Presented at the
Tenth Annual National Conference on Private Property Rights
Property Rights Foundation of America, Inc.
Albany, N. Y. - October 14, 2006
Thank you. Oh boy, now I have a lot to live up to. So I am
going to engage in the great American pastime of setting the record
straight. It seems there was a fellow once introduced at some
program and was given a similarly fulsome introduction, and when
he got up there, he said, let me set the record straight. I was
introduced to you as the fellow who made a million dollars in
oil in California. Well, actually it wasnt California. It
was Pennsylvania. And it wasnt oil, it was coal. And it
wasnt a million dollars. It was a $100,000, and I didnt
make it, I lost it. If you are an eminent domain lawyer, you kind
of appreciate the irony of that joke.
This is a single honor for me. In forty years of being invited
to speak and speaking all over the country from Hawaii and Alaska
to Virginia and Florida, I have never been invited to speak in
New York. Why not? Well, because New York is kind of the basement
or the sub-basement of eminent domain law, if not the sewer. Listen,
dont worry about it. I plan to be out of town before sunset,
so I can be very honest with you. You have to understand.
New York has a very primitive, very brutal system of eminent domain.
If you take that business of notice that these gentlemen alluded
to, when I hear these things, I sit there with my eyes open wide
because it has been at least maybe forty or fifty years ago that
the U. S. Supreme Court decided Schroeder v. City of New York
in which it explained to New York that you have to give notice
to people if you are going to take their land. Oh, really! Well,
they are still not doing it.
Just recently the Second Circuit Court of Appeals in the Brody
case told them again, youve got to give them notice.(1) Give me a break.
Im supposed to tell you about where weve been and
where we are and probably where were going. The problem
with eminent domain law is that it has always been that way. In
1953, incidentally, a very prominent New Yorker, a gentleman named
Louis Orgel, wrote a two-volume treatise called Valuation Under
Eminent Domain in whichits an old book, a half
century old, but its still regularly consulted and cited
in the courtsin which he characterized eminent domain as
the dark corner of the law. And that it is, everywhere, but particularly
in New York.
Why is it? Why has it been so assailed? What is wrong with it?
Well, its supposed to be a taking for a public use upon
payment of just compensation. Thats pretty clear in the
Fifth Amendment. In fact, it kind of reminds me of what some witty
historian said about the Holy Roman Empire. It wasnt holy,
it wasnt Roman, and it wasnt an empire. There is no
public use increasingly in eminent domain. And the
just compensation is concededly unjust. The courts have repeatedly
said, oh yeah, thats terrible, its harsh. At the same
time they say, well, really, we are striving for equity and fairness
and justice and indemnity. Then when you walk in there and say,
hi, your honors, here I am. Id like some indemnity, they
say, oh you silly fool, you dont understand the law. I have
actually had the California Supreme Court say that to me, because,
you know, they say, oh, those are just panoramic expressions.
They are an indication of our idealism, but we dont really
apply them to real cases.
So, how did we get into that mess? The idea is, the simple
idea is, that the government, in order to function requires property,
usually land, but not necessarily land. The government also condemns
patents and copyrights, trade secrets, and so on. So any species
of property is subject to being taken. That is a part of the inherent
attributes of government, inherent attributes of sovereignty.
What makes a sovereign a sovereign is that it has these attributes
and those are the power to engage in foreign relations, the power
to wage war, the power of taxation, the police power, and the
power of eminent domain. Even without a constitution a government
by virtue of being a government has these powers. The U. S. Constitution,
therefore, only limits those powers and provides two limitationsthat
the taking be for public use and that just compensation be paid.
And, as I have already told you, neither one of these standards
is observed.
How did it happen? Well, at first, how does that line goa
cloud on the horizon no bigger than a mans hand.(2)
At first it was believed that the federal government didnt
even have the power of eminent domain, so that even into the nineteenth
century there were cases where the federal government required
land in the states, and they would turn to someone within the
state government to condemn the land for them. So the state would
condemn and turn it over to the feds, and there were cases like
that in Massachusetts and in California. Then later on the U.
S. Supreme Court decided a case called United States vs. Kohl,
and in that case they explained what I just told you, except they
took a long opinion to explain it, and that is that its
in an attribute of sovereignty that the government can just do
it because it is one of its powers and the Constitution only imposes
these two conditions.
