My First WSJ.com Law Column

This is my inaugural Wall Street Journal Online law column:

State Courts Seek Wiggle Room Around Decision in Kelo
By DAN ACKMAN

THE WALL STREET JOURNAL ONLINE
January 6, 2006

Rearview Mirror, a new feature on the Online Journal's law page1, looks at how judicial decisions from several months ago are playing out in courts and for businesses. If you have an idea for a Rearview Mirror feature, please email us at lawblog@wsj.com2, and please put Rearview Mirror in the subject line.

Last June, when the U.S. Supreme Court decided Kelo v. New London, ruling that local governments could exercise their power of eminent domain even if the land taken ended up in private hands, it boded well for cities and developers. Soon after, though, perceptions of the ruling changed.

For starters, legislation to restrict local government powers was proposed in dozens of states, and was enacted in several. The legislative "backlash" led some municipalities to pull back on controversial projects. Perhaps more surprisingly, now a few state courts seem to be taking a skeptical look at the ruling, trying to figure out whether it meshes with state constitutions, statutes, and procedural rules.

Kelo involved a development project in New London, Conn., in which the city sought to use the power of eminent domain to force the sale of 15 modest homes. The land on which the homes sat was to be used to build a research facility for Pfizer Inc., the pharmaceutical company, as well as a nearby conference center, marina, and shopping mall, much of which would wind up in private hands. The Court, in a 5-4 decision, found the city's argument -- that the sale of the homes would aid economic development -- persuasive enough to satisfy the Fifth Amendment's "public use" requirement.

The case was one of the most publicized of the 2004-2005 term, and many pundits rose in protest. They rallied behind the charge leveled by Justice Sandra Day O'Connor, in a dissenting opinion, that the Court had abandoned a "long-held, basic limitation on government power" and mused that "all private property is now vulnerable to being taken and transferred to another private owner"—albeit for "just compensation," which the Constitution also requires.

Since the Kelo ruling, 38 states have proposed legislation designed to restrict the power of state and local governments to exercise rights of eminent domain for economic development purposes, according to Dana Berliner, a lawyer with the Institute for Justice, a not-for-profit law firm that represented the homeowners in Kelo. Alabama, Delaware and Texas have enacted laws already. The Michigan legislature voted on an amendment to the state constitution, subject to popular approval in an election in November. "The focus has shifted to the states and that's where it should shift," says David Parkhurst, a lawyer for the National League of Cities, which generally backs the rights of local governments.

In one sense, this is nothing new. In his majority opinion, Justice John Paul Stevens noted that some states had long established stricter eminent domain guidelines, either as a matter of state constitutional law or statute.
While the legislation churns, there have been several court decisions that observers say suggest an unease over the broad power allowed states and cities by the Supreme Court.

On Dec. 16, the Mercer County, N.J. Superior Court rejected an attempt by the City of Trenton to expand a redevelopment area to include an area of what the city planners called "substandard, unsafe, unsanitary, dilapidated" buildings. The county court didn't refer to Kelo and it didn't reject the thrust of the Kelo decision: that the state could use its authority of eminent domain in this manner. But the court decided that the city had failed to present "substantial credible evidence" that the property fell within New Jersey's statutory definition of an area in need of redevelopment: where buildings are sub-standard or unsafe or that the land is increasingly under-utilized.

Timothy Duggan, a partner with Stark & Stark, the New Jersey firm that represented the property owners, says the Kelo case loomed in the background. "State courts now understand their role in protecting property rights," Mr. Duggan says, adding that, given the unsettled statutory definition of blight, New Jersey courts in particular will be less likely to "rubber stamp" the conclusions of local planners.

New Jersey, the nation's most densely populated state with an active development community, has long been "a hotbed of private condemnations," according an Institute for Justice Report. Before the Trenton case, but in the wake of Kelo, two separate New Jersey state courts also rejected cities' plans to take property, citing each city's failure to present "substantial evidence" that the property needed redevelopment.

Several other state courts have reached similar conclusions, also without necessarily citing Kelo. In September, an Arizona trial court found that the use of eminent domain to transfer land to a retail shopping complex failed to satisfy the state's definition of "public use." Other judges have applied Kelo reluctantly. A Missouri Circuit Court judge, ruling for the city of St. Louis in an eminent domain case, compared the Kelo decision to the denial of reinforcements to the Alamo.

And more state court battles loom. One big eminent domain showdown will come in Ohio when that state's highest court hears arguments in the case of Norwood, Ohio, a Cincinnati suburb, where the town fathers want to take middle-class homes to make way for a store and office complex. A few local residents refused to sell to the developer so the city exercised its eminent domain authority, designating the area "blighted." The property owners lost in the lower court, a decision stayed by the Ohio Supreme Court pending appeal. In front of the Court, the residents' lawyers will argue that the "blighted" designation is a fraud and will ask the Court to decide whether Ohio law allows such a taking.

Dan Ackman is a lawyer and Senior Writer at the Institute for Judicial Studies, a think tank that examines the judiciary.