Home, Safe Home

October 2004

Home, Safe Home

By Dana Berliner

Anyone who owns a home, a small business or a piece of property became a whole lot more secure in those possessions on July 30, 2004. That was when the Michigan Supreme Court released a unanimous decision ruling unequivocally that the government may not use eminent domain to take private property because someone else’s use of the property might be more profitable. Although many observers were hoping for a good decision, the unanimous ruling in County of Wayne v. Hathcock crossed political lines and surpassed all expectations.

“In Poletown, General Motors convinced Detroit to condemn Poletown—a neighborhood of more than 1,000 homes, 600 businesses, many churches and a hospital—so that GM could build a new car manufacturing facility.”

The Court unanimously overruled the infamous Poletown decision and caused a seismic shift in the legal battle between home and business owners, on the one side, and an unholy alliance of tax-hungry bureaucrats and land-hungry developers on the other.

Decided in 1981 by the Michigan Supreme Court, Poletown was the first major decision in the United States upholding the use of eminent domain for “economic development”—increasing tax revenues, jobs and the local economy generally.

In that case, General Motors convinced Detroit to condemn Poletown—a neighborhood of more than 1,000 homes, 600 businesses, many churches and a hospital—so that GM could build a new car manufacturing facility. GM and the mayor of Detroit claimed the project would produce more than 6,000 jobs and help restore economic health to Detroit.

A divided Michigan Supreme Court agreed that bolstering Detroit’s economy was so important that Poletown could be destroyed. (As it turned out, the GM plant never came close to living up to its promises. At its height, it employed less than 60 percent of the numbers it originally claimed.)

The Poletown decision rocked the country. The U.S. Constitution and all states limit eminent domain to condemnations for “public use.” Until 1981, that included condemnations for roads and public utilities, and to eliminate slums or severely blighted neighborhoods. But Poletown allowed cities to condemn property in order to give it to a private business to increase its private profits, on the assumption that the private success of that business would bring economic benefits to the area. The decision could be used to justify the condemnation of any property at all. Whose home wouldn’t produce more taxes and jobs as an industrial plant or large retail establishment?

Poletown was cited by other state courts in upholding eminent domain for private businesses. It is cited in every property textbook in law school as one of the three most important and influential eminent domain decisions in the nation’s history. For 23 years, it has been the foundation of the most oppressive eminent domain practices sweeping the nation. And on July 30, 2004, the Michigan Supreme Court admitted that it had been a terrible mistake, a “radical departure” from the protections written into the Constitution to protect individuals from abuses of power and the taking of their properties for other private parties.

The Michigan Supreme Court finally recognized what should have been obvious from the start: `every business produces taxes and jobs and contributes to the health of the economy, but that does not and cannot mean that all private businesses are now “public uses” for which other individuals’ property may be condemned.

Continuing our nationwide effort to end eminent domain abuse, the Institute for Justice filed a friend of the court brief in the case. Written by Ilya Somin (former IJ law clerk and now George Mason law professor) and me, on behalf of IJ and the Mackinac Center for Public Policy, IJ’s brief emphasized to the Court the significant difference between a public use and a public purpose or public benefit. The U.S. Constitution and the Michigan Constitution allow property to be taken only for public use, which should mean that the public will in fact have a right to use the property. Government can spend money for any so-called public purpose, and as we all know, government spends money on practically anything these days. So limiting eminent domain to supposed “public benefit” places no more restriction on eminent domain than on any other government activity. That’s obviously not what the Constitution intends. Getting courts to recognize that the requirement of “public use” imposes a special restriction on condemnations is one of IJ’s major goals in the field of eminent domain. And in the Hathcock case, the Michigan Supreme Court did indeed stress that the Constitution limits eminent domain more than it limits ordinary government spending.

Poletown produced terrible incentives, and IJ’s brief documented the aftermath. After Poletown, lower courts in Michigan occasionally prevented the condemnation of small areas of property for a single private business. But when developers made wildly inflated claims to cities about all the benefits their projects would produce if only they could acquire some prime real estate, courts would uphold the condemnations because of the size of the potential benefit. In Michigan and elsewhere, the result was a feeding frenzy.

Indeed, one of the Justices of the Michigan Supreme Court wrote a separate opinion explaining her reasoning and gave examples of the type of abuse that Michigan must avoid. The two examples were two IJ cases—Lakewood, Ohio, and Mesa, Ariz.—and the Justice cited the 60 Minutes segment covering these cases as well as an article I co-authored with Scott Bullock. Public perception of eminent domain abuse really is changing!

And so are the courts. The unanimous decision from the Michigan Supreme Court overturning Poletown signals a dramatic change in the law. It also reflects a growing recognition among people of all political persuasions that local governments and developers are abusing the power of eminent domain. Eminent domain is not a political issue—it’s an issue of basic constitutional rights.

In the wake of the Michigan decision, textbooks will be rewritten, cities will be forced to reconsider their plans to seize homes and businesses, and developers may have to go back to buying property just like everyone else. With this decision, the nation took a giant step forward in protecting people’s rights to keep the homes and businesses they love.

Dana Berliner is an IJ senior attorney.