Then whats a public use? Thats an interesting question.
At first it would seem pretty clearpublic buildings, military
installations, docks, customs houses, lighthouses, roads, hospitals,
etc. Then came the period of railroad construction, which had
a terrible corrupting effect on the field and on America in general.
Now, mind you, before we get too excited here, a railroad is plainly
a public use. In fact, in most of the world, railroads are run
by the government. It is only in this country that, and even now
we have Amtrak, but historically in this country railroads were
private institutions. There has always been a confusion that persists
until this day as to the public character of the taker as opposed
to the public character of the use.
It always sounds as a shock to my students and even to experienced
practicing lawyers that the power of eminent domain can be exercised
by anybody, anybody at all, you, you. How is that done?
In this country when we say sovereign, we create confusion. In
England its easy. In England the sovereign is an old lady
named Elizabeth Windsor. She wears funny hats and she makes speeches
and cuts ribbons. In this country, we have three institutions.
We have the executive, the legislative, and the judicial branches
of government. Together, they are the sovereign. Well then, how
does it apply here?
The power of eminent domain in this country rests in the first instance in the legislature; so that even though the government has that power inherently, the legislature must release it before it can be exercised. There is a very funny case in California from the sixties in which the highway department attempted to condemn a freeway right-of-way through a cemetery, and the owners of the cemetery said, sorry, Buster, you cant do that. Why not? Because there is a statute that the legislature passed that says that cemetery property shall not be taken for streets and highways. And they said, oh, tish tosh, we are the state, we are the government, we are sovereign, we can do it. And the court they went to, it went up to appeal, and the Appellate Court said, no, you aint nothing but a hound dog. You have to obey the law, same as anybody else. Youre the executive branch; so therefore you dont get to release the power of eminent domain. You have to be authorized by the legislature. The legislature didnt give you that power, so you dont have it. Period.
So the legislature then enables one to exercise the power, then the executive branch implements that decision and takes the property through a variety of means, and the judicial branch then makes sure that the conditions of both the Constitution and any statutes that the legislature may have passed are complied with. Thats the theory.
Well, in New York its a mess. First of all, you dont
have a right to a jury trial in eminent domain. Almost everybody
does except New York, Rhode Island, and Connecticut, I guess.
I dont how that came about, but it did.
Second, its worse than that because if I go to the Los Angeles
Superior Court with a case and I get a judge pissed off at me,
the next time I go there are 200 other judges, and chances are
Ill get one of the others. In New York, if you are in a
county that has any significant amount of eminent domain business,
one justice of the local supreme court is designated as the eminent
domain judge, and he is the whole cheese. Every single eminent
domain case comes before him or her. The result of that is that
the New York bar, which is in many ways very lively, very aggressive,
very, you know, New York, in eminent domain, youve never
seen a bunch of more modest pussy cats than those guys, and no
real strident, vigorous eminent domain bar has ever developed
in New York. In New York City, which is an enormous city with
a lot of business of that type, youd be hard put to count
the specialized eminent domain law firms on one hand. In California,
youd probably count scores of them, which is still very
few in a state of that size. But New York is kind of unique. So
this bar, the informed segment of the bar that knows this field
and practices, it has been pretty thoroughly intimidated into
silence.
The legislature, well, I dont know. I keep reading stuff.
Look, all I know is what I read in the papers. So I read in the
papers about some crazy things that happen here in Albany. The
other day I pick up The New York Times and theres
a big article that Governor Pataki signed this wonderful revision
on eminent domain, and I said, oh, they really got the message.
Right? The post-Kelo anger and whatnot, and then I read
it and say, what the hell is this! It limits the condemnation
for power lines. Now, power lines are about as public a use as
you can imagine. Everybody uses power. In every state that I know
of there is a law that gives everybody the right to go to the
local utility and plug in. Its public. So that is where
they do a revision!
New York is a sewer. New York City is a sewer when it comes to
abuse of the power of eminent domain for favored private interest.
