Property Rights Foundation of America®

Speech from Proceedings of the Fourth Annual New York Conference
on Private Property Rights
(1999)

Unequal Protection—The Injustice of Using Eminent Domain on Behalf of Private Business
Dana Berliner
Attorney, Institute for Justice, Washington, D.C.

Thank you very much. My name is Dana Berliner and I am an attorney at the Institute for Justice. As Carol was explaining, we are a law firm that is devoted to defending individual freedom, and we focus on the areas of economic liberty, school choice, property rights, and free speech. I am very honored to be here today because, as I am sure you realize, you are part of a growing wave of resistance to the encumbrances on property rights that is going on in this country, and it is really personally inspiring to me to come to a conference like this and see so many people who are actually getting involved in resisting the kinds of excessive regulations and government abuse that I see so much of. So thank you so much for coming here and for working on this issue. It is really, really important.

I realize that most of you have come to talk about zoning and regulation and regulatory takings. I am here to tell you about an area that you may or may not be familiar with, which is eminent domain and condemnation laws. This is actually an area that I was not familiar with up until about three years ago when I started working on a case in Atlantic City, New Jersey. Although I heard about eminent domain in law school, I had always understood it to be something that happened once in a while. Every so often the government would take a piece of property for a highway, and I had never believed that it was a particularly common event. I was much more familiar with regulatory takings. So I was very surprised when I began working on this case in Atlantic City.

Now, what happened in Atlantic City is that the state of New Jersey created a Casino Reinvestment Development Authority which was an agency devoted to the promotion of casinos as a form of economic development in Atlantic City. Now, already you are thinking this sounds kind of suspicious, right? It is. Because one of the things that the legislature did was it granted this agency the power of eminent domain. There is no reason that an agency of that type should ever have been granted the power of eminent domain. But indeed they had it, and, like every government agency that is given a power like that, they used it. And what they used it for was they attempted to condemn a house that a woman, our client, Vera Coking, had lived in for now 38 years, a small Italian restaurant that had been there for over 20 years, and a little gold shop that had just been purchased by a Russian immigrant. They were condemning these to turn them into a lawn and a limousine waiting area for Donald Trump's casino across the street.

Now, I heard about this and I thought, I don't understand how this is a proper use of eminent domain. It seemed very surprising to me, and what I learned is that eminent domain law is absolutely terrible in this country. It originally began in Roman times as a way that the Roman government could condemn routes primarily for aqueducts, which was a big issue in those days, and also for roads.

In our Constitution, that is not where the power itself comes from. The power of eminent domain in the Constitution says, as I'm sure you all are very familiar with, "nor shall private property be taken for public use without just compensation." The purpose of this constitutional phrase is to say, okay, we recognize that once in a while the government will have to take property, but it has to pay just compensation. There was no attempt in the Constitution to increase the power of eminent domain and, really, up until about the middle of this century it was used primarily for road access and certain public works. It was not widely used at all. It was used for railroads, as well, and that was the biggest use. But up until about the 1930s to 1950s, depending on the state, it was not used to take property from one private party and give it to another private party. It could be used if the government was going to own the property like a school or a road, but not to transfer it.

Then in the middle of this century things started to go completely haywire and, whereas before you couldn't transfer between private parties, suddenly courts started authorizing that all the time. The beginning of the decline really started in the 1950s with a case called Berman vs. Parker in which a guy in Washington, D.C., had a thriving department store that wasn't in a very nice neighborhood and D.C. decided to completely redevelop the area. This one guy said, well, my building looks great. I just remodeled it. It is in wonderful shape. You can do the rest of the area but I want mine to stay. And the U.S. Supreme Court said, no, the entire area needs to be redeveloped. We are just going to toss you in even though there is nothing wrong with your property. And that is still a public use.

After that, as you can imagine, things began to get much worse. In the 1980s there were two very famous cases that became, I think, the nadir of property rights and eminent domain in this country. The first was Poletown, which was a case in Detroit where an entire large neighborhood with hundreds of homes and businesses and churches was razed and completely leveled to make a plant for GM. The idea was that this plant would revitalize Detroit. Suddenly Detroit would become a thriving city full of employment opportunities and economic growth. And, of course, what happened? They destroyed a neighborhood. Everybody who lives in Detroit does not, in fact, see a resurgence in its economic development. That never made it to the U.S. Supreme Court, but it did make it to the Michigan Supreme Court.

The next case was only a couple of years later and that was in Hawaii. Hawaii is in a weird land setup where almost all of the property was owned by a few land trusts and everyone who lived there leased it in, like, hundred year leases. They owned the houses and these very long leases, but they didn't actually own the land. The State decided that it would just transfer all of the land from the people who owned it to the people who were leasing it, and the landowners said, how is this a public use? The use of the land is going to be exactly the same, the piece of land that the house is on or an apartment building. There is no difference whatsoever except who owns it and you are transferring it from one private party to another private party. How was this a public use? The U.S. Supreme Court said it is a public use. Hawaii decided there is too much concentrated land ownership. That's not a public good, so we are just going to change it. And that's the public purpose.

After that, it was kind of a free for all, as you can imagine. The courts just routinely upheld absolutely anything as a public purpose. That has caused a real problem, particularly as there begins to be more cooperation between private industry and the government. Cooperation ordinarily is not such a bad thing, but it is a bad thing when private parties start to use the power of government.

Fortunately, in the last few years there has started to be an improvement, and I think that courts are finally stepping back and saying this situation has gone a little too far, and they are starting to apply a greater level of scrutiny to takings where the property goes from one private party to another private party. This is a change in the law that is really just beginning, something that I am very excited about, and it is something that we saw in this case in Atlantic City where the courts said that the property being taken was just being handed over to Trump. He wasn't even obliged to use it for a lawn and a limousine waiting area. Frivolous as those things are, he wasn't even bound by that. He could have done anything with it, and the courts said that's too much. That's a blank check to take someone else's property, and that is not a public purpose.

