In the sections below, the federal and Michigan court decisions on eminent domain are categorized into two contrasting sets of underlying principles. The relative merits of the two strains are weighed, including a brief overview of the necessity of economic development takings.
The Two Competing Visions of Eminent Domain
As the discussion above suggests, there are two strains of takings jurisprudence in federal and Michigan law. One is characterized by Kelo v. New London, Hawaii Housing Authority v. Midkiff, Berman v. Parker and Poletown Neighborhood Council v. Detroit; it will be referred to in this Policy Brief as the "Kelo" strain. In the Kelo strain, the courts have allowed more types of takings that allow private property to be transferred to another private entity. Included within these takings are economic development takings.
The second strain is characterized by Wayne County v. Hathcock, Calder v. Bull and Vanhorne’s Lessee v. Dorrance; it will be referred to here as the "Hathcock" strain.‡‡ Under the Hathcock strain, the courts permit fewer takings that allow private property to be transferred to another private entity. For instance, economic development takings are not allowed.
‡‡ A fourth case, Norwood v. Horney, decided in 2006 by the Ohio Supreme Court, fits the Hathcock mold. It is discussed under "Property-by-Property Blight Assessment" below.
The Kelo Strain
In the Kelo strain, private property can be taken and transferred to another private entity when a government engages in some form of planning or legislative deliberation to justify the action. In such cases, the court holds that it must defer to the determination of the taking entity.
The planning and legislative determinations are deemed by the courts to be crucial. For instance, in Berman v. Parker, the U.S. Supreme Court highlighted the fact that the city of Washington, D.C., had a "comprehensive or general plan for the district," including a "redevelopment plan" that covered the entire area that was declared "blighted" and at issue in the case. In the court’s view, this plan made the taking of unblighted property constitutional:
"In the present case, Congress and its authorized agencies attack the problem of the blighted parts of the community on an area rather than on a structure-by-structure basis. That, too, is opposed by appellants. They maintain that since their building does not imperil health or safety nor contribute to the making of a slum or a blighted area, it cannot be swept into a redevelopment plan by the mere dictum of the Planning Commission or the Commissioners. The particular uses to be made of the land in the project were determined with regard to the needs of the particular community. The experts concluded that if the community were to be healthy, if it were not to revert again to a blighted or slum area, as though possessed of a congenital disease, the area must be planned as a whole. It was not enough, they believed, to remove existing buildings that were insanitary or unsightly. It was important to redesign the whole area so as to eliminate the conditions that cause slums — the overcrowding of dwellings, the lack of parks, the lack of adequate streets and alleys, the absence of recreational areas, the lack of light and air, the presence of outmoded street patterns. It was believed that the piecemeal approach, the removal of individual structures that were offensive, would be only a palliative. The entire area needed redesigning so that a balanced, integrated plan could be developed for the region, including not only new homes but also schools, churches, parks, streets, and shopping centers. In this way it was hoped that the cycle of decay of the area could be controlled and the birth of future slums prevented."
Absent the plan described above, the U.S. Supreme Court would not have had a legislative proclamation to defer to, and the court would have retained some role in determining whether the taking constituted a public use. But the court’s role was diminished by that legislative proclamation, and the court summarized, "Subject to specific constitutional limitations, when the legislature has spoken, the public interest has been declared in terms well-nigh conclusive."
In Hawaii Housing Authority v. Midkiff, the Supreme Court expressed a similar deference to legislative decisions, noting:
"In short, the Court has made clear that it will not substitute its judgment for a legislature’s judgment as to what constitutes a public use ‘unless the use be palpably without reasonable foundation.’
"When the legislature’s purpose is legitimate and its means are not irrational, our cases make clear that empirical debates over the wisdom of takings — no less than debates over the wisdom of other kinds of socioeconomic legislation — are not to be carried out in the federal courts. Redistribution of fees simple to correct deficiencies in the market determined by the state legislature to be attributable to land oligopoly is a rational exercise of the eminent domain power. Therefore, the Hawaii statute must pass the scrutiny of the Public Use Clause."
Thus, the Hawaii Legislature’s determination that the concentration of land ownership affected market conditions became grounds for according deference to the state of Hawaii’s decision to redistribute the ownership of land using eminent domain.
