Public Power, Private Gain: The Abuse of Eminent Domain

Environmental Law & Property Rights Practice Group Newsletter - Volume 1, Issue 2, Spring 1997

May 1, 1997

Dana Berliner

YOU MAY BE REQUIRED TO MOVE WITHIN 90 DAYS AFTER YOU RECEIVE THIS NOTICE. IF YOU REMAIN IN POSSESSION OF THE PROPERTY AFTER THAT TIME, CRDA MAY BE ABLE TO HAVE YOU AND YOUR BELONGINGS REMOVED BY THE SHERIFF.

Vera Coking received this letter telling her to move out of the house she has lived in for 36 years. So did Joseph and Gilda Ann Rutigliano, who have operated a small motel in Atlantic City for over 30 years, Vincent Sabatini, who has run his Italian restaurant for the last 32 years, and Peter Banin, who had just purchased his small gold shop. Neighboring casino/hotels wanted their property, and the New Jersey Casino Reinvestment Development Authority (CRDA) agreed to condemn the properties and give it to the casinos. Trump Plaza will use Vera Coking's house as a limousine waiting area; the Sabatini restaurant and the Banin shop will become a grassy area in front of the casino. The Rutigliano's motel will become a parking lot for the Tropicana Hotel across the street.

Private property owners in Atlantic City and nationwide find their property rights under attack from unethical marriages between developers and local governments. The result is an erosion of a fundamental constitutional right. And the legal landscape-especially at the federal level-is stacked against the land holders.

When the condemnation began in 1994, Vera Coking opposed it in court, and while the case was pending, Trump continued with construction. The Trump Plaza Hotel and Casino was completed; grass was put down on one side of Vera's property and parking lots operate on the other sides. The only part of the project left is razing Vera's house and two other buildings on the block. The final project included a new casino (even though Trump's original plan did not.) In March 1995, the Atlantic County Superior Court ruled that CRDA could not fund projects with new casino space and, because CRDA couldn't fund the project, it also couldn't condemn Coking's and her neighbors' properties. On November 13, 1996, however, the Appellate Division reversed this decision and stated that the condemnation should go forward.

On December 13, 1996, the Institute for Justice joined Vera's attorney, Glenn Zeitz, in asking the New Jersey Supreme Court to reverse the appellate decision allowing the condemnation of Vera's property and to hold that the condemnation violated the New Jersey and federal Constitutions.1

Vera Coking and her neighbors, who have been similarly mistreated, cannot believe the government can throw them out of their homes and businesses in order to give the property to Trump. Vera Coking explains, "This is my home. This is my castle."

Vincent Sabatini lives on the same block as Vera. He and his wife own and operate Sabatini's Italian Restaurant, a family business that put four kids through school. When asked about CRDA's offer of $700,000 for their property-a figure that wouldn't even cover the cost of legal fees and starting up a new restaurant-he exclaimed, "I've been here for 32 years, and they want to give it to Trump. I don't want their money. If they left me alone, I'd be happy and sell a few spaghettis."

Peter Banin and his brother own the third building on Vera's block. A few months after they paid $500,000 to purchase the building for a gold shop, CRDA offered them $174,000 and told them to take the money and leave the property. A Russian immigrant, Banin says, "I knew they could do this in Russia, but not here. I would understand if they needed it for an airport runway, but for a casino?"

The procedure for approving such condemnations shows almost no consideration for the rights of the landowner. Indeed, it is a classic use of bureaucratic jargon to avoid acknowledging or taking responsibility for the personal upheaval that results. A developer comes up with an idea for a construction project that will add hotel space or some other "public benefit" to the city. It proposes a project to receive public funds. The government agency--in this case CRDA--determines if the project qualifies for public funding. Because the Atlantic City projects will produce new hotel space, they qualify. Then, another city planning board must approve the project. The "appurtenant facilities" of the hotel development project include parking and "parks" (i.e., lawns). The project design provides for the location of appurtenant facilities on private property. Since these properties are necessary for completion of the approved project (even if they are not used for hotel space), the agency goes about acquiring them by eminent domain. The cost of the acquisition is often paid by the developer, and the developer gets the title to the property. Finally, not only does the developer select the properties it wants, but it can call off the condemnation if the properties are assessed too expensively.

This use of eminent domain for obviously private benefit has been made possible only because courts have abdicated their role of protecting individual rights and limiting government power. Originally, eminent domain was a power that allowed the government to construct public works, like roads and aqueducts. In the United States, both federal and state constitutions always have constrained eminent domain by requiring that private property be taken only for "public use." There is good reason for restraint. The power to throw someone out of her home or destroy a business is the ultimate despotic power, and it should not be used lightly.

Until the middle of this century, courts and governments abided by these constitutional limits. Thus, governments could not take property in order to transfer it from one private owner to another. Government was limited to taking only that property necessary for the public use. Activities that constituted "public uses" were narrowly limited to public works, public utilities, and a handful of others.2 Gradually, though, government has come to ignore each of these limits, and courts have ratified a sweeping use of eminent domain. Now, local governments will take property and give it to a private person for their economic profit. Anything that a government might be allowed to do at all-storage, planting flowers-it can condemn property in order to do. And it does not need to show that it actually needs the property in question.

This erosion of the doctrine of eminent domain has led to predictably appalling results. In 1981, Detroit destroyