EMINENT DOMAIN AFTER KELO V. CITY OF NEW
LONDON: AN ARGUMENT FOR BANNING ECONOMIC
DEVELOPMENT TAKINGS
CHARLES E. COHEN*
I. INTRODUCTION ......................................................492
II. HISTORY OF THE DOCTRINE ..................................500
A. Public-Private Takings in the Colonial
and Revolutionary Eras ................................500
B. Public-Private Takings in the Nineteenth
Century ...........................................................504
C. Public-Private Takings in the Early
Twentieth Century ........................................508
D. Public-Private Takings in the Latter
Twentieth Century: Berman, Midkiff,
and Poletown ...................................................510
E. The Kelo Decision...........................................516
1. The Majority Opinion.............................518
2. Justice Kennedy’s Concurring
Opinion.....................................................521
3. Justice O’Connor’s Dissenting
Opinion.....................................................523
4. Justice Thomas’s Dissenting Opinion ..526
III. JUSTIFICATIONS FOR EMINENT DOMAIN..............533
A. Overview of Common Justifications ..........533
B. Coercion and Undercompensation .............536
* Assistant Professor of Law, Capital University Law School; J.D., University of
California, Hastings College of Law, 1999; B.A., Harvard University, 1987. I am
grateful to Capital University Law School for its generous financial support, and
to the members of the Ohio Legal Scholarship Workshop for their helpful
feedback. I am also indebted to Professors William Arraiza, James Beattie, Mark
Brown, Dennis Hirsch, Donald Hughes, David Levine, Susan Looper-Friedman,
David Mayer, Adam Mossoff, Susan Rozelle, Shelley Ross Saxer, Mark Strasser,
and Richard Wood for their invaluable suggestions and observations. Thanks, too,
to my intrepid and hard-working research assistants Braden Angel, Amy Kramb
Botos, Nicholas Grilli, and Kelly Ann Sabo for their first-rate contributions. I
would also like to thank my parents and brother for their unwavering
encouragement and support.
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1. Subjective Premium................................538
2. Surplus from Transfer ............................539
3. Mitigating Undercompensation:
Reciprocity of Advantage ......................539
4. Efficiency Concerns ................................540
IV. A BAN ON ECONOMIC DEVELOPMENT
TAKINGS .................................................................543
A. Reciprocity of Advantage.............................544
B. Efficiency Concerns.......................................546
C. Capture and Oppressive Takings ...............547
D. Broad Judicial Deference ..............................550
E. Proposed Modifications to the Public Use
Framework .....................................................551
F. Shortcomings of Proposed Modifications
to the Public Use Framework ......................555
G. Proposing a Legislative Ban on Takings
for Economic Development .........................558
H. Consequences of a Ban on Takings for
Economic Development ...............................567
I.
INTRODUCTION
When the New London Development Corporation (NLDC)
embarked on an ambitious program to revitalize a ninety-acre
parcel along the Thames River in southeastern Connecticut, it
encountered formidable opposition from Susette Kelo and nine
of her neighbors. NLDC, a non-profit development agency established by the City of New London, wanted to use its power
of eminent domain1 to take, with compensation, the homes and
businesses occupying the proposed site of its new development. The goal of the project was to revitalize economically distressed New London, which had an unemployment rate twice
that of the state average.2 Plans called for developers to construct a mixed-use complex containing homes, a hotel, a marina, restaurants, shops, office space, and other amenities.
Although the fee interest in the land would be owned by
1. “Eminent domain . . . is the legal right to acquire property by forced rather
than by voluntary exchange.” Patricia Munch, An Economic Analysis of Eminent
Domain, 84 J. POL. ECON. 473, 473 (1976).
2. Kelo v. City of New London, 125 S. Ct. 2655, 2658 (2005).
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Banning Economic Development Takings
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NLDC, the property would be occupied under long-term
ground leases by the developers and operators of the new project. NLDC was able to purchase through negotiation most of
the property in the proposed development site, but Susette
Kelo and her neighbors refused to sell. When NLDC initiated
condemnation proceedings to take the land through eminent
domain, Kelo and her neighbors dug in their heels and sued,
claiming that the proposed project was not a “public use,” as
required by the United States3 and Connecticut4 Constitutions,
because the property would be occupied by private entities after the taking. Kelo and her neighbors lost in the Connecticut
Supreme Court by a 4-3 margin,5 but the U.S. Supreme Court
granted certiorari in the case,6 bringing the once-sleepy academic backwater of the public use requirement for the exercise
of eminent domain to the fore.
After a long period of relative dormancy in the field of eminent domain generally, much recent attention has surrounded
so-called “public-private” takings for economic development
like the one at issue in Kelo.7 Such public-private takings occur
when the government uses its eminent domain power to transfer non-blighted property from a private individual or entity to
another private individual or entity. The debate in these cases
has centered on whether the proposed end-use of the condemned property properly can be considered “public” as is required by the Fifth Amendment’s Takings Clause. The
conceptions of public use can be generally divided into two
categories: the “narrow” view and the “broad” view. Under the
narrow view, the term “public use” means “use by the public.”
Under this approach, property is taken for “public use” only if
the public has the right to use the property, or the property is
3. U.S. CONST. amend. V (“[N]or shall private property be taken for public use,
without just compensation.”).
4. CONN. CONST. art. I, § 11 (“The property of no person shall be taken for
public use, without just compensation therefor.”). Several other state constitutions
contain provisions with similar requirements. See Adam Mossoff, The Death of
Poletown: The Future of Eminent Domain and Urban Development After County of
Wayne v. Hathcock, 2004 MICH. ST. L. REV. 837, 837 n.3.
5. Kelo v. City of New London, 843 A.2d 500, 574–75 (Conn. 2004), aff’d, 125 S.
Ct. 2655 (2005).
6. Id., cert. granted, 542 U.S. 965 (2004).
7. See, e.g., Jeffery W. Scott, Public Use and Private Profit: When Should Heightened
Scrutiny Be Applied to “Public-Private” Takings?, 12 J. AFFORDABLE HOUSING &
COMMUNITY DEV. L. 466, 466 (2003) (defining and using term “public-private
taking”).
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owned by the government, after it is taken. Under the broad
view, property is taken for “public use” if the taking results in
some public advantage or benefit. Under this view, anything
that enhances public welfare constitutes a “public use.”8 The
broad view is almost universally accepted; indeed, throughout
most of American history, it has been the dominant view.9 Advocates of the use of eminent domain for economic development projects contend that the indirect benefits accruing to the
public from these projects—job creation, an increased tax base
and economic revitalization—constitute public uses because
they produce a public benefit. Opponents contend that such
projects primarily benefit the developers, provide uncertain
public benefits, and, if considered public uses, could lead to
unfettered use of the eminent domain power.
The question of whether the intended use of property
marked for condemnation by eminent domain is a “public use”
has not, until recently, been given serious consideration by federal courts. While it has frequently been stated that a law taking property from A and giving it to B for a purely private use
is beyond the power of government,10 for most of the history of
the federal Takings Clause, and of the similar state constitutional provisions, most courts have adopted a policy of extreme
deference to the decisions of government policy makers on the
public use issue. The famous modern U.S. Supreme Court decisions in the area, Berman v. Parker11 and Hawaii Housing Authority v. Midkiff,12 adopted a rational basis standard of review,13
which has been interpreted as requiring deference to a governmental public use determination “until it is shown to involve an impossibility.”14
Usually included in the trio of public use cases granting extreme deference to the governmental taker is the Michigan Supreme Court’s recently overturned decision in Poletown
8. 2A JULIUS L. SACKMAN, NICHOLS ON EMINENT DOMAIN §§ 7.02[2]–7.02[3] (3d
ed. 2005) [hereinafter NICHOLS] (discussing broad and narrow views).
9. See infra Parts II.A–D.
10. Kelo v. City of New London, 125 S. Ct. 2655, 2671 (2005) (O’Connor, J.,
dissenting) (noting the “long-held, basic limitation on government power” that
property may not be taken from A and given to B (citing Calder v. Bull, 3 U.S. (3
Dall.) 386, 388 (1798))).
11. 348 U.S. 26 (1954).
12. 467 U.S. 229 (1984).
13. See Berman, 348 U.S. at 33–36; Midkiff, 467 U.S. at 241–43.
14. Midkiff, 467 U.S. at 240 (quoting Old Dominion Co. v. United States, 269 U.S.
55, 66 (1925)).
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Neighborhood Council v. City of Detroit, in which the court upheld, over a public use challenge, the taking of a 465-acre
neighborhood for the construction of a General Motors plant.15
All three cases involved so-called “public-private” takings. Indeed, these cases and others have been so deferential in their
analysis of the public use requirement that many scholars have
concluded that the Public Use Clause is “moribund,” effectively imposing no check on the use of the eminent domain
power.16 As a result, say critics, this awesome (some have said
“despotic”)17 governmental power has been abused, overused,
and sold to the highest-bidding special interest, breeding inefficiency and running roughshod over the property rights of
untold numbers of citizens.18
Some scholars and property rights activists were hoping for
relief from this state of affairs when the Supreme Court granted
certiorari in Kelo in September 2004.19 The Court’s writ, coming
as it did in the wake of several high-profile decisions from state
supreme courts and lower federal courts employing unusually
hard-nosed approaches to questions of “public use,”20 led some
15. 304 N.W.2d 455 (Mich. 1981), overruled by County of Wayne v. Hathcock, 684
N.W.2d 765, 800 (Mich. 2004).
16. Wendell E. Pritchett, The “Public Menace” of Blight: Urban Renewal and the
Private Uses of Eminent Domain, 21 YALE L. & POL’Y REV. 1, 2 (2003); see also
RICHARD A. EPSTEIN, TAKINGS: PRIVATE PROPERTY AND THE POWER OF EMINENT
DOMAIN 162 (1985) (“Scholarly commentators have rivaled each other in their
efforts to read the [public use] limitation out of the Constitution.”).
17. E.g., James W. Ely, Jr., Can the “Despotic Power” Be Tamed?: Reconsidering the
Public Use Limitation on Eminent Domain, PROB. & PROP., Nov.–Dec. 2003, at 30, 32
(quoting Vanhorne’s Lessee v. Dorrance, 28 F. Cas. 1012, 1015 (Paterson, Circuit
Justice, C.C.D. Pa. 1795) (No. 16,857)).
18. See DANA BERLINER, PUBLIC POWER, PRIVATE GAIN: A FIVE YEAR, STATE-BYSTATE REPORT EXAMINING THE ABUSE OF EMINENT DOMAIN (2003), available at
http://www.castlecoalition.org/report/pdf/ED_report.pdf (reporting more than 3,722
private condemnations filed, and more than 6,500 threatened during the period from
1998 to 2002).
19. Kelo v. City of New London, 843 A.2d 500 (Conn. 2004), cert. granted, 542
U.S. 965 (2004).
20. See Daniels v. Area Plan. Comm’n, 306 F.3d 445, 463 (7th Cir. 2002) (holding
that exercise of eminent domain was unconstitutional where claim of economic
development was “conclusory and largely unsupported”); 99 Cents Only Stores v.
Lancaster Redev. Agency, 237 F. Supp. 2d 1123, 1129 (C.D. Cal. 2001) (holding that
exercise of eminent domain was for impermissible private use where motivated
solely by desire to satisfy retailer’s wish to expand); Sw. Ill. Dev. Auth. v. Nat’l
City Envtl., 768 N.E.2d 1, 10–11 (Ill. 2002) (holding that condemnation for
racetrack expansion was not a public use, even though it would contribute to
economic growth in the region); County of Wayne v. Hathcock, 684 N.W.2d 765,
783–84 (Mich. 2004) (overruling Poletown Neighborhood Council v. City of
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to believe that the Court was about to announce a new, tighter
standard for judicial review of public use determinations.21
Those hopes were dashed when the Court, in a 5-4 decision,
affirmed the Connecticut Supreme Court’s finding that the
New London economic development project constituted a public use for Fifth Amendment purposes.22 Relying heavily on
Berman and Midkiff, the Court reaffirmed its policy of extreme
deference to governmental “public use” determinations.23 Justice Kennedy’s concurring opinion emphasized that courts
should take seriously accusations of “impermissible favoritism
to private parties”24 and suggested “the possibility that a more
stringent standard of review than that announced in Berman
and Midkiff might be appropriate for a more narrowly drawn
category of takings.”25 Other than this quiet hint at the theoretical possibility of a shift in the future, and the faint suggestion
in the majority opinion that a “carefully considered” or “integrated” development plan would be strong, or perhaps essential, evidence that a taking was not a pretext for conferring a
benefit on a private party,26 those dissatisfied with the current
legal regime found little to celebrate in Kelo.
The Kelo decision was correct as a matter of law, following
naturally from Berman and Midkiff and consistent with American judicial and legislative approaches to the public use question that pre-date the U.S. Constitution. Yet the policy
implications of the Kelo decision and the precedents underlying
it are extremely troubling. As Justice O’Connor correctly noted
in her dissent in Kelo, the majority’s holding that the construction of economic development projects may constitute a public
use means that “all private property is now vulnerable to being
taken and transferred to another private owner, so long as it
might be upgraded—i.e., given to an owner who will use it in a
way that the legislature deems more beneficial to the public—
Detroit, 304 N.W.2d 455 (Mich. 1981), and holding that construction of an office
park for economic development was not a public use).
21. See, e.g., James E. Krier & Christopher Serkin, Public Ruses, 2004 MICH. ST. L.
REV. 859, 860 (“[H]owever unexpectedly, the subject of public use is back on the
table, with a good chance of substantial change in the law across the country.”).
22. Kelo v. City of New London, 125 S. Ct. 2655, 2669 (2005).
23. See id. at 2663–64.
24. Id. at 2669 (Kennedy, J., concurring).
25. Id. at 2670.
26. Id. at 2666–67 (majority opinion).
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in the process.”27 She declared that for the majority to hold that
“incidental public benefits resulting from the subsequent ordinary use of private property render economic development
takings ‘for public use’ is to wash out any distinction between
private and public use of property.”28 The result, she contended, was “effectively to delete the words ‘for public use’
from the Takings Clause.”29
For years, judicial acceptance of this broad view has, in fact,
produced the kind of results Justice O’Connor warned of in her
Kelo dissent. The result has been that the existing public use
regime has failed to produce the two most important goals of a
proper eminent domain regime: efficiency and justice.30 “Efficiency” or “utility” occurs when societal resources are deployed so as to increase overall societal wealth.31 “Justice,”
most commonly invoked in the context of eminent domain, is
achieved when the government is prevented from “forcing
some people alone to bear burdens which, in all fairness and
justice, should be borne by the public as a whole.”32
Rather than advancing the goals of efficiency and justice,
modern eminent domain practices in the area of economic development are tainted by the abuse of existing property owners33 (particularly, but not exclusively, in the form of
undercompensation for taken property), capture by special interests, and inefficiency.34 Because the Kelo decision was well
27. Id. at 2671 (O’Connor, J., dissenting).
28. Id.
29. Id.
30. See Michael A. Heller & James E. Krier, Deterrence and Distribution in the Law
of Takings, 112 HARV. L. REV. 997, 998 (1999) (“In a vast and otherwise contentious
literature, whether judicial opinions or scholarly books and articles, there appears
to be virtual consensus that the purposes of just compensation are essentially
two[:] . . . ‘efficiency’ and ‘justice[]’ . . . . ”); Frank I. Michelman, Property, Utility,
and Fairness: Comments on the Ethical Foundations of “Just Compensation” Law, 80
HARV. L. REV. 1165, 1214–24 (1967) (Michelman, in this enormously influential
work on the subject, preferred the terms “utility” and “fairness”).
31. See Heller & Krier, supra note 30, at 998–99. Michelman defines “efficiency”
as “augmentation of the gross social product where it has been determined that a
change in the use of certain resources will increase the net pay-off of goods
(however defined or perceived) to society ‘as a whole.’” Michelman, supra note 30,
at 1173. He goes on to add that “[a]n ‘efficient’ process is one which maximizes
the total amount of welfare, of personal satisfaction, in society, and not all
satisfaction is material.” Id.
32. Armstrong v. United States, 364 U.S. 40, 49 (1960).
33. See infra text accompanying notes 245–69, 282–92, 307–15.
34. See Krier & Serkin, supra note 21, at 867 (“Condemnation for . . . non-public
uses gives rise to concerns with fairness and efficiency alike.”).
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grounded in history and case law, right or wrong, this Article
does not argue that the Kelo majority should have ruled otherwise. Nor would it be realistic to expect a change in the law
any time soon. Instead, this Article calls for a pragmatic solution: a ban on takings for economic development, enacted either by state legislation or, preferably, by state constitutional
amendment.35
This solution is desirable for several reasons. First, exercises
of eminent domain are associated with systematic undercompensation of the dispossessed landowner.36 Thus, the aggrieved
owner essentially subsidizes the government (or private) project. This is not only unjust, it is also inefficient; the government, able to acquire property at a discount, does not have to
consider the full costs of its plan in deciding whether the overall economic gains accruing to society from the project outweigh the overall costs.37 For reasons that will be discussed,
these dual problems arising from undercompensation—
injustice and inefficiency—are potentially much more severe
when the taking is a public-private taking for economic development.
Second, as has been widely noted, allowing takings for economic development imposes no structural limitations on the
eminent domain power, because “[a]ny business enterprise
produces benefits for society at large.”38 If the eminent domain
power can be exercised without limitation, then no property is
safe from condemnation. Third, most of the less drastic proposals for remedying the aforementioned justice and efficiency
problems do not actually solve these problems.
Fourth, and most importantly, even accepting the questionable premise that economic development projects are the only
35. A handful of state supreme courts have already enacted such a ban under
their state constitutions. See, e.g., City of Little Rock v. Raines, 411 S.W.2d 486,
493–95 (Ark. 1967); Baycol, Inc. v. Downtown Dev. Auth., 315 So. 2d 451, 455 (Fla.
1975); Sw. Ill. Dev. Auth. v. Nat’l City Envtl., 768 N.E.2d 1, 10–11 (Ill. 2002); City of
Owensboro v. McCormick, 581 S.W.2d 3, 7 (Ky. 1979); County of Wayne v.
Hathcock, 684 N.W.2d 765, 770 (Mich. 2004). In recent academic literature, Ilya
Somin has also called for a categorical ban on the use of eminent domain for
economic development. Ilya Somin, Overcoming Poletown: County of Wayne v.
Hathcock, Economic Development Takings, and the Future of Public Use, 2004 MICH.
ST. L. REV. 1005, 1007.
36. See infra text accompanying notes 248–69, 282–92.
37. See infra text accompanying notes 276–92, 305–06.
38. Poletown Neighborhood Council v. City of Detroit, 304 N.W.2d 455, 464
(Mich. 1981) (Fitzgerald, J., dissenting), overruled by Hathcock, 684 N.W.2d at 787.
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or best way to revitalize economically distressed regions, there
is a better way to foster such projects than through the exercise
of eminent domain.39 A ban on the use of eminent domain for
economic development projects would effectively require that
all property used in economic development projects be purchased on the open market. This solution would force the government and its proxies to consider the full cost of the property
it acquires. Although this proposal would increase the cost of
property acquisition to potential participants in economic development projects, the government, if it so desires, could offer
tax breaks, grants, and other incentives to these businesses in
order to offset these increased costs. The money to pay for
these tax breaks and grants would, of course, come from the
public treasury, meaning that the additional costs of property
acquisition arising from the unavailability of eminent domain
would be spread among all taxpayers. Spreading the cost is
much more just than concentrating the burden of subsidizing
economic development projects on the few people whose
property would otherwise be marked for condemnation.
Significantly, removing eminent domain from the economic
development process need not seriously hinder revitalization
of depressed local economies, because economic development
projects are not strictly necessary for this purpose.40 Moreover,
even assuming that such projects are indispensable, there is
considerable evidence to suggest that the use of eminent domain for economic development takings is frequently unnecessary, because other less problematic options for acquiring the
necessary property are readily available. Moreover, it is often
possible for projects to be redesigned to work around properties that cannot be purchased on the open market. Though
these alternative options are not perfect, and may sometimes
fail to achieve the land acquisition necessary for a worthwhile
project, risking a slight reduction of economic development
projects is a reasonable price to pay for avoiding the problems
caused by the present regime.
Part II of this Article briefly traces the history of the public
use requirement in the United States from colonial times
through the Supreme Court’s decision in Kelo. Although this
39. See infra text accompanying notes 351–54.
40. See INSTITUTE FOR JUSTICE, KELO V. CITY OF NEW LONDON: WHAT IT MEANS
AND THE NEED FOR REAL EMINENT DOMAIN REFORM 5 (Sept. 2005), http://www.castle
coalition.org/pdf/Kelo-White_Paper.pdf.
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history reflects some ambivalence and inconsistency regarding
the breadth of the public use requirement, the most common
approach since colonial times has been to define “public use”
to mean “public advantage or benefit,” rather than literal “use
by the public.” Thus the so-called “broad view” of public use is
so deeply entrenched in American case law that it would have
required a radical break from history and precedent for the Kelo
court to have ruled otherwise. Both Justice O’Connor’s and Justice Thomas’s dissents, while correct in their assessment of the
negative consequences flowing from the majority’s decision, do
not provide plausible legal arguments for ruling otherwise.
Part III discusses the rationales for the eminent domain
power, its use in the modern world, and the justice and efficiency concerns surrounding relatively unfettered use of the
power by government.
Part IV sets forth the case for banning economic development takings, arguing that an outright ban on such takings is
the best way to alleviate the serious concerns regarding justice
and efficiency that they raise. This Article also sets forth proposed language for a constitutional amendment implementing
such a ban.
