July 11, 2018

Kelo revisited

By Brian T. Hodges Senior Attorney

The Takings Clause of the Fifth Amendment promises that the government will not take private property unless it is for a valid public use and the owner is fully compensated. And yet, we all know that Kelo v. City of New London, Conn. (2005) allowed a Connecticut city to condemn a middle class neighborhood for private redevelopment in the name of “economic growth.” According to the Supreme Court, the city’s plans to attract wealthier residents provided the general public with economic benefits sufficient to constitute a “public use” of the condemned properties.

That conclusion was met with shock and outrage across the nation. People of all political stripes feared that Kelo would open the door for government to use its eminent domain powers to transfer the property of one private owner to another for “economic development” purposes, without limitation.

Kelo provided little assurance how this type of eminent domain abuse could be curtailed. After all, just about any redistribution of property from a poorer person to a wealthier person could be justified as “economic development.” And although the Court indicated that a purely private taking would remain forbidden, it did not explain how a court can distinguish a legitimate claim of “economic development” from one that is just a pretext for a private taking, leaving that decision for another day.

That day may have come. Last month, a New Orleans port operator filed a petition with the U.S. Supreme Court asking it to flesh out the pretextual taking question left unanswered by Kelo. At issue in Violet Dock Port, Inc., LLC v. St. Bernard Port, Harbor, and Terminal District, is a government decision to condemn Violet Dock Port’s port facility and transfer it to a private competitor. The Louisiana Supreme Court concluded that the Port District’s economic development rationale qualified as a “public use” despite evidence indicating that the economic development rationale was a pretext for a forbidden private taking.

Today, PLF filed an amicus brief urging the Supreme Court to accept the case and finally close the loophole left wide-open by Kelo. The brief points out that the Kelo majority had emphasized that the government would not “be allowed to take property under the mere pretext of a public purpose, when its actual purpose was to bestow a private benefit.” Justice Kennedy’s concurrence also stated that under the Public Use Clause, a court “should strike down a taking that, by a clear showing, is intended to favor a particular private party, with only incidental or pretextual public benefits.” Although neither opinion set forth a test for determining when an economic development plan is actually a forbidden private taking, PLF brief notes that a number of potentially relevant factors are present here: the competing business was identified prior to the taking and the transfer of the port facility conveys private benefits to the new owner with only incidental public benefits.

We are hopeful that the Court will take this opportunity to contain the “economic development” rationale to only those circumstances where there is an actual public use of the condemned property.

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St. Bernard Port, Harbor & Terminal District v. Violet Dock Port, Inc., LLC

The St. Bernard Port, Harbor & Terminal District condemned Violet Dock Port’s property in order to hand it over to a competitor’s business—merely because the district believed that the competitor could operate the dock better and charge more favorable rates. A Louisiana appellate court upheld the condemnation as a valid “public use” because the government said it would help the area’s economic development. In January 2018, the state supreme court delivered a mixed decision and denied a rehearing. Violet Dock Port has asked the U.S. Supreme Court to review the case. PLF argued in a supporting brief that the economic development rationale is commonly used to circumvent the Constitution’s prohibition against private takings. The decision from the United States Supreme Court was unfavorable, in that the Court denied the Petition for Writ of Certiorari.

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