The New York Stock Exchange, the New York Times, the Bank of America,
those are only the current ones. Thats been going on for
a long time. And, its phony. Why do I say that with such
force? Well, I come to New York on business regularly, every now
and then, and every time I go to Manhattan, what do I see? I see
construction. I see skyscrapers going up. I see cranes. I hear
jackhammers going. Almost none of it is redevelopment. This is
all privately assembled land on which private individuals build
buildings. So what do they need all that redevelopment for, if
not for private, favored deals? Look, there have been entire chunks
of boroughs in New York that have been abandoned, the south Bronx
being the famous example that looked like Hamburg after the war,
in 1945 for a while. Why dont they redevelop that? Oh no.
Thats the Willie Sutton principle. How many here remember
Willie Sutton? Too many dont. Willie Sutton was a premier
bank robber and safe cracker in his day, but he wasnt as
good at getting away as he was at robbing banks. So he got caught,
and he served time in prison. When he was released, he was sort
of a celebrity. So newspaper reporters interviewed him, and one
said, Willie, why do rob banks? And he said, because that is where
the money is.
And thats the answer to it. So you have these huge chunks of New York that for decades have gone without redevelopment, whereas in Manhattan, in the heart of Manhattan where everything was booming, thats where you had redevelopment. That New York Stock Exchange caper cost the city of New York over a hundred million dollars for nothing, because they had to abandon it. The Stock Exchange changed its mind, and they didnt want another skyscraper that might be a target. The New York Times is getting a big building on 43rd Street and Eighth Avenue. A friend sent me a copy of the lease, the ground lease between the Empire State Development Corporation and The New York Times, and its supposed to be a ninety-year lease to New York Times and its developer. Except, if you read it carefully, buried in it is an option provision which after thirty years enables the Times and the redeveloper to buy this property from the Empire State Development Corporation, for nominal consideration. You know what that means. So, Im sorry, this is in a bad area and New York is about the worst, and theres not much that one can say to argue with that.
But I left you hanging in the air, didnt I? I said, well, we had this public use and somehow in the railroad era it got undermined. Well, yes, what happened is the railroads were an idea whose time had come, and it was widely believed in this country in the mid nineteenth century that it was essential to complete the railroad network, and the government was supporting them. It was not just for general public benefit, but also for the governments own use. Remember, that in the Civil War in the 1860s railroads played an important role in the waging of that war and the transportation of troops and supplies in the war-making effort. So there was an encouraged activity, and the business community in those days was dominated often by folks who came down in history as the robber barons. They, of course, were able to exercise their influence on various state governments to promote their activities and help them obtain railroad rights-of-way. It was considered to be such an important thing for the country that before the Civil Warthere is a two-volume book, the memoirs of John Sherman, who before the Civil War was a condemnation lawyer in Ohio. He describes the railroad practices, how they would come down and talk to the farmers. Remember, they werent taking peoples homes. They would take a strip through farmland, and they would promise em the moon. They would say, look, we are going to put through the railroad. Its going to bring prosperity and wealth and everybody is going to be well off and why dont you give us the land. And a lot of those farmers did. And some asked for modest amounts and thats how it went.
The upshot of that period was that as things started changing, land became more valuable, and eminent domain cases starting hitting dwellings and businesses, rather than open farmland it ran head on into the already established judicial culture that people who asked for money for their land were somehow greedy and overreaching. Therefore, there developed a great judicial resistance to private citizens claims for their land. The residue of that attitude is still very much with us.
You will find, regularly, judicial opinions saying that we cant pay these people for all of their demonstrable economic losses because it will bankrupt the state. The California Supreme Court once with a straight face said, why, if we have to pay them for these losses, an embargo on useful public projects will have to be declared. This was absolute nonsense. The state was booming. There was plenty of money. The California Division of Highways, which was the biggest condemnor at the time, was accumulating annual surpluses in the hundreds of millions of dollars, and the court was talking of, we cant pay them because it will bankrupt us.
In the 1960s the court declared that when, in an eminent domain taking, access to the owners remaining land was impaired, that was a compensable event. One of the justices dissented, and it was none other than Roger Traynor, later Chief Justice, an extremely intelligent and highly revered man. He wrote a long dissenting opinion, and he concluded it by saying pretty much, well, in spite of my arguments, youve done it, and from now on there will be no more freeways in California. That was in the 1960s.
