successes, the Institute for Justice filed lawsuits against eminent domain abuse in Arizona, Mississippi and Ohio. In Mississippi, IJ joined forces with the Southern Christian Leadership Conference and stopped the state from unjustly taking land and homes of the Archie family. Lonzo Archie and his family had made their home on 24 acres of land in Madison County, Miss., for decades. But the state had other plans. Mississippi not only granted the Nissan Motor Company more than $290 million in subsidies and tax breaks and approximately 1,300 acres of land to build a new auto plant in Canton, Miss., but it also exercised eminent domain to forcibly take the Archies’ land property and transfer it to Nissan.

In September 2001, the Supreme Court of Mississippi granted IJ’s motion to halt the condemnation proceedings against the Archies, ensuring that nothing was going to happen to their homes or land until the Court determined the constitutionality of the takings. This decision stopped the state dead in its tracks and frustrated Nissan’s construction plans. The following April, Mississippi announced that Nissan would redesign its facility, allowing the Archie family to hold onto their land and homes. Mississippi dropped its eminent domain lawsuits accordingly.

The Institute for Justice scored another win against abusive condemnations when it defended Randy Bailey’s brake shop in Mesa, Ariz. Mesa planned to take the brake shop, which had been owned by Randy’s family since the 1970s, raze it and sell the land to an already-existing local hardware store for that store’s relocation to a more desirable location. To make the deal even sweeter for the developer of that store’s relocation, Mesa would have picked up the tab for construction permit fees, title insurance fees, and most impact fees and costs that would normally be incurred by the buyer. But in 2003, the Arizona Court of Appeals unanimously struck down this use of eminent domain as unconstitutional.

In Lakewood, Ohio, the Institute for Justice successfully defended 17 homeowners and entrepreneurs from a ridiculous “blight” label, saving the properties of longtime homeowners like Jim and JoAnn Saleet. The Saleets have lived in their dream home on Gridley Street, overlooking the Rocky River, since 1965. After nearly 40 years happily ensconced in their home, the Saleets were stunned when Lakewood Mayor Madeline Cain announced that, to increase the city’s tax base, Lakewood was helping a developer replace their home and neighborhood with high-end shopping and upscale condos.

Lakewood declared homes and small businesses in this vibrant and well-kept neighborhood “blighted” in order to have an excuse to give the land to private developers. Because the area is attractive and looks much like other nice parts of Lakewood, the city had to use a broad definition of “blight.” According to that broad definition, characteristics of “blight” for a home included not having a two-car garage, having less than two full bathrooms and having less than three full bedrooms. If that definition were applied to all of Lakewood, about 93 percent of homes in Lakewood would have characteristics of “blight.”

Along with Randy Bailey, the Saleets became folk heroes for individual rights and were profiled by 60 Minutes for a wide-ranging segment on the nationwide abuse of eminent domain. Ultimately, voters in Lakewood agreed to repeal the blight designation by a margin of almost two to one, ending this nightmare for the Saleets and other owners.

Kelo v. City of New London

A little pink house became the center for one of the most controversial decisions in the entire history of the U.S. Supreme Court. When Susette Kelo purchased her pink, two-bedroom house in 1997 along the Thames River—a beautiful stretch of waterfront property in New London, Conn.—she thought she had her work cut out for her just restoring the house and designing the garden. That turned out to be the least of her worries.

Unbeknownst to Susette, the city, the New London Development Corporation (a private development corporation) and Pfizer Corporation had reached an agreement. Pfizer would build a new facility nearby. The NLDC would take all of the land in Susette’s neighborhood and transfer it to a private developer. The private developer would in turn build an expensive hotel for Pfizer visitors, expensive condos for Pfizer employees, an office building for biotech companies, and other projects to supposedly complement the Pfizer facility. The state and the city would contribute millions of dollars. The only people standing in the way were Susette and her neighbors.

The Institute for Justice litigated to defend Susette and her neighbors. The fight over Fort Trumbull, Susette’s neighborhood, eventually reached the U.S. Supreme Court. In 2005, in a bitterly contested 5-4 ruling, the Court held that economic development was a “public use” under the Fifth Amendment to the U.S. Constitution.

“The specter of condemnation hangs over all property. Nothing is to prevent the State from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory. —Justice Sandra Day O’Connor

After the decision, the remaining residents who had fought to save their homes, including Susette, were forced out. The Fort Trumbull site was completely razed. And it has remained empty ever since—brown, barren fields no longer home to people but rather to feral cats and migratory birds.

