Eminent domain arguments
Give the Supremes a round of applause!
In their one-hour of oral arguments on Kelo v. New London, the justices asked all the right questions (link in .pdf), and in so doing cut up both counsel pretty badly — which leaves open the question of how they will decide.
By the way, pay no attention to the various tea-leaf reading you may have read in the public press, which focused on the justices’ manner and the tone of their questions. Anyone who does not understand the issues is unqualified to pronounce on the matter, because although it is a public event, a Supreme Court oral argument really has only a private audience: the nine justices. Everybody else is supernumerary. Because of this, and under the pressure of time, the justices pepper each counsel with questions that seem to (and do) jump around. When read together, and suitably rearranged for clarity, they elucidate very clearly the issues and the legal difficulties.
Here’s what the Supremes, quite properly, cared about.
[In quoting from the record, I have taken the liberty of clarifying the prose by eliminating the inevitable verbal stutters. Numbers in parentheses are (or should be!) pages from the transcript (link in .pdf). And rather than cite counsel by name, I’ve simply called them by their Homeric attributes, Owner and Government.]
1. Is this a question of rights, money, or both?
Rights. Under what circumstances may the government take private property?
Money. If the government does take the property, what does the owner receive?
The Fifth Amendment imposes both tests: “nor shall private property be taken for public use without just compensation.” The rights question centers on what constitutes a valid public use; the money question is captured by defining just compensation.
Scalia: You can take from A and give to B if B pays significantly more taxes? You accept that?
Government: I do, Your Honor.
Justice Antonin Scalia
Kennedy: There are statements in our cases that say you cannot take from A just to give to B. (31)
Justice Anthony M. Kennedy
In other words (and I’m merely interpreting what the justices said, not doing my own legal research), prior cases have established that state or municipality must have a motive greater than the purely Benthamite utilitarian — there must be a public purpose beyond simply raising the tax base. This is partly because citizens who oppose a governmental action are fighting at an inherent disadvantage:
Breyer: We are told in the briefs that the people who often might hold out, might be doing so to get more money, but it might also be because they are poor, they are not well connected politically, and their only hope is to go to a court and stop this thing. So you’d give them two weapons:
1. Weapon one is you have to pay them. That’s correct. Compensation.
2. And weapon two is they can put you to a test of being reasonable. (41)
Justice Stephen Breyer
Government: The compensation measures. Exactly. If there are some scholarly articles on that, I’m not aware of it either. But I would point out that’s something, in terms of social costs, that this court might or might not wish to consider in a just compensation cases, but I don’t think it should affect whether you take the property or not. (45)
In other words, says the government, how much we pay when we take is a question separate from under which circumstances we have the right to take.
Souter: I mean, what bothered Justice Breyer I guess bothers a lot of us. And that is, is there a problem of making the homeowner or the property owner whole? But I suppose the answer to that is that goes to the measure of compensation which is not the issue here. (49)
Justice David H. Souter
Here I believe Justice Souter is commenting not that compensation is irrelevant to the case — it’s the core! — but rather, whether it is ripe for the matter that has come up to the Supreme Court, namely whether
Our view (aka “the right answer”). The government’s initial response (more taxes are enough) is wrong, and the government blew the answer. Paying taxes are merely a collateral benefit of urban renewal — its principal purpose is revitalizing an ailing community.
2. In urban renewal, how ’sick’ must a community be to justify surgery (eminent domain taking for urban development)?
Under previous Supreme Court decisions (Berman, Midkiff), the court has already determined that if there is ‘blight,’ government is authorized to take for urban renewal. Kelo asks the court whether conditions that are depressed short of blight rise to the level of urgency
O’Connor: But you take the position that if a city is suffering from enormous lack of jobs and depression, economic depression, that there is no public purpose for taking land to enable the creation of jobs?
Owner: That is correct, Your Honor. (8)
Justice Sandra Day O’Connor
If government pronounces a patient dead or terminally ill (makes a finding of blight), then the government may perform radical excision surgery — take by eminent domain for urban renewal. But must we wait until the patient is dead (or mortally wounded) before we can operate? Maybe we can act before the patient is mortally ill?
Kennedy: You want me to make a distinction between blight which is a permissible governmental use, and economic revival, which isn’t? Is that the line you want me to draw?
Owner: Yes.
Kennedy: Well, an economist might say, it’s very clear that if this economic depression continues for another five years we are going to have blight.
Owner: Governments have to meet a certain objective criterion to satisfy that this is actually a blighted area.
Kennedy: Why isn’t it an objective criterion to say that we are going to have economic revival, avoid economic downturns? (13)
So the owner wants the city to be on its deathbed because to act beforehand is to invite economic euthanasia of those who, being powerless, are effectively voiceless. This runs contrary to a previously decided Supreme Court case:
Government: Mr. Berman’s property [previous case of eminent domain upheld — Ed.] was not blighted. (28)
Souter: I think you’re [owner] moving in the direction of saying we really have got to overrule the prior cases. (11)
The government then exposes this risk:
Government: Economic development can take place anywhere in town. Blight happens in one area of town where the poor and the minorities are likely to live. If you stick to blight, you’re going to end up making blight jurisprudence because the cities are going to say, we can only do this by blight, so they are going to have marginal definitions of blight.