In Kelo, the U.S. Supreme Court cited the city of New London’s redevelopment plan for the area in question as grounds for ruling that the taking was constitutional:
"[T]he City would no doubt be forbidden from taking petitioners’ land for the purpose of conferring a private benefit on a particular private party. Nor would the City be allowed to take property under the mere pretext of a public purpose, when its actual purpose was to bestow a private benefit. The takings before us, however, would be executed pursuant to a ‘carefully considered’ development plan.
"The disposition of this case therefore turns on the question whether the City’s development plan serves a ‘public purpose.’ Without exception, our cases have defined that concept broadly, reflecting our longstanding policy of deference to legislative judgments in this field."
Justice Anthony Kennedy, the fifth vote in the majority opinion, wrote a concurring opinion and likewise stated that the city has created "a comprehensive development plan" and therefore that the court should not "presume an impermissible private purpose." He did indicate, "[T]here may be categories of cases in which the transfers are so suspicious, or the procedures employed so prone to abuse, or the purported benefits are so trivial or implausible," that a heightened standard of judicial review would be appropriate. He added, however, "This is not the occasion for conjecture as to what sort of cases might justify a more demanding standard. ..."
In Poletown, the five Michigan Supreme Court justices signing the majority opinion also referred to "planning" and talked about deference:
"This case arises out of a plan by the Detroit Economic Development Corporation to acquire, by condemnation if necessary, a large tract of land to be conveyed to General Motors Corporation as a site for construction of an assembly plant.
"The Legislature has determined that governmental action of the type contemplated here meets a public need and serves an essential public purpose. The Court’s role after such a determination is made is limited. ‘The determination of what constitutes a public purpose is primarily a legislative function, subject to review by the courts when abused, and the determination of the legislative body of that matter should not be reversed except in instances where such determination is palpable and manifestly arbitrary and incorrect.’ The United States Supreme Court has held that when a legislature speaks, the public interest has been declared in terms ‘well-nigh conclusive.’ [Berman, 348 U.S. at 32]."
In all four cases in the Kelo strain, the courts deferred to the taking entity’s assertions that the property taken furthered a public use. They did so on grounds that the taking followed some deliberative process empowered by the legislature, whether this process was a specific legislative act, as in Midkiff, or a delegated planning process undertaken by a commission, as in Berman, Kelo and Poletown.
The Hathcock Strain
Calder v. Bull and Vanhorne’s Lessee v. Dorrance are both illustrative of a judicial unwillingness to defer to legislative determinations that would allow property to be taken for the benefit of another private owner. In Calder, Justice Chase indicated that he would not bestow the title of "law" on "An ACT of the Legislature ... that ... takes property from A. and gives it to B. ..." (Emphasis appears in the original.) He called such an act "against all reason and justice" and refused to presume that the "people [would] entrust a Legislature with SUCH powers." (Emphasis appears in the original.)
A clearer rejection of deference to a legislature is hard to imagine, but Justice Paterson might have done so a few years earlier. In Vanhorne’s Lessee, he reflected on the idea of using eminent domain to transfer property from one private owner to another and opined:
"If this be the Legislation of a Republican Government, in which the preservation of property is made sacred by the Constitution, I ask, wherein it differs from the mandate of an Asiatic Prince? Omnipotence in Legislation is despotism. According to this doctrine, we have nothing that we can call our own, or are sure of for a moment; we are all tenants at will, and hold our landed property at the mere pleasure of the Legislature. Wretched situation, precarious tenure! And yet we boast of property and its security, of Laws, of Courts, of Constitutions, and call ourselves free! In short, gentlemen, the confirming act is void; it never had Constitutional existence; it is a dead letter, and of no more virtue or avail, than if it never had been made."
It is an understatement to note that Justice Paterson’s opinion is not particularly deferential to a legislative determination that would permit transfers of property from one private party to another.
Justice Young, author of the majority opinion in the Hathcock case, noted that the Poletown majority cited Berman for the proposition that the courts should readily defer to legislative determinations that a taking is for a public use.±± That citation was characterized as "particularly disingenuous" since it was a "radical and unabashed departure from the entirety of [Michigan]’s pre-1963 eminent domain jurisprudence." Justice Young summarized, "Questions of public purpose aside, whether the proposed condemnations were consistent with the Constitution’s ‘public use’ requirement was a constitutional question squarely within the Court’s authority."
Justice Young also questioned the idea that Wayne County’s determination that the public purpose of economic development would be served by the taking (or Detroit’s similar determination with the GM Poletown plant) could render the taking constitutional:
"To justify the exercise of eminent domain solely on the basis of the fact that the use of that property by a private entity seeking its own profit might contribute to the economy’s health is to render impotent our constitutional limitations on the government’s power of eminent domain. Poletown’s ‘economic benefit’ rationale would validate practically any exercise of the power of eminent domain on behalf of a private entity." (Emphasis appears in the original.)
Thus, the Hathcock court not only rejected the idea of judicial deference, but in modern terms echoed Justice Paterson’s concern that deference to the legislature could lead to all property owners becoming "tenants at will" of the government. The Hathcock court even echoed the emphasis on rights expressed by Justices Chase and Paterson: "[W]e must overrule Poletown in order to vindicate our Constitution [and] protect the people’s property rights. ..."
The Hathcock court is not the only recent court to endorse a traditional legal analysis in which the courts interpret constitutional text involving individual rights. In 2006, the Ohio Supreme Court rendered a decision firmly in the Hathcock strain in Norwood v. Horney. In this case, the city of Norwood, which is entirely surrounded by Cincinnati, Ohio, sought to redevelop a "deteriorating" neighborhood. Norwood officials believed that this redevelopment would lead to an increase in the city’s tax revenue. When some landowners refused to sell, the city attempted to take their property.
The Ohio Supreme Court rejected the city’s argument that the takings constituted a public use. It began its constitutional analysis by observing: "The rights related to property, i.e., to acquire, use, enjoy, and dispose of property, are among the most revered in our law and traditions. Indeed, property rights are integral aspects of our theory of democracy and notions of liberty."
The court went on to reject the Kelo-style deference to legislative determinations of public use, stating, "Inherent in many decisions affirming pronouncements that economic development alone is sufficient to satisfy the public-use clause is an artificial judicial deference to the state’s determination that there was sufficient public use." The Norwood court continued, "[O]ur precedent does not demand rote deference to legislative findings in eminent-domain proceedings, but rather, it preserves the courts’ traditional role as guardian of constitutional rights and limits."
That said, the Norwood and Hathcock courts have accepted transfers of private property for such uses as railroads and pipelines — actions that might well have been anathema to Justices Paterson and Chase. Thus, the Hathcock opinion is in some ways a middle ground between the pure individual rights standpoint, which would probably reject any private entity receiving taken land, and the Kelo strain, which would permit nearly any transfer from one private party to another. Nevertheless, what Hathcock, Norwood, Vanhorne’s Lessee and Calder all share in common is a belief that some meaningful judicial check is necessary upon the use of eminent domain to transfer property from one private party to another. The Kelo strain of cases, in contrast, provides no discernible judicial check at all.
±± There were three concurring opinions in Hathcock. Justice Weaver disagreed with the majorityfs method of constitutional interpretation, but not the result. Justices Cavanagh and Kelly separately also agreed with the result, but they would not have applied the decision retroactively. They would therefore have allowed the takings at issue, but prevented all future takings for economic development. None of these three opinions expressed any disagreement with the majority regarding the important role of the courts in public-use determinations.
Evaluating the Two Strains of Eminent Domain Jurisprudence
There are major weaknesses in the Kelo strain of thought. First, it is an undemanding intellectual exercise to generate some sort of rationale for a legislative deliberation or a "plan," especially since the courts have failed to delineate what level of deliberation or planning is necessary to trigger the "well-nigh conclusive" deference of the courts. As Justice O’Connor noted in her dissent in Kelo, "[I]f predicted (or even guaranteed) positive side-effects are enough to render transfer from one private party to another constitutional, then the words ‘for public use’ do not realistically exclude any takings, and thus do not exert any constraint on the eminent domain power."
Thus, meeting the planning or legislative requirement is so simple as to constitute a meaningless standard. Justice O’Connor observed that even in the example of Justice Kennedy’s "as-yet-undisclosed test" for cases where a suspicious taking that benefits a private party has occurred, "[I]t is difficult to envision anyone but the ‘stupid staff[er]’ failing it."
Even when the projections are more specific, as when General Motors promised 6,000 jobs would result at the Poletown factory, the courts do not inquire into whether the projections are sound. Further, there is no mechanism for "undoing" a taking after a projection has proven to be inaccurate. For instance, GM’s Poletown plant never employed more than 3,600.
