The Supreme Court Hears an Important Constitutional Case That Asks If Private Property Is Truly Taken For "Public Use" When It Is Given to a Private Developer

On Tuesday, February 22, the Supreme Court heard oral argument in an important constitutional case, Kelo v. New London. The case explores when the government may - and may not -- take private property through its use of its eminent domain power.

The aggrieved parties in Kelo are homeowners in a middle-class neighborhood in Connecticut. The local government sought to transfer their homes to a private entity, which would then develop commercial office space (which would, in turn, generate more taxes for the city).

The homeowners were so outraged by this plan that they have taken their case all the way to the Supreme Court. In this column, I will explore whether what their local government tried to do violates the Fifth Amendment.

The Fifth Amendment Issue In Kelo

The Fifth Amendment makes clear that when the government takes property from a private person, the taking must be for "public use." Thus, the Court must decide, in this case, whether it is a "public use" to transfer property to be used for a private, but more economically profitable, project.

Under the Fifth Amendment, even if the "public use" requirement is satisfied, the taking still must be for "just compensation." But in reality, "just compensation" tends to mean a price significantly below the property's value on the open market.

Thus, if this kind of government action is held to be permissible, private developers will be able to continue to use the government's eminent domain power as a tool to avoid paying market price for the land they seek.

The homeowners argued before the Court that there should be a bright-line rule against any takings for private development, but that is not likely to happen.

The Underlying Issue in Kelo: The Proper Role of the Courts

Certainly, the local government's plan for the Kelo homeowners seems unfair: Not only will their property be taken away, but it is unlikely they will actually be paid a fair price for it.

Moreover, the government's need to take away their property is dubious: Unlike traditional exercises of the eminent domain power, this one is hardly prompted by public necessity: It is not as if these houses must give way so a public highway can be expanded, or a town hall, courthouse, or school erected.

But the Court's precedents in this area do not focus on fairness alone. They also focus on the relatively limited role of the courts in deciding whether a taking is for a public use.

Among the three branches - executive, legislative, and judicial - the judicial branch is, institutionally, somewhat limited in its capacity to make determinations about the larger public good. The Constitution limits the courts' role to resolving "cases and controversies" - whereas the legislature and the executive may address issues as broadly as they like, and need not wait for a specific dispute to arise before they do so.

Moreover, the "cases and controversies" requirement does much more than just limit the court to deciding the dispute before it. It also prevents the court from resolving issues the parties have not raised (except in the unusual instance in which a court can legitimately raise such matters on its own initiative - in legal parlance, "sua sponte"). It restrains courts from issuing "advisory" opinions - on, for example, the constitutionality of a piece of legislation that has not yet been enacted into law.

Finally, the "cases and controversies" requirement forbids courts from engaging in independent research beyond the four-corners of the dispute before it. Unlike a legislature, a court cannot convene hearings at which it chooses the witnesses who will testify. Rather, it must hear the evidence - and only the evidence - that the parties present (as long as it rules such evidence admissible under the rules of evidence).

For all these reasons, the Supreme Court, in its prior precedents, has tended to defer to local and state assessments as to whether a government taking was justified by a legitimate public purpose.

Thus, at oral argument in Kelo, the Justices seemed to be most concerned about whether they should wade into these waters at all - or simply afford state and local governments wide latitude in determining whether a given property use is a "public use."

Why This Type of Case, In Particular, Does Demand Court Intervention

In this particular case, however, the Court should not balk, and step back.

It is simple, to begin with, for a court to determine if a local government has taken property and given it to a private citizen or entity. And it is clear that, if there are no limits to this power, abuses will inevitably occur.

What is more fundamental to the American Dream than owning one's own house - where one's children can grow up, and where one can grow old? And what shatters that dream more than having one's town decide to forcibly sell one's house - at cut rate - to a private developer?

Granted, promoting economic welfare -- including increasing a city's tax base -- is a legitimate public interest. But that does not mean that shifting private property into different hands is always a "public use" simply because the government will profit from the transfer. That is because the government will naturally profit from the operation of the free market, too - without having to intervene among buyers and sellers.