II.
A.
HISTORY OF THE DOCTRINE
Public-Private Takings in the Colonial and
Revolutionary Eras
Although the principle that private property could only be
taken for public use did not become firmly entrenched in
American law until after the Revolution,41 actual practices prior
to the ratification of the U.S. Constitution are highly relevant to
the later debates over the scope of the “public use” requirement. Based on colonial land use practices, at least initially,
there were virtually no limits on nonconsensual property transfers between private individuals. The taking of land to build
dams and private roads and to drain private land was commonplace.42 Today, many of these takings would be considered
public-private takings, in that private individuals or entities,
rather than the government, were permitted (literally or in effect) to condemn the property of others. Eminent domain trans41. Errol E. Meidinger, The “Public Uses” of Eminent Domain: History and Policy,
11 ENVTL. L. 1, 16 (1980).
42. 2A NICHOLS, supra note 8, at § 7.01[3] (citing Meidinger, supra note 41, at 2).
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fers to the government were common as well: There were, for
example, formal statutes authorizing local governments to take
land to build roads as early as 1639.43 But of greater interest to
the study of the public use requirement are legislative schemes
that, by limiting the traditional legal remedies available for
trespass and other common-law actions, had the effect of facilitating nonconsensual transfers to private individuals or entities.44 The most commonly cited examples of these schemes are
the so-called “Mill Acts”45 and various other legislative
schemes permitting landlocked property owners to condemn
ways of access over their neighbors’ land.46
Under the Mill Acts, colonial governments dramatically limited the remedies available to upper riparian landowners for
flooding caused by the construction of lower riparian mill
dams.47 One constructing a mill under the Mill Acts was liable
only for annual or permanent damages and enjoyed a privileged status compared with his common-law forebears, whose
aggrieved upper riparian neighbors could resort to the remedies of self-help, punitive damages, and injunctive relief.48 The
effect of this regime was that “the lower riparian had a right to
condemn the lands of his upper neighbor by flooding.”49 In virtually all Mill Act states, the mills were heavily regulated and
required to serve any paying customer.50 Thus, although the
Mill Acts permitted forced property transfers to private individuals, the mills constructed on property so transferred were,
43. Meidinger, supra note 41, at 13.
44. See Lawrence Berger, The Public Use Requirement in Eminent Domain, 57 OR. L.
REV. 203, 206 (1978) (discussing limitations on the property rights of upper
riparian property owners under the Mill Acts).
45. For a complete listing of the early Mill Acts, see generally Head v.
Amoskeag Mfg. Co., 113 U.S. 9, 17 n.2 (1885).
46. See Meidinger, supra note 41, at 14–15.
47. Berger, supra note 44, at 206 (citing Morton J. Horwitz, The Transformation in
the Conception of Property in American Law, 1780–1860, 40 U. CHI. L. REV. 248, 272
(1973)).
48. Id.; see also Meidinger, supra note 41, at 14–15; Harry N. Scheiber, Property
Law, Expropriation, and Resource Allocation by Government: The United States, 1789–
1910, 33 J. ECON. HIST. 232, 239 (1973).
49. Berger, supra note 44, at 206. In many southern colonies and states, the Mill
Acts even permitted mill builders to exercise eminent domain to take land on the
opposite side of the river, on which the mill could situate part of the dam. 1
NICHOLS, supra note 8, § 1.22[10].
50. See Nathan Alexander Sales, Classical Republicanism and the Fifth Amendment’s
“Public Use” Requirement, 49 DUKE. L.J. 339, 372–77 (1999).
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in Nathan Sales’s words, “public utilities.”51 These takings
would be considered to comport with the narrow view of public use. One important exception, however, was Maryland’s
Mill Act, enacted in 1719, which extended Mill Act protections
to builders of private mills used for iron production, and which
did not require that these mills be available for use by the public.52 But even in states whose Mill Acts did require access to
the mills by the public, some courts spoke of the mills in terms
of the general benefits they would produce for the public at
large, rather than the benefits provided to those who actually
used the mills.53 At the same time, many colonial legislatures
authorized property owners lacking access to public roads to
condemn, upon payment of compensation, rights of way over
surrounding lands.54 Thus, by the colonial era, “[a]lready eminent domain’s exercise was split between governmental bodies
and private parties.”55
Other colonial land use practices would raise eyebrows
among today’s advocates of a strict public use requirement.
John F. Hart, in his study of colonial land use practices,56 catalogued numerous colonial statutes authorizing transfers from
one private party to another if the original owner failed to
make productive use of the land. In the Plymouth colony, for
example, one who failed to begin productive operations within
a year of discovering a mine would forfeit the mine and the
government could appoint another person to operate that mine
for his own profit.57 Similar statutes in other colonies allowed
private individuals to condemn sites suitable for mill construc51. See Head v. Amoskeag Mfg. Co., 113 U.S. 9, 18–19 (1885) (“The principle [sic]
objects, no doubt, of the earlier acts were grist-mills, and it has been generally
admitted, even by those courts which have maintained the most restricted view of
the legislative power, that a grist-mill which grinds for all comers, at tolls fixed by
law, is for a public use.”); see generally Sales, supra note 50, at 374–75.
52. See An Act for the Encouragement of Iron Manufacturing, Within This
Province (June 8, 1719), in 33 ARCHIVES OF MARYLAND 467 (1913) (cited in Sales,
supra note 50, at 373 n.162).
53. See Skipwith v. Young, 19 Va. (5 Munf.) 276 (1816) (upholding condemnation under the state’s Mill Act on the basis of the general public benefit accruing
from the existence of a mill) (cited in Sales, supra note 50, at 374).
54. Berger, supra note 44, at 207; see also 1 NICHOLS, supra note 8, § 1.22[7].
55. Meidinger, supra note 41, at 16.
56. John F. Hart, Colonial Land Use Law and Its Significance for Modern Takings
Doctrine, 109 HARV. L. REV. 1252 (1996).
57. Id. at 1265. Connecticut law allowed such a transfer even if the miner was
actually operating the mine, if the pace of production fell below a statutorily
determined level. Id. at 1265–66.
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tion if the present owner failed to build a mill58 or to take property of owners who allowed sites amenable to forges and foundries to lay idle.59 Several colonial acts threatened owners of
undeveloped urban lots with forfeiture if they failed to develop
the land within prescribed time periods or in a manner determined by law.60 Thus, “antient proprietors” of land in James
City, Virginia who failed to build on their holdings could lose
their property interest if another person built a “decent house”
on the undeveloped land.61 None of these takings resulted in
actual use by the public. Instead, they were intended to advance communities’ needs for economic development and
population growth.
Although a requirement of public use, narrow or broad, was
not part of the forced-transfer regime at the time of the Revolution,62 it is interesting to note that even before it was relevant as
a matter of law, some common practices, such as those authorized by the Mill Acts, resulted in takings that would satisfy the
modern narrow standard. Others, like those chronicled by
Hart, would satisfy only the broad test.
This observation, however, is merely academic, as a public
use requirement of any kind did not begin to emerge until
later, under circumstances that remain to some extent unclear.
Pennsylvania and Virginia were the first colonies to insert the
phrase “public use” into their constitutions in 1776.63 Pennsylvania’s constitution provided that “no part of a man’s property
can be justly taken from him, or applied to public uses, without
his own consent, or that of his legal representatives . . . .”64 Virginia’s “public use” clause stated that citizens “cannot be taxed
or deprived of their property for public uses, without their own
consent, or that of their representatives so elected . . . .”65 However, the language of neither provision clearly states that emi-
58. Id. at 1267.
59. Id.
60. See generally id. at 1276–79 (describing statutes in Virginia, New York City,
and New Jersey, and mentioning statutes in Rhode Island and South Carolina).
61. Id. at 1276–77.
62. Meidinger, supra note 41, at 16.
63. Berger, supra note 44, at 204 (citing William B. Stoebuck, A General Theory of
Eminent Domain, 47 WASH. L. REV. 553, 591 (1972)).
64. PA. CONST. of 1776, art. VIII, reprinted in 8 SOURCES AND DOCUMENTS OF
UNITED STATES CONSTITUTIONS 278 (William F. Swindler ed., 1979).
65. VA. CONST. of 1776, § 6, reprinted in 10 SOURCES AND DOCUMENTS OF UNITED
STATES CONSTITUTIONS, supra note 64, at 49.
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nent domain may only be exercised for public uses, and history
does not reveal the drafters’ exact intentions.66 Errol E. Meidinger may provide a partial explanation for this ambiguity with
his speculation:
[I]t may be surmised that eminent domain had yet to emerge
distinctly from the complex of due process considerations
flowing from the development of Magna Charta. Both the
quoted provisions, for instance, emphasize the Lockean notions of representation and effective consent, rather than the
substantive nature of the use.67
In any case, only after the outbreak of the Revolution did most
of the other original thirteen states add public use language to
their constitutions, beginning with Vermont in 177768 and concluding with South Carolina in 1868.69 These latter provisions,
like the ones in Virginia and Pennsylvania, often did not specify the actual permitted uses and limitations of the eminent
domain power.70
B.
Public-Private Takings in the Nineteenth Century
As a result of the vagueness of limitations on the takings
power, eminent domain doctrine developed piecemeal, decision by decision, in the state courts.71 Lacking explicit direction
66. See Meidinger, supra note 41, at 17; see also Stoebuck, supra note 63, at 591–92 .
67. Meidinger, supra note 41, at 17.
68. VT. CONST. of 1777, ch. I, art. II, reprinted in 9 SOURCES AND DOCUMENTS OF
UNITED STATES CONSTITUTIONS, supra note 64, at 489.
69. S.C. CONST. of 1868, art. I, § 23, reprinted in 8 SOURCES AND DOCUMENTS OF
UNITED STATES CONSTITUTIONS, supra note 64. For a list of public use provisions in
the constitutions of the 13 original states and their years of enactment, see 2A
NICHOLS, supra note 8, § 7.01[3] n.15.
70. See Scheiber, supra note 48, at 234–35.
71. See id. at 235; Pritchett, supra note 16, at 9. The federal courts played almost
no role in this early development because, from independence until the late
Nineteenth Century, almost all eminent domain battles were fought at the state
level. It was common practice throughout most of the Nineteenth Century for
state governments to condemn property on behalf of the United States in state
courts. See Mark C. Landry, Note, The Public Use Requirement in Eminent Domain—
A Requiem, 60 TUL. L. REV. 419, 423 & n.21 (1985). Not until 1875, after the
Michigan Supreme Court prohibited this practice in People ex rel. Trumbley v.
Humphrey, 23 Mich. 471 (1871), did the United States seek to exercise eminent
domain in the federal courts. See Landry, supra, at 423 n.21 (citing Kohl v. United
States, 91 U.S. 367 (1875)). Moreover, after the ratification of the Constitution, a
handful of state courts applied the Fifth Amendment to state exercises of eminent
domain, see Harry N. Scheiber, The Road to Munn: Eminent Domain and the Concept
of Public Purpose in the State Courts, in LAW IN AMERICAN HISTORY 327, 360
(Donald Fleming & Bernard Bailyn eds., 1971), but in 1833 the U.S. Supreme Court
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from their respective state or colonial takings provisions, the
courts turned to civil law, natural law,72 and common law for
guidance.73 Among the key principles developed by the courts
during this period was that eminent domain was a power inherent in government and that it “could be legitimately exercised by the state only for a ‘public use’ or ‘public purpose.’”74
William B. Stoebuck, in his classic A General Theory of Eminent
Domain, noted that the early civil law theorists Grotius, Vattel,
Pufendorf, and Bynkershoek all argued for limitations on the
power of eminent domain, insisting, respectively, that the
power should be used only for “public advantage,” “public
welfare,” “necessity of the state,” or “public utility.”75 Stoebuck
further noted that these theorists, often quoted in American
judicial opinions, “apparently influenced” the American development of the “public use” requirement.76 Alternatively, Philip
Nichols, Jr. concluded that
American courts seem to have evolved [the public use requirement] by reference to the “higher law,” with some assistance from an implication by negative inference from the
phrase in the Fifth Amendment to the Federal Constitution,
and in many state constitutions, “nor shall private property
be taken for public use without just compensation.”77
In any case, even absent explicit legislative or constitutional
provisions, many early decisions held that governments lacked
the power to permit the nonconsensual taking of private property for private use.78 Some such holdings were based on natural law theories,79 while other courts reached the same result by
held that the Fifth Amendment did not apply to the States. See Barron v. City of
Baltimore, 32 U.S. (7 Pet.) 243 (1833). Thus, while some states adopted principles
derived from the Fifth Amendment, see Schieber, supra, at 362, a study of eminent
domain, and the public use requirement in particular, during most of the
Nineteenth Century must involve the study of numerous state court decisions
applying state law.
72. See 2A NICHOLS, supra note 8, § 7.01[4]; Scheiber, supra note 71, at 235.
73. See Scheiber, supra note 71, at 235.
74. Id.
75. Stoebuck, supra note 63, at 586.
76. Id. at 589.
77. Philip Nichols, Jr., The Meaning of Public Use in the Law of Eminent Domain, 20
B.U. L. REV. 615, 616 (1940) (citations omitted).
78. 2A NICHOLS, supra note 8, § 7.01[4].
79. See id. § 7.01[4].
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concluding that state constitutional language implied that
property could only be taken for a public use.80
Initially, the principle that private property could not be
taken for a private use had little impact on the actual uses of
the takings power.81 Eminent domain practices changed little
during the first decades following independence, focusing
primarily on roads and dams.82 In fact, even general exploitation of natural resources was widely seen by early nineteenthcentury courts as a “public use.”83
As the Nineteenth Century progressed, however, the use of
eminent domain expanded dramatically. In an effort to foster
investment and speed economic development, legislatures in
every state granted the power of eminent domain to private
corporations building or operating railroads, turnpikes,
bridges, and canals.84 Courts generally upheld these takings on
the theory that the companies were what would today be called
common carriers, obligated to provide service to any member
of the public,85 or on the theory that the ultimate uses of the
taken property would produce a public benefit.86 In addition,
the number and scope of Mill Acts grew dramatically.87 No
longer limited to “public” grist mills for use by neighboring
farmers, mills constructed under these later acts were increasingly devoted to processing lumber, cotton, and pulp, or to fueling foundries.88 Despite the obvious lack of any “public use”
of such mills, courts repeatedly upheld the private takings to
foster their construction. In most cases, the courts echoed the
reasoning applied to railroads, turnpikes, bridges, and canals:
80. See id. § 7.01[5].
81. See Nichols, supra note 77, at 617.
82. Meidinger, supra note 41, at 18.
83. See Nichols, supra note 77, at 617 & n.13; see, e.g., Scudder v. Trenton Del.
Falls Co., 1 N.J. Eq. 694 (1832); Boston & Roxbury Mill Corp. v. Newman, 29 Mass.
(12 Pick.) 467 (1832); see also Meidinger, supra note 41, at 23–24 (discussing cases).
84. Scheiber, supra note 48, at 237. In addition to granting these enterprises
eminent domain rights, state courts adopted what Scheiber calls “expediting
doctrines”: interpretations of the law designed to facilitate economic expansion by
shifting costs away from, and granting other advantages to, these companies. See
generally id. at 235–40.
85. Meidinger, supra note 41, at 27–28.
86. See Pritchett, supra note 16, at 9.
87. See Meidinger, supra note 41, at 23.
88. See id.
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that the ultimate uses of the taken property would provide a
“public benefit.”89
In the 1840s and 1850s, however, a different view began to
emerge: In some jurisdictions, actual use by members of the
public became an essential element of “public use.”90 The impetus for this development was increasing concern among courts
that the explosive growth in the use of eminent domain, made
possible by wide judicial adoption of the broad view of public
use, threatened the institution of private property,91 and that
legislatures had been co-opted into favoring powerful private
interests over the public good.92 Other judges feared that excessive support for private enterprise might bring additional government regulation.93 There is some scholarly disagreement
over how widespread this use-by-the-public view ever became.
Philip Nichols, Jr. concluded that this “narrow view” eventually became the majority position.94 Lawrence Berger, however,
contended that
[w]hile the narrow view of public use held considerable
sway, especially in the latter half of the nineteenth century,
it never completely took over the field. The two doctrines
competed, leaving the commentators in hopeless confusion
as to what the “true rule” (for in those days they believed in
such things) was.95
89. See id. at 24.
90. See Berger, supra note 44, at 208; Donald J. Kochan, “Public Use” and the
Independent Judiciary: Condemnation in an Interest-Group Perspective, 3 TEX. REV. L. &
POL. 49, 67 (1998); Meidinger, supra note 41, at 24; Nichols, supra note 77, at 617.
91. See Berger, supra note 44, at 208.
92. See Pritchett, supra note 16, at 10; see also MORTON J. HORWITZ, THE
TRANSFORMATION OF AMERICAN LAW 1780–1860, at 260 (1977) (stating that “[a]
widespread fear of legislatively authorized redistribution of wealth began to
overshadow the enthusiasm for eminent domain as an important instrument of
cheap economic growth”).
93. Pritchett, supra note 16, at 10.
94. Nichols, supra note 77, at 619 (stating that a “respectable minority of
decisions” supported the view of Michigan Supreme Court Justice Thomas Cooley
that public benefit or advantage constituted public use). But see Stoebuck, supra
note 63, at 589 n.123 (criticizing Nichols for “assum[ing] the courts took the pure
form of the public-use doctrine more seriously than they probably did”).
Moreover, Nichols is almost certainly misinterpreting Cooley’s view on the public
use issue, as Cooley was actually a strong advocate for the narrow view. See
generally James W. Ely, Jr., Thomas Cooley, “Public Use,” and New Directions in
Takings Jurisprudence, 2004 MICH. ST. L. REV. 845, 846–50.
95. Berger, supra note 44, at 209.
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Meidinger agreed with Berger, arguing that “two separate positions, the ‘broad’ public benefit view and the ‘narrow’ use-bythe-public view, began to grow up beside each other.”96
Nonetheless, adherence to a use-by-the-public standard,
even where it existed, was often more rhetorical than actual,
although some legislative acts were struck down under the
rule.97 Stoebuck described the use-by-the-public rule as “mostly
fabeled [sic].”98 Part of the problem was that the test was difficult to apply, requiring a court to determine the extent of, or
conditions on, public access necessary to meet the use-by-thepublic standard.99 Philip Nichols, Jr. noted that
[m]ore important [than the stated doctrines in jurisdictions
adopting the use-by-the-public test] were the loopholes, the
limitations, and the evasions which courts giving lip service
to the majority view were forced to sanction, in order to
avoid bringing that view into irreconcilable conflict with the
expanding industrialism of the times, and the quick exploitation of natural resources which was felt to be necessary.100
The tendency to permit liberal use of the eminent domain
power reached its peak toward the end of the Nineteenth Century. By the 1870s, it became routine for governments to delegate eminent domain powers to private interests.101 The
western states, in their eagerness to foster development, “followed Colorado’s lead in handing out eminent domain to practically any source of capital that could use it.”102
C.
Public-Private Takings in the Early Twentieth Century
By the Twentieth Century it appeared that the narrow doctrine, where it still ostensibly existed, constituted at best a mi-
96. Meidinger, supra note 41, at 24.
97. See Stoebuck, supra note 63, at 590 (citing Loughbridge v. Harris, 42 Ga. 500
(1871)).
98. Id. at 589.
99. Kochan, supra note 90, at 67.
100. Nichols, supra note 77, at 619. For a more detailed discussion of the
evasions, see id. at 618–24. Accord Meidinger, supra note 41, at 24 (stating that the
“practical consequences [between the narrow and broad views] appear rather
minor. . . . Many courts, while formally embracing the use-by-the-public view,
developed elaborate methods of evading its implications”).
101. See Meidinger, supra note 41, at 28.
102. Id. at 29.
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nor hindrance to liberal use of the eminent domain power.103
On those rare occasions in the Nineteenth Century when the
U.S. Supreme Court addressed public use cases, it did so under
the Fourteenth Amendment’s Due Process Clause on the theory
that a taking for private use violated fundamental principles of
justice.104 The Court’s limited case law tended to favor the
“broad public benefit” view of public use:105 In 1897, the Court
incorporated the Fifth Amendment’s public use requirement
against the States through the Fourteenth Amendment in Chicago, Burlington & Quincy Railroad Co. v. Chicago.106 In 1905, the
Court upheld a Utah law empowering an individual to condemn a neighbor’s land in order to convey water.107 Thereafter,
in Hairston v. Danville & Western Railway Co., the Court emphasized “[t]he propriety of keeping in view by this court, while
enforcing the Fourteenth Amendment, the diversity of local
conditions and of regarding with great respect the judgments
of the state courts upon what should be deemed public uses in
that State.”108 In 1916, the Court, in upholding a power company’s authority to condemn land and water rights in order to
produce and sell hydroelectric power, formally rejected the
use-by-the-public test, with Justice Holmes declaring, “The inadequacy of the use by the general public as a universal test is
established.”109 A few years later in Rindge Co. v. Los Angeles
County, the Court elaborated that it was “not essential that the
entire community, nor even any considerable portion, should
directly enjoy or participate in an improvement in order to constitute a public use.”110
103. See Nichols, supra note 77, at 624; see also Scheiber, supra note 48, at 243
(“No longer did judges or framers of state constitutions rely so much upon
sophistries about ‘public use.’ Instead, they now merely paused to assert
prescriptively that one private interest or another—mining, irrigation, lumbering
or manufacturing—was so vitally necessary to the common weal as to be a public
use by inference.”).