You sure you want to take that position?
(C) Rubber Ritchie, www.flexinthecity.com, used with permission.
Assuming for the moment that public policy justifies intervening before terminal illness — which it certainly should! — how do we check government from performing elective surgery (urban renewal just to stabilize) or even more shallowly, cosmetic surgery — improving just to make prettier (collect more revenue)? How can the court write a rule that can be adjudicated in future cases?
Scalia: Would it not be fully as much, under your theory of a public use, for a city to say yes, we are not doing badly, but we could do better? Let’s attract some high-tech industry here. You can’t possibly draw a line between depressed cities and un-depressed cities, can you?
Government: I would not draw a line.
Are you sure you wanted to say that, government?
Scalia: You wouldn’t. And you wouldn’t ask us to do it either. You could take property from A and give it to B if B is richer, and would pay higher municipal taxes, couldn’t you?
When you’re in a hole, government, stop digging.
Government: Yes, Your Honor. But you’re very likely to have a Willowbrook v. Oleck problem about discrimination.
Justice Scalia brushes the discrimination argument aside:
Scalia: I just want to take property from people who are paying less taxes and give it to people who are paying more taxes. That would be a public use, wouldn’t it?
And O’Connor picks up the economic motivation question:
O’Connor: For example, Motel 6 and the city wants a Ritz-Carlton. Now, is that okay?
Government: Yes, Your Honor. Because otherwise you’re in the position of drawing the line. (30)
If the sole goal is economic benefit, and the situation is not so dire, then does the government really need eminent domain power?
Scalia: You’re taking property from somebody who doesn’t want to sell it. Does that count for nothing? If the project is indeed reasonable, and there is genuine prospect that all of these good things that you’re talking about will happen, why wouldn’t private money come in to further the project?
Government: There are some plaintiffs who are not going to sell at any price. They want to stay there. You’ve got a severe assembly problem. (39)
The right answer: Very poor arguing by the government [Hey, easy for you to say, you weren’t there — Ed.], which missed the right answer to respond: the finding has to rise to some level of, let’s say, ‘enduring economic depression,’ capturing two ideas:
- The downturn must be significant.
- It must be more than cyclical, but rather structural.
3. Can the public achieve a public purpose by using a private party who is pursuing private gain?
Eminent domain requires public use. Does that mean that the development activity must be carried out by a public entity?
Owner: Eminent domain cannot be used for private uses.
Kennedy: Everybody knows that private developers were the beneficiaries in Berman. (12)
Souter: I can understand why we would want to draw a distinction between the use of eminent domain power that takes a parcel of property from private person A and simply then reconveys it to private person B without any particular object in mind except that the city likes B. (19)
If one can have public use carried out by a private entity, what kind of private entity? Must it be one that the government already regulates?
Scalia: Common carriers are subject to state regulation to a degree that private companies are not. I don’t think the public utility cases are at all comparable to condemning land in order to get a new company to move in and pay more taxes. I just don’t think it’s similar. (42)
Government: There is a difference. The whole point is about having a test about reasonable assurances about whether something is going to happen and there’s where the railroad case makes a difference.
So the government is trying to argue that not only may a private company be an acceptable agent of public purpose, it is self-evidently so if the public benefits are foreseeable. Does this test stand up? Once again, Justice Scalia appears not to think so:
Scalia: You can give it to a private entity, you can give it to a railroad, to some public utility. But the use that it’s put to by that railroad and public utility is a public one. That’s why it’s a public utility. It’s quite different to say you can give it to a private individual simply because that private individual is going to hire more people and pay more taxes. That, it seems to me, just washes out entirely the distinction between private use and public use.
Government: Well, I don’t agree, Your Honor, because I think if a person is without a job and if a person is not able to get basic services that they need from the town because the town can’t afford it, that’s just as important as a train running on time or eliminating blight. (53-54).
Justice Scalia is right, and the government eventually realized it, belatedly retreating.
The right answer. Of course public benefit can be delivered through private companies — that’s why capitalism works — but when a private actor is involved, government must exercise a higher standard of care to assure that the private partner’s legitimate (nay, honorable) pursuit of maximum profit is yoked to a path that must inevitably and inescapably provide the public sector with benefit, and indeed more benefit than the public sector could achieve acting for itself.
Yes, that standard is fact-based and may be difficult to demonstrate in particular cases. But so be it.
4. If we let a private party develop, how can we hold the private party accountable for its future performance?
If we allow a doctor to diagnose the patient, and indeed to issue the anticipatory death certificate justifying radical surgery, who then actually performs the surgery? Who is qualified?
Previous cases establish that government is ipso facto qualified — so government may satisfy its public purpose by delivering use. When a private surgeon is allowed, these must be regulated — the statutory history includes railroads and utilities, both of which are publicly regulated. A purely private developer, an unregulated entity, is not necessarily accountable for its rosy scenarios. So even beyond finding that the private sector’s involvement is desirable, how do we know they will come through? Are we at risk of buying the snake oil?
“Guaranteed new jobs! Higher tax base!”
