July 26, 2005
KELO V. CITY OF NEW LONDON
By: John Rappa, Principal Analyst
You asked for an analysis of the U. S. Supreme Court's decision in Kelo v. City of New London 125 S. Ct. 2655 (June 23, 2005).
In Kelo v. City of New London the U.S. Supreme Court ruled that New London could take privately owned properties for private development under its economic revitalization plan. Since the plan served a public purpose, it satisfied the U.S. Constitution's public use requirement, which bans government from taking land for public use without just compensation. Relying on prior decisions, the Court interpreted public use as being the equivalent of “public purpose.”
The decision upheld the Connecticut Supreme Court's 2004 Kelo decision (268 Conn. 1), which found that New London's actions did not violate either the Connecticut or the United States constitutional bans against taking property for public uses without just compensation (Ct Const. Art I, § 11; U.S. Const. Amend V). Attachment 1 is an OLR report analyzing that opinion (2004-R-0394).
The case arose after New London began to implement a development plan to revitalize its economy. Adopted in 2000, the plan sought to develop a 90-acre area on the Thames River near Fort Trumbull State Park and Pfizer's global research facility, which was slated to open in 2001. The area comprises the closed U.S. Naval Undersea Warfare Center, the regional water pollution control authority, and residential and commercial properties situated on 115 privately owned parcels.
The Court noted that New London was economically distressed and decided to redevelop this area as a way to attract and accommodate new businesses linked to the Pfizer facility, create leisure and recreational opportunities, and attract more businesses and people to the city. Consequently, it prepared and adopted a plan under a state statute that allowed municipalities to acquire, improve, and transfer property for new development (CGS § 8-186 et seq.). That statute specifies how municipalities must implement these tasks and explicitly authorizes them to acquire property through negotiation or eminent domain.
The plan proposed to develop the area for different uses, but did not intend for all of them to be opened to the public. The uses included a marina, river walk, conference hotel, new housing, a small cluster of shops and restaurants, research and development office space, and unspecified “support” as well as the proposed U.S. Coast Guard Museum.
New London designated the nonprofit New London Development Corporation (NLDC) to prepare and implement the plan, including acquiring the properties slated for redevelopment. NLDC successfully acquired 110 parcels, but had to initiate condemnation proceedings to acquire the other 15 by eminent domain. Four of the disputed parcels were located on the site of the proposed research and development offices and 11 on the property designated for unspecified use to support the proposed marina or the adjacent state park.
The owners of the 15 parcels challenged the takings in state court, claiming that NLDC violated the Connecticut and United States constitutional bans against taking property for public uses without just compensation. After a seven-day bench trial, the Superior Court upheld some of the takings and overturned the others, which led both parties to appeal to the Connecticut Supreme Court. That court upheld all of the takings on the grounds that they were reasonably necessary to achieve the plan's economic revitalization goals. The dissenting justices agreed that the plan served a valid public purpose, but found the takings unconstitutional because the city failed to show how they would achieve those goals.
The owners subsequently appealed to the U.S. Supreme Court, claiming that the takings violated the Fifth Amendment's Takings Clause.
According to the majority, the case turned on whether New London's plan satisfied the “public use” requirement or whether it was simply a way to confer a private benefit on a particular party.
The Fifth Amendment's Takings Clause provides, in part, “nor shall private property be taken for public use without just compensation.” This provision applies to states as well as the federal government (Chicago B&QR v. Chicago, 166 US 226 (1987)). The courts have interpreted the clause to ban government from taking property that belongs to party A only to transfer it to party B, even if the government justly compensated party A (Kelo, at 2661).
By a five to four margin, the Court upheld the Connecticut Supreme Court's ruling that New London's plan served a valid public purpose and that the takings thus satisfied the Fifth Amendment's public use requirement. It held that the city carefully prepared the plan and did not adopt it as a way to benefit specific individuals. Justice Kennedy joined in the majority opinion and wrote a separate concurrence. Justice O'Connor, joined by Chief Justice Rehnquist and justices Scalia and Thomas, wrote the dissenting opinion. Justice Thomas also wrote a separate dissent.
Precedent for Broad Interpretation of “Public Use”
In upholding New London's plan, the Court noted that it long ago rejected the narrow interpretation of “public use.” Under that interpretation, a taking was constitutional if the public could literally use the condemned property. Instead, the Court opted for a broader interpretation under which a taking is constitutional if it serves a public purpose, such as eliminating slum and blight. The Court also noted that historically it had deferred to the legislature's judgment as to what constituted a public purpose.