So we are starting to get victories, and there have been a few other cases around the country similarly where courts have said it is going too far. But it is still an area that is sadly misused. Instead of property being taken for a so-called public purpose, it is often a tool of political favoritism where there is a business that says, I'll contribute tax dollars, or it is a business that has a lot of political pull, and it will request a piece of property and the government will say, okay, we will condemn it for you and you can expand over there. That is a frequent problem.

Another one is getting rid of unpopular businesses or unpopular residents. If someone really makes a nuisance of themselves, or—Carol mentioned gravel mines— there are other kinds of businesses that are not especially popular. Factories are an example. There is a situation in New York in which a small factory is facing condemnation just because the town doesn't really like it and claims that it wants to redevelop it as a mall with movie theaters, but really it just doesn't like this particular property and doesn't like the owner.

It has also been used basically as a tool for redecorating. A town or a city says our downtown could be spiffier. I visited another city and their downtown area and mall looked shinier. It would be nice if we could just have a different mall here or have a different downtown area, and because it is eminent domain they don't have to negotiate really with the property owner, and they don't have to take full market value, and they don't have to do all of the things that you ordinarily have to do to get someone's property. The real cost in human life is hidden from the government. So they can just sort of say this sounds like a good idea and ignore everything that it will do to all the people who live there.

Another kind of thing that eminent domain can get used for that is particularly pernicious is it can be used to change the racial constitution of an area. There have been a couple of situations like that. There was one in Chicago where there was a whole area that was primarily a nice middle-class area, primarily populated by Hispanic people, and the city tried to just condemn the whole thing to turn it into condominiums.

There is another situation going on right now in Pittsburgh where they are proposing changing the entire downtown. Right now it is a racially mixed sort of middle class-lower middle class shopping area, and they want to change it into a kind of shopping area that only very wealthy people and probably only very white people are going to be going to, instead of the people that are currently shopping there.

Eminent domain is a power that can be gravely misused in lots of different kinds of ways. And one of my purposes in being here is to suggest to you at least a few things that you can do when you have the opportunity to stop it.

The first is fairly obvious. No government entity, or almost no government entity, should be having this power anymore. So if they are, if your town or your state is creating a new agency or redevelopment authority or economic development corporation or parking authority or county agency, anything, and there is a question about whether or not to give that agency the power of eminent domain, the answer is no, no, no. Every time it comes up for a vote, vote no. They should not have the power of eminent domain because once they have it, it is going to get misused.

If there is a situation where an agency already has the power but there is a question should it exercise discretion to condemn this piece of property for whatever reason or should it vote in favor of a redevelopment plan with the power of eminent domain, again you should always express your opinion no. If you have a vote, vote no. If you have an opportunity to write a letter to the editor or a letter to the agency or whatever about whether it should use its discretion this way, the answer is no.

Sometimes there are ways to limit the reasons that an agency can use the power of eminent domain. For example, some states will say it can just be used for the public purpose which is very, very general, but it can also say it can only be used for public ownership, for necessary public works. There are other kinds of limitations that can be put on something. So if an agency is going to have to have it, you conceive limiting language, like the transportation authority can only condemn property for roads. In some states, the transportation authority can condemn property for roads, but it can also condemn it for scenic beauty along the highway which means, not only does it tear down homes to build the highway, but it can decide that it would like to see a little more green space nearby and tear down all the homes in the neighborhood. This is not as it should be, and in any state that you have the opportunity to resist this, you should do so.

A limit that can be placed on eminent domain is financial. You can make it more expensive, and ways that some states have done this is to require relocation assistance for the businesses that are displaced. Right now a lot of states will provide a little bit like say $500 for your entire business that you have been in for 30 years to move to another location. The higher the relocation assistance is, the better.

Some other states have occasionally recognized that the kind of just compensation that is given is so low and so unjust that they have actually required certain condemning authorities to pay 110 percent of the appraisal value because they realize that the appraisals are so low. In particular, Kansas is one place that I am aware of it where they tried this. As you may know if you have dealt with this, sometimes people will give appraisal values that are a third or a tenth of the actual value, so getting an extra 10 percent may not get you very far.

In the Atlantic City case, the offers for the properties were certainly no more than a quarter of the actual values of the properties. Although that, of course, was a huge problem, the real problem was that no one wanted to move, and that is often what you come across in these situations. Of course, there is the injustice of being paid much, much less than the property is worth, but there is also the fact that oftentimes people are comfortably situated. There are people who have lived in houses for 70 years, family estates.

I have been hearing a lot about situations that are in your back door. I have been reading lately that there is a situation in Connecticut with a whole family that has been living on this particular estate for years that is getting moved out for, I think, a metal fabricator. In New York there are a couple of different small factories and small business that are getting moved out for malls. There is a family business in Harlem which you may even have read about that they are trying to relocate again for a big box retail store. Now, I have nothing about big box retail stores. They are fine. I just don't see why one has to condemn another thriving business in order to transfer that property to some other retail store.

I think what has happened is that government, as you know, when power grows, it really loses the motivation to question what it is doing. It is our job to make government agencies and officials take a step back and say, is this right even if we have the power, even if the courts won't stop us? Is it right to take one person's property that they are using happily and give it to another private party? We have got to tell them no.

That's the state of affairs and I think it is a fundamentally important area to fight because all of these same issues of what are property rights and how can you defend them and the same questions of what is a public purpose carry over into every single type of property issue that you will be dealing with today. It comes up in zoning. It comes up in regulatory takings. It comes up in resource management. And it is important to start drawing the line about what kind of power the government can have.

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