Kelo v City of New London

How to Reform Eminent Domain

By Thomas W. Merrill

The Supreme Court's ruling in Kelo v. New London, declining to ban the use of eminent domain for local economic development projects, has triggered a firestorm of criticism. The cause has now been taken up in Congress, where the House has passed a resolution condemning the decision, and legislation has been introduced to overturn it. Much of the criticism of the decision is poorly informed about the history and practice of eminent domain. But the spotlight on the power to take property, and the push to do something to reassure property owners that this power will be held in check, are welcome developments.

The question Congress and other legislative bodies must now consider is what form the legislative response should take. The initial impulse, reflected in the proposed legislation, is to ban the use of eminent domain for projects the sponsors think are unworthy. But the history of controversy over when the " public use" requirement has been satisfied suggests that coming up a workable definition of what is permitted and what is forbidden to local governments is no easy task. If thousands of federal and state judges, struggling with this question for nearly 200 years, have been unable to come up with a satisfactory formula, it is unlikely that modern legislators will succeed in their rush to enact a response to Kelo.

For example, the statutes proposed by House Judiciary Chair James Sensenbrenner (R-Wis.) and Senator John Cornyn (R-Tex.) would prohibit any state or local government receiving federal funds from using eminent domain for " economic development purposes." But what exactly does that mean? Virtually all exercises of eminent domain — whether for highways, utility lines, or industrial parks — are designed to promote economic development. The language of these bills could raise legal doubts about even the most conventional exercise of eminent domain.

Do the sponsors mean to prohibit eminent domain when it is used solely for economic development? Well, the project that has raised such ire in New London, Connecticut, is not designed solely for economic development purposes. It will also provide a marina, a public walkway along the Thames River, a site for Coast Guard museum, and public parking facilities for the museum and a nearby state park. So if we ban eminent domain for projects designed solely for economic development, this would quite likely not cover the New London Redevelopment project and any number of similar projects.

The prohibitory approach, even if we could solve the definitional dilemmas, also requires that there be someone to enforce the ban. Do the sponsors intend to create a new federal cause of action permitting eminent domain opponents to take local officials to federal court for a ruling on whether their projects are permissible? Do we really want federal judges deciding whether local development projects should be allowed to go forward or not?

And where are the lawyers going to come from to represent the landowners who object to their property being taken for economic development? Property owners currently rely on lawyers who work for a percentage of any additional compensation they obtain for the owners. These lawyers have a strong incentive to argue that their clients are entitled to more money, since that will automatically increase their fees. But their incentives to argue that the taking is prohibited are obviously more problematic; if they push too hard and the argument actually prevails, there may be no money to pay their fees.

A better reform idea would be to require more complete compensation for persons whose property is taken by eminent domain. The constitutional standard requires fair market value, no more and no less. Congress modified this when it passed the Uniform Relocation Act in 1970, which requires some additional compensation for moving expenses and loss of personal property. Congress could modify the Relocation Act again, in order to nudge the compensation formula further in the direction of providing truly " just" compensation.

For example, Congress could require that when occupied homes, businesses or farms are taken, the owner is entitled to a percentage bonus above fair market value, equal to one percentage point for each year the owner has continuously occupied the property. This would provide significant additional compensation for the Susette Kelos and Wilhelmina Derys who are removed from homes they have lived in for much of their lives.

Alternatively, Congress could require that when a condemnation produces a gain in the underlying land values due to the assembly of multiple parcels, some part of this assembly gain has to be shared with the people whose property is taken. Under current law, all of the assembly gain goes to the condemning authority, or the entity to which the property is transferred after the condemnation.

Either one of these adjustments in the measure of just compensation — or others that might be advanced if Congress held serious hearings on the matter — would do more to protect homeowners against eminent domain than declaring a federal prohibition on takings for economic development. Adjustments in compensation would protect all property owners — those whose property is taken for highways and public housing projects, as well as those whose property is taken for economic development projects. Such a requirement would be vigorously enforced by the attorneys who represent property owners in condemnation proceedings. Providing additional compensation in cases of greatest concern would discourage local governments from using eminent domain in these cases, without prohibiting its use altogether. Perhaps most importantly, assuring a more "just" measure of compensation would leave the ultimate decision about when to exercise this power in the hands of local elected officials, where it has long been lodged, and where it belongs.

Thomas Merrill is Charles Keller Beekman Professor at Columbia Law School. He filed a brief amicus curiae on behalf of the American Planning Association in Kelo v. City of New London.