So we are dealing here with a judicial culture that is essentially
biased against private property owners. That culture was reinforced,
of course, in the 1930s during the New Deal, when it became
official in the U. S. Supreme Court, in the famous switch in time
that saved nine, capitulated to Franklin Delano Roosevelts
threat to add additional seats and to pack the court with his
supporters. They started upholding the various New Deal legislation.
In the process they went out of their way to denegate, unnecessarily,
in my opinion, property rights and their importance in the first
place. So we approached that with that sort of a generalized stage
setting, so to speak.
Well, what about the public use business? Everything
was going swimmingly. They worried about such things, for example,
in the 1890s of was it a public use to take land for a national
park at Gettysburg, and they said, oh yes, thats a public
use. Youve been to Gettysburg? You know it is a public use.
You figure, what the hell were they doing pondering that. Its
about as public as you can get. Its open to the public.
You can come and go. But it was novel, so they kind of went along.
The doo-doo hit the fan, it kind of blindsided everybody, talk
about stealth decision making. In 1896 an English woman named
Bradley sued the Fallbrook Irrigation District in California.
It was not an eminent domain action. She sued to get an injunction
to prevent the district from selling her land located within the
district. Why would the district do that? Because she refused
to pay her assessment. So the district would kind of use foreclosure,
would then foreclose on the land and sell the property, and she
wanted to stop them. On what conceivable theory? Well, she said
that the district wasnt legitimate and therefore it didnt
have any powers. That it was not a proper public purpose for the
government to get involved in promotion of irrigation. For some
strange reason she wound up in front of some eccentric federal
judge, who said, yeah, I agree with that, thats right, and
he issued the injunction.
That case went to the U. S. Supreme Court and was decided by a gentleman named Peckham, and he wrote a long opinion. I dont know why, because it was a very simple case. Is irrigation in the arid west a legitimate function of government? Yes. It was legitimate under California law, the Constitution provided for it, the statutes did, and what was Mrs. Bradley relying on? She was relying on the substantive due process clause. Well, it has nothing to do with due process. The government can do that. The government can govern. And one of the things in governance is to provide water. So they could have disposed of it very simply, but Justice Peckham went on and on about the public purpose of it and said, we dont need to worry about them using that money to acquire land because that would be for a public use etc., etc., etc. Mrs. Bradley loses.
Everything seems to be copacetic and then nine years later, whammo, out of the blue. I told you it was a stealth thing. Two guys get into a controversy in Utah, Clark and Nash. They are both farmers or own agricultural land. Nash decides to enlarge his farm, but Utah is an arid state, so he needs more water. He has an irrigation ditch, but he wants to enlarge that ditch and bring in more water. Utah had a statute that said that any person could exercise the power of eminent domain. Remember, I told you that. Any person could use the power of eminent domain for irrigation ditches. Perfectly sensible law. Well, it may be sensible from a states local, regional point of view, but the defendant, Mr. Clark, says, wait a minute. Thats all very nice and good and Im sure that Nash will be happy and wealthy if you let him do this, but it isnt for a public use. He wants to enlarge his own farming operation at my expense.
He lost. He went to the U. S. Supreme Court. That case is known as Clark vs. Nash, and, as luck would have it, it went to Justice Peckham, and the old boy forgot what he had said in the Bradley opinion. So he wrote an opinion in Clark vs. Nash in which he said in the Bradley case a private corporation was seeking to condemn land for irrigation, and we allowed it. So we will allow it here. If you know the two opinions, you go, what! The Bradley opinion had nothing to do with condemnation, remember? It was that assessment. The validity of a tax, essentially, but that is what he said.
As luck would further have it, one year later comes another case from Utah called Strickley vs. Highland Boy Gold Mining Company, same basic scenario except the mining company wants to condemn an easement under Utah law across Strickleys land so they can put in one of those aerial bucket tram lines to transport the ore from the mine to a processing plant.
It goes up to U. S. Supreme Court, goes to Justice Holmes, and Justice Holmes quite naturally says, wait a minute. Didnt we just decide this last year? Of course we did, in Clark vs. Nash. Boom, affirmed. No analysis, no nothing. And that is how the law came into being enabling private entities, private individuals to exercise the power of eminent domain for their own commercial benefits. The theory beingthey didnt use that term, its a modern termbut there was essentially a trickle down theory. They reasoned that if these guys prospered, the region will prosper, the agricultural resources will get developed, etc., etc., and, therefore, that is a public benefit and is explained then in Fallbrook Irrigation District vs. Bradley. Why a public benefit is a public use, theyre the same thing.