In 2009, Pfizer announced that it would close its research and development headquarters and leave New London. The disastrous Fort Trumbull project is now Exhibit A in demonstrating the folly of government plans that involve corporate welfare and that abuse eminent domain for private development. Hopefully, city officials, planners and developers across the country will take the Fort Trumbull experience to heart and pursue revitalization efforts only through voluntary—not coercive—means.

Even though the Fort Trumbull neighborhood was lost, Susette Kelo’s little pink house—where this fight all began—still stands in downtown New London about one mile away from Fort Trumbull. Susette’s home was disassembled and moved piece by piece to its new location. It is once again a home for its new owner, local preservationist Avner Gregory. The beauty of the restored home obviously reflects the love Avner has for the house and its historic importance. Like Betsy Ross’ house in Philadelphia and Paul Revere’s home in Boston, Susette Kelo’s pink cottage stands as a monument to her and her neighbors’ struggle, one that has changed this nation for the better.

Backlash

Unfortunately, just as Justice O’Connor had predicted, the Supreme Court’s judicial abdication ushered in a new wave of eminent domain abuse nationwide. As the Institute for Justice revealed in its report Opening the Floodgates: Eminent Domain Abuse in the Post-Kelo World, in the year after the Kelo decision, local governments pressed forward “with more than 117 projects involving the use of eminent domain for private development. Since the decision was handed down, local governments threatened eminent domain or condemned at least 5,783 homes, businesses, churches, and other properties so that they could be transferred to another private party.” By comparison, “that is more than half of the 10,282 properties threatened or taken by eminent domain for the benefit of private parties in the five years between 1998 and 2002.” One condemnation even began within hours after the Kelo ruling came down.

Though IJ lost that battle, it was determined not to lose the war. Less than one week after the Kelo decision was handed down, the Institute for Justice launched a national campaign called “Hands Off My Home.” IJ was determined to focus the outrage over Kelo and turn it into meaningful reform. In the years since the Kelo decision, there has been an unprecedented backlash against this ruling in terms of public opinion, citizen activism, legislative changes, state court decisions and lessons learned from the case.

A historic coalition that cut across the philosophical spectrum united and called to reform the nation’s eminent domain laws. Along with the Institute for Justice, the National Association for the Advancement of Colored People, League of United Latin American Citizens, Farm Bureau, National Federation of Independent Business, Mexican American Legal Defense and Educational Fund, National Council of Churches and other non-traditionally aligned groups have joined in the legal and legislative fight against eminent domain abuse.

As a result, 44 states tightened their eminent domain laws, and 12 states amended their constitutions to ban eminent domain for private gain and to provide for more protections for property owners. Additionally, the Institute for Justice published the Eminent Domain Abuse Survival Guide to empower grassroots activists and trained well over 2,000 community leaders to fight land grabs in their neighborhoods. Thanks to IJ’s litigation and activism efforts, we have saved more than 16,000 properties from the abuse of eminent domain.

After Kelo, State Courts Protect Property Owners

While Kelo remains on the books for federal law, the decision did leave room for state courts to tighten eminent domain usage under state constitutions. In nine states, courts have either rejected Kelo or strengthened protections for property owners. One year after Kelo, in case litigated by the Institute for Justice, the Supreme Court of Ohio unanimously held that taking the home of Carl and Joy Gamble, and the properties of IJ’s other clients, was unconstitutional. Norwood v. Horney was the first case on the issue of eminent domain’s use for private development to be argued before and decided by a state supreme court in the wake of Kelo, and it was a resounding repudiation of the U.S. Supreme Court.

This case began when developer Jeffrey Anderson decided he wanted to expand his $500 million real estate empire by building a complex of chain stores, condominiums and office space on top of the well-kept neighborhood where Carl and Joy Gamble and other IJ clients lived.

After choosing to bulldoze the Gambles’ neighborhood for his private gain, Anderson initiated and paid for a “study” the Norwood government used to declare the well-kept neighborhood “deteriorating,” so it could use eminent domain under Ohio law. Under the Ohio Constitution and urban renewal laws, eminent domain can only be used to eliminate actual conditions of slum and blight.

But in 2006, the Ohio Supreme Court rejected the Kelo decision and ruled that local governments could not take property from one person and transfer it to another person under the rationale that the new owner might produce more taxes or more jobs than the current one. The Court also declared that state courts must apply “heightened scrutiny” to uses of eminent domain, especially when the property is being taken for use by another private party. According to the Court, lower Ohio courts should not simply rubber-stamp decisions by local government to take property.

Court decisions by an engaged judiciary are vital to protect property rights when the legislature has failed to act. New Jersey is just one of six states that failed to reform its eminent domain laws after Kelo. In Long Branch, the Institute for Justice represented homeowners in the charming neighborhood of Marine Terrace, Ocean Terrace and Seaview Avenue (MTOTSA) from an egregious attempt to abuse eminent domain.