104. See, e.g., Mo. Pac. Ry. Co. v. Nebraska, 164 U.S. 403 (1896) (holding that a
Nebraska order requiring a railroad to permit a private individual to build a grain
elevator on the railroad’s land was an unconstitutional taking of private property
for the private use of another).
105. See Meidinger, supra note 41, at 30.
106. 166 U.S. 226, 228 (1897).
107. Clark v. Nash, 198 U.S. 361 (1905).
108. 208 U.S. 598, 607 (1908).
109. Mt. Vernon-Woodberry Cotton Duck Co. v. Ala. Interstate Power Co., 240
U.S. 30, 32 (1916).
110. 262 U.S. 700, 707 (1923).
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The next major development in the application of eminent
domain law came in the first half of the Twentieth Century,
with an increase in urban redevelopment programs.111 The
1920s brought an upsurge in urban projects, aided by the
newly prominent profession of “urban planner.”112 These programs, generally designed to eliminate slums and blight or to
foster commercial development,113 began in earnest during the
Great Depression.114 Some courts initially struck down attempts
to use the eminent domain power to carry out some of these
programs, because the projects as constructed would be either
owned or occupied by private individuals.115 But the majority
trend was for courts to uphold these takings under the “public
advantage” approach to the public use rule.116 The United
States Housing Act of 1937117 made funds available to local
governments for slum removal and the development of affordable public housing, and the Housing Act of 1949118 provided a
massive influx of funds for use by local agencies for urban redevelopment.119 These acts led to a generation of additional
public use litigation, with the courts again generally upholding
takings under the public advantage test.120
D.
Public-Private Takings in the Latter Twentieth Century:
Berman, Midkiff, and Poletown
This frenzy of slum clearing and urban redevelopment set
the stage for one of the most famous twentieth-century Supreme Court public use cases: Berman v. Parker.121 In Berman,
the District of Columbia, acting pursuant to congressional authorization, had embarked on an urban redevelopment plan in
111. See Berger, supra note 44, at 214; Meidinger, supra note 41, at 33; see generally
Pritchett, supra note 16.
112. See Pritchett, supra note 16, at 14–15.
113. See Berger, supra note 44, at 215.
114. See Meidinger, supra note 41, at 33.
115. See Pritchett, supra note 16, at 24.
116. See, e.g., N.Y. City Hous. Auth. v. Muller, 1 N.E.2d 153 (N.Y. 1936); see also
Berger, supra note 44, at 215 (explaining that courts generally adopted the public
advantage approach in upholding enabling acts).
117. Pub. L. No. 75-412, 50 Stat. 888 (codified as amended at 42 U.S.C. §§ 1437–
1437f (2000)).
118. Pub. L. No. 81-171, 63 Stat. 413 (codified as amended in scattered sections
of 12 U.S.C. and 42 U.S.C.).
119. See Berger, supra note 44, at 215; Meidinger, supra note 41, at 33–34.
120. See Berger, supra note 44, at 215; Meidinger, supra note 41, at 34.
121. 348 U.S. 26 (1954).
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southwest Washington, D.C., an area which the city planning
commission had determined suffered from blighted conditions.122 The commission intended to embark on a comprehensive plan, including construction of housing and other facilities.123 Under the terms of the plan, part of the property taken
would be leased or sold to private entities to facilitate the project.124 Appellants, owners of property on which a department
store was located, objected to the taking of their property on
the grounds that, while it fell within the parameters of the redevelopment area, it was not itself a blighted property.125
Moreover, they complained that the property, once taken,
would be managed by a private agency and developed for private use.126 Thus, they contended, the taking was not for a public use as required by the Fifth Amendment.127
Justice Douglas, writing for a unanimous court, rejected the
department store owners’ claim.128 He dismissed the contention
that the taking was not for a “public purpose” by explaining,
We deal . . . with what has traditionally been known as the
police power. An attempt to define its reach or trace its outer
limits is fruitless, for each case must turn on its own facts.
The definition is essentially the product of legislative determinations addressed to the purposes of government, purposes neither abstractly nor historically capable of complete
definition. Subject to specific constitutional limitations,
when 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.129
Justice Douglas explained that this principle applied even
though the power of eminent domain was involved, for “[t]he
122. Id. at 28–32.
123. Id. at 30.
124. Id.
125. Id. at 34.
126. Id. at 31.
127. Id.
128. Id. at 36.
129. Id. at 32; see also Thomas W. Merrill, The Economics of Public Use, 72 CORNELL L.
REV. 61, 70 (1986) (“‘Police power’ is here synonymous with the extent to which
government may constitutionally regulate private activity. It defines those issues
with which government may properly concern itself.”). For a well regarded
treatment of the history, parameters, and significance of the police power, see
generally ERNST FREUND, THE POLICE POWER: PUBLIC POLICY AND CONSTITUTIONAL
RIGHTS (1904).
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role of the judiciary in determining whether that power is being exercised for a public purpose is an extremely narrow
one.”130 After acknowledging that improving public health,
welfare, and safety were clearly within the government’s police
power, he continued, “Once the object is within the authority
of Congress, the right to realize it through the exercise of eminent domain is clear. For the power of eminent domain is
merely the means to the end.”131 That private enterprise would
be used in redeveloping the area did not mean the public use
requirement was violated. The redevelopment project overall
served a public use, and therefore “the means of executing the
project are for Congress and Congress alone to determine, once
the public purpose has been established.”132 Moreover, Justice
Douglas rejected the appellants’ claim that the taking of their
property was unconstitutional because their property did not
contribute to the blighted conditions, stating that “[o]nce the
question of the public purpose has been decided, the amount
and character of land to be taken for the project and the need
for a particular tract to complete the integrated plan rests in the
discretion of the legislative branch.”133
The Court did not decide another major public use case for
thirty years. Then, in Hawaii Housing Authority v. Midkiff,134 the
unanimous Supreme Court, in an opinion authored by Justice
O’Connor, applied similar reasoning in rejecting a challenge to
Hawaii’s land reform plan. Because of the state’s history of feudal land tenure under its early Polynesian settlers, in the mid1960s forty-seven percent of the state’s land (almost all of the
privately owned land in the state) was held by seventy-two private owners, who leased land to many homeowner tenants.135
Finding this situation to be contrary to public welfare, the legislature enacted a scheme to condemn much of this land, pay
compensation to the owners, and then sell the fee interests to
the present tenants.136 The landowners sued, arguing that because their property would ultimately be transferred to private
130. Berman, 348 U.S. at 32.
131. Id. at 32–33.
132. Id. at 33.
133. Id. at 35–36.
134. 467 U.S. 229 (1984).
135. Id. at 232.
136. Id. at 232–34.
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individuals, the plan violated the public use requirement of the
Fifth and Fourteenth Amendments.137
In upholding the land reform plan, the Court cited Berman
for the proposition that any permissible governmental purpose
could be carried out using the eminent domain power.138 Summarizing Berman’s discussion of permissible uses of the taking
power, Justice O’Connor declared, “The ‘public use’ requirement is thus coterminous with the scope of a sovereign’s police
powers.”139 Since “[r]egulating oligopoly and the evils associated with it is a classic exercise of a State’s police powers,”
Hawaii’s decision to use the eminent domain power so regulating was constitutionally permissible.140 The Court acknowledged that “[a] purely private taking could not withstand the
scrutiny of the public use requirement; it would serve no legitimate purpose of government and would thus be void.”141
But, “where the exercise of the eminent domain power is rationally related to a conceivable public purpose, the Court has
never held a compensated taking to be proscribed by the Public
Use Clause.”142 According to the Court, “[j]udicial deference is
required because, in our system of government, legislatures are
better able to assess what public purposes should be advanced
by an exercise of the taking power.”143 The Court rejected suggestions that it consider whether the land reform project was
likely to accomplish its goals, noting that “whether in fact the
provision will accomplish its objectives is not the question: the
[constitutional requirement] is satisfied if . . . the . . . [state] Legislature rationally could have believed that the [Act] would promote its objective.”144 The Court noted that Berman had cited
Old Dominion Co. v. United States,145 which required deference to
legislative public use determinations “until it is shown to involve an impossibility.”146 While acknowledging a limited role
137. Id. at 234–35.
138. Id. at 239–40.
139. Id. at 240.
140. Id. at 241–42.
141. Id. at 245.
142. Id. at 241.
143. Id. at 244.
144. Id. at 242 (quoting W. & S. Life Ins. Co. v. State Bd. of Equalization, 451 U.S.
648, 671–72 (1981)).
145. 269 U.S. 55 (1925).
146. Midkiff, 467 U.S. at 240 (quoting Old Dominion Co. v. United States, 269
U.S. 55, 66 (1925)).
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for courts to review a legislature’s public use judgment,147 the
Court declared, “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.”148
In the interim between Berman and Midkiff, the Supreme
Court of Michigan entered the debate, issuing one of the most
notorious public use decisions.149 Poletown Neighborhood Council
v. City of Detroit involved Detroit’s attempt to condemn an entire neighborhood to make way for the construction of a General Motors assembly plant.150 Deferring to the government’s
view that the expected economic revitalization resulting from
the plant—General Motors and the City of Detroit claimed the
project would prevent the loss of 6,150 jobs and provide $15
million in tax revenue151—would be helpful to the public in the
midst of an economic recession, the court found that a public
use existed under the Takings Clause of the Michigan Constitution.152 Because the use of eminent domain would benefit “specific and identifiable private interests,” the court purported to
inspect “with heightened scrutiny the claim that the public interest is the predominant interest being advanced.”153 While
averring that “[t]he power of eminent domain is restricted to
furthering public uses and purposes and is not to be exercised
without substantial proof that the public is primarily to be
benefited,” the court declared that the projected benefit was
“clear and significant.”154 Noting that a project with a smaller
147. Id.
148. Id. at 242–43.
149. See Somin, supra note 35, at 1006 (describing Poletown as “notorious” and
“the most visible symbol of eminent domain abuse”); see also Ely, supra note 17, at
35 (“To many observers of differing political viewpoints, the Poletown case was a
poster child for excess condemnation.”); Lee Anne Fennell, Taking Eminent Domain
Apart, 2004 MICH. ST. L. REV. 957, 958 (noting “the near-unanimous scholarly
applause” that Poletown had been “smashed into oblivion”).
150. 304 N.W.2d 455, 457 (Mich. 1981). For detailed discussions of Poletown, its
history and consequences, see generally Somin, supra note 35, and William A.
Fischel, The Political Economy of Public Use in Poletown: How Federal Grants
Encourage Excessive Use of Eminent Domain, 2004 MICH. ST. L. REV. 929.
151. Poletown, 304 N.W.2d at 467 (Ryan, J., dissenting).
152. Id. at 457–59 (majority opinion) (citing MICH. CONST. of 1963, art. 10, § 2).
153. Id. at 459–60.
154. Id. at 459.
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or less obvious public benefit might not meet with approval,155
the court upheld the taking.156
Two decades later, the Michigan Supreme Court overturned
Poletown in County of Wayne v. Hathcock, a case concerning
whether the taking of property for the construction of an office
park for economic development purposes constituted a public
use under the Michigan Constitution.157 Michigan’s approach
for interpreting the meaning of legal terms of art in its constitution is to discern the “common understanding” of the term
“among those sophisticated in the law at the time of the constitution’s ratification.”158 Applying this standard, and applying
case law preceding the adoption of the 1963 constitution, the
court concluded that a transfer of condemned property to a
private entity meets the public use test if it possesses one of
three characteristics: (1) the transfer involves “public necessity
of the extreme sort otherwise impracticable”;159 (2) “the private
entity remains accountable to the public in its use of that property”;160 or (3) the land is selected for condemnation based on
“‘facts of independent public significance,’ meaning that the
underlying purposes for resorting to condemnation, rather
than the subsequent use of condemned land, must satisfy the
Constitution’s public use requirement.”161 The court explained
that “public necessity of an extreme sort otherwise impracticable” referred to endeavors providing “public benefits whose
very existence depends on the use of land that can be assembled
only by the coordination central government alone is capable
of achieving.”162 An example of property selected on the basis
of “facts of independent public significance,” the court explained, would be blighted property that is condemned and
then sold to private persons. In such a case, the “controlling
purpose in condemning the properties” is removal of the blight,
and subsequent resale is merely incidental to that purpose.163
155. Id. (”If the public benefit was not so clear and significant, we would
hesitate to sanction approval of such a project.”).
156. Id. at 460.
157. 684 N.W.2d 765, 769–70, 787 (Mich. 2004). For a general discussion and
analysis of the Hathcock decision, see generally Somin, supra note 35.
158. Id. at 779–81.
159. Id. at 781 (quoting Poletown, 304 N.W.2d at 478 (Ryan, J., dissenting)).
160. Id. at 782 (citing Poletown, 304 N.W.2d at 479 (Ryan, J., dissenting)).
161. Id. at 783 (quoting Poletown, 304 N.W.2d at 480 (Ryan, J., dissenting)).
162. Id. at 781 (quoting Poletown, 304 N.W.2d at 478 (Ryan, J., dissenting)).
163. Id. at 783.
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Applying these three tests to the office project at issue, the
court concluded that the proposed taking was not for a public
use.164 The court reasoned that the very existence of the project
did not depend on the use of eminent domain for assembling
property:
To the contrary, the landscape of our country is flecked with
shopping centers, office parks, clusters of hotels, and centers
of entertainment and commerce. We do not believe, and
plaintiff does not contend, that these constellations required
the exercise of eminent domain or any other form of collective public action for their formation.165
Concluding that the project would not remain subject to public
oversight, and that the property taken had not been selected
based on facts of independent significance, the court found the
proposed condemnations to be unconstitutional.166
E.
The Kelo Decision
After Midkiff, the Supreme Court did not decide a major public use case until Kelo v. City of New London,167 on certiorari to
the Connecticut Supreme Court.168 There, property owners
sued the City of New London and the New London Development Corporation (NLDC), a nonprofit development corporation established by the city, to enjoin use of the eminent
domain power in furtherance of a comprehensive economic
development plan.169 The plaintiffs asserted that the Connecticut and United States Constitutions prohibited the exercise of
eminent domain power to allow for economic development by
private entities, since the condemned properties would not be
put to a “public use.”170
The planned development, as conceived by the NLDC,
would occupy ninety acres along the Thames River and consist
of both residential and commercial areas.171 It would include a
waterfront hotel and conference center, marinas, a public
164. Id. at 770, 784, 788.
165. Id. at 783–84.
166. Id. at 784.
167. 125 S. Ct. 2655 (2005).
168. Kelo v. City of New London, 843 A.2d 500 (Conn. 2004), aff’d, 125 S. Ct.
2655 (2005).
169. Id. at 507–08.
170. Id. at 519.
171. Id. at 509.
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walkway along the river, residences, a Coast Guard museum,
space for high technology research and development office
space, additional office and retail space, and parking.172 Under
the plan, the NLDC would own the land in the development
area and enter into ground leases with various private developers, who would then develop the parcels in accordance with
the plan.173 The development plan was divided into seven parcels.174 Four of the plaintiffs’ properties were on parcel 3, slated
for at least 90,000 square feet of research and development
space immediately north of Pfizer Inc.’s recently constructed
$300 million research facility.175 Interestingly, the planners had
decided to leave untouched a building owned by a private social organization, the Italian Dramatic Club, also located on
parcel 3.176 Eleven properties owned by four of the plaintiffs
were located on parcel 4A, which was designated for “park
support,” either parking or retail services for the adjacent state
park.177 The NLDC estimated that the plan would create hundreds of construction jobs and roughly 1,200 to 2,300 permanent jobs.178 Property tax revenues resulting from the plan were
projected at between roughly $680,000 and $1,200,000 annually.179
In the U.S. Supreme Court, the Kelo property owner petitioners raised several arguments.180 First, they argued that the proposed New London development was “not a public use under
172. Id. at 509–10.
173. Id. at 510.
174. Id. at 509.
175. Id. at 508–09; Kelo v. City of New London, 125 S. Ct. 2655, 2659–60 (2005).
176. Kelo, 843 A.2d at 509.
177. Id.
178. Id. at 510. Specifically, the NLDC projected between 518 and 867 construction jobs, between 718 and 1,362 direct jobs, and between 500 and 940 indirect
jobs. Id.
179. Id.; see also id. at 598 (Zarella, J., concurring in part and dissenting in part)
(noting that the projected tax figures are annual). Specifically, the NLDC projected
that between $680,544 and $1,249,843 in tax revenue would result from the
project. Id. at 510. The court noted that 54% of the land area in New London was
exempt from property taxes, and that the city had recently suffered dramatic job
losses as the result of losing roughly 2,900 government sector positions, in part
due to the closure of the United States Naval Underseas Warfare Center. Id. As a
result, the court noted, the state of Connecticut had designated New London a
“distressed municipality.” Id.
180. For a detailed discussion of the parties’ briefs in the case, see generally
Alan T. Ackerman, The Changing Landscape and Recognition of the Public Use
Limitation: Is Hathcock the Precursor of Kelo?, 2004 MICH. ST. L. REV. 1041.
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the Fifth Amendment to the U.S. Constitution.”181 The petitioners contended that a “public benefit” is not equivalent to a
“public use,” asserting, “[I]f nothing more is required to constitute a public use than listing expected tax revenue and job
growth that might result from private development, then there
is scarcely any private use or business for which the power of
eminent domain could not be used.”182 The petitioners suggested that this is precisely what had happened to them: “Respondents—a local government and a private development
corporation—seek to take Petitioners’ 15 homes to turn them
over to other private parties in the hope that the City may
benefit from whatever trickle-down effects those new businesses produce.”183 They thus requested a “clear, bright-line
rule that the trickle-down benefits of successful business do not
make private business a public use.”184 The petitioners distinguished the holdings in Berman and Midkiff, noting that transfers to private parties had been permitted “in only limited and
specific circumstances”: elimination of urban blight in the former case, and elimination of Hawaii’s “oligopolistic pattern of
land-ownership” in the latter.185 As a fallback argument, the
petitioners asked the Court to hold that even if economic development can be a public use, the condemnations at issue
were still unconstitutional because “there must at least be a
reasonable certainty that the condemnations will result in [the
alleged] public benefits.”186 Because the benefits of the proposed project were unreasonably speculative, and even some of
the important details were left unspecified, they argued the
Court should be loath to uphold eminent domain takings to
advance the project.187
1.
The Majority Opinion
A sharply divided Court rejected all of the petitioners’
claims.188 The Court cited Midkiff for the proposition that “the
City would no doubt be forbidden from taking petitioners’
181. Brief of Petitioners at 9–10, Kelo v. City of New London, 125 S. Ct. 2655
(2005) (No. 04-108).
182. Id. at 10.
183. Id. at 9.
184. Id. at 27.
185. Id. at 24–27.
186. Id. at 27.
187. Id. at 37–39.
188. Kelo v. City of New London, 125 S. Ct. 2655, 2665–68 (2005).
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land for the purpose of conferring a private benefit on a particular private party.”189 It further noted that a pretextual public
use would also be forbidden.190 Here, though, the Court explained, the development plan at issue was “carefully considered,” and neither the trial judge nor any of the Connecticut
Supreme Court justices saw any evidence of an illegitimate
purpose.191 Even though the city and the private developers
would not keep the taken land open to the public, the proposed
plan was a public use because the “Court long ago rejected any
literal requirement that condemned property be put into use
for the general public.”192 Such a rule was “difficult to administer” and had “proved to be impractical given the diverse and
always evolving needs of society.”193
Thus, according to the majority, the Court’s earliest public
use cases (decided after incorporation of the Fifth Amendment
in the late 1800s) had “embraced the broader and more natural
interpretation of public use as ‘public purpose.’”194 And in deciding whether a proposed use of land served a “public purpose,” the Court stated that “[w]ithout exception, our cases
have defined that concept broadly, reflecting our longstanding
policy of deference to legislative judgments in this field.”195 The
Court noted that in Berman, in which the individual department store at issue was not blighted, “Justice Douglas refused
to evaluate this claim in isolation, deferring instead to the legislative and agency judgment that the area ‘must be planned as a
whole.’”196 The majority also noted that the Midkiff Court had
“[r]eaffirm[ed] Berman’s deferential approach to legislative
judgments in this field” in finding that “the State’s purpose of
eliminating the ‘social and economic evils of a land oligopoly’
qualified as a valid public use,” despite Hawaii’s plan for rapid
transfer of the condemned properties to private parties.197
The Court unequivocally rejected the petitioners’ proposed
bright-line rule that economic development can never constitute a public use, and held that promoting economic develop189. Id. at 2661 (citing Haw. Hous. Auth. v. Midkiff, 467 U.S. 229, 245 (1984)).
190. Id.
191. Id. (quoting Kelo v. City of New London, 843 A.2d 500, 536 (Conn. 2004)).
192. Id. at 2662 (quoting Midkiff, 467 U.S. at 244).
193. Id. at 2662.
194. Id.
195. Id. at 2663.
196. Id. (quoting Berman v. Parker, 348 U.S. 26, 34 (1954)).
197. Id. at 2664 (quoting Midkiff, 467 U.S. at 241–42).
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ment is a classic government function, indistinguishable from
other public purposes upheld by the Court in the past.198 The
Court rejected the argument that a taking for economic development might “blur[] the boundary between public and private takings,” noting that “the government’s pursuit of a public
purpose will often benefit individual private parties.”199 The
Court declined to consider the possibility, urged by the petitioners, that failing to adopt the bright-line rule would leave
nothing to “stop a city from transferring citizen A’s property to
citizen B for the sole reason that citizen B will put the property
to a more productive use and thus pay more taxes.”200 Such
facts, while “certainly rais[ing] a suspicion that a private purpose was afoot,” were not before the Court; the majority noted,
with apparent approval, that “[c]ourts have viewed such aberrations with a skeptical eye.”201
The Court also rejected the petitioners’ argument for a rule
requiring “reasonable certainty” that the claimed benefits of a
project will actually occur.202 This, the majority stated, “would
represent an even greater departure from our precedent.”203
The Court quoted Midkiff’s declaration that “[w]hen the legislature’s purpose is legitimate and its means are not irrational . . .
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.”204 The
majority noted that the realities of a comprehensive plan require
that the legal rights of all interested parties be established
before new construction can be commenced. A constitutional rule that required postponement of the judicial approval of every condemnation until the likelihood of success
of the plan had been assured would unquestionably impose
a significant impediment to the successful consummation of
many such plans.205
198. Id. at 2665–67.
199. Id. at 2666.
200. Id. at 2666–67.
201. Id. at 2667 n.17 (citing Cincinnati v. Vester, 281 U.S. 439, 448 (1930) and 99
Cents Only Stores v. Lancaster Redev. Agency, 237 F. Supp. 2d 1123 (C.D. Cal.
2001)).
202. Id. at 2667–68.
203. Id. at 2667.
204. Id. (quoting Haw. Hous. Auth. v. Midkiff, 467 U.S. 229, 242 (1984)).
205. Id. at 2668.
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For similar reasons, the Court declined to adopt a rule requiring scrutiny of whether a particular parcel of land is necessary
for the project.206 Quoting Berman, the majority explained that
“[o]nce the question of the public purpose has been decided,
the amount and character of land to be taken for the project
and the need for a particular tract to complete the integrated
plan rests in the discretion of the legislative branch.”207
It will be some time before the full implications of the Kelo
decision are known. The case should not be read as approving
all development projects for which the alleged public purpose
is an enhanced tax base, job growth, and general economic improvement. The Court does not rule out the possibility that
such a project could be a pretext for conferring a private benefit.208 The Court concludes, however, that the New London project is not such a project, in large part because the condemnations involved would be “executed pursuant to a ‘carefully
considered’ development plan.”209 In response to petitioners’
charge that approving the takings at issue would leave nothing
to prevent governments from transferring property from one
private individual to another if the transferee could generate
more taxes by putting the property to a more productive use,210
the Court offered a similar rationale, stating that such transfers,
“executed outside the confines of an integrated development
plan,” were not before the Court, and that such “hypothetical
cases . . . can be confronted if and when they arise.”211 In both
instances, the Court seemed to assume that an integrated development plan would be considered strong evidence that a
taking was not a pretext for conferring a benefit on a private
party.
2.
Justice Kennedy’s Concurring Opinion
Justice Kennedy provided the fifth vote for the majority
opinion. In a key concurring opinion, he declared that “meaningful rational basis review . . . is required under the Public Use
Clause.”212 He wrote that the reiteration of the rational basis
206. Id.
207. Id. (quoting Berman v. Parker, 348 U.S. 26, 35–36 (1954)).
208. See id. at 2661.
209. Id. (quoting Kelo v. City of New London, 843 A.2d 500, 536 (Conn. 2004)).
210. Id. at 2666–67.
211. Id. at 2667.
212. Id. at 2670 (Kennedy, J., concurring).
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standard of review in public use cases does not alter the fact
that the Public Use Clause forbids “transfers intended to confer
benefits on particular, favored private entities, and with only
incidental or pretextual public benefits.”213 Justice Kennedy
called on courts to take “plausible accusation[s] of impermissible favoritism” seriously and to review the record to evaluate
such accusations, but “with the presumption that the government’s actions were reasonable and intended to serve a public
purpose.”214 He corrected petitioners’ “incorrect assumption
that review under Berman and Midkiff imposes no meaningful
judicial limits on the government’s power to condemn any
property it likes.”215 Rather, he continued,
a more stringent standard of review than that announced in
Berman and Midkiff might be appropriate for a more narrowly drawn category of takings. 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.216
Under the facts presented in Kelo, he explained, there was no
evidence of impermissible favoritism of any private parties.217
He enumerated the many factors considered by the trial court
indicating that this claim of public benefit was not a pretext:
testimony from the government and business leaders involved
in the plan, evidence of correspondence between the parties,
that the NLDC was aware of the city’s poor economic condition
and that this condition was corroborated by evidence, that the
state committed money to the project before particular developers were identified, that a variety of plans were considered,
that the developer was chosen from a group of candidates, and
that some of the private beneficiaries of the plan were still unidentified, because it was unclear who would occupy the anticipated office space.218 At the same time, he pointed out, “the
projected economic benefits of the project can not be character-
213. Id. at 2669.
214. Id.
215. Id. at 2670.
216. Id.
217. See id. at 2669–70.
218. Id.
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ized as de minimus.”219 Thus, a presumption of an impermissible
public purpose was not justified.220
Justice Kennedy’s concurrence is significant for two reasons.
First, it suggests that, at least where a plausible claim of impermissible favoritism is asserted, the courts should undertake
a more searching review of the government’s decision-making
process than was suggested in Berman.221 Second, he appears to
echo the majority’s emphasis on an integrated plan as evidence
of a legitimate purpose.222
3.
Justice O’Connor’s Dissenting Opinion
Justice O’Connor filed a dissenting opinion, joined by Chief
Justice Rehnquist and Justices Scalia and Thomas. The dissenters accused the Court of abandoning the “long-held, basic limitation on government power” that property may not be taken
from A and given to B.223 Regarding the majority decision, Justice O’Connor wrote, “all private property is now vulnerable to
being taken and transferred to another private owner, so long
as it might be upgraded—i.e., given to an owner who will use it
in a way that the legislature deems more beneficial to the public—in the process.”224 She stated that characterizing economic
development takings as “for public use” whenever “incidental
public benefits result[] from the subsequent ordinary use of
private property” would “wash out any distinction between
private and public use of property.”225 The result, Justice
O’Connor concluded, was “effectively to delete the words ‘for
public use’ from the Takings Clause.”226
In the dissenters’ view, the dual requirements that a taking
be “for public use” and that “just compensation” be paid to the
owner were intended to ensure “stable property ownership” by
preventing arbitrary, abusive, and unfair use of the takings
power.227 The requirement that property may be taken only for
a public use “promotes fairness as well as security,”228 while
219. Id. at 2670.
220. Id. at 2670–71.
221. Id. at 2669–70.
222. Id.
223. Id. at 2671 (O’Connor, J., dissenting).
224. Id.
225. Id.
226. Id.
227. Id. at 2672.
228. Id.
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the just compensation requirement is intended to distribute the
cost of takings fairly among the general population.229 Such
protections are particularly important, Justice O’Connor noted,
for people who are “unable to protect themselves in the political process against the majority’s will.”230
While acknowledging a history of deference to the determinations of the political branches as to what government actions
benefit the public, Justice O’Connor insisted that some “external, judicial check” is necessary for such decisions; otherwise,
“the Public Use Clause would amount to little more than hortatory fluff.”231 She noted that the Court had previously approved three types of takings that amounted to public uses,
“though it is in the nature of things that the boundaries between these categories are not always firm.”232 The two most
“straightforward” categories involved transfer of private property to the government for some kind of public project and
transfer to private parties, “often common carriers, who make
the property available for the public’s use.”233 But because these
two categories “are sometimes too constricting and impractical
ways to define the scope of the Public Use Clause,”234 the Court
has classified certain takings as serving a “public purpose”
even when the property ultimately would be put to a private
use, as was the case in Berman and Midkiff.235
Justice O’Connor distinguished Berman and Midkiff on a key
point: “In both those cases, the extraordinary, precondemnation use of the targeted property inflicted affirmative harm on
society—in Berman through blight resulting from extreme poverty and in Midkiff through oligopology resulting from extreme
wealth.”236 Elimination of the harm, she argued, was the public
purpose of the taking.237 Thus, the majority’s decision expanded permissible public-private takings beyond the Court’s
previous “decisions sanctioning the condemnation of harmful
229. See id.
230. Id.
231. Id. at 2673.
232. Id.
233. Id.
234. Id.
235. Id.
236. Id. at 2674.
237. See id.
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property use,” creating almost limitless opportunities for exercises of eminent domain.238
Justice O’Connor’s dissent is striking for several reasons.
First, it represents a dramatic retreat from the broad language
Justice O’Connor herself employed in Midkiff. There, she had
boldly asserted that virtually any permissible government goal
could be accomplished through the use of eminent domain,
proclaiming that “[t]he ‘public use’ requirement is . . . coterminous with the scope of a sovereign’s police powers.”239 In her
Kelo dissent, however, she acknowledged that “[t]his language
was unnecessary to the specific holdings of [Midkiff and Berman].”240 In the dissenters’ view, some permissible government
goals, like fostering economic development, cannot constitutionally be accomplished through an eminent domain transfer
to a private party unless the taken property is affirmatively
harmful.241 Moreover, according to Justice O’Connor, the affirmative harm requirement was not new, but consistent with
the Court’s precedents.242 But as the majority opinion correctly
notes, several of the Court’s earlier decisions sanctioned transfers to private parties where the condemned property was in
no way harmful.243
Justice O’Connor’s rule would have the Court distinguish
takings intended to eliminate affirmative harms from, presumably, those intended to confer benefits. Yet, as was once
noted by Justice Scalia (who, notably, joined in Justice
O’Connor’s dissent), “the distinction between ‘harm-preventing’
and ‘benefit-conferring’ regulation is often in the eye of the beholder.”244 It could be argued, for example, that the property
taken in Kelo was being used in a harmful manner because continuing its past use would deprive the New London region of
increased jobs and tax revenue.
238. Id. at 2675.
239. Haw. Hous. Auth. v. Midkiff, 467 U.S. 229, 240 (1984).
240. Kelo, 125 S. Ct. at 2674 (O’Connor, J., dissenting).
241. See id.
242. See id. at 2675 (“In moving away from our decisions sanctioning the
condemnation of harmful property use, the Court today significantly expands the
meaning of public use.”).
243. See id. at 2666 n.16 (majority opinion); see also Clark v. Nash, 198 U.S. 361
(1905) (upholding condemnation of land where condemned land was not
affirmatively harmful); Fallbrook Irrigation Dist. v. Bradley, 164 U.S. 112 (1896)
(same).
244. Lucas v. S.C. Coastal Council, 503 U.S. 1003, 1004 (1992).
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Justice Thomas’s Dissenting Opinion
Justice Thomas filed a separate dissenting opinion, denouncing the majority’s decision as “simply the latest in a string of
our cases construing the Public Use Clause to be a virtual nullity.”245 He contended that “the Public Use Clause, originally
understood, is a meaningful limit on the government’s eminent
domain power,”246 and further stated that previous Court decisions had “strayed from the Clause’s original meaning” and
should be reconsidered.247 Justice Thomas argued that the most
natural reading of the Public Use Clause is the narrow view,
permitting a taking “only if the government owns, or the public has a legal right to use, the property, as opposed to taking it
for any public purpose or necessity whatsoever.”248 He rested
this argument partly on the theory that adopting the majority‘s
broad view of public use renders the Public Use Clause redundant to the Necessary and Proper Clause.249 He contended that
“a taking is permissible under the Necessary and Proper
Clause only if it serves a valid public purpose. Interpreting the
Public Use Clause likewise to limit the government to take
property only for sufficiently public purposes replicates this
inquiry.”250 He further contended that the most common definition of the word “use” at the time of the Founding, and the
most natural reading of the term in the context of the Constitution, required the narrowest reading of “public use.”251 He asserted that eminent domain practices existing in early America
“largely” supported his call for a narrow reading of public use,
relying primarily on the Mill Acts as examples.252 Justice Thomas complained that many of the Court’s public use precedents had been adopted “blindly, with little discussion of the
[Public Use] Clause’s history and original meaning.”253 He observed that interpreting “public use” to mean “public purpose”
left the Court without a coherent principle for limiting the
scope of eminent domain.254 It also put the Court in a position
245. Kelo, 125 S. Ct. at 2678 (Thomas, J., dissenting).
246. Id.
247. Id.
248. Id. at 2679.
249. Id. at 2680–81.
250. Id. at 2681.
251. See id.
252. Id. at 2682.
253. Id. at 2682.
254. See id. at 2686.
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of having to second-guess governmental policy decisions in
order to protect against purely private takings, a difficult role
the Court should be reluctant to undertake.255 He argued that
“[i]t is far easier to analyze whether the government owns or
the public has the legal right to use the taken property than to
ask whether the taking has a ‘purely private purpose’—unless
the Court means to eliminate public use scrutiny of takings entirely.”256 Finally, Justice Thomas noted that the consequences
of the majority’s decision were easy to predict:
Allowing the government to take property solely for a public purpose 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 “discreet and insular minorities,” surely that principle would apply with great force
to the powerless groups and individuals the Public Use
Clause protects.257
Justice Thomas’s analysis, though correct in its assessment of
the problematic consequences of the majority’s decision, suffers
from several flaws. Most notably, his dissent misreads the
Court’s own public use precedents and selectively invokes the
history of American practices. He argues, for example, that the
majority’s reliance on language in Fallbrook Irrigation District v.
Bradley258 supporting the broad view of public use is misplaced
because that language was dictum,259 as the law at issue in
Bradley allowed actual use by the public of water to be produced by the irrigation district.260 But this interpretation misreads Bradley. There, plaintiff Bradley contended that an
assessment to fund an irrigation district (and the resulting confiscation of plaintiff’s land for failing to pay the assessment)
was unconstitutional because, among other things, the irrigation ditches to be constructed by the district would be for pri255. See id.
256. Id.
257. Id. at 2686–87 (citation omitted) (quoting United States v. Carolene Prods.
Co., 304 U.S. 144, 152 n.4 (1938)).
258. 164 U.S. 112 (1896).
259. Kelo, 125 S. Ct. at 2683 (Thomas, J., dissenting).
260. Id.
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vate use.261 In upholding the validity of the irrigation district
scheme, Justice Peckham wrote broadly about the public advantages accruing from irrigation of arid land, stating at one
point, “To irrigate, and thus to bring into possible cultivation,
these large masses of otherwise worthless lands, would seem to
be a public purpose, and a matter of public interest, not confined to the landowners, or even one section of the state.”262
Justice Thomas contends that this language is dictum, because
the public use issue could have been resolved on the ground
that the irrigation act provided for actual use of the water by
the public, because “all similarly situated members of the public—those who owned lands irrigated by the ditch—had a right
to use it.”263 But it is not clear that the use of the water by those
few landowners whose lands were subject to the irrigation district assessment constitutes an actual public use. In fact, section
11 of the law in question specifically allocated water to landowners in proportion to their contribution to the overall assessments levied upon the entire district, clearly indicating that
non-landowners, or people outside of the district, could not
draw water as a matter of right.264 Thus, the water was not, as
Justice Thomas suggests, available for actual use by the general
public; instead, it was only available for use by a discrete set of
landowners who benefited from the taking.265 Thus, the act at
issue in Bradley actually effected a public-private taking,
whereby private property was taken for the benefit of an identified and limited set of private individuals, on the basis of the
broad general advantage that would accrue from the resulting
irrigation.
Justice Thomas makes a similar argument regarding Clark v.
Nash,266 another irrigation ditch case. There, the Court upheld a
state statute authorizing a landowner to condemn an irrigation
ditch over a neighbor’s land where necessary to gain access to
public waters.267 The Court held that the use to be made of the
ditch was public, even though only one landowner would
benefit.268 Justice Peckham, again writing for the majority, men261. Bradley, 164 U.S. at 121–23, 154.
262. Id. at 161.
263. Kelo, 125 S.Ct. at 2683 (Thomas, J., dissenting).
264. Bradley, 164 U.S. at 116 n.1.
265. Kelo, 125 S. Ct. at 2683 (Thomas, J., dissenting).
266. 198 U.S. 361 (1905).
267. Id. at 370.
268. Id. at 369–70.
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tioned in passing that “[o]ther landowners adjoining the defendant in error, if any there are, might share in the use of the
water by themselves taking the same proceedings to obtain
it.”269 From this statement, Justice Thomas presumably concludes that the case involved actual use by the public because
“it involved condemnation for the purpose of ensuring access
to a resource to which similarly situated members of the public
had a legal right of access.”270 But, as in Bradley, the general
public did not have a right to use the flow produced by the
condemnation; that theoretical benefit was reserved to a discrete set of landowners within a geographically confined area.
Justice Thomas seems to confuse a right to use by members of
the public who are similarly situated to the condemnor with a
general right of use by the public. In fact, where only similarly
situated members of the public are permitted to use condemned property, the taking is most likely a public-private taking: that is, a taking from one private individual to benefit a
limited set of private individuals.271
Justice Thomas’s attempt to dismiss as dictum the broad language in Strickley v. Highland Gold Boy Mining Co.272 is even less
plausible. There, the Court upheld a Utah statute under which
a mining company had been permitted to condemn a right of
way over private property in order to construct an aerial
bucket line.273 Citing Clark, the Court noted that “there might be
exceptional times and places in which the very foundations of
public welfare could not be laid without requiring concessions
from individuals to each other upon due compensation, which,
under other circumstances, would be left wholly to voluntary
consent.”274 Justice Thomas contends that this language was
dictum because the facts of the case state that, “‘the plaintiff
[mining company] [was] a carrier for itself and others.’”275
From this language, Justice Thomas concludes that “the bucket
269. Id. at 370.
270. Kelo, 125 S. Ct. at 2683 (Thomas, J., dissenting).
271. See Minn. Canal & Power Co. v. Koochiching Co., 107 N.W. 405, 414 (Minn.
1906) (“[A] use which, by physical conditions, is restricted to a very few persons
who must use it within a very restricted area, is not a [narrow view] public use.”).
272. 200 U.S. 527 (1906).
273. Id. at 529, 532.
274. Id. at 531.
275. Kelo v. City of New London, 125 S. Ct. 2655, 2684 (2005) (Thomas, J.,
dissenting) (quoting Strickley, 200 U.S. at 531–32).
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line was legally open to the public.”276 Yet there is nothing in
Strickley to indicate the terms under which the mining company was carrying raw materials for others, or remotely suggesting that it was in any way legally required to open itself to
the public. Although left to speculation, the most plausible scenario is that the aerial line was not open to the public; instead,
the mining company was providing its service for a fee to those
nearby with whom it wished to deal. Justice Holmes could
have disposed of the case without citing to or relying upon
Clark. It does not follow, therefore, that Justice Holmes’s observation that Clark had recognized “the inadequacy of use by the
general public as a universal test”277 was mere dictum. In Bradley, Clark, and Strickley, the clear basis for a finding of public
use was the overall public advantage resulting from the
schemes at issue, not actual use by the public. They are good
precedent for the majority’s proposition that public advantage
or benefit constitutes public use under the Takings Clause.
Justice Thomas also relies on selective use of history for his
argument that prevailing practices prior to ratification show
that the Framers intended “public use” to have a narrow meaning. Although it is true that prior to ratification, most mills constructed pursuant to the Mill Acts were required to be open to
the general public, were subject to extensive regulation, and
thus were comparable to modern “public utilities,”278 Maryland’s Mill Act contained no such requirements.279 Assuming,
as Justice Thomas does, that practices at the time of ratification
provide insight into the original meaning of the Public Use
Clause,280 then we should consider all of the practices then existing. Admittedly, the practices of a single outlier do not suggest a great diversity of opinion on the meaning of public use.
But Maryland’s law presumably would have been known to
the Framers and the members of the ratifying conventions,
which were comprised of educated and politically aware men,
including many lawyers and legislators.
Arguably, had the ratifying generation held strong convictions that Maryland’s approach was wrong, they very well
276. Id.
277. Strickley, 200 U.S. at 531 (citing Clark v. Nash, 198 U.S. 361 (1905)).
278. See supra notes 40–45, 47.
279. See supra note 46.
280. See Kelo, 125 S. Ct. at 2681 (Thomas, J., dissenting). Justice Thomas, of
course, is by no means the only person to assume this. See Paul Brest, The
Misconceived Quest for the Original Understanding, 60 B.U. L. REV. 204, 210 (1980).
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could have drafted and approved a more explicit public use
clause, thereby removing all doubt about its scope.281 This assumes a premise that is by no means self-evident: That the
Framers and Adopters had a single, congruent intention regarding the meaning of public use. Yet the Adopters of the
Constitution consisted of those voting in the majority in Congress and the ratifying conventions.282 As Paul Brest has observed, it is likely that, with respect to any provision of the
Constitution, the intentions of the Framers and Adopters varied among individuals.283 According to Brest, the likelihood of
differing intentions regarding any specific provision of legislation increases when multiple provisions are adopted at once, as
was the case with the Bill of Rights.284 Thus, drawing any inference regarding the Adopters’ intent with respect to a particular
provision is precarious. Such inference drawing depends, to
some extent, on speculation regarding what possible “instances
of the rules’ application . . . passed through [the Adopter’s]
mind during the process of adopting it.”285 To the extent the
Adopters voted based on these “subjective exemplary applications” of a rule, existing practices at the time of ratification become relevant.
Of course, the Adopters may have had different “instances of
the rule’s application” in mind when they voted. Some members of the Maryland delegation, which was the tenth state to
ratify the Constitution, may well have had their own state’s
Mill Act (which did not require mills constructed under its authority to act as public utilities or provide public services) in
mind when considering whether a public use required actual
use by the public or general public advantage—that is, if the
Maryland delegates even considered the issue at all. When it
comes to the Takings Clause, there is an unusual paucity of
contemporaneous evidence regarding the Adopters’ intent. The
Takings Clause is the only provision of the Bill of Rights that
was not specifically requested by the state ratifying conven-
281. See Brest, supra note 280, at 214; see also U.S. CONST. art. VII (“The ratification of the conventions of nine states, shall be sufficient for the establishment of
this constitution between the states ratifying the same.”).