They arent. But the law got fundamentally confused at that point, and it went on from there. The difficulty was that, well, it wasnt really a difficulty, but the thing that delayed the present situation was that, in the twentieth century there wasnt much condemnation except in World War II, and that didnt involve things like that. Those were classic condemnation cases of the government, the military taking property for the war effort, and there the court typically was talking about compensability and compensation, not the right to take.
The right to take problem didnt surface until 1954 in Washington, DC. And Washington, DC, decided to have a slum clearance. If youve been to Washington, you may recall that the city, the District of Columbia, is a square with a point pointing north. It is actually an irregular square because a river runs through part of it, the Potomac, and the stuff on the west side of the Potomac was ceded back to Virginia after the Civil War. So the southwest corner of that square is kind of an odd-shape, smaller than the others. And it was a slum. There was no question about it. It was a slum.
In fact, those gray hairs among you like me may recall in high school we used to have these civics books. They had black and white pictures of the capitol dome and these terrible slums in the foreground and some caption to the effect of, what a shame it is that this wealthy nation maintains such terrible places within the sight of the capitol dome. I dont know if you remember that. I do.
So they decided to eliminate the slums. Well, is that a public
use? Probably. Its a close question, but probably.
Along comes a fellow named Berman who owned a neighborhood department
store in southwest Washington, and his store was certainly no
slum. It was well maintained, good looking, thriving, prosperous,
supplied the inhabitants of the area with goods, no problem. So
he goes to court and he says, not so fast. First of all, my property
is not a slum, so how can you take it for slum clearance. Second,
this is not done. No matter what you say, this isnt a taking
for a public use because under this redevelopment schedule you
are going to take all these properties in the southwest corner
of Washington, you are going to raze them to the ground, and then
turn over the ground to private redevelopers. They will then put
up private apartments and condos, townhouses, and whatnot. Thats
all very nice but it isnt public use. Its strictly
private sector activity.
So here we have another one of those bad historical jokes.
The justice of the U. S. Supreme Court who winds up writing the
opinion was Douglas, who over the years acquired the nickname
of Wild Bill because he was given to writing these expansive,
rhetorical, sloppy, poorly reasoned opinions. He was a big gung-ho
New Dealer. He was Roosevelts friend, and I guess he was
chairman of the Securities and Exchange Commission before he went
on the Court. He wrote this flaming manifesto in favor of the
government power to make the community pretty if thats what
the government wanted, and taking property, displacing the owners,
in prettifying the property would also make the definition of
public use.
Well, so you have another big step down the slippery slope. The
next case that I should mention in the remaining time is the famous
Hawaiian land redistribution case, where the Supreme Court said
that it was okay to condemn the title of a land lessor and convey
it to the lessees who had leased parcels and built homes on them.
That, too, they said was a public use, because it would eliminate
a land oligopoly on Hawaii. That was nonsense, because there was
a shortage of land in Hawaii due to the fact that the government
owns half of Oahu, but thats another story.
All of which brings us to Kelo, which I dont think
I need to say much about. What made Kelo rather interesting
is the factual context because in Berman you were talking
about real slums mostly and this one store. In Midkiff,
the Hawaiian case, you were talking about people gaining title
to their homes. In Kelo it was flipped, and ordinary people,
lower middle class neighborhoods, were being displaced and deprived
of their homes so that redevelopers could come in. There is a
Corcoran Jennison company of Boston, which was the redeveloper,
and they would get a 90-acre waterfront parcel for 99 years for
one dollar a year. Way to go, huh? If they gave me land like that,
I could be a big developer, too. Anyway, so you know what happened.
The owners lost and that ignited a real fury across the country.
I have never seen anything like it, and I have been at this for
over forty years. Not only is it in terms of the polls, the lopsided
polls, but I think I have an explanation. I am not sure Im
right, but lets try it out.
If you will look at some of the controversial cases of the
twentieth century like Roe vs. Wade, there were two constituencies.
