Another Disturbing Case About Government’s Promises to Use Eminent Domain

by Timothy Sandefur

A while back I discussed the Colorado Supreme Court's decision in the Wheat Ridge case, which held that courts could not compel cities to use eminent domain to transfer land to private developers—but which contained some very disturbing language about the government's power to "redistribute" land through eminent domain.

Today the Ninth Circuit Court of Appeals decided Matsuda, et al. v. Parker, et al., a case coming from Hawaii, that addresses a similar issue. There, a group of individuals asked the government to condemn land and give it to them under Hawaii's abusive eminent domain laws—laws which were addressed in the infamous Midkiff case twenty years ago. After the people had submitted their application, the government decided to repeal its eminent domain ordinance and not condemn the land after all, and Matsuda and others sued, arguing that this decision violated the Contracts Clause of the U.S. Constitution, by revoking the existing agreement. The city responded that it could change its mind, because just as government may not promise that will refrain from using eminent domain, so it cannot promise that it will use eminent domain—the "reserved powers doctrine." The trial court agreed.

The Ninth Circuit's decision, however, disagrees. 

the City's contracts with the Lessees do not restrict its ability to exercise its eminent domain power in any way. The contracts reflect the City's voluntary undertaking to use its best efforts to effect a condemnation of the property at Discovery Bay and to convey that property to the Lessees if successful. The contracts do not purport to require the City to refrain from the exercise of any sovereign power, including the power of eminent domain. Instead, the contracts reflect the City's decision to initiate proceedings to exercise its power of eminent domain over the property at Discovery Bay, and to convey the property to the Lessees if successful. This is not the type of agreement to which the reserved powers doctrine applies….

The court therefore remanded the case back to the trial court to determine whether the city's actions violated the Contracts Clause.

It seems reasonable to say that if the government makes an agreement with a developer to use a power—a power I think unconstitutional and illegitimate, but which has been sanctioned by the responsible authorities—and then changes its mind, then the developer should at least get his money back. But I think it is really poor judgment to create any incentive for government to go through with a redistributive condemnation if it chooses not to, or to create obstacles in its path to doing so. The choice to condemn is not on a par with the choice not to condemn—that's why the law creates presumptions and requires strict construction of laws regarding eminent domain. I think courts should make it easy for government to refrain from condemnation.