Second, and even more fundamentally, as the U.S. Supreme Court ruled long ago in the landmark case Marbury v. Madison, "It is emphatically the province and the duty of the judicial department to say what the law is." In referring to "the law," the Marbury court meant that while the legislature’s job is to enact statutes and decide public policy, the courts’ job is to determine whether those statutes and policies are permissible under the federal and state constitutions. This doctrine means the courts must inevitably interpret the Fifth Amendment, which is part of the U.S. Constitution. Yet in Berman, the U.S. Supreme Court stated: "[W]hen the legislature has spoken, the public interest has been declared in terms well-nigh conclusive. In such cases the legislature, not the judiciary, is the main guardian of the public needs to be served by social legislation."
Such a judicial abdication makes little sense. As Justice Thomas noted in his Kelo dissent, "We would not defer to a legislature’s determination of the various circumstances that establish, for example, when a search of a home would be reasonable."
Indeed, local sheriffs are elected officials and are aware of local conditions, including what areas under their jurisdiction are plagued by high crime rates. Yet the courts would not defer to the local sheriff’s determination that a search would be reasonable, even if the sheriff were able to articulate the societal benefits that would result from a lower crime rate or announced a countywide crime protection plan.
Third, the concept of deference does not account for the important fact that the legislature or planning commissions are interested parties in the very case in which a court is deferring to them. This is particularly true when an economic development or revenue enhancement taking is at issue. If the taking is successful, the taking entity expects to receive higher tax revenues and therefore has a financial interest in seeing the taking occur. Moreover, government officials may receive a political benefit from the taking to the extent that the increased revenue allows them to provide more services to constituents whose properties were not taken. And as Justice Kennedy, who joined the Kelo majority, admitted, "There may be private transfers in which the risk of undetected impermissible favoritism of private parties is so acute that a presumption (rebuttable or otherwise) of invalidity is warranted under the Public Use Clause."
A legislative body’s potential conflict of interest was discussed at length by James Madison in the seminal "Federalist Paper No. 10":
"No man is allowed to be a judge in his own cause, because his interest would certainly bias his judgment, and, not improbably, corrupt his integrity. With equal, nay with greater reason, a body of men are unfit to be both judges and parties at the same time; yet what are many of the most important acts of legislation, but so many judicial determinations, not indeed concerning the rights of single persons, but concerning the rights of large bodies of citizens? And what are the different classes of legislators but advocates and parties to the causes which they determine?"
Thus, a legislature could serve the purposes of one class of people, rather than society as a whole. Madison referred to this dynamic as a type of "factionalism":
"By a faction, I understand a number of citizens, whether amounting to a majority or a minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adversed to the rights of other citizens, or to the permanent and aggregate interests of the community."
Madison concluded, "The inference to which we are brought is, that the CAUSES of faction cannot be removed, and that relief is only to be sought in the means of controlling its EFFECTS" (Emphasis appears in the original.) Thus, controlling the effects of a powerful faction was the appropriate end of a just government:
"When a majority is included in a faction, the form of popular government, on the other hand, enables it to sacrifice to its ruling passion or interest both the public good and the rights of other citizens. To secure the public good and private rights against the danger of such a faction, and at the same time to preserve the spirit and the form of popular government, is then the great object to which our inquiries are directed."
Madison himself eventually helped address this problem by drafting and championing a Bill of Rights, including what became the Fifth Amendment. In contrast to Madison’s vision, the federal courts’ deferential treatment leaves the taking entity, an interested party, as the de facto interpreter of the Fifth Amendment.
Madison’s concerns about factionalism appear relevant in light of the concerns raised in the many criticisms of the Kelo strain. For example, Justice Clarence Thomas, in his Kelo dissent, observed:
"The consequences of today’s decision are not difficult to predict, and promise to be harmful. So-called ‘urban renewal’ programs provide some compensation for the properties they take, but no compensation is possible for the subjective value of these lands to the individuals displaced and the indignity inflicted by uprooting them from their homes. Allowing the government to take property solely for public purposes is bad enough, but extending the concept of public purpose to encompass any economically beneficial goal guarantees that these losses will fall disproportionately on poor communities. Those communities are not only systematically less likely to put their lands to the highest and best social use, but are also the least politically powerful. If ever there were justification for intrusive judicial review of constitutional provisions that protect ‘discrete and insular minorities,’ surely that principle would apply with great force to the powerless groups and individuals the Public Use Clause protects. The deferential standard this Court has adopted for the Public Use Clause is therefore deeply perverse."
Justice Thomas then set forth examples of factions "actuated by some common impulse of passion" imposing their will on less powerful groups without regard to their rights.
