Landmark Eminent Domain Abuse Decision

Washington, D.C.—In a case with nationwide implications to halt the abuse of eminent domain, the Michigan Supreme Court last night reversed its infamous Poletown decision, which had allowed the condemnation of private property for so-called “economic development.” In a unanimous decision in County of Wayne v. Hathcock, issued at 9:30 p.m. on Friday, July 30, the Court decisively rejected the notion that “a private entity’s pursuit of profit was a ‘public use’ for constitutional takings purposes simply because one entity’s profit maximization contributed to the health of the general economy.”

In the 1981 Poletown decision, the Michigan Supreme Court allowed the City of Detroit to bulldoze an entire neighborhood, complete with more than 1,000 residences, 600 businesses, and numerous churches, in order to give the property to General Motors for an auto plant. That case set the precedent, both in Michigan and across the country, for widespread abuse of the power of eminent domain. It sent the signal that courts would not interfere, no matter how private the purpose of the taking.

But in Hathcock, the Court called Poletown a “radical departure from fundamental constitutional principles.” “We overrule Poletown,” the Court wrote, “in order to vindicate our constitution, protect the people’s property rights and preserve the legitimacy of the judicial branch as the expositor, not creator, of fundamental law.”

According to Dana Berliner, an attorney with the Institute for Justice, which filed a brief in the Hathcock case, the case has profound nationwide implications. “Poletown was the first major case allowing condemnation of areas in the name of jobs and taxes. It is cited in every property textbook in the country. The Court literally rewrote the book with this decision,” said Berliner. The use of eminent domain for private development has become increasingly common throughout the United States. According to Public Power, Private Gain, authored by Berliner, there were 10,000 properties either taken or threatened with eminent domain for private parties in the U.S. between 1998 and 2002. And state supreme courts from Nevada to Connecticut have relied on the Poletown decision when upholding the condemnation of land for private parties.

“The Court made an exception in Poletown because of the supposedly enormous benefits of the GM plant,” said Berliner. “Instead, the exception swallowed the rule.”

The application of Poletown in Michigan produced disastrous results. Michigan courts tended to forbid small condemnations for private parties, but when the city and developer claimed the project would have a significant economic impact, lower courts upheld the takings.

“Poletown gave cities and developers an incentive to make outrageous, wildly inflated predictions of the impact of the project,” explained Scott Bullock, senior attorney at the Institute for Justice. “It was the worst possible incentive. The Poletown project itself also didn’t come close to living up to the promises. In all likelihood, it destroyed more jobs than it created.”

The Michigan Supreme Court also decided another important eminent domain case, although one that has received less attention. In Detroit Wayne County Stadium Authority v. Alibri, the Stadium Authority told Frida Alibri it would condemn her property if she didn’t sell “voluntarily.” It promised, among other things, that it would not be given to a private party. After the sale, it was indeed transferred to a private corporation. At that point, Alibri sought to get her property back, because the Stadium Authority didn’t have the power to condemn for that purpose, and it had told her that the purpose was not transfer to a private party. The trial court agreed with Alibri; the appellate court, however, agreed with the Stadium Authority. The Michigan Supreme Court returned the property to its rightful owner—Mrs. Alibri.

“Most people end up selling under threat of eminent domain, rather than spend years in court fighting it, so these two decisions truly prevent the government from taking property for private parties,” according to Berliner. “The government can’t convince people to sell by telling them their property will be used for a public use, then turn around and transfer it to a private party.”

“The Poletown decision gave cities the green light to take property for private parties,” said Chip Mellor, president and general counsel of the Institute for Justice. “It was a terrible mistake. Now, the Michigan Supreme Court has restored the rights of all Michiganders to keep their homes and businesses, even if another, politically connected private business wants them. This is a great day for property rights nationwide.”

The Institute for Justice and the Mackinac Center for Public Policy filed a friend of the court brief in the Hathcock case, co-authored by George Mason Law School professor Ilya Somin and IJ Senior Attorney Dana Berliner, discussing the disastrous effects of the Poletown decision in Michigan and the country, as well as the failure of the Poletown project to live up to its promises. The Institute for Justice also filed a friend of the court brief in the Alibri case. John Ceci, of Howell, Michigan, assisted the Institute for Justice as local counsel in both cases.