282. See Brest, supra note 280, at 214.
283. Id.
284. Id. at 210.
285. Id.
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tions.286 Nor is there any evidence that the clause was ever debated either in Congress or the conventions.287 James Madison’s
original draft of the Takings Clause read, “No person shall
be . . . obliged to relinquish his property, where it may be necessary for public use, without a just compensation.”288 The final, ratified version of the Takings Clause, “[N]or shall private
property be taken for public use, without just compensation,”
suggests, of course, that a requirement of necessity was intentionally discarded. From that, one might conclude that a taking
that is simply “useful” or “advantageous” to the public was
thought permissible at the time of ratification. But that does not
resolve whether the taken property had to be actually used by
the public or merely contribute some benefit to the public.289
More significant, though, is the abundant evidence of takings
during the colonial era that would satisfy only the modern, expansive public benefit test.290 These, too, would have been part
of the political and legal worldview that the Framers and ratifying convention participants brought to their understanding
of public use. Aware of this history of transfers to private individuals justifiable only by the resulting public benefit, they
could have, and presumably would have, been more explicit in
their drafting of the Takings Clause had they wished to require
a strict “use by the public” standard.
Justice Thomas’s textual argument regarding the Takings
Clause may make sense as a matter of literal interpretation. But
the assumption that the drafters of the Constitution wrote with
such precision and forethought that the Constitution must in
all cases be interpreted with the rigid logic of a philosopher
would, if generally applied, lead to consequences that could
not have been consistent with the Framers’ intent. For example,
286. William Michael Treanor, The Original Understanding of the Takings Clause
and the Political Process, 95 COLUM. L. REV. 782, 791 (1995).
287. Id. See also Stoebuck, supra note 63, at 594 (“[W]hile there was a popular
groundswell [in the ratifying conventions] for a bill of rights, we must frankly
conclude there is no evidence that eminent domain limitations were given much
attention.”); Meidinger, supra note 41, at 17 (“If the available evidence demonstrates anything, it is that eminent domain was not high among the concerns of
those debating the Bill of Rights. Indeed, there is little evidence that it was a
concern at all.”).
288. See Stoebuck, supra note 63, at 595 (quoting 1 ANNALS OF CONG. 451–52
(Joseph Gales ed., 1834)).
289. See generally id. (speculating, without resolution, on the significance of the
change from Madison’s original language); Meidinger, supra note 41, at 17 (same).
290. See generally supra notes 52–54, 57–61 and accompanying text.
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one plausible reading of the phrase “[N]or shall private property be taken for public use without compensation” is that private property may be taken for private use.291 Another
plausible reading is that the taking of property for public requires compensation, while a taking for private use does not.292
But even assuming that Justice Thomas is correct, it does not
follow that the intent of the Framers and Adopters of the Constitution should be the single controlling factor in interpreting
the Public Use Clause. While the ongoing and contentious debate over strict constructionism and original intent is beyond
the scope of this article, it should be noted that the U.S. Constitution was adopted by a select group of property-owning
males who were citizens of a largely agrarian, pre-industrial
society. If the strictures of the public use requirement have
been loosened over time to spur the growth of the economy
and allow the government to achieve desirable social goals, it
may be one of many examples of subordinating formerly absolute property rights to changing societal needs and values.293
III.
JUSTIFICATIONS FOR EMINENT DOMAIN
To understand the reasons for a bright-line rule prohibiting
the use of eminent domain for economic development, it is important first to explain the justifications for and criticisms of
modern eminent domain practices generally as applied to true
public use takings as well as to private takings. The many concerns surrounding eminent domain in general are frequently
elevated when the power is being used for an economic development project.
A.
Overview of Common Justifications
When the government wishes to acquire property for itself, it
has at least two options: purchase the property on the open
market (an option it often takes), or exercise the power of eminent domain.294 When the government wishes to facilitate ac291. See Berger, supra note 44, at 205.
292. See Jeb Rubenfeld, Usings, 102 YALE L.J. 1077, 1080 (1993).
293. See generally Laura S. Underkuffler, On Property: An Essay, 100 YALE L.J. 127
(1990) (describing the evolution from a conception of property rights as absolute
to one recognizing these rights as subject to the collective needs of society).
294. See Nicole Stelle Garnett, The Public-Use Question as a Takings Problem, 71
GEO. WASH. L. REV. 934, 964 (2003) (describing a government’s options in
acquiring property as including open market purchase and condemnation).
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quisition by a private entity, the government may leave that
entity to its own devices, requiring it to acquire property on the
open market. Often, though, the private entity will want assistance from the government as an enticement for undertaking
the project. In that case, the government may offer a package of
tax breaks, grants, and other incentives in order to lower the
ultimate cost of property acquisition. Alternatively, the government might itself use the eminent domain power with the
intent of transferring the acquired property to the private entity, or it might delegate its eminent domain power to those
beneficiaries.295
What, then, are the supposed advantages of using the eminent domain power, as opposed to purchasing on the open
market? The most important justification of eminent domain is
to facilitate the acquisition of property in what scholars call
“thin markets,”296 in which the property necessary for a proposed project is scarce or uniquely suited to the project.297
Without the power of eminent domain, thin markets may make
the acquisition of property prohibitively expensive, because of
monopoly pricing by sellers298 who “hold out,”299 realizing they
295. See id. (describing a government’s choices about how to exercise eminent
domain).
296. See Merrill, supra note 129, at 65, 76; see also Fennell, supra note 149, at 971–
72.
297. See Merrill, supra note 129, at 74–76 (discussing a basic economic model for
eminent domain); see also Fennell, supra note 149, at 971–72 (describing thin and
thick markets). A common example of a thin market is one in which it is necessary
to acquire numerous contiguous parcels in order to complete, say, a pipeline or
highway that must traverse a particular path. Such a scenario is typically referred
to in the eminent domain literature as an “assembly problem.” See, e.g., Merrill,
supra note 129, at 75. Thin markets also exist when the location or attributes of a
single desired parcel render it essential for a project. Merrill cites a “promontory
for a lighthouse or a narrows for a bridge” as properties representing “thin”
markets. Id. at 76.
298. See RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 49 (3d ed. 1986)
(discussing eminent domain and monopoly); Berger, supra note 44, at 224–25
(discussing same); see also Merrill, supra note 129, at 76 (explaining that the seller’s
monopoly allows “the seller to seek economic rents, that is, to charge a price
higher than the property’s opportunity cost” and defining “any situation where a
seller can extract economic rents from a buyer as a ‘thin market’”).
299. See Merrill, supra note 129, at 75; see also Steve P. Calandrillo, Eminent
Domain Economics: Should “Just Compensation” Be Abolished, and Would “Takings
Insurance” Work Instead?, 64 OHIO ST. L.J. 451, 468–69 (2003) (describing the
holdout problem); Fennell, supra note 149, at 971–72 (same); Munch, supra note 1,
at 474 (same). Errol Meidinger describes the holdout problem as follows:
Stated in lay terms it is the possibility that an owner of property
necessary to the completion of a substantial project either will refuse to
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control a rare and essential commodity,300 or because of the increased transaction costs that naturally arise from hard bargaining for scarce resources.301 As a result, socially useful
projects may not be completed.302 In contrast, when the market
for a particular property is “thick,” that is, there are many suitable properties available and therefore no holdout problems,
the government is likely to purchase the property on the market because purchasing is a cheaper option than using the
power of eminent domain.303
Drawing on Guido Calabresi and A. Douglas Malamed’s famous distinction between property rules and liability rules,304
Thomas Merrill observes that resorting to eminent domain imposes a liability rule regime on the owner of condemned prop-
sell and thus entirely thwart the project’s possible benefits or will hold
out for an exorbitant price and thereby “blackmail” society for a higher
than fair price. In economic terms the problem is defined as a seller
holding out for a higher price from a buyer known to be “assembling”
properties for a particular configuration (e.g., a railroad right-of-way)
than the seller would ask from a buyer not suspected of planning such an
assembly. Where hold-out behavior occurs, fewer projects requiring
assembly will be carried out than if sellers sold at their true—
“atomistic”—prices, and the net production available to society will be
lower than if goods were compared, bought, and sold at their true
opportunity costs. Production is thus expected to be sub- or at least
nonoptimal.
Meidinger, supra note 41, at 49; see also Munch, supra note 1, at 476 n.7 (defining
“atomistic market reservation price” as “the reservation price of a seller to a buyer
whom he did not suspect of planning an assembly”); RICHARD A. POSNER,
ECONOMIC ANALYSIS OF LAW 6 (6th ed. 2003) (describing opportunity cost as “the
benefit forgone by employing a resource in a way that denies its use to someone
else”).
300. See Calandrillo, supra note 299, at 469; Merrill, supra note 129, at 75–77.
301. See Merrill, supra note 129, at 74–77. See also Michelman, supra note 30, at
1174; Munch, supra note 1, at 474.
302. See Meidinger, supra note 41, at 49; Munch, supra note 1, at 474; POSNER,
supra note 299, at 49.
303. See Merrill, supra note 129, at 77, 80 (describing the “due process” costs of
eminent domain, including the costs of persuading the government to authorize
or use the power, complying with eminent domain procedural requirements,
appraisal, litigation and settlement).
304. See generally Guido Calabresi & A. Douglas Melamed, Property Rules,
Liability Rules, and Inalienability: One View of the Cathedral, 85 HARV. L. REV. 1089
(1972). According to Calabresi and Melamed, an entitlement is protected by a
“property rule” when it can only be obtained from the owner with the owner’s
consent at a price agreed upon by the owner. Id. at 1092. An entitlement is
protected by a “liability rule” if it can be acquired without the owner’s consent by
paying compensation objectively determined by an organ of the state, such as a
court. Id.
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erty by depriving him of the property-rule right to hold out.305
By eliminating this holdout option, eminent domain eliminates
potential monopolies and reduces transaction costs, thereby
lowering the total cost of assembling necessary parcels.306 Thus,
“eminent domain is designed to increase social wealth by facilitating certain transactions that otherwise would not take place,
or that would take place only at an inefficiently high cost.”307
B.
Coercion and Undercompensation
The obvious problem with eminent domain is its coercive nature.308 The power of eminent domain exists to prevent individuals from thwarting theoretically beneficial projects by
forcing those individuals to sell when they otherwise would
not, either because they wish to retain the property for personal
reasons or because the condemnor is offering less than the
owner’s asking price.309 Indeed, eminent domain practices typically require the would-be condemnor first to attempt to purchase the property through free negotiation on the open market
before resorting to condemnation.310 Thus, before a condemnation proceeding begins, the owner of the property will usually
have refused to sell on the terms sought by the government.
The coercive nature of eminent domain is sometimes justified
on the grounds that the government must pay “just compensation” when it takes property.311 As a result of the just compensation requirement, eminent domain, in theory, represents “an
equitable compromise between the needs of the public and the
rights of the individual.”312 One unfamiliar with eminent domain might even ask why property owners guaranteed “just
305. See Merrill, supra note 129, at 74–75.
306. See id. at 75.
307. Id. at 82.
308. See Munch, supra note 1, at 474 (stating that eminent domain “is effectively
a reassignment of property rights: the seller is deprived of his right to refuse to
sell and constrained in his right to bargain over price”).
309. See Gideon Kanner, Condemnation Blight: Just How Just Is Just Compensation?,
48 NOTRE DAME L. REV. 765, 772 (1973) (stating that “the open use of the power of
eminent domain is involved to deprive the owner of an otherwise legally
protected economic advantage”).
310. See Munch, supra note 1, at 473.
311. See James Geoffrey Durham, Efficient Just Compensation as a Limit on Eminent
Domain, 69 MINN. L. REV. 1277, 1277 (1985).
312. Id.
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compensation” would complain when their property is condemned.313
But the constitutionally required just compensation that
courts routinely award property owners when the government
condemns their property is generally viewed as undercompensatory.314 The Supreme Court has decided that just compensation equals “fair market value,”315 that is, “‘what a willing
buyer would pay in cash to a willing seller’ at the time of the
taking.”316 The shortcomings of this formula for determining
“just compensation” are obvious. The owners of a condemned
property are, by definition, not willing sellers.317 They may be
unwilling to sell because the “fair market value” offered does
not match the value of the property to them,318 either because
they value the property more highly for sentimental reasons or
because they are denied compensation for increments of value
that willing sellers would probably insist upon, or at least bargain hard for, before entering into a transaction.319
Scholars have attached a variety of labels to the types of increments of value that are routinely uncompensated when the
state takes property through eminent domain. Lee Anne
Fennell, for example, has dubbed these uncompensated elements in aggregate the “uncompensated increment.”320 The
most common uncompensated increments discussed in the literature are the “subjective premium,” sometimes also called
“consumer surplus,” and the loss of a chance to gain from any
313. See JESSE DUKEMINIER & JAMES E. KRIER, PROPERTY 1113 (5th ed. 2002); see
also Krier & Serkin, supra note 21, at 865.
314. See Ely, supra note 94, at 855 & n.66; see also Eric R. Claeys, Public-Use
Limitations and Natural Property Rights, 2004 MICH. ST. L. REV. 877, 924–28; Michael
DeBow, Unjust Compensation: The Continuing Need for Reform, 46 S.C. L. REV. 579,
580 (1995); Durham, supra note 311, at 1285; Fennell, supra note 149, at 962 & n.17;
Garnett, supra note 294, at 943–44, 945 & n.71, 947 & n.86; Krier & Serkin, supra
note 21, at 865–66.
315. United States v. 564.54 Acres of Land, 441 U.S. 506, 511 (1979).
316. Id. (quoting United States v. Miller, 317 U.S. 369, 374 (1943)).
317. See Krier & Serkin, supra note 21, at 866; see also Fennell, supra note 149, at
963 (“Most property owners value their property above fair market value; if they
did not, they likely would have sold it already.”).
318. See Munch, supra note 1, at 479 (“Just compensation is defined as ‘fair
market value’ exclusive of the value to this particular seller.”).
319. The increments of value mentioned here are generally increases in value
resulting from the transfer or from the demand that gives rise to the transfer.
320. Fennell, supra note 149, at 961.
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increase in the value of the property arising from the transfer.321
Fennell also notes that eminent domain fails to compensate a
property owner for his loss of the autonomy to refuse to sell at
any price, even at a price exceeding his own valuation of the
property.322
1.
Subjective Premium
The terms “subjective premium” and “consumer surplus” refer to the value an owner places on his property that exceeds its
opportunity cost.323 This premium may include sentimental attachment, unique suitability of the property to the owner’s
needs, relocation costs, replacement costs of the land and improvements, consequential damages to retained property, attorneys’ fees, lost business revenue, goodwill or going-concern
value, and the aggravation of having to move.324 Some commentators have included in the subjective premium such factors as the “search costs of finding shops and services in the
new location.”325 The Supreme Court has justified the rule limiting compensation to “fair market value” on the basis of the
“serious practical difficulties in assessing the worth an individual places on particular property at a given time.”326
321. See Garnett, supra note 294, at 948 (“[T]he condemnee does not share in any
increased value that the condemnation adds to the property, despite the fact that
an exercise of eminent domain almost always raises the value of the property.”).
The value of the property may increase as a result of the assembly of multiple
parcels into a larger unit worth more than the combined pre-transfer value of its
constituent parts. See Fennell, supra note 149, at 965 (also noting that “eminent
domain typically assigns the entire surplus to the condemning authority (or to
that authority’s transferee)”).
322. See Fennell, supra note 149, at 966–67. Fennell analogizes this autonomy to
“holding an option—the capacity to wait on unfolding conditions to decide when
one wishes to sell.” Id. at 967.
323. See Robert C. Ellickson, Alternatives to Zoning: Covenants, Nuisance Rules, and
Fines as Land Use Controls, 40 U. CHI. L. REV. 681, 735 (1973) (“There is a minimum
price at which any person would voluntarily exchange any item of his property.
The excess of this subjective value over market value is termed ‘consumer
surplus.’”); Merrill, supra note 129, at 83 (defining subjective premium as the value
an owner “might attach to his property above its opportunity cost”).
324. See DeBow, supra note 314, at 582–83; Durham, supra note 311, at 1305;
Fennell, supra note 149, at 963–64; Merrill, supra note 129, at 83.
325. Fennell, supra note 149, at 963.
326. United States v. 564.54 Acres of Land, 441 U.S. 506, 511 (1979).
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Surplus from Transfer
In addition to being denied compensation for subjective
premium, eminent domain condemnees are routinely denied
“the chance of reaping a surplus from trade.”327 When property
is taken in order to assemble a larger parcel for some postcondemnation use, substantial surpluses are frequently realized in the hands of the ultimate transferee.328 Such assemblydriven exercises of eminent domain are common, generating a
large percentage of the litigation over “public use.”329 Yet the
typical eminent domain award involves “fair market value” of
the condemned property assessed at the time of the taking
without regard to any value increases occurring after the transfer.330 The effect is that all surplus from transfer is typically assigned to the transferee.331 While allowing the transferee to reap
the full benefits of the transfer surplus is not unfair in all
cases,332 as a general matter the result is that the condemnee is
denied a right enjoyed by most other property owners: the
chance to benefit from the possibility that the potential value of
the property to the buyer may drive up the price that the buyer
is willing to pay for the property.
3.
Mitigating Undercompensation: Reciprocity of Advantage
Despite the apparent abuses entailed in essentially confiscating the uncompensated increment, many scholars contend that
this injustice is mitigated if the condemnee receives an “aver327. Fennell, supra note 149, at 958–59.
328. See id. at 965; see also Krier & Serkin, supra note 21, at 870 (“Assembling
property should create a surplus, because the value of each individual parcel is
likely less than its value as part of a larger whole put together by the government.”);
Merrill, supra note 129, at 85.
329. See Merrill, supra note 149, at 98 (finding that, in a small study of contested
public use cases, sixty-nine percent of the clearly classifiable cases involved
assembly).
330. See, e.g., Olson v. United States, 292 U.S. 246, 255–56 (1934) (stating that
compensation “is the market value of the property at the time of the taking” and
does not include “any element resulting subsequently to or because of the
taking”); United States v. Miller, 317 U.S. 369, 375 (1943) (stating that property’s
“special value to the condemnor as distinguished from others who may or may
not possess the power to condemn, must be excluded as an element of market
value”).
331. Fennell, supra note 149, at 965; see also EPSTEIN, supra note 16, at 164.
332. See Merrill, supra note 129, at 86 (arguing that “[t]he active agent, the
supplier of the idea and initiative, is the condemnor . . . . [A]s between a
condemnor and a condemnee, the condemnor is typically more responsible for,
and hence arguably deserving of, the surplus generated by the project”).
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age reciprocity of advantage.”333 This term refers to the possibility that the property owner may derive some reciprocal
benefits from the condemnation. In other words, he might directly or indirectly benefit from the taking. Reciprocity of advantage can work on at least two levels. On the narrow level, a
property owner may enjoy reciprocity of advantage if he enjoys
some advantages from the actual project for which his property
is taken that are “not enjoyed by the community as a whole.”334
On the broader level, the term implies that individuals who are
undercompensated in a given exercise of eminent domain
might still benefit from the overall scheme if this scheme, applied evenly across the board over time, leads to overall societal wealth enhancement.335 Richard Epstein describes these
advantages as “implicit in-kind compensation.”336
Moreover, even if the reciprocity of advantage does not fully
compensate the injured landowner, it still may justify an undercompensatory taking on the theory that the landowner, because she benefits from living in a orderly, civilized society, is
morally obligated to give something back to that society.337 As
Hanoch Dagan argues,
As long as the disproportionality in the distribution of the
burden of the public action is not too extreme, and as long as
the political and economic power of the injured party is not
disproportionately low . . . there should be no difficulty if a
particular landowner (who has not been arbitrarily singled
out) incurs a disproportionate share of the public burden.338
4.
Efficiency Concerns
If part of the reciprocity of advantage enjoyed by the landowner is the overall societal wealth enhancement resulting
333. See Hanoch Dagan, Takings and Distributive Justice, 85 VA. L. REV. 741, 768
n.84 (1999) (noting that the term “average reciprocity of advantage” was first used
by Justice Holmes in Jackman v. Rosenbaum Co., 260 U.S. 22, 30 (1922), and later
in Penn. Coal Co. v. Mahon, 260 U.S. 393, 415 (1922)).
334. Id. at 769.
335. Id. (“[R]eciprocity of advantage also has been read in a much broader sense,
requiring only that the injured landowner be a member of the benefited
community and, as such (rather than in her role as the regulated party), that she
enjoy a share of the general welfare-enhancement generated by the public action
at issue or by other beneficial public actions, even if this benefit is outweighed by
the burden she sustains.”).
336. EPSTEIN, supra note 16, at 195.
337. See Dagan, supra note 333, at 771.
338. Id.
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from the eminent domain regime, then the validity of the reciprocity of advantage justification depends on the regime’s actually enhancing wealth. Yet, the scholarly literature suggests
that undercompensation has a strong propensity to lead to inefficiency, not wealth enhancement.339 To fully understand the
efficiency consequences of undercompensation, it is helpful to
consider the reasons for requiring any compensation at all. In
the words of Richard Posner, “The simplest economic explanation for the requirement of just compensation is that it prevents
the government from overusing the taking power.”340 The
compensation requirement is said to provide an essential check
on government power: by forcing local officials to internalize
the cost of a taking, the just compensation requirement is said
to prevent abuse341 and overconsumption of property.342 The
just compensation requirement is also thought to encourage
efficiency, at least in some cases, by forcing officials to consider
whether the proposed project for which the property is taken
339. See Durham, supra note 311, at 1300–01; Fennell, supra note 149, at 961 &
n.16; see also EPSTEIN, supra note 16, at 165 (discussing increased costs of legislative
solutions to land acquisition due to rent-seeking behavior).
340. RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 58 (4th ed. 1992).
341. See Heller & Krier, supra note 30, at 999 (contending that “the obligation to
pay compensation can constrain government inclinations to exploit politically
vulnerable groups and individuals”); see also Garnett, supra note 294, at 951; Glynn
S. Lunney, Jr., Compensation for Takings: How Much Is Just?, 42 CATH. U. L. REV.
721, 723 (1993).
342. See William A. Fischel & Perry Shapiro, Takings, Insurance, and Michelman:
Comments on Economic Interpretations of “Just Compensation” Law, 17 J. LEGAL STUD.
269, 269–70 (1988) (arguing that the compensation requirement has the effect of
“disciplining the power of the state, which would otherwise overexpand unless
made to pay for the resources that it consumes”); see also Garnett, supra note 294,
at 951; Christopher Serkin, The Meaning of Value: Assessing Just Compensation for
Regulatory Takings, 99 NW. U. L. REV. 677, 725 (noting “the assumption that forcing
the government to pay compensation will have some deterrent effect on its willingness
to act”). Public choice theorists, however, contend that the compensation
requirement does not deter overconsumption of property. Under public choice
theory, legislators are said to respond to political incentives, including political
support, votes, contributions, and less legitimate benefits, rather than fiscal
constraints. See Garnett, supra note 294, at 956 (quoting Daryl J. Levinson, Making
Government Pay: Markets, Politics, and the Allocation of Constitutional Costs, 67 U.
CHI. L. REV. 345, 349 (2000)); Kochan, supra note 90, at 79–80. As a result,
governments may not internalize any of the costs in acquiring property by
eminent domain. This is particularly true given the intense competition among
municipalities seeking to attract developers. See Garnett, supra note 294, at 956–57.
The desire to lure investment may more than overcome any brake imposed by the
prospect of compensation. If so, this suggests even greater risks of abuse and
inefficiency, as even the minimal limitations imposed by the present undercompensatory scheme would seem to have little impact on land acquisition.
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will produce more value than the amount of compensation that
must be paid.343 It also enables private investment in property
as such investment would be unlikely if the government could
freely take private property without “just compensation.”344
Most of the justifications for the just compensation requirement provide insights into the problems of undercompensation. Some commentators contend that undercompensation
allows the government to avoid internalizing the full cost of a
taking, operating under the “fiscal illusion” that the property is
worth less than it actually is.345 Thus, when the government is
permitted to undercompensate, it is likely to disregard the uncompensated increment in weighing the true costs of the taking
against the projected gain, leading to potential inefficiencies.346
For example, because the government need not consider subjective value in determining its cost for acquiring a given property, it may embark on projects in which the wealth created in
the hands of the transferee pales in comparison to the subjective value of the property in the hands of the original owner.347
Because subjective value is by definition non-transferable,348 it
is destroyed upon transfer.349 Thus, a government entity disregarding subjective value may actually destroy more wealth
than it produces.350 Even absent such blatant inefficiencies,
Lawrence Blume and Daniel Rubinfeld contend that “if compensation is offered only at market value, the government does
343. See Heller & Krier, supra note 30, at 1001 (“[T]o relieve the government of
any obligation to pay is to forgo an opportunity to test whether the benefits of a
government program are truly worth its costs.”); see also Serkin, supra note 342, at
705–06.
344. See Dagan, supra note 333, at 748; Fischel & Shapiro, supra note 342, at 269–
70. Hanoch Dagan and others, however, have argued that a full-compensation
regime is also potentially inefficient, as it might encourage excessive investment
by property owners who disregard the risk that their property might be taken.
Dagan states that “[w]hen there is uncertainty about the government’s needs, a
full-compensation rule provides incentives for excessive private investment,
including improvements that will be of no use in the event that the land in
question is subjected to public use.” Dagan, supra note 333, at 749.
345. Lawrence Blume & Daniel L. Rubinfeld, Compensation for Takings: An
Economic Analysis, 72 CAL. L. REV. 569, 621 (“Fiscal illusion arises because the costs
of governmental actions are generally discounted by the decisionmaking body
unless they explicitly appear as a budgetary expense.”).
346. See Serkin, supra note 342, at 705.
347. See Fennell, supra note 149, at 964; Merrill, supra note 129, at 83–84.
348. See Fennell, supra note 149, at 964.
349. See id.
350. See id. at 964–65; see also Merrill, supra note 129, at 83–84.
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not have the appropriate incentive to avoid regulating or taking properties that are highly valued for ‘unique’ reasons.”351
The failure to allow the property owner to enjoy any of the
surplus from transfer poses a different kind of problem.352 In
many eminent domain cases, the value of the property should
increase dramatically after the transfer.353 This situation, in the
context of a public-private taking, creates a strong incentive for
rent-seeking behavior354 by a party or parties seeking to become
the ultimate transferee of the property.355
IV.
A BAN ON ECONOMIC DEVELOPMENT TAKINGS
As serious as fairness and efficiency concerns are with respect to many kinds of takings, economic development takings
are particularly problematic. The only way to mitigate these
concerns sufficiently is by banning economic development takings altogether. In enacting such a ban, a legislature must be
careful to adequately target “economic development” so as to
avoid loopholes and prohibitions against less harmful uses of
the eminent domain power. Accordingly, this Article also sets
forth model language that seeks to achieve this result.
As previously explained, if the supposed public benefits of
an economic development project can amount to a “public
use,” then there is virtually no limit to the potential reach of the
eminent domain power. As Justice O’Connor observed in her
Kelo dissent,
[N]early any lawful use of real private property can be said
to generate some incidental benefit to the public. Thus, if
predicted (or even guaranteed) positive side-effects are
351. Blume & Rubinfeld, supra note 345, at 619.
352. Surplus occurs only if the property is more valuable in the hands of the
transferee than it was in the hands of the transferor. Fennell, supra note 149, at 965.
In some cases, where subjective value is high and the value of the property in the
transferee’s hands is low, there will be no surplus from transfer. Id.
353. Krier & Serkin, supra note 21, at 870 (“Assembling property should create a
surplus, because the value of each individual parcel is likely less than its value as
part of a larger whole put together by the government.”).
354. “Rent seeking” refers to the expenditure of resources by private parties to
“capture” political entities for the purpose of obtaining economic gain. See Somin,
supra note 35, at 1021. The economic gain obtained by the rent-seeking party is
generally not due to wealth creation, but comes at the expense of another party or
group. See generally Anne O. Krueger, The Political Economy of the Rent-Seeking
Society, 64 AM. ECON. REV. 291 (1974).
355. See Fennell, supra note 149, at 964–65.
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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.356
This lack of constraint is problematic, as economic development takings are particularly susceptible to inefficiency, unfairness, capture, and abuse.
A.
Reciprocity of Advantage
As noted in Part III, undercompensation is sometimes justified by reference to so-called reciprocity of advantage. From
this justification follows the first major argument for curtailing
economic development takings. Reciprocity of advantage is, to
a large extent, non-quantifiable. But there is no doubt that at
least some of the benefits assumed to accrue to the landowner
are the advantages that flow back to her, either directly as a
result of the actual project for which her property is taken, or
indirectly, from the wealth-producing effects of the general
eminent domain regime. It has frequently been noted that concerns over undercompensation are at their lowest when the
proposed public use for the condemned property is “public” in
the broadest sense.357 This relationship is true because the more
that the benefits of a public use inure to the public as a whole,
the more likely it is that the condemnee is reaping some reciprocity of advantage from the taking.358
But in the case of a public-private taking, the risk that little or
no benefit will accrue to the public is also a risk that implicit,
in-kind benefits will not materialize.359 Because of the extremely deferential judicial scrutiny of the public use requirement, there is always a risk that the claimed public benefit
relied upon to justify the taking is “merely incidental” to the
true benefits accruing to the benefited private transferee; in
356. Kelo v. City of New London, 125 S. Ct. 2655, 2675 (2005) (O’Connor, J.,
dissenting).
357. See, e.g., Krier & Serkin, supra note 21, at 866 (arguing that benefits
produced by true public uses “provide some amount of implicit compensation to
the erstwhile owners whose property has been taken to enable the government
project in question”); see also Fennell, supra note 149, at 960 n.14.
358. Fennell, supra note 149, at 960 n.14; Krier & Serkin, supra note 21, at 866
(noting that implicit compensation is more certain in classic public uses “precisely
because the benefits so clearly accrue to the public at large (and not to private
interests for their own sake)”).
359. See Krier & Serkin, supra note 21, at 867.
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other words, “that the underlying program is . . . a ruse.”360 Indeed, among those states that permit takings for economic development, none, including Connecticut, imposes any
requirement that the condemning authority or the transferee
provide any legally binding assurances that the projected economic benefits actually will occur.361 Nonetheless, the Supreme
Court in Kelo explicitly rejected petitioners’ call for a public use
test requiring reasonable certainty that the claimed benefits of
an economic development project actually will occur.362
The absence of any requirement that the purported benefits
of an economic development project be established in advance
encourages overstated projections by would-be condemnors.363
Even where backers of an economic development project are
acting in good faith, the possibility that there will be no benefit
to the public, or much less benefit than anticipated, is always
present. Indeed, in the famous Poletown case, the actual benefits
provided by the General Motors plan fell far short of the 6,150
jobs projected.364 Seven years after displacing 4,000 residents,
destroying 1,400 homes and between 140 and 600 businesses,
the plant employed only about 2,500 people.365 In fact, Ilya
Somin speculates that Detroit may have sustained a net job loss
as a result of the General Motors project.366 Thus, the argument
that undercompensated eminent domain condemnees benefit
from reciprocity of advantage is particularly weak in the realm
of economic development takings.367
360. Id. at 863.
361. Somin, supra note 35, at 1013–14; accord Thomas Ross, Transferring Land to
Private Entities by the Power of Eminent Domain, 51 GEO. WASH. L. REV. 355, 375 (1983)
(“In an ordinary taking, the state retains title and can ensure the continued use of
the land in the way desired by society; a private transferee has no obligation to use
his property in the societally desired way.”). Some courts, however, do require
assurances that condemned property will actually be used for the “public use” put
forth as the justification for the taking. For jurisdictions that require assurances that
the property taken will be put to the asserted “public use,” see Somin, supra note 35,
at 1011 n.27.
362. Kelo v. City of New London, 125 S. Ct. 2655, 2667–68 (2005).
363. Somin, supra note 35, at 1011.
364. Id. at 1012–13.
365. Id. at 1013, 1017 & n.52.
366. Id. at 1017.
367. See Krier & Serkin, supra note 21, at 867 (noting that as the use becomes less
public, implicit compensation declines, possibly to zero in extreme cases).
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Efficiency Concerns
Another concern arising from undercompensation is the possibility that a government entity seeking to exercise eminent
domain may not fully consider the value destroyed as a result
of a proposed project in assessing whether the project will be
wealth-enhancing. Undercompensation leads to the “fiscal illusion” that the costs of a project are lower than they actually are.
As serious as this concern may be with respect to truly public
takings, it is magnified in the case of economic development
takings. With a truly public taking, the government may be
presumed to be acting in the public interest in making efficiency determinations about the acquisition of property. But
takings in which the ultimate transferee is a private entity raise
the specter of “capture” of the political process by powerful
special interests. In such cases, the decision to take property
may be motivated more by the special interests’ desire to capture the surplus for personal profit and the government entities’ desire to placate these special interests, than by a desire to
enhance societal value.
Indeed, concerns about a breakdown of the democratic process are among the most potent criticisms of public-private takings generally, and economic development takings in particular. Donald Kochan has written that because of the extremely
deferential standard of review of “public use” determinations,
[a] public use is now whatever the legislature says is public.
Legislators can sell the eminent domain power to special interests for almost any use, promising durability in the deal
given the low probability that the judiciary will invalidate it
on the grounds that the condemnation is private in nature.368
Other commentators agree; as Somin wrote recently, economic
development takings
allow politically powerful interest groups to “capture” the
condemnation process for the purpose of enriching themselves at the expense of the poor and politically weak. While
economic development takings are not the only type of condemnation subject to this kind of abuse, they are especially
vulnerable to it because “economic development” can justify
almost any condemnation that transfers property to a commercial enterprise.369
368. Kochan, supra note 90, at 52.
369. Somin, supra note 35, at 1008.
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Given this danger of political capture, public-private takings
seem particularly prone to producing inefficient outcomes.
C.
Capture and Oppressive Takings
The prospect of interest group capture raises another concern
that is especially troubling in the area of economic development takings. One enduring concern surrounding the Takings
Clause has been the risk of “majoritarian oppression”: that is,
abuse of the political process by a powerful majority that exerts
sufficient control over the government such that it can co-opt
the eminent domain power to confiscate the property of a less
powerful minority.370 As Neil Komesar has noted, however, the
opposite can also occur: a politically powerful minority can
capture control of governmental processes, using these processes for its own enrichment at the expense of the majority.371
Public-private transfers raise this second concern. Where the
number of transferees is relatively small, as is usually the case
in a public-private transfer, there is the danger that a concentration of politically powerful interests will manipulate the political process.372 When, as in a case like Kelo, the number of
transferors is relatively small, there is the further danger that
powerful interests are enriching themselves by burdening a
powerless minority.373
Indeed, much has been written about the particular travails
suffered by the poor and by African-Americans in some of the
most expansive eminent domain campaigns in our country’s
history: the massive urban renewal programs that began
around the turn of the Twentieth Century. Nicole Stelle Garnett
notes that urban renewal programs were sometimes referred to
as “Negro Removal,”374 and that African-Americans and the
poor were the primary victims of such programs.375 Many African-American communities were destroyed and, because of
pervasive housing discrimination, their former residents were
shunted into other black neighborhoods that quickly became
370. Fennell, supra note 149, at 967 (citing NEIL KOMESAR, LAW’S LIMITS: THE
RULE OF LAW AND THE SUPPLY AND DEMAND OF RIGHTS 60–70 (2001)).
371. See KOMESAR, supra note 370, at 60–70.
372. See Fennell, supra note 149, at 970.
373. See id.
374. Garnett, supra note 294, at 952.
375. See id. at 952–54; see also BERNARD J. FRIEDEN & LYNNE B. SAGALYN,
DOWNTOWN, INC.: HOW AMERICA REBUILDS CITIES 28–30 (1989); Garnett, supra
note 294, at 945 n.74.
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overcrowded and expensive.376 As a result, many of the supposed beneficiaries of urban renewal ended up paying higher
prices for housing that was as bad as what they had left.377
Most scholarly analyses of these urban renewal programs have
concluded that they consistently fell short of their goals of job
creation and increased investment, and today these programs
are widely discredited.378 It is no surprise then, that both dissenting opinions in Kelo emphasized that the primary victims
of the majority’s decision would be the poor and politically
powerless.379
Indeed, the appearance that a powerful minority has taken
control of the machinery of eminent domain for its own enrichment at the expense of a powerless minority could very
well explain the outrage that followed the announcement of the
Kelo decision. In the wake of Kelo, legislation to study, curtail,
or prevent the use of eminent domain for economic development has been introduced in more than forty states and in Congress.380 Such popular resistance likely derives from several
factors. Kelo was the first of the three major modern public use
cases to sanction the taking of people’s homes.381 As a result,
people realized with fear that their homes could be sacrificed to
benefit commercial interests.382 This fear appeared to some to
be well founded. Where the effect of a transfer is to produce
indirect economic benefits that would not be realized without
the transfer, there is a natural inference that the government is
transferring property to an entity that will make more profitable use of it: that is, in the words of Justice O’Connor, that the
376. Garnett, supra note 294, at 954.
377. Id.
378. Id. at 953.
379. See Kelo v. City of New London, 125 S. Ct. 2655, 2677 (2005) (O’Connor, J.,
dissenting) (“The beneficiaries are likely to be those with disproportionate influence
and power in the political process . . . . As for the victims, the government now has
license to transfer property from those with fewer resources to those with more.”);
id. at 2687 (Thomas, J., dissenting) (“[E]xtending the concept of public purpose to
encompass any economically beneficial goal guarantees that these losses will fall
disproportionately on poor communities.”). Justice Thomas also observed that
“[u]rban renewal projects have long been associated with the displacement of
blacks . . . . Regrettably, the predicable consequence of the Court’s decision will be to
exacerbate these effects.” Id.
380. See Castle Coalition, State Legislative Actions, http://maps.castlecoalition.
org/legislation.html (last visited Feb. 8, 2006).
381. See D. Benjamin Barros, Home as a Legal Concept, 46 SANTA CLARA L. REV.
(forthcoming 2006).
382. See id.
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property is being “upgraded.”383 If the government may use the
eminent domain power simply to transfer property to one who
will use it more profitably, than almost any property is vulnerable. As Justice O’Connor queried in her Kelo dissent, “Who
among us can say she already makes the most productive or
attractive possible use of her property? The specter of condemnation hangs over all property.”384 Such transfers are problematic because, if permitted at the will of the government, the
security of property ownership is undermined. So too is respect
for the legal system and political process, as most citizens
would intuitively (and correctly) conclude that the beneficiaries
of such a regime would be rich and powerful interests profiting
at the expense of ordinary property owners.385 If the government can use the eminent domain power as a tool for revenue
enhancement or job growth, the temptation and the opportunity to overuse the power may be too great.
At the same time, some popular outcry no doubt derives
from traditional notions of the “sanctity of the home” and the
deeply personal role that homes play in people’s lives. As such,
it represents an expression of Margaret Jane Radin’s suggestion
that some property may be too “personal” to be subject to a
governmental taking under any circumstances.386 She postulates that “hypothetically, if some object were so bound up
with me that I would cease to be ‘myself’ if it were taken, then
a government that must respect persons ought not to take it.”387
383. Kelo, 125 S. Ct. at 2671 (O’Connor, J., dissenting); see also S.J. Res. 24, 93d
Gen. Assemb. (Mo. 2005) (proposed constitutional amendment) (preventing
transfers to private businesses for economic development or for private use, and
further providing that “[p]roperty shall not be taken from one owner and
transferred to another on the grounds that the public will benefit from a more
profitable private use”).
384. Kelo, 125 S. Ct. at 2676 (O’Connor, J., dissenting).
385. See id. at 2677.
386. See Margaret Jane Radin, Property and Personhood, 34 STAN. L. REV. 957, 1005
(1982).
387. Id. Thus, she notes that “one might expect to find that a special class of
property like a family home is protected against the government by a ‘property
rule’ and not just a ‘liability rule.’” Id. at 1005–06. Radin calls for a “substantive
due process limitation on the eminent domain power” for situations in which the
government would force people to sell their homes to a corporation, requiring a
showing of a “compelling state interest” before the government could proceed.
See Margaret Jane Radin, The Liberal Conception of Property: Cross Currents in the
Jurisprudence of Takings, 88 COLUM. L. REV. 1667, 1690–91 (1988).
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Broad Judicial Deference
Thus, the ready availability of eminent domain for economic
development projects poses grave risks of unfairness, inefficiency, and abuse. The current regime of broad deference, under which “public use is . . . whatever the legislature says is
public,”388 provides virtually no judicial protection against
these abuses and inefficiencies. The risks to justice and efficiency posed by economic development takings underscore the
seriousness of the claim that economic development as a theory
of public use is virtually unlimited in its potential application.
Thomas Merrill, in his influential article The Economics of Public Use, attributes the courts’ extreme deference on questions of
public use to “a historical focus on ends rather than means.
Public use analysis has traditionally examined the ends of a
government taking—the purpose or use to which property will
be put once acquired.”389 As governments have replaced natural-rights-based laws with more pervasive socio-economic
regulations, however, courts have grown increasingly deferential390 to legislative determinations of the proper ends of government.391 “[S]uch questions,” according to Merrill, “demand
an exercise in high political theory that most courts today are
unwilling (or unable) to undertake.”392 This reticence naturally
flows from separation of powers concerns; modern courts tend
to believe that the more democratic branches of government
should do most of the political theorizing.393 In any case, courts
have become almost adamant in their unwillingness to substitute their own judgment for that of the condemning governmental entity on the issue of whether a proposed use of
condemned property is “public” (that is, one that may be con-
388. Kochan, supra note 90, at 52.
389. Merrill, supra note 129, at 64.
390. See, e.g., Berman v. Parker, 348 U.S. 26, 33 (1954) (“Once the object is within
the authority of Congress, the right to realize it through the exercise of eminent
domain is clear. For the power of eminent domain is merely the means to the end.
Once the object is within the authority of Congress, the means by which it will be
attained is also for Congress to determine.”) (citations omitted); Haw. Hous.
Auth. v. Midkiff, 467 U.S. 229, 241 (1984) (“[W]here the exercise of eminent
domain power is rationally related to a conceivable public purpose, the Court has
never held a compensated taking to be proscribed by the Public Use Clause.”).
391. Merrill, supra note 129, at 64.
392. Id. at 67.
393. See id. at 68.
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stitutionally achieved through the exercise of eminent domain).394
E.