The Court relied on three cases to support its holding. In Berman v. Parker (348 U.S. 26 (1954)), the Court upheld Congress' plan to redevelop a blighted Washington D.C. neighborhood by acquiring and transferring property to private developers. A property owner sued the city when it condemned his store, arguing that it was not blighted and that redeveloping a neighborhood was not a valid public purpose for taking the store by eminent domain. The court deferred to the government's determination that the area needed to be planned as a whole and saw nothing in the Constitution that prevented redevelopment programs from treating several properties as a whole (Kelo, at 2663).
In Hawaii Housing Authority v. Midkiff (467 US 229 (1984)), the Court upheld a law permitting Hawaii to take and transfer leased land to its lessees. Again it deferred to the legislature's determination that this policy served a valid public purpose: eliminating a land oligopoly. The fact that the state immediately transferred the land to private individuals did not diminish the takings' public purpose. Consequently, the law's constitutionality depended on its purpose (i.e., eliminating the oligopoly), not the means to achieve it (i.e., transferring the property to private individuals) (Kelo, at 2665).
Lastly, in Ruckelshaus v. Monsanto Co. (467 US 986 (1984)), the Court upheld a law allowing a federal agency to evaluate new pesticide applications based on trade secrets and other data submitted by prior applicants as long as the latter received just compensation. In doing so, it deferred to Congress' determination that the law served a public purpose, fostering competition in the pesticide industry (Kelo, at 2665).
Economic Development Constitutes a Public Purpose
In Kelo, the Court applied its prior holdings and concluded that taking land by eminent domain for economic development in this situation served a valid public purpose. It noted that promoting economic development is a traditional and long accepted governmental function and there is no way to distinguish economic development from other recognized public purposes. For this reason, the Court rejected the premise that all economic development takings were unconstitutional (Kelo, at 2666).
It also concluded that the fact that economic development takings benefit private parties and produce incidental public benefits does not render them unconstitutional. In support of this conclusion, the Court observed that public policies and programs often benefit private interests, and sometimes, these interests do a better job at serving a public purpose than a government agency (e.g., a business that creates new jobs after receiving a low-interest government loan to build a facility) (Kelo, at 2667)
The Court also rejected the petitioners' alternative argument that the constitutionality of economic development takings should turn on whether there is a reasonable certainty that the takings will benefit the public. This test would require the courts to second-guess the legislature about the likelihood that the benefits would actually accrue and stop or slow down the development process while waiting for a court decision (Kelo, at 2668).
While economic development takings satisfy the Takings Clause's public use requirement, the majority indicated that nothing prevents the states from restricting or prohibiting the use of eminent domain powers for this purpose (Kelo, at 2669).
Kennedy's Concurring Opinion
In Justice Kennedy's view, courts must examine economic development takings more closely than other takings to see if they favor a private party rather than provide a public benefit. Courts can do this without assuming that the government acted unreasonably or only to benefit that party, he added. Kennedy was satisfied that the trial court in this case reached its decision after closely examining the takings and rejecting the contention that the city was acting only to benefit specific private interests (Kelo, at 2670).
Writing the primary dissent, Justice O'Connor argued that economic development takings violated the Takings Clause's public use requirement, which she interpreted literally. She rejected the majority's view that the constitution permits the transfer of private property to private developers so long as the public obtains some incidental benefit. And she asserted that it was for the courts, not the legislative bodies to determine if the use of eminent domain was constitutional.
O'Connor read Berman and Midkiff, as cases where the court had upheld the takings not for economic development but for eliminating harm: blight in Berman and land oligopoly in Midkiff. In upholding the Kelo takings, the Court should not have deferred to the city's decisions; doing so rendered the Takings Clause meaningless and consequently removed any effective check on the eminent domain power (Kelo, at 2674).
Writing a separate dissent, Justice Thomas argued that the Fifth Amendment allows government to take property only if the government intends to own the property or literally allow the public to use it. He urged the Court to reconsider its holdings based on the Takings Clause's historical meaning. In doing so, he contrasted the way the founders used “public use” and “public welfare” to convey different meanings. Over time, the courts strayed from the literal meaning of public use to one that was closer to public welfare. Like O'Connor, Thomas concluded that the Kelo Court rendered the Takings Clause meaningless by substituting “public purpose” for the Constitution's “public use” language (Kelo, at 2679).