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 wasn't California. It was
Pennsylvania. And it wasn't oil, it was coal. And it wasn't a
million dollars. It was a $100,000, and I didn't 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, don't 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, you've got to give them notice.(1) Give me a break.
I'm supposed to tell you about where we've been and where we are and probably where we're 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 whichit's an old book, a half century old, but it's 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, it's supposed to be a taking for a public use upon payment of just compensation. That's 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 wasn't holy, it wasn't Roman, and it wasn't 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, that's terrible, it's 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. I'd like some indemnity, they say, oh you silly fool, you don't 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 don't 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 man's hand.(2) At first it was believed that the federal government didn't 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 it's 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 what's a public use? That's 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 it's 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 can't 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 ain't nothing but a hound dog. You have to obey the law, same as anybody else. You're the executive branch; so therefore you don't get to release the power of eminent domain. You have to be authorized by the legislature. The legislature didn't give you that power, so you don't 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. That's the theory.
Well, in New York it's a mess. First of all, you don't have
a right to a jury trial in eminent domain. Almost everybody does
except New York, Rhode Island, and Connecticut, I guess. I don't
how that came about, but it did.
Second, it's 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 I'll 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, you've 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, you'd be hard put to count the specialized eminent domain law firms on one hand. In California, you'd 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 don't 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 there's 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. It's 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. That's been going on for a long time. And, it's 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 don't they redevelop that? Oh no.
That's the Willie Sutton principle. How many here remember Willie Sutton? Too many don't. Willie Sutton was a premier bank robber and safe cracker in his day, but he wasn't 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 that's 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, that's 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 didn't 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 it's 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, I'm sorry, this is in a bad area and New York is about the worst, and there's not much that one can say to argue with that.
But I left you hanging in the air, didn't 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 government's own use. Remember, that in the Civil War in the 1860's 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 weren't taking people's 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. It's going to bring prosperity and wealth and everybody is going to be well off and why don't you give us the land. And a lot of those farmers did. And some asked for modest amounts and that's 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 can't 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 can't pay them because it will bankrupt us.
In the 1960's the court declared that when, in an eminent domain taking, access to the owner's 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, you've done it, and from now on there will be no more freeways in California. That was in the 1960's.
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 1930's 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 Roosevelt's 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 1890's of was it a public use to take land for a national park at Gettysburg, and they said, oh yes, that's a public use. You've been to Gettysburg? You know it is a public use. You figure, what the hell were they doing pondering that. It's about as public as you can get. It's 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 wasn't legitimate and therefore it didn't 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, that's 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 don't 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 don't 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 state's local, regional point of view, but the defendant, Mr. Clark, says, wait a minute. That's all very nice and good and I'm sure that Nash will be happy and wealthy if you let him do this, but it isn't 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 Strickley's 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. Didn't 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 didn't use that term, it's 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, they're the same thing.
They aren't. But the law got fundamentally confused at that point, and it went on from there. The difficulty was that, well, it wasn't really a difficulty, but the thing that delayed the present situation was that, in the twentieth century there wasn't much condemnation except in World War II, and that didn't 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 didn't surface until 1954 in Washington, DC. And Washington, DC, decided to have a slum clearance. If you've 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 don't know if you remember that. I do.
So they decided to eliminate the slums. Well, is that a public
use? Probably. It's 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 isn't 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. That's all very nice but it isn't public use. It's 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 Roosevelt's 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 that's 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 that's another story.
All of which brings us to Kelo, which I don't 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 I'm right, but let's 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
court's 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
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 can't 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. We'll 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, I'm 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 don't know. I hope it won't. Whether or not the New York legislature is even amendable to that kind of pressure, I don't 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 it's 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 they'd 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 o'clock? Yeah, yeah, sure. Good, be here and vote for blah, blah. That's how they pick judges. That's 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. It's 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 everybody's 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 York's Kelo coming. It is going to go to the Court of Appeals. I've 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 they're suing, including J.C. Penney's 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 we've 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.
(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.