There were the social conservatives who were horrified at the
courts invasion of what they thought was a religious obligation,
but on the other hand there were the liberals and the feminists
on the other side who were cheering on the Court. So it was very
vigorous, but there were two contending constituencies. Probably
the same was true of Brown vs. Board of Education. The
fair-minded liberal part of the country cheered the Court for
doing away with school segregation, but the South was opposed
to it. In Kelo there are no two constituencies. The initial
polls were running something like 80-90 percent in favor of the
property owners.
That leaves me just a couple of minutes to do what nobody is supposed
to do and that is try to predict the future. I cant do it
any more than anybody else. But I can tell you what I see and
what I see is this: If the present anger, the intensity of feelings
on the part of Americans who rightly resent the rule of law that
makes them and their homes fair game to wealthy, well connected,
political types with an in to city hall, maintain their righteous
indignation and continue pressing, I think you will see some changes.
You know, you must know, that there are several initiatives going
in the West. There is one in California. There is one in Nevada,
and there are some others where the people finally got tired and
said, okay, never mind the legislature. Well do it ourselves.
There are problems with these initiatives, because the people
who draft them are not skilled legislation draftsmen and sometimes
they create problems or they give the courts an excuse to invalidate
them as has happened in Oregon a couple of years ago where the
court said no, no, you went too far because your constitutional
amendment deals with two subjects, and you can only do it one
at a time. We shall see. But the tide still seems to be running
in favor of the property owners on that one, and it remains to
be seen whether or not that tide will eventually reach the legislatures.
At the moment, Im a pessimist. I come from a long line of
pessimists who had much to be pessimistic about. So I am not really
very cheerful about that, because the legislators are accustomed
to seeing these waves of anger that dissipate as time goes on
and then the usual suspects, the lobbyists and the money folks
take over and get them back into business as usual. Maybe it will
happen again. I dont know. I hope it wont. Whether
or not the New York legislature is even amendable to that kind
of pressure, I dont know. I doubt it. Certainly the New
York courts are completely hopeless. After I read the reports
on the way they pick judges in New YorkI have known some
New York judgesand after I read the reports in The New
York Times of how they pick judges in New York, I mean its
not even a joke.
There was a federal grand jury investigation and there were some indictments. What happened was that the way they pick judges wasthey are partisan officersso theyd have a convention to pick the candidates. They offered examples like somebody, one of the bosses there, would call up somebody and say, hey, Charlie, you are a candidate to the convention. Can you be here day after tomorrow at three oclock? Yeah, yeah, sure. Good, be here and vote for blah, blah. Thats how they pick judges. Thats what precipitated the indictments in Brooklyn. So I said, oh boy, good old New York City and Brooklyn. So a few days later I pick up The New York Times and I find out that they have the same system upstate. Hopeless.
James E. Morgan: Thank you. Okay, in about 30 seconds we are going to open the floor for a handful of questions, because we are running tight on time for lunch. Its not a problem. But we want to keep close. But there is one thing I forgot to bring up, and I want to bring it to everybodys attention, including the rest of the panel.
On September 29 of this year the Fourth Department of the New York State Appellate Division handed down a decision which may be New Yorks Kelo coming. It is going to go to the Court of Appeals. Ive been told this. It is the matter of the application of the City of Syracuse IDA versus a number of, there are approximately thirty entities, I believe, that theyre suing, including J. C. Penneys and others. What this is an attempt to use eminent domain on behalf of the IDA of Syracuse taking leaseholds in one mall and so the purpose is to build Destiny USA, which is going to supplant, in theory, the Mall of the Americas, the largest shopping center in the world. So this is something to monitor because most of the issues weve been talking about are related.
Gideon Kanner: Can I add a word?
James E. Morgan: Sure.
Gideon Kanner: There is no problem condemning leaseholds. That is perfectly proper and is done all the time, but what they did up there in Syracuse is these guys purported to condemn phrases, paragraphs in the lease.
Carol LaGrasse: Rewriting the contract.
Gideon Kanner: Exactly.
James E. Morgan: This is something we should keep an eye on because I am sure next year the decision should have been handed down, and it will have dealt with the most recent decision of the Court of Appeals of the State of New York to deal with a number of issues we have been talking about.
Notes:
(1) Brody v. Village of Port Chester,
2nd U.S. Circuit Court of Appeals (2005)
(2) I Kings 18:44-45. Elijah saw a little cloud arise out of the
sea. A great rain followed.
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