A Michigan Supreme Court Decision Supports Private Landowners' Rights:
Its Reasoning and Possible Nationwide Ramifications

On July 30, in the case of County of Wayne v. Hathcock, the Michigan Supreme Court handed down a decision that is an important victory for the rights of private landowners.

The decision addressed the government's power of eminent domain - that is, its power to take private land for public use, as long as it provides compensation to the private landowner. At issue was exactly what counts as a "public use" under the Takings Clause of the Michigan Constitution.

The Court rightly held that the use the government intended to make of the land - turning it over to private businesses - was not a public use. While that judgment may sound innocuous, it is actually striking.

At least since the 1980s, many states have tended to interpret the government's eminent domain power extremely broadly. But they have been wrong to do so: "Public use" means public use - not private use. When courts hold to the contrary, they give the government license to infringe the rights of private landowners willy-nilly.

The Facts of the Case, and the Meaning of the "Public Use" Requirement

The case arose because the County of Wayne sought to condemn property near an airport. It claimed the taking was for public use, but it was public in only the most tenuous sense. The County had no plans to turn the land to permanent public service, but rather planned to give the land to private developers, who, in turn, planned to construct a business and technology park. In essence, the government was acting as a broker for business.

So where was the public use? The County claimed that the project would help the public by reinvigorating the economy, increasing tax receipts, and generating jobs. But of course, virtually any development would do that. That is the role of private industry, is it not? So if the County's argument were to be accepted, the "public use" limitation would be no limitation at all, and government could use its eminent domain power to arbitrarily choose between private property owners.

Fortunately, however, the court disagreed with the County. It said that to count as a taking with a "public use," a taking of land must fall into one of three categories:

First, it could be a taking meant to solve the collective action problems introduced by necessary public projects such as highway or oil pipeline construction. Rather than buy out a number of parcel holders - who might ask exorbitant prices, or simply hold out and refuse to sell - the government can take the land necessary for the highway or pipeline, and pay fair (but not exorbitant) compensation.

Second, it could be a taking of property that would then be transferred to private entities with continuing government oversight and public benefit. A taking of property that would become the campus for a government-affiliated (but not government) hospital might be a good example.

Third, it could be a taking where there are "facts of independent public significance" beyond the private recipients' interest. A taking of property in a severely blighted neighborhood for the purpose of building affordable housing could fall into this category.

Since the County's taking of the land for private businesses' private use fit none of these categories, the court held it was not authorized by the Michigan Constitution. Thus, if they wanted the land, the businesses would have to approach the private landowners themselves and pay market price just like any other buyer.

This Case of a Dubious "Public Use" Is Just One of Many

The facts of the Hathcock case have been repeated in cities across the country. Indeed, the case is but one example of a noxious but an all-too-common phenomenon.

Here's how the phenomenon works: A local government entity forces reluctant private property owners, usually at a price significantly below the open market, and then to relocate. And it does so not because the public will benefit from the new use of the property, but rather because it seeks to benefit private developers. Why? Because the developers have lobbied the government in the hopes of securing this special privilege, rather than having to take their chances like any other potential land buyer.

Consider one New York City situation. The New York Times is interested in developing an office tower on land previously owned by thriving though small private businesses near Times Square. The developers behind the project have managed to get the land they want condemned - thus neatly avoiding the necessity of going on the open market and actually bidding for the land.

Improperly, the government has been the Times' broker and front man. And if there were any doubt this was a boondoggle, it ought to be resolved by the fact that the City also has thrown in tax breaks that will amount to millions of dollars of savings for the Times. As a result, New York taxpayers will not only pay for their morning paper; they will effectively pay for it twice.

Along the way, a number of the most basic principles of the free market are undermined. Owners lose their power to set their price - via auction, or whatever method they choose. They lose their right to exclude others from their property - this buyer is going to be occupying the property no matter what. And they lose their power to decide whether to sell, and to whom to sell.

These powers are part of what property law calls the "bundle of sticks" - the powers of the owner that together constitute the right of property ownership. Eminent domain is supposed to be a very limited grant to the government to take a few of those "sticks" for public use - while granting just compensation.

Abuses like those I have cited in Michigan in New York might as well be making of the "bundle of sticks" a bonfire. It's basic property rights - the reason our system is capitalist, not socialist or communist - that are going up in flames.

The Michigan Decision May or May Not Have National Ramifications

Will the Michigan decision be followed by other state courts? That is entirely up to them.

In fact, Michigan started the downward trend in takings jurisprudence. In 1981, Michigan was a trendsetter when, in the case of Poletown Neighborhood Council v. Detroit, its Supreme Court opened the door for private entities to claim their profitable projects were in the public's interest and therefore eminent domain ought to be exercised for their benefit. The Poletown case arose because Detroit wanted to take property in a blighted neighborhood, and transfer it to General Motors. The argument that this was a "public use" came from proof by the City that the transfer would yield generally positive economic consequences. The court accepted the argument. And its decision convinced many other state courts to follow suit.

Hathcock expressly and wisely overrules Poletown. But Michigan's Supreme Court will not necessarily be a trendsetter again. It depends on the views of other state courts, interpreting other state constitutions. Those courts should be persuaded by the powerful logic of the Michigan Supreme Court. But they are not bound by the decision.

Poletown opened the door to already powerful interests to capitalize on a power the government did not have previously. The power equation may not work in the opposite direction. The power romance between government and large business has been sealed in too many jurisdictions. Hathcock empowers the small landowner, and disables the grand plans of big business, which will have every incentive to fight to keep the Poletown reasoning alive. Even so, the basic principles of our system or private property ought to win out in the end.

Making the Little Guy a Second-Class Landowner

As I have discussed in other prior columns, there are strong forces at work in this society undermining the rights of private landowners. The Religious Land Use and Institutionalized Persons Act turns private homeowners into second-class citizens as compared to their religious neighbors, and current takings law in too many states, following Poletown, treats them as second-class citizens as compared to big business intent on avoiding the expense of buying land in the open market.

When examining constitutional issues like this one, one is never too far from the Framers' most fundamental insight. Power is likely to combine with other power, and such combinations are dangerous to the people. Checks were built into the state and federal constitutions to keep the branches of government from joining powers and becoming a source of tyranny. Religion was to be subject to the Establishment Clause.

The state and federal constitutions did not address, however, the ability of big business to turn public policy against the people, except in a negative sense. In theory, it was the free market that was to be the disciplinarian for business. But for Poletown and its progeny, it would be in the private property context.

At least in Michigan, that particular abuse of power has now been deflected, and the little guy--the small business owner or the individual landowner--has been restored to his rightful place.