Proposed Modifications to the Public Use Framework
Most recent eminent domain scholarship, however, has
tended to eschew analysis of whether a given land acquisition
scheme is a permissible end of government. In the modern era,
most eminent domain projects will be found to be in pursuit of
a permissible governmental goal. Instead, scholars have preferred to focus on whether eminent domain is the appropriate
“means” for achieving the government’s stated purpose.395
Frank Michelman, for example, proposed that the public use
question be determined by employing a cost-benefit analysis.396
394. See id. at 64.
395. See, e.g., id. at 65.
396. Michelman proposed what is by far the most famous eminent domain
efficiency theory. Although he was primarily concerned with determining “just
compensation,” his theory also includes scenarios in which efficiency concerns
would render a project unconstitutional as lacking a public use. See Merrill, supra
note 129, at 72–73 (explaining efficiency outcomes which, under Michelman’s
theory, would lead to a finding of an unconstitutional private use).
Michelman coined the term “demoralization costs” to describe an uncompensated
loss to the condemnee. He defined these costs as
the total of (1) the dollar value necessary to offset disutilities which
accrue to losers and their sympathizers specifically from the realization
that no compensation is offered, and (2) the present capitalized dollar
value of lost future production (reflecting either impaired incentives or
social unrest) caused by demoralization of uncompensated losers, their
sympathizers, and other observers disturbed by the thought that they
themselves may be subjected to similar treatment on some other occasion.
Michelman, supra note 30, at 1214 (citations omitted). Put simply, demoralization
costs are the costs necessary to compensate demoralized property owners and
those who sympathize with them for the bad feelings they suffer as a result of an
undercompensated taking, and the consequences (namely, reluctance to invest or
“social unrest”) of those feelings on future behavior. See id.; see also WILLIAM A.
FISCHEL, REGULATORY TAKINGS: LAW, ECONOMICS, AND POLITICS 145 (1995)
(“Demoralization costs, in short, are the bad (for a utilitarian) things that happen
if you don’t pay.”).
Drawing on his perception of the “responses we must impute to ordinarily
cognizant and sensitive members of society,” Michelman identifies particular
takings scenarios in which demoralization costs are most likely to occur.
Michelman, supra note 30, at 1215–16. A key overriding indicator is where there is
a “visible risk of majoritarian exploitation,” because such exploitation is likely to
be “self-determining and purposive.” Id. at 1216–17. The sense that one is being
“systematically imposed upon” is more distressing than the sense that one is
subject to risks “randomly generated” by “other loss-producing forces.” Id. at 1217
(emphasis added). Randomly generated risks can be “conveniently dismissed
from consciousness on the ground that, being uncontrollable, it is not worth
thinking about”; but systemic actions imposing “strategically determined losses”
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Other scholars have also proposed weighing the benefits resulting from the proposed taking against the costs to the owners of
condemned property.397 Other approaches require a showing of
put the property owner in the position of having to expend energy and resources
to fight back. Id. Thus, a property owner is likely to “remain on edge” when facing
the possibility of loss from majoritarian exploitation. Id. Or, as Fischel has written,
interpreting Michelman, “People can adjust to strategic loss, but these adjustments
are more costly (or involve greater disutility) than adjustments to random loss.”
FISCHEL, supra, at 149.
Michelman further identifies specific types of government actions that are likely
to generate demoralization costs. They include situations in which compensation
would have been easy and inexpensive; where the property owner feels he has
suffered disproportionately compared to others; where the taking does not appear
to be plausibly motivated by efficiency concerns, suggesting corrupt redistribution; where the property owner is unlikely to enjoy reciprocal benefits from the
project for which his property is taken; where the type of taking does not appear
to be “rare or peculiar” and lacks the “illusion of long-term indiscriminateness,”
suggesting that the demoralized property owner may be victimized again; and
where the property owners lacked sufficient influence to have obtained “some
compensatory concession ‘in kind.’” Michelman, supra note 30, at 1218.
Michelman also attached the label “settlement costs” to “the dollar value of the
time, effort, and resources which would be required in order to reach
compensation settlements adequate to avoid demoralization costs.” Id. at 1214.
Settlement costs include “the costs of settling not only the particular compensation claims presented, but also those of all persons so affected by the
measure in question or similar measures as to have claims not obviously
distinguishable by the available settlement apparatus.” Id. Though admitting that
the definition of settlement costs is “vague,” he nonetheless suggested that they
would include, essentially, the costs of bargaining to reach settlements, the
judicial costs associated with resolving unsettled claims and the costs of
disposing, in a similar manner, of other claims arising from similar measures if
those other claims arose because the original claims were recognized. Id. at 1214
n.99. Put more succinctly, “Settlement costs correspond roughly to the administrative costs of determining compensation.” Blume & Rubinfeld, supra note 345,
at 578 n.49.
Putting those terms together, Michelman argued that if either demoralization
costs or settlement costs would exceed efficiency gains, the project is impermissible.
Michelman, supra note 30, at 1215; see also Heller & Krier, supra note 30, at 1003
(interpreting Michelman).
397. See, e.g., Berger, supra note 44, at 235–36, 240; Meidinger, supra note 41, at
45–47. Meidinger proposed that a condemnor be required to show that its plan
was formulated to maximize the benefit of the taking and minimize its cost, but
explained that “[t]he question is not simply whether a taking’s benefits exceed its
costs, but whether the taking is optimal to carrying out the project.” Meidinger,
supra note 41, at 46. Because it is difficult to estimate costs and benefits, Meidinger
allowed that “the courts necessarily will have some latitude in deciding how
closely to second-guess condemnations.” Id. Berger proposed that for a taking to
be permissible, “the increase in values as a result of the change should exceed the
total cost of making it.” Berger, supra note 44, at 240. By this, he appears to mean
that the value of the property, after subtracting construction and transaction costs,
should be higher than its value before the taking. See id. at 235–36; see also
Meidinger, supra note 41, at 51 & n.182 (interpreting Berger). In addition, according
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necessity for the use of eminent domain.398 Some have proposed increased compensation for condemnees as a way of addressing the efficiency and fairness concerns arising from the
fair market value standard.399 Garnett, in an innovative approach that was the basis for an amicus brief in Kelo,400 called
for an inquiry into whether the exercise of eminent domain is
“‘reasonably necessary’ to advance or, put differently, ‘related
in nature and extent’ to the public purpose used to justify it.”401
Merrill called for heightened scrutiny of cases involving high
subjective losses and cases where the government either transfers condemned property to a small number of parties or delegates the power of eminent domain to a small number of
parties.402 Epstein proposed a radically narrow test for public
use. He would allow the exercise of eminent domain for only
those acquisitions that would produce benefits that could be
characterized as “public goods,” that is, benefits from which no
to Berger, the benefit to the public must outweigh harms suffered by the condemnee.
See Berger, supra note 44, at 241–43.
398. See, e.g., Berger, supra note 44, at 240; Meidinger, supra note 41, at 45.
Meidinger proposed a public use test requiring that the taking “be necessary to
carrying out a public purpose.” Under his test, condemnors would be required to
show that the use of eminent domain was reasonably necessary to the realization
of the public project. Situations in which the condemnor could obtain on the open
market similar property on comparable terms would fail this test. Meidinger,
supra note 41, at 45. Berger set forth a test whereby no taking could occur absent a
showing of “condemnee monopoly.” Berger, supra note 44, at 240.
399. See, e.g., EPSTEIN, supra note 16, at 173–75 (approving of New Hampshire
Mill Act scheme compensating owners at 150% of fair market value); Berger, supra
note 44, at 245 (advocating compensation of 120% to 125% of fair market value for
public takings); see also FISCHEL, supra note 396, at 173–74 (interpreting Epstein);
Merrill, supra note 129, at 87 n.90 (interpreting Epstein).
400. See Brief of Professors David L. Callies et al. as Amicus Curiae Supporting
Petitioners, Kelo v. City of New London, 125 S. Ct. 2655 (2005) (No. 04-108), 2004
WL 2803192.
401. Garnett, supra note 294, at 939 (quoting Dolan v. City of Tigard, 512 U.S.
374, 390–91 (1994)). Garnett’s argument analogizes the public use inquiry to the
“means-ends” analysis discussed, until recently, by the U.S. Supreme Court in
determining whether exactions demanded by governments as a condition of
granting development permits are constitutional. See Agius v. City of Tiburn, 447
U.S. 255 (1980); Dolan, 512 U.S. at 390–91; Nollan v. Cal. Coastal Comm’n, 483 U.S.
825 (1987). The Court recently rejected the means-end test in Lingle v. Chevron
U.S.A., Inc., 125 S. Ct. 2074 (2005). Thus, Garnett’s theory is no longer analogous to
any existing takings doctrine. Nonetheless, it is worthy of analysis. She is
forthright in acknowledging that her test, if adopted, might not result in many
attempted exercises of eminent domain being struck down. See Garnett, supra note
294, at 969.
402. See Merrill, supra note 129, at 87–88.
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one can be excluded and that can be extended to additional
people at no additional cost. 403
403. See EPSTEIN, supra note 16, at 166–69; see also Fischel, supra note 150, at 933
(“Private goods are . . . ‘excludable,’ in that those not willing to pay [for them] can
be excluded from receiving their benefits. Public goods, however, are
‘nonexcludable,’ meaning that there is no practical way to exclude those who do
no [sic] pay from receiving the benefits if the good is provided at all.”). Epstein
explains that “[t]he purest of all public goods are those where the marginal cost of
any extra unit of protection is zero.” EPSTEIN, supra note 16, at 166. According to
Epstein, a rule based on “public goods” is helpful in addressing the problem of
unfair surplus distribution, because the “universal access and nondiscrimination
provisions are designed to ensure that no single individual or small group of
individuals (be it franchisee or user) is able to capture the entire surplus to the
exclusion of others.” Id. at 168. Thus, Epstein’s model eliminates the possibility of
rent seeking. See Merrill, supra note 129, at 87 (“[Under Epstein’s approach] no one
person could capture a taking’s entire surplus for himself to the exclusion of all
others.”).
Epstein acknowledges that limiting the eminent domain power to “public
goods” would be “too narrow for constitutional purposes.” EPSTEIN, supra note 16,
at 167. He allows that other benefits, like parks and highways, also constitute
public uses, even though providing these benefits to additional people increases
the cost of the benefits, thus taking them out of his definition of “public goods.”
Id. He justifies this additional category of “public uses” on the basis that parks
and highways are analogous to common carriers: anyone meeting minimal
requirements is entitled to use them. Id. at 168. He explains, “So long as all
individuals have the right to use the facility . . . then the public use requirement is
satisfied, even if all individuals cannot simultaneously use it.” Id.
Epstein also examines the distribution of the surpluses arising from eminent
domain transactions as a way of assessing whether a particular taking is for a
“public use.” Id. at 163–64. Takings involving things other than public goods
might be permissible, but for a public-private transfer to satisfy the public use
requirement, the forced transfer must arise from true necessity, and any surplus
produced by the transaction must be divided evenly. Id. at 173; see also Claeys,
supra note 314, at 885 (“In the private-on-private assembly transfers . . . Epstein
applies an understanding of ‘public use’ that requires the government to prove
that there exists a bona fide hold-out problem and that the ousted owners get
above-market compensation.”); Dagan, supra note 333, at 757 (“[Epstein’s] rule of
proportionality dictates that the claimant not sustain a burden that is
disproportionately heavy in comparison to that sustained by other beneficiaries of
the public action, taking into account the respective benefits to all parties
involved. . . . Thus, this rule bars any public actions that make some owners worse
off by transferring some of their economic value to the public or to other
individuals.”). As mentioned supra note 399, Epstein suggests that property
owners be paid 150% of fair market value to insure fair distribution. EPSTEIN,
supra note 16, at 173–75 (approving of New Hampshire Mill Act compensation
scheme); see also Merrill, supra note 129, at 87 n.90 (interpreting Epstein); FISCHEL,
supra note 396, at 173–74 (interpreting Epstein).
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F.
Banning Economic Development Takings
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Shortcomings of Proposed Modifications to the Public Use
Framework
The theories just discussed are either unworkable or have the
potential to produce more negative consequences than they
alleviate. Michelman’s approach, while provocative and influential among academics, suffers from the fatal flaw shared by
almost all efficiency theories: the impossibility of measuring, at
the time of the eminent domain proceeding, the projected benefits of the project.404 This is particularly true with respect to economic development projects, which like other business ventures
are inherently speculative and subject to what Christopher
Serkin describes as “development risks.”405 Among those risks
are “permit denials, environmental hazards, cost overruns, unscrupulous contractors, unanticipated pitfalls, and the basic risk
that the project will not be a commercial success.”406 Moreover,
to the extent an efficiency theory calls for an analysis of the loss
to the condemnee, similar problems result. Because subjective
value is inordinately difficult to estimate, a court faced with
such a task is unlikely to reach a correct result.407 This may ex-
404. See Merrill, supra note 129, at 73 (“How can courts accurately measure a
taking’s projected benefits, many of which will be intangible and speculative?”);
see also Kochan, supra note 90, at 87 (“[D]etermining whether an action is utilitymaximizing is a difficult task.”).
405. Serkin, supra note 342, at 690–91.
406. Id.
407. Merrill’s argument for special scrutiny where subjective values are high, see
Merrill, supra note 129, at 82–85, is problematic, since determining subjective
value is so difficult. In fact, he acknowledges that this proposal “runs into all the
difficulties of measurement and comparative institutional advantage associated
with judicial cost-benefit analyses generally.” Id. at 85. Nonetheless, assuming we
can identify the scenarios where subjective losses appear high, Merrill would call
for special judicial scrutiny or perhaps cost-benefit analysis in those cases. Id. at
84–85.
Meidinger’s test is somewhat less objectionable from a judicial review
perspective than the typical cost-benefit test, because it requires merely a showing
that the condemning authority has “attempted” to maximize benefits and
minimize costs, not that such a result will actually occur. See generally Meidinger,
supra note 41, at 45–47. The problem with the test, of course, is that in order to
address reciprocity of advantage and fairness concerns, an actual benefit must be
realized and an actual efficient outcome must result. Meidinger’s test provides no
assurances that this will occur. An economic development project might pass
judicial scrutiny under Meidinger’s test (for presumably all economic development
projects are designed to appear profitable in the planning stage), yet the projected
benefits might fail to materialize. Moreover, because subjective values are difficult
to assess, it would be extremely difficult for courts to determine whether, in fact,
loss has been minimized. Similar criticisms apply to Berger’s requirement that the
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plain why pure efficiency theories, in practice, seem to leave
the courts cold.408 As Serkin has observed, “Leading commentators have . . . pointed out that the demands of economic efficiency are so far removed from existing takings doctrine that
viewing the Takings Clause in exclusively economic terms
should remain an academic exercise.”409
Theories that turn on an inquiry into whether exercise of
eminent domain is “necessary” are problematic for other reasons. Necessity tests basically ask whether the project is likely
to be stymied by holdout behavior.410 These tests are of limited
benefit, as litigation over a proposed taking is unlikely to occur
except when property owners hold out.411 Where property
owners are willing to sell at the prices offered by the government, there is no need to litigate. Indeed, while the theories on
this matter conflict, leading commentators argue that employing eminent domain is actually more expensive than purchasing properties in open market transactions.412 This makes
governments reluctant to invoke the eminent domain power
except in thin markets where holdout behavior is likely or has
actually occurred.413 Therefore, in a given eminent domain lawsuit, the requirement of necessity will almost always be met.
total value of the project exceed the total cost in constructing it. See generally
Berger, supra note 44, at 235–36.
408. See Heller & Krier, supra note 30, at 998 n.5 (“[M]ost commentators think
about the Takings Clause in terms of efficiency and justice.”) (emphasis added).
409. Serkin, supra note 342, at 707.
410. See, e.g., Berger, supra note 44, at 240 (arguing for a prohibition on the use of
eminent domain absent a showing of “condemnee monopoly”); Garnett, supra
note 294, at 967 (theorizing that courts might require the government to show that
it could not acquire the property on the open market free of the rent-seeking and
monopolistic behaviors eminent domain is meant to prevent); Meidinger, supra
note 41, at 45–47 (explaining that where a would-be condemnor could obtain
comparable properties on the open market under similar terms, use of eminent
domain would not be “reasonably necessary”).
411. See supra note 299 and accompanying text.
412. See Fischel, supra note 150, at 934; see also supra note 303 and accompanying
text.
413. See Garnett, supra note 294, at 969 (noting that governments frequently
attempt to purchase property on the open market before resorting to eminent
domain in order to avoid the high costs of the eminent domain process, and that
the government therefore usually employs eminent domain in “thin markets” in
which it is easy to demonstrate the presence or risk of holdout behavior); see also
Merrill, supra note 129, at 77–81 (arguing that because of the administrative costs
and bureaucratic delays associated with taking through eminent domain, in thick
markets governments are more likely to acquire properties through ordinary
market exchange).
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Banning Economic Development Takings
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Moreover, the notion that eminent domain ought to be available to overcome holdout behavior in the economic development context is not self-evident. As explained below, the use of
eminent domain should not be necessary to overcome holdout
behavior when a proposed taking is for economic development.
Proposals for increased compensation are also problematic.
As a general principle, because of the difficulties associated
with assessing subjective values and projecting potential gains,
it is impossible to arrive at a correct level of compensation.
There are dangers associated with overcompensating as well as
undercompensating. Overly generous awards may lead to inefficient overinvestment by property owners.414 A property
owner, knowing he was entitled to 150% of fair market value,
might make improvements to his property in pursuit of a 50%
return on his investment.415 Some property owners might go
out of their way to increase their chances of condemnation in
order to receive their bonuses.416
Garnett’s proposal to analogize the public use inquiry to the
rough proportionality tests of Dolan and Nollan for government
exactions suffers from several problems. Most important, any
such proposal would require protracted litigation employing
vague standards and so is likely to deter property owners from
asserting their rights. As already noted, eminent domain is frequently used against poor and politically powerless groups.
Moreover, because property owners frequently lack the resources, political clout, or sophistication to contest an attempt
to take their property by eminent domain, the mere threat of
eminent domain is often enough to cause a targeted owner to
sell, despite the unfairness and inefficiencies that might result.
A bright-line rule preventing the use of eminent domain for
economic development would rob the condemning powers of
the ability to make such threats. The same criticism can be leveled at Merrill’s call for special scrutiny where subjective values are high, when the property will be transferred to a small
number of people, or when the eminent domain power is delegated to a small number of people. Each proposal has the potential to lead to protracted litigation, which means, as a
practical matter, that most targeted property owners will sim414. Fennell, supra note 149, at 993.
415. Id. at 993 n.118.
416. See Merrill, supra note 129, at 92.
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ply sell under threat of eminent domain without litigating to a
decision.417
Epstein’s public goods approach is exceedingly narrow; only
a small percentage of presently routine takings would pass his
test.418 Although that approach would most certainly prohibit
economic development takings, it might also screen out other
worthwhile projects. As it allows no exceptions for monopoly
or necessity, it disallows the social benefits that actually may
accrue in properly motivated exercises of eminent domain.
G.
Proposing a Legislative Ban on Takings
for Economic Development
A legislatively enacted ban on economic development projects, properly delimited, would solve the unfairness and efficiency concerns that this Article has raised. To be sure, simply
banning takings for economic development, without a clear
and generally applicable definition of “economic development,” would only generate protracted litigation yielding inconsistent results at great cost to the private litigants seeking to
protect their property. Such a consequence is neither fair nor
efficient; a more precise and carefully considered approach is
necessary. In formulating such an approach it is helpful to examine some of the many approaches adopted, under both existing and proposed legislation, to prevent economic development
takings, or takings having the potential to produce the injustice
and inefficiency threatened by economic development takings.419
417. Merrill does argue that the prospect of close court scrutiny might provide a
potential condemnee with greater bargaining power against the government. See
id. at 85. The close scrutiny he advocates, however, involves a cost-benefit
analysis, which is problematic for reasons stated earlier. See supra notes 396–97
and accompanying text.
418. See Merrill, supra note 129, at 74.
419. The number of permutations existing among proposals in many states
prohibits consideration of every approach that has been suggested. This Article
attempts to discuss the most common approaches. Moreover, most approaches to
banning public-private takings for economic development exclude from the ban
public-private takings for the purpose of transferring property to common
carriers or to private entities for the purpose of eliminating blight. Because this
Article is concerned with addressing the problems associated with economic
development takings, it does not attempt to address the efficiency and fairness
implications of the blight and common carrier exceptions. Transfers to common
carriers and to private entities for the purpose of eliminating blight are factually
and analytically distinct from transfers of non-blighted property to private entities
for the purposes of economic development, and are therefore beyond the scope of
this Article.
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One common governmental tactic is to forbid takings for the
purpose of increasing tax revenues, fostering employment, or
improving the general state of the economy. For the sake of
brevity, this Article refers to these prohibited goals as “indirect
economic benefits.” Some proposals ban outright all takings for
the purposes of achieving these indirect economic benefits.420
Other approaches prohibit takings that aim “solely” or “principally” to produce these indirect economic benefits.421 The focus
on prohibiting takings designed to produce indirect economic
benefits reflects concerns about unfettered use of the eminent
domain power.
Another common approach, reflected in the constitutions of
several states, is simply to prohibit the use of eminent domain
for “private use.”422 A related approach involves preventing
transfers that are designed to confer a private benefit on a private party.423
420. See, e.g., H.R. No. 1835, 2005 Gen. Assemb. (Pa. 2005) (prohibiting use of
eminent domain “to add to or increase the tax base of the municipality”); S.R. 611,
2006 Gen. Assemb. (Mo. 2006) (prohibiting takings for “economic development,”
defined as “any activity performed to increase tax revenue, tax base, employment
rates, or general economic health, when the activity does not result in the transfer
of property to: (1) public ownership; (2) a private entity that is a common carrier;
(3) a public utility, rural electric cooperative, or municipally-owned utility”).