Owner: If this court accepts that economic development can be a public use, then we advocate a test of reasonably foreseeable uses and minimum standards in order to counter the dangers posed by such private involvement in the use of eminent domain power. (14)
With his usual unerring aim, Justice Scalia then pokes a finger in the owner’s eye:
Scalia: If I condemn land for a public utility and the public utility turns out to be very inefficient, has the condemnation been invalid?
Owner: No, Your Honor. (16)
And when it’s the government’s turn on the hot seat, Justice Breyer comes at it the other way:
Breyer: Owner counsel was arguing that there has to be a reasonable assurance that the public use will in fact take place.
Government: I don’t think it’s necessary to do that. (28)
So the government bravely, perhaps foolishly, adopts the view that we need not believe our projections to any degree of certainty, nor need we extract any collateral or pledge of performance. Conversely, drawing a likely-enough line itself raises problems:
O’Connor: Do you really want courts to be in the business of trying to weigh the evidence to see if the utility will be successful? I mean, what kind of a test are you proposing?
Owner: At a minimum, this court should require that the government actually name a use. (21)
That’s certainly legally credible: by definition, a proposed use is more readily evaluated than a range of hypothetical uses with which we’re merely toying. But is this something of sufficient frequency to worry about?
O’Connor: Does the record tell us anything about how often takings by eminent domain for economic development occur in this country? Is it frequent?
Owner: It is frequent, Your Honor. We do not know of any study …. (21)
The right answer. There’s no doctrinal elixir — the test of credibility inevitably involves judgment about the future that is fact-specific and time-specific. Nor does limiting the power to government improve things: indeed, the private sector’s on-time-on-budget record is better than the public’s (Big Dig, anyone?).
You’re not going to solve the problem this way. Better is to find a counterbalance that economically incentivizes government away from leaping to eminent domain.
Just compensation, anyone?
5. Since there will be a boost in value, should we revisit how we measure ‘just compensation’?
Scalia: What this lady wants is not more money. No amount of money is going to satisfy her. She said I’ll move if it’s being taken for a public use, but by God, you’re just giving it to some other private individual because that individual is going to pay more taxes. It seems to me that’s an objection in principle that the public use requirement of the Constitution seems to be addressed to. (51)
Government. I guess the best answer I have, Justice Breyer, to your question [asked a few minutes earlier to which Justice Scalia’s comment is a followup], is simply to go back to the point that the time at which you consider what just compensation is, is in the just compensation proceedings. (52)
Here the government keeps missing the point – higher taxes are the byproduct of urban revitalization, not its purpose – but then invites the justices to find another measure of just compensation in urban renewal cases. Was government counsel doing this just to win the right to take, or because he is genuinely willing to have an expanded definition? It seems to be the latter:
Government: I would say in terms of just compensation, in deciding what the fair market value is today, you can certainly take into account the economic plan that’s going into effect. You know –
Justice Kennedy pounces.
Kennedy: Really? I thought that that was a fundamental of condemnation law that you can not value the property being taken based on what it’s going to be worth after the project. (50-51)
This pounce is all the more revealing when read against Justice Kennedy’s earlier cross-examination of the owner on precisely the same issue:
Kennedy: Are there any writings or scholarship that indicate that when you have property being taken from one private person ultimately to go to another private person, that what we ought to do is to adjust the measure of compensation, so that the owner — the condemnee — can receive some sort of a premium for the development?
Owner: There may be ….
Kennedy: And you have to ignore the project when you determine the value. The value is a willing buyer and a willing seller, without reference to the project.
Owner: Yes, that is right. (22)
We also heard Justice Souter express the same worry, almost in passing:
Souter: I mean, what bothered Justice Breyer I guess bothers a lot of us. And that is, is there a problem of making the homeowner or the property owner whole? (49)
The Constitutional standard isn’t ‘fair market value, it’s ‘just compensation.’ Since the property owner is an unwilling seller, perhaps a premium above fair market value is warranted when the public purpose is economic. This is precisely the argument I advanced in my lengthy analysis (link in .pdf) suggesting that in addition to the standards articulated above, we could solve the problem by defining just compensation to mean:
Fair market value at the moment of taking (the current standard)
plus
A proportionate ownership share in the development entity economics.
This approach doesn’t refute prior cases, any more than Einsteinian mechanics refuted Newtonian. Rather, it expands the equation to include an element that is indistinguishable from zero in the Newtonian world but significant in the Einsteinian.
Giving owners their value today, knowing that the taking will be a springboard to a pile of public money going in and a pile of private benefit coming out, may be unjust, especially if one wishes, as in Justice Breyer’s formulation, to give holdout owners a meaningful economic deterrent capability.
Government: The compensation measures. Exactly. If there are some scholarly articles on that, I’m not aware of it either. But I would point out that’s something, in terms of social costs, that this court might or might not wish to consider in a just compensation cases, but I don’t think it should affect whether you take the property or not. (45)
Kennedy: But what I am asking is if there has been any scholarship to indicate that maybe that compensation measure ought to be adjusted when A is losing property for the economic benefit of B. (25)
Over here, Justice Kennedy!
