August 15, 2004

Eminent domain on the wane?

By: James N. Markels

Private property owners got some good news from Michigan last month when the state’s supreme court struck down a county’s use of the eminent domain power in County of Wayne v. Hathcock. That case overturned over two decade’s worth of jurisprudence that essentially gave the government carte blanche to seize private property for almost any reason. While it is a welcome change, private property advocates still have a ways to go before eminent domain will be safe from government over-reaching and corruption. And, unfortunately, U.S. Supreme Court Justice Sandra Day O’Connor may be standing in the way.

Eminent domain allows a government to take privately owned land for public use in exchange for just compensation without having to negotiate or compete with other buyers. Without such a power it would be practically impossible for any state or federal government to build significant public projects, such as roads, utilities, airports, and the like; any one private owner whose property is needed could simply refuse to sell.

Unfortunately, the more common application of eminent domain recently has been for the government to use the power to benefit private business, not the public. In County of Wayne, the private property being taken was going to be turned over to private developers for the creation of a business and technology park near an airport. Instead of those developers having to persuade property owners to sell for a price the developers could afford, they used the government to condemn the property, buy it, and give it to the developers with no strings attached. It’s corporate welfare, plain and simple.

For the last twenty-odd years that corporate welfare was considered a “public use.” Originally, in Poletown Neighborhood Council v. City of Detroit, Michigan’s supreme court decided that it was a “public use” for the government to take land from one private group and give it to another if doing so would improve the local economy. In Poletown, General Motors convinced Detroit to seize a residential neighborhood and give it to the car company so it could build an assembly plant there, creating new jobs in a city where unemployment had reached “calamitous proportions.” The court upheld the taking, and Poletown became the benchmark for permissive takings in law textbooks everywhere.

The government in County of Wayne relied on Poletown, arguing that the creation of the business and technology park would bring in new jobs, new tax revenue, and attract businesses to invest in the area. But Michigan’s supreme court finally realized its error and struck down such redistribution as not being “public use” at all. It identified three ways a taking could be classified as a “public use” if the government ultimately gives the seized property to another private entity.

First, it is permissible to give seized land to a private corporation if doing so “involved ‘a public necessity of the kind otherwise impracticable,'” such as to build railroads, highways, and canals. Second, it is permissible to give seized land to a private party if that party “remains accountable to the public in its use of that property”–in other words, the government retains some measure of control over the way the property is being used by the private entity. Finally, it is a “public use” when the land is seized originally “on the basis of ‘facts of independent public significance.'” This means that the government can seize property with a present condition that hurts the public, such as blighted housing or polluted bogs, and then later sells or gives it to private owners for use and development. Obviously, the technology park in County of Wayne was none of these.

Since the Poletown decision was borrowed by many states to define the scope of their own eminent domain powers, County of Wayne may prompt a rethinking of state-based eminent domain. That is a significant victory for private property rights.

However, federal eminent domain use is another matter. While that power is also confined by the requirement of “public use,” the U.S. Supreme Court has been somewhat broader in its allowance of economic benefit to qualify. Not long after Poletown, the Court ruled in Hawaii Housing Authority v. Midkiff that it was permissible for the government to break up large private estates that left most land in the hands of few parties. Justice O’Connor wrote for the majority that because “the unique way titles were held in Hawaii skewed the land market, exercise of the power of eminent domain was justified.”

Admittedly, the facts in the case were a bit extreme: Of all the land in Hawaii at the time, 49 percent was owned by the federal government while 47 percent was in the hands of a mere 72 private owners. Such was the result of the feudal style of land ownership first instituted by Polynesian settlers, and repeated efforts to diversify land ownership had failed. However, in the end the Court and Justice O’Connor borrowed the rationale of Poletown to uphold the takings, namely that there would be “public use” in improving the economy by forcing the divestment of private estates.

Perhaps County of Wayne will begin a rollback of the use of eminent domain to truly public uses. Now that Poletown has been scrapped, other states may follow suit. The U.S. Supreme Court is not so easily beholden, however, and Justice O’Connor’s ruling in Midkiff, as well as her tendency to not want to rock the boat, may make the cause of property rights face more challenges in the future.

James N. Markels is an attorney and a regular columnist for