"[T]he legacy of this Court’s ‘public purpose’ test [has been] an unhappy one. In the 1950’s, no doubt emboldened in part by the expansive understanding of ‘public use’ this Court adopted in Berman, cities ‘rushed to draw plans’ for downtown development. ‘Of all the families displaced by urban renewal from 1949 through 1963, 63 percent of those whose race was known were nonwhite, and of these families, 56 percent of nonwhites and 38 percent of whites had incomes low enough to qualify for public housing, which, however, was seldom available to them.’ Public works projects in the 1950’s and 1960’s destroyed predominantly minority communities in St. Paul, Minnesota, and Baltimore, Maryland. In 1981, urban planners in Detroit, Michigan, uprooted the largely ‘lower-income and elderly’ Poletown neighborhood for the benefit of the General Motors Corporation. Urban renewal projects have long been associated with the displacement of blacks; ‘[i]n cities across the country, urban renewal came to be known as "Negro removal."’"
Jane Jacobs, world-renowned urban scholar and author of the 1961 book "The Death and Life of Great American Cities," likewise noted in her amicus curiae brief in the Kelo case that urban renewal takings have disproportionately affected blacks. She observed that in Berman v. Parker, 97.5 percent of the 5,000 residents in the neighborhood were black, and that within a few years of the taking, the neighborhood had become predominately white.
As noted above, Justice O’Connor recognized that while a disproportionate share of the takings would be borne by the poor and disadvantaged, in reality no property was safe, since "any Motel 6" could be replaced with "a Ritz-Carlton." Michigan Supreme Court Justice Young made a similar observation a year earlier, when he noted, "After all, if one’s ownership of private property is forever subject to the government’s determination that another private party would put one’s land to better use, then the ownership of real property is perpetually threatened by the expansion plans of any large discount retailer, ‘megastore,’ or the like."
Economic Considerations in Eminent Domain
The significant practical drawbacks of the Kelo strain of jurisprudence make it an undesirable basis for judging future takings. Nevertheless, some may question whether the Hathcock strain of decisions fails to acknowledge the practical difficulties attending private economic development and the need for government intervention in the form of eminent domain.
This concern should be tempered on several grounds. First, the Hathcock strain is hardly absolutist, since it allows takings for railroads and other private infrastructure.
Second, while beyond the scope of this paper, it’s clear that substantial economic development occurs without eminent domain, and it’s not clear that eminent domain is necessary even for some of the more difficult forms of private development. Some developers contend that eminent domain is necessary to facilitate development of large-scale projects where numerous lots owned by multiple owners must be assembled. Developers contend that without eminent domain, "holdouts" could either block a project or extract an exorbitant price for it.
Jane Jacobs, in her Kelo amicus brief, disagreed. She notes that developers have a number or strategies to prevent holdouts. For instance, the developers can negotiate in secret or use agents so as not to alert potential holdouts. Also, the developers may use a "most-favored-nation" clause, which promises everyone in the neighborhood the same terms. This has the practical effect of discouraging holdouts by tying the developer’s hands in advance, since the holdouts know that the developer cannot afford to pay the last seller more money because it means he will have to pay everyone that "inflated" price.
Thus, while the lack of eminent domain may hamper some projects, developers do have methods to achieve their ends. As Jacobs summarized, "Large-scale development projects can and do succeed without recourse to the coercive power of eminent domain."
In addition, even if there were a small number of projects that could not be built without eminent domain, there is no principled distinction that would restrict the use of eminent domain only to these instances. The use of eminent domain to prevent holdouts would weaken individual rights merely to make certain projects easier for developers.
Third, it is not clear that eminent domain has worked well in many of the cases in which it has been used. Looking at Poletown, for example, in a dissenting opinion in that case, Michigan Supreme Court Justice Ryan observed that the public cost of the Poletown project, which included buying the land, demolishing the structures and building roads and rail, was more than $200 million. Justice Ryan also noted that GM paid "little more than $8 million" for the property. In Kelo amicus brief, Jacobs noted that the 600 businesses supplanted in the Poletown takings probably employed more workers "than the 2,500 jobs created at the GM plant by 1988." The plant later employed as many as 3,600 workers, but this figure was only 60 percent of the approximately 6,000 jobs promised at the factory by GM’s chairman immediately preceding the Poletown trial. Jacobs concluded, "Overall, even if we consider it in purely economic terms, it is likely that the Poletown condemnation caused more harm to the people of Detroit than good."