421. See, e.g., H.R. 114, 2006 Leg. (Ky. 2006) (preventing “condemnation of
private property for transfer to a private owner solely for the purpose of economic
development that benefits the public only indirectly, such as by increasing the tax
base, tax revenues, employment, or by promoting the general economic health of
the community”); H.R. 2426, 2005 Gen. Assemb. (Tenn. 2005) (prohibiting use of
eminent domain “solely or principally for the purpose of improving tax revenue
or the tax base or for the purpose of economic development”); H.R. 2431, 2005
Gen. Assemb. (Tenn. 2005) (providing that property may not be “sold, leased or
otherwise transferred to a private developer, corporation, or other nongovernmental entity solely or principally for the expansion of tax revenue, a
perceived increase in the taxable value of the property, or the promotion of
economic development”).
422. See, e.g., ALA. CONST. art. I, § 3 (“[N]or shall private property be taken for
private use, or for the use of corporations, other than municipal, without the
consent of the owner.”); ARIZ. CONST. art. II, § 17 (“Private property shall not be
taken for private use.”); COLO. CONST. art. II, § 14 (“Private property shall not be
taken for private use unless by consent of the owner, except for private ways of
necessity, and except for reservoirs, drains, flumes or ditches on or across the
lands of others, for agricultural, mining, milling, domestic or sanitary purposes.”).
A proposed California bill would provide, among other things, “In the exercise of
eminent domain, ‘public use’ does not include the taking or damaging of property
for private use, including, but not limited to, the condemnation of property for
economic development.” H.R. 590, 2005 Gen. Assemb. (Cal. 2005).
423. See, e.g., S.R. 7, 2005 Leg. (Tex. 2005) (banning takings for “economic
development” while also prohibiting any use of eminent domain that “confers a
private benefit on a particular private party through the use of the property”; or
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Still other proposals address the issue by simply preventing
transfers to private entities, including businesses.424 Other approaches attempt to distinguish between uses that produce direct public benefits, and those that produce merely incidental
public benefits.425 Some proposals combine several approaches.426 Several existing and proposed provisions explicitly
that “is for a public use that is merely a pretext to confer a private benefit on a
particular private party”); S.R. 693, 2005 Leg. (Mich. 2005) (providing that “[a]
taking of private property for public use . . . does not include a taking for a public
use that is a pretext to confer a private benefit on a known or unknown private
entity”); S.R. 1035, 2005 Leg. (Okla. 2005) (“Notwithstanding any other provision
of law, no governmental entity may take private property by eminent domain and
sell, lease, or otherwise transfer it to a private person, partnership, corporation,
business, or other private entity with the primary purpose being the benefit of
such private entity.”); H.J.R. 10, 126th Gen. Assemb. (Ohio 2005) (proposed
constitutional amendment) (“[P]rivate property shall not be taken for economic
development purposes by an exercise of eminent domain when the sole or
primary driving force behind the acquisition of the private property is a private
individual or business entity that seeks the private property of another for its own
economic benefit.”).
424. See, e.g., H.R. 4091, Gen. Assemb. 2005 (Ill. 2005) (limiting exercise of
eminent domain to “qualified public use,” defined to include transfers to
ownership by the government and to exclude transfers to private ownership or
control unless for a public use, and then only if explicitly approved by the state
legislature); H.R. 1835, 2005 Gen. Assemb. (Pa. 2005) (prohibiting use of eminent
domain if property is to be turned over “to a nonpublic interest”); H.R. 2054, 2005
Gen. Assemb. (Pa. 2005) (“[T]he exercise of any condemnor of the power of
eminent domain to take private property in order to use it for private commercial
enterprise is prohibited.”). H.R. 4091 (Ill. 2005), supra, provides that “‘private
ownership or control’ shall be liberally construed to prevent the use of long-term
leases, options to purchase, and other mechanisms intended to defeat the purpose
of this section, which is to limit the acquisition of property by eminent domain
when it is primarily for the benefit and use of private entities.”
425. See, e.g., H.R. 4295, 116th Gen. Assemb., 2d Reg. Sess. (S.C. 2006) (defining
“public purpose” or “public use” to mean “a purpose or use that results in a
significant and direct benefit to the public. It does not mean a secondary benefit to
the public which is merely incidental, indirect or pretextual when the primary
benefit inures to a private person or entity”); H.R. 1806, 2005 Gen. Assemb., Reg.
Sess. (Va. 2005) (prohibiting condemnation of property that (i) is made with the
intent of making the property available for ownership or use by a private entity
unless any benefits that will accrue to the private entity as a result of its
ownership or use of the property are merely incidental when compared to the
benefits that will accrue to the public or (ii) is otherwise predominantly for a
private purpose).
426. See, e.g., Private Property Protection Act of 2005, H.R. 4138, 109th Cong.
§ 8(1) (2005) (defining economic development as “taking private property,
without the consent of the owner, and conveying or leasing such property from
one private person or entity to another private person or entity for commercial
enterprise carried on for profit, or to increase tax revenue, tax base, employment,
or general economic health”); ALA. CODE § 11-47-170(b) (2005) (preventing the use
of eminent domain “for the purposes of private retail, office, commercial,
industrial, or residential development; or primarily for enhancement of tax
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Banning Economic Development Takings
561
reject the view that determination of whether something is a
public use is a political question entitled to judicial deference.427
This variety of approaches to preventing private-public takings for the purposes of economic development428 underscores
the difficulty of identifying precisely the characteristics of a potentially unfair or inefficient taking, and describing these characteristics in language that will reliably produce the intended
result. Some of the proposals may be as pliable in application
as the traditional doctrine requiring a “public use.” As such,
they may fail to produce their intended results if government
revenue; or for transfer to a person, nongovernmental entity, public-private
partnership, corporation, or other business entity”).
427. See, e.g., ARIZ. CONST. art. II, § 17 (“Whenever an attempt is made to take
private property for a use alleged to be public, the question whether the
contemplated use be really public shall be a judicial question, and determined as
such without regard to any legislative assertion that the use is public.”); COLO.
CONST. art II, § 23 (identical language); OKLA. CONST. art. II, § 24 (“In all cases of
condemnation of private property for public or private use, the determination of
the character of the use shall be a judicial question.”).
428. Many of the proposals are obviously derived, to varying degrees, from
model language promulgated by the Castle Coalition. For example, the coalition
proposes the following language for state constitutional amendments:
With just compensation paid, private property may be taken only when
necessary for the possession, occupation, or enjoyment of land by the public at
large, or by public agencies. Except for privately owned common carriers,
private property shall not be taken for use by private commercial enterprise,
for economic development, or for any other private use, except with the
consent of the owner. Property shall not be taken from one owner and
transferred to another, on the grounds that the public will benefit from a more
profitable private use. Whenever an attempt is made to take private property
for a use alleged to be public, the question whether the contemplated use be
really public shall be a judicial question, and determined as such without
regard to any legislative assertion that the use is public.
Castle Coalition, Model Language for State Constitutional Amendments, http://www.
castlecoalition.org/legislation/model/state_constitution.html (last visited Feb. 8, 2006).
The coalition’s model legislation for prohibiting use of eminent domain for
economic development contains the following definition:
Economic Development—The term “economic development” means any
activity to increase tax revenue, tax base, employment, or general economic
health, when that activity does not result in (1) the transfer of land to public
ownership; (2) the transfer of land to a private entity that is a common carrier,
such as a railroad or utility; or (3) the transfer of property to a private entity
when eminent domain will remove a threat to public health or safety, such as
the removal of public nuisances, removal of structures that are beyond repair
or that are unfit for human habitation or use, or acquisition of abandoned
property; (4) the lease of property to private entities that occupy an incidental
area within a public project.
Castle Coalition, Model Language for State Statutes Limiting Eminent Domain Abuse,
http://www.castlecoalition.org/legislation/model/state_statute.html (last visited Feb. 8,
2006). For other examples of model proposals, see Castle Coalition Legislative
Center, http://www.castlecoalition.org/legislation/ (last visited Feb. 8, 2006).
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authorities adjust their policies, arguments, and justifications in
order to capitalize on this pliability. To minimize this risk, one
principle that should be included in any legislative approach is
an express statement that the question of whether a proposed
use is permissible is to be decided by the courts without deference to the condemning authority. Thus, unlike courts applying existing federal takings doctrine, courts operating under
the new legislative directives will not be required or inclined to
give government the benefit of any doubt.
A clause like that contained within the Oklahoma Constitution, providing that the question of public use is a “judicial
question,”429 does not go far enough to produce a meaningful
change. In fact, without more, such a statement produces no
change at all. It has long been the case under the Fifth Amendment that the question of whether a taking is for public use is
ultimately one for the courts.430 The problem is that courts, in
answering this question, have shown enormous deference to
government public use claims. Under the current regime, any
taking that “is rationally related to a conceivable public purpose” is to be upheld.431 An effective change requires language
providing, as do the pertinent clauses in the constitutions of
Arizona, Colorado, and Mississippi, that the court is to make a
public use determination “without regard to any legislative
assertion that the use is public.”432
Even assuming that courts are free to make an independent,
non-deferential determination of whether a taking is for a public use, several of the proposals described above would pose
daunting, if not impossible, challenges in their application. For
example, the measures that would prohibit the use of eminent
domain “solely” or “primarily” for the purpose of producing
indirect economic benefits would put the courts in the difficult
position of having to ascertain the motives of government officials. Furthermore, the expenditure of judicial resources and
legal fees to resolve this issue is unnecessary, as the motivations of the government should not be relevant in determining
429. See OKLA. CONST. art. II, § 24.
430. See, e.g., City of Cincinnati v. Vester, 281 U.S. 439, 446 (1930) (“It is well
established that, in considering the application of the Fourteenth Amendment to
cases of expropriation of private property, the question what is a public use is a
judicial one.”).
431. See Haw. Hous. Auth. v. Midkiff, 467 U.S. 229, 241 (1984).
432. ARIZ. CONST. art. II, § 17; COLO. CONST. art II, § 23; MISS. CONST. art. III,
§ 17.
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whether a taking is permissible. The legally determinative issue
is whether the taking produces a public benefit. The effect of a
taking, not the intent underlying it, determines its validity.433
A better approach, one that eliminates the need to determine
the purpose motivating a proposed taking, is simply to specify
that indirect economic benefits do not constitute a public use.
Even then, government officials may seek to circumvent the
restriction by claiming that some other feature or benefit of the
project constitutes the required public use. For example, if a
local government seeks to condemn land for the construction of
a giant retail store, it might claim that the resulting public
benefit will be more diverse shopping opportunities, more retail competition, and thus lower prices for its residents. Similarly, backers of a mixed-use development project like the one
at issue in Kelo might claim that the benefit resulting from the
construction of, say, a marina, public walks, and housing is the
aesthetic improvement and the social cohesion and sense of
community resulting from a concentrated, optimally located
residential community.434 They might further argue that for
such a community to succeed, retail establishments and hotels
would be necessary. Then, too, it might be necessary to include
office development in order to make the economics of the project attractive to potential developers. Courts, no longer required to defer to the government’s assertions, would have to
decide whether the alleged aesthetic improvements and social
benefits would in fact result and, if so, whether they would
constitute sufficient public advantages to justify use of the
eminent domain power. The result would be unguided decision-making, inconsistency, and a tendency for judges to apply
their own subjective views to the question. Thus, simply declaring that indirect public benefits do not constitute a public
use, without more, does not definitively prevent economic development from occurring; rather, it simply complicates the
inevitable legal battles that would ensue.
Laws stating that property shall not be taken for “private
use” also pose a problem: They afford little more protection
433. See Kelo v. City of New London, 125 S. Ct. 2655, 2676 (2005) (O’Connor, J.,
dissenting) (noting that the government officials’ motive “has no bearing on
whether an economic development taking will or will not generate secondary
benefit for the public”).
434. See id. at 2659 (majority opinion) (noting that the plan at issue “was also
designed to make the City more attractive and to create leisure and recreational
opportunities on the waterfront and in the park”).
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from economic development takings than the existing doctrine
limiting the use of eminent domain to public uses. The terms
“public use” and “private use” are equally pliable. If public use
can mean public advantage or benefit, then it follows that a
taking producing a public benefit or advantage is not a taking
for “private use.” Thus, a prohibition of takings for “private
use,” without more, does not prevent the expansion of permissible uses of eminent domain to encompass takings that produce public benefits. A taking like the one at issue in Kelo, then,
might not be precluded even in a jurisdiction purporting to
eliminate takings for “private uses.”
Rules that prevent the use of eminent domain to benefit a
private individual or group, where the “primary” or “sole”
purpose is to benefit a private individual or group, or where
the claimed use is a “pretext” for conferring a benefit on a private party are also problematic. As a preliminary matter, a law
prohibiting the use of eminent domain to benefit a private individual or group (as opposed to laws prohibiting condemnation where the “sole” or “primary” purpose is to confer a
private benefit) is simply nonsensical. Any exercise of eminent
domain benefits at least one private individual in some way.
Even an uncontroversial taking of property for use by the government benefits the government attorney who earns his living
by managing the procedure for exercising eminent domain.
Thus, taken literally, this rule would outlaw eminent domain of
any kind.
A rule preventing condemnations where the “primary” or
“sole” purpose is to benefit an individual or group is better, but
also problematic. As already stated, the effect of the taking, not
the intention behind it, is what matters. And, even if the primary effect is that an individual or group is benefited, the taking should not necessarily be prohibited. Some people who are
not the intended beneficiaries might nonetheless benefit incidentally, and there is no clear rule for how many people must
benefit in order for a taking to pass muster. On the other hand,
where the “sole” effect is a private benefit, “a truly private taking”435 has occurred. This would be a classic scenario of “a law
that takes property from A, and gives it to B.”436 Such a taking
“could not withstand the scrutiny of the public use requirement; it would serve no legitimate purpose of government and
435. See Midkiff, 467 U.S. at 245.
436. Calder v. Bull, 3 U.S. (3 Dall.) 386, 388 (1798).
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would thus be void.”437 Thus, a taking that “solely” benefits an
individual or small group is already prohibited; a taking that
“primarily” benefits an individual or small group might not be
prohibited. What is necessary in the latter case is a standard for
determining how many beneficiaries is too few for a public use
to be found. But it would be difficult, if not impossible, to formulate a generally applicable rule that would serve this function. A similar analysis applies to provisions that would
prohibit takings providing only “incidental” public benefits.
Such rules raise several questions: How is a non-economic public benefit quantified? How little of such a benefit is considered
incidental? These laws direct the courts to apply rules without
any standards for doing so.
Provisions barring the use of eminent domain in order to
transfer private property to private ownership or control
would have the effect of preventing Kelo-type takings. But
unless they include exceptions, such laws are overbroad: They
also would prohibit benign438 and even beneficial takings. For
example, such laws would prevent the use of eminent domain
to facilitate construction of a performing arts center, sports
arena,439 not-for-profit hospital, or museum if, as would likely
be the case, any one of these were to be owned or controlled by
a non-public entity.
Ultimately, in arriving at a legislative or constitutional approach to preventing the kind of problematic takings associated with economic development projects, it is important to
remember how eminent domain works in the real world. Typically, officials of a condemning entity first attempt to acquire
targeted property without resort to eminent domain, but with
the implicit or explicit threat that eminent domain will be used
437. Midkiff, 467 U.S. at 245.
438. The term “benign” is used because such takings are unlikely to result from
capture and rent seeking. As a result, governments are more likely to make correct,
good-faith assessments in determining whether to take property for such projects.
Moreover, these undertakings are less likely than other takings to produce substantial surpluses in the hands of transferees. Thus, the potential injustice of denying
condemnees a share of this surplus is greatly lessened. Increments of subjective
value may still go uncompensated, but the reciprocity of advantage justification is
more persuasive where the resulting project actually produces public benefits,
which is more likely to occur in the case of museums, hospitals, and recreational
facilities than in the case of a speculative, profit-driven development project.
439. Although a sports arena might be owned by the government, it is likely to
be leased to one or more privately owned sports franchises. Thus a taking for the
construction of a sports arena would result in a transfer of private property to
private control.
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if voluntary exchanges cannot be negotiated. Frequently, the
owner of the targeted property does not understand the condemnation process or his rights and, even if he does, lacks the
resources to resist through a protracted legal battle. As a result,
a large number of property owners who are threatened with
eminent domain sell their property to the government outside
the eminent domain process.440 Because uncertainty disadvantages property owners, a rule that is simple and straightforward is preferable to one that is unpredictable and difficult to
apply. A straightforward rule can be explained clearly to potential condemnees, putting them on notice as to the limits of
the government’s power. Moreover, litigating a straightforward rule, which is likely to generate consistent and straightforward precedents, is likely to be less expensive than litigating
an ambiguous rule. Thus, with a simple rule, a community or
neighborhood association is more likely to be able to muster
the resources to defend their property in court.
In the final analysis, the simplest and most effective way to
prevent a taking like the one in Kelo is simply to ban takings
where the ultimate transferee will be any non-governmental
entity or individual. However, it is desirable to provide a
mechanism for making exceptions for those rare cases where it
might be desirable to use the power of eminent domain for
beneficial and benign projects that would likely be owned by a
non-government entity, such as museums, zoos, stadiums, arenas, and not-for-profit hospitals. As a safety valve for the possibility that a project not contained on the list might become
desirable in the future, the law could provide that the eminent
domain power could be used to transfer power to a nongovernmental entity only if the entity was not operated for
profit and voters approved the use of eminent domain for the
project in a public referendum.
Thus, my proposed constitutional amendment would read as
follows:
The State or its subdivisions shall not exercise the power of
eminent domain for the purpose of acquiring property that
will be transferred to a non-governmental entity or individual. Notwithstanding the preceding sentence, the State or its
political subdivisions may exercise the power of eminent
domain for the purpose of acquiring property that will be
transferred to and used as the site for a not-for-profit mu440. See INSTITUTE FOR JUSTICE, supra note 40, at 5.
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seum, public performing arts center or other cultural venue,
stadium, sports arena, or hospital. Should it become desirable to exercise the power of eminent domain to acquire
property that will be transferred to and become the site of a
type of not-for-profit entity not enumerated in this provision, the State or the relevant subdivision shall do so only
upon a majority vote of the people held at public referendum. However, a public referendum may not authorize the
use of the power of eminent domain to transfer property to
any business or other organization operated for profit or to
any individual.
H.
Consequences of a Ban on Takings for Economic Development
Governments may still, and no doubt will, undertake economic development projects, but under this Article’s approach
they may not use the taking power to acquire property. Instead, if the government believes it must subsidize the acquisition of property for the project, it must use an alternative
approach that does not implicate the risks of inefficiency, unfairness, and abuse inherent in the use of eminent domain. The
government must buy the property on the open market, or if it
wishes the property to be acquired directly by the developers
participating in the project, it must use tax incentives and
grants to subsidize that acquisition.
Requiring that economic development projects rely on the
open market in acquiring property serves several functions.
Primarily, it assures fuller and fairer compensation to property
owners whose property is acquired. This guarantee eliminates
many of the ills this Article has discussed: the unfairness and
efficiency concerns caused by undercompensation, the risk that
rent-seeking special interests will “hijack” the political process
in order to capture the uncompensated surplus for their own
profit, the risk of oppression of weak minorities by politically
powerful interest groups, and the risk of inefficient overacquisition fueled by fiscal illusion.
The most obvious objection to this proposal is that removing
eminent domain from the political process potentially deprives
the government and its proxies of the most potent weapon for
overcoming holdouts, which might deprive an economically
distressed region of the benefits of a needed economic development project. If no alternative remedy is supplied, a useful
tool for economic revitalization may be lost. Fortunately, there
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are well established alternatives that, in most cases, provide
solutions to the holdout problem.
One common practice is the use of the so-called “precommitment” contract, whereby a developer signs contracts
with all potential sellers in a targeted area, promising to pay
each owner the same price.441 As a negotiating strategy, this
allows the developer to argue convincingly that he cannot pay
a substantially higher price to a holdout without incurring ruinous expenses in the form of higher payments that would
thereby be owed to every other seller.442 Kochan has described
a similar strategy analogous to corporate tender offers.443 Of
course, such a strategy, while possibly effective against strategic holdouts, would have no effect on sincerely motivated
holdouts.
Still, as the Hathcock court observed, “the landscape of our
country is flecked with shopping centers, office parks, clusters
of hotels, and centers of entertainment and commerce” that
were constructed without the benefit of eminent domain.444
Part of the reason economic development projects are not dependent on the eminent domain power is that, unlike railroads
or canals, they are able to modify plans to work around holdouts, perhaps by minor relocation, redesign of buildings, or
even building around a holdout.445 This possibility allows a developer to minimize the obstacles posed by a sincere holdout,
while giving pause to someone motivated solely by greed. If a
monopolistic seller sets her price too high, the developer may
work around her, or go somewhere else.
Of course, some economic development projects may be so
site-dependent or fixed in their goals that this will not be an
option, but intuition, and the presence of those development
projects described by the Hathcock court, suggests such projects
would be rare. Risking the infrequent derailment of an economic development project in order to eliminate the injustice
and inefficiency herein described seems to be not only a smart
choice, but a necessary one.
441. See Somin, supra note 35, at 1027 (describing practices).
442. See id. (same).
443. Kochan, supra note 81, at 88. But see Merrill, supra note 129, at 81 (describing private sector assembly relying on “buying agents, option agreements, straw transactions,
and the like,” but arguing that they can not be relied upon to work in all cases).
444. County of Wayne v. Hathcock, 684 N.W.2d 765, 783 (Mich. 2004).
445. See Fennell, supra note 149, at 974 (describing strategies for working around
holdouts).