The homeowners suggested that takings for private entities might be permissible, but only in certain circumstances and under certain conditions: They say that "there must at least be a reasonable certainty that the condemnations will result in those public benefits. The condemnor must actually have a use for the property, and there must be contractual, statutory, or other minimum standards in place to ensure the likelihood of realization of the public benefits that justified the condemnation in the first place."

The homeowners point out that "[t]his type of analysis does not require the courts to decide if a particular project is a good idea, but it does allow them to assess the connection between the goals of the project and the means used to achieve them."

"In this case," the homeowners argue, "the condemnors have no reasonably foreseeable use for the property. That fact alone renders the condemnation of Petitioners' homes not for 'public use.'" The homeowners also add that "the condemnations lack minimum standards to ensure realization of public benefit, and the actual use of the property would not result in the purported public benefits."

The Solution: A Rebuttable Presumption Against Public Use In This Context

The Court, then, should require that the local government show that it cannot increase its tax base in other ways, before it permits the government to unilaterally institute a market discount in favor of a larger developer.

After all, there are many options the government has, short of this one: It can court large developers by offering them favorable terms and perks, for instance. But such perks should come out of municipal pockets, not be stolen from private ones.

Thus, cases like this should work this way: The Court should institute a rebuttable presumption that such private transfers are not for a public purpose. Put another way, the government cannot ask the court to assume a public purpose exists when it tries to transfer property among private hands; instead, it must prove that one exists.

How might the government overcome the presumption that its use in these circumstances was not public? It could do so by proving that the operation of the free market could not have achieved the same end.

As a practical matter, it would be private developers who would, in effect, bear this burden of proof. Unless they could make a case for "public use" to a given municipality, the municipality could not then justify the transfer in court, and therefore would likely refuse to do the developer's bidding.

So things might well proceed this way: The private developer would have to approach individual homeowners to try to purchase their houses on the market. If its initial attempts were unsuccessful, it would have to raise its prices to a true market price - or even a bit above it. Emotional value must be taken into account in many financial arrangements; there is no reason to shield developers from the emotional ties individuals and families have to their houses.

Doubtless, many homeowners would then sell. Perhaps all will sell - and the government never will have to get involved at all. If no one sells, there is going to be strong reason to believe the developer has not acted out of good faith in the prices it has offered, and the presumption could not be overcome.

But what if a few holdout homeowners refuse to accept even somewhat above-market prices? In that instance, the developer could go to the local government and point out that a clear case for a constitutional exercise of the eminent domain power existed: This specific evidence that market offers were not working would allow the rebuttable presumption to be overcome. Knowing it would win in court, the local government could then use its power to transfer the remaining homes to the developer.

Homeowners Should Speak Out Against At-Will Government Takings for Private Use

Of course, such a rebuttable presumption would be a modest check, at best, on local and state governments' use of the eminent domain power. But at least it would be an improvement over the present situation - in which at-will condemnations of property by local and state governments, at the behest of private developers, are threatening homeowners and small businesses across the country.

In the end, however, even if the Court does use this case to set a limit on how far the term "public use" can stretch, homeowners, too, must act. Their most effective remedy is not in the courts, once takings are already planned, but in the city councils and legislatures, to pre-empt them before they happen. Those homeowners under siege by the Religious Land Use and Institutionalized Persons Act, discussed in previous columns including one that appeared recently, are finding this out as well.

What the Kelo case shows, if nothing else, is that homeowners need to make themselves heard by their elected officials--local, state, and federal. These officials are too often in the thrall of vocal, wealthy, powerful interests such as private developers. To fight these interests, and protect their American Dream, homeowners, too, must become vocal and powerful in the political process

The passion is there: Look at the New London homeowners' dogged defense of their neighborhood. Now, organization and action need to accompany it. In this situation, as well as the RLUIPA context, public officials seem to have forgotten how important homeownership is to their constituents. It's time for homeowners to remind them.