MTOTSA is a collection of architecturally unique cottages and bungalows, some dating to the World War II era. Many of the homes have been in the same families for generations. Today, as throughout its colorful history, the neighborhood is a melting pot, home to both young children and retirees in their 90s. But Long Branch attempted to forcibly take these homes and hand the land over to private developers who planned to make tens of millions of dollars building upscale condos for the wealthy.

After IJ took on the case, in 2008, a New Jersey appellate court found that the city did not provide “substantial evidence” to support its findings of blight. Long Branch later dismissed the eminent domain actions filed against the MTOTSA homeowners, while an order barred the city from taking the homes in the future under the current or any subsequent redevelopment plan.

Looking Ahead

IJ continues to litigate against the abuse of eminent domain. Most recently, IJ is representing Charlie Birnbaum in Atlantic City, N.J. Charlie’s story is a classic American story. His parents—both immigrants and survivors of the Holocaust—left him many things: a love of this country, a deep passion for music and a home right near the boardwalk in Atlantic City. That home—his parents’ foothold in their adopted country—has been a source of love, tragedy and renewal to the Birnbaum family for the past 50 years. Charlie now keeps an apartment and piano studio on the ground floor; the top two floors are given over to longtime tenants who pay below-market rents; and the whole building is devoted to the memory of Charlie’s parents.

Unfortunately, a state agency, the Casino Reinvestment Development Authority (CRDA), is trying to change all that. New Jersey’s CRDA is trying to use eminent domain to seize Charlie’s property as part of a “mixed-use development” project to complement the bankrupt Revel Casino. The trouble is that CRDA has no concrete plans to do anything in particular with Charlie’s property—other than get rid of it. CRDA does not actually need Charlie’s property to develop the surrounding neighborhood. Instead, CRDA is just trying to take Charlie’s home because it thinks it can.

Even though it does not have any concrete plans for Charlie’s property, CRDA attempts to justify its land grab by pointing to the supposed need to redevelop the neighborhood. But pure economic development is not a public use, and CRDA does not need Charlie’s property to redevelop the area surrounding the Revel casino. Indeed, many of the lots in the neighborhood are empty and are for sale and CRDA is free to purchase them. Charlie’s property, a sturdy and well-maintained brick townhouse located at the very edge of the proposed redevelopment area, is simply not necessary to develop the neighborhood.

As with every IJ case, IJ litigates not only in the court of law but in the court of public opinion. Charlie’s story has garnered voluminous media attention, including coverage by The New York Times, New York Post and Wall Street Journal. More than 100,000 people have signed a petition demanding Gov. Chris Christie spare Charlie’s long-time family home.

The fight against abusive condemnations is also succeeding through IJ’s talented team of grassroots activists. In 2014, IJ’s Activism team defeated land grabs in Philadelphia and Indiana.

Philadelphia artist James Dupree turned a broken-down warehouse and garage into a unique art space where he works and has hosted art classes. James has plans to start a mentorship program so that inner-city kids—like he once was—can learn to appreciate art and maybe even become artists one day.

But James’ plans were halted. In November 2012, the Philadelphia Redevelopment Authority (PRA) used eminent domain to take 17 properties from their owners in order to build a new supermarket and parking lot in west Philadelphia. Included in that seizure was James’ 8,600 square-foot studio. His studio houses over 5,000 pieces of art and has been a classroom for many local artists in the community. His paintings are housed at the Philadelphia Museum of Art and numerous pieces of his are displayed throughout the city.

Thanks to the Institute for Justice and the community support IJ generated, IJ defeated this abuse of eminent domain. In December 2014, the PRA dropped its condemnation proceedings to acquire Dupree Studios. After years of fighting the system, James gets to keep his studio that houses more than 40 years of his life’s work.

For almost a year, homeowners in Charlestown, Ind. lived in fear that their homes would be lost. Although Indiana law bans eminent domain for private development, Charlestown’s mayor was determined to bulldoze all 354 homes in the Pleasant Ridge neighborhood, forcing hundreds of veterans, retirees and long-time residents out into the cold. The mayor wanted to replace the homes with new development and even applied for state funding to do it. IJ worked with the community to mobilize opposition to the plan, helping residents collect signatures and hosting community events to encourage homeowners to stand up for their rights and draw media attention to their plight. Good news came days before Christmas when the city council rejected the mayor’s illegal plan. This meant residents celebrated the holidays of 2014 without fear of the government knocking on their door.

Through strategic litigation, communications, research and activism, the Institute for Justice is determined to defend Americans’ property rights and thwart eminent domain for private gain.

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