U.S. Supreme Court Holds Condemnation for Economic Development is Constitutional
Kelo v. City of New London
05 CDOS 5466 No. 04-108 (U.S. Supreme Court, June 23, 2005)
In a 5-4 decision, the U.S. Supreme Court held that economic development constitutes a valid public purpose within the meaning of the U.S. Constitution Fifth Amendment "public use" clause. Relying heavily on previous U.S. Supreme Court takings cases, Justice Stevens, writing for the majority, found that the City's purpose of economic development fit safely within the Court's broad interpretation of public purpose. Justice O'Connor, writing for the dissent, distinguished past U.S. Supreme Court takings cases as involving harmful precondemnation use of the private property whereas in the present case, the precondemnation use was not harmful. The majority only addressed takings under the U.S. Constitution and noted that states may place greater restrictions on its eminent domain power. The majority also rejected Petitioners' argument that the City's economic development plan would provide only purely economic benefits.
In a concurring opinion, Justice Kennedy stated that although the case did not pose such an issue, a higher standard of review may be appropriate for a narrow class of private transfers where a court should presume an impermissible private purpose. He opined that cases where there is suspicion that a private party has been impermissibly favored, for example, may warrant further consideration of this issue.
This decision may have less impact in California than elsewhere because most California cities and counties rely on the California Redevelopment Law when condemning for economic development. The CRL requires a finding of blight before the powers it provides can be invoked. That was not the case in New London.
For more information please contact Michael Wilmar. Michael B. Wilmar is special counsel in the Real Estate, Land Use and Natural Resources Practice Group in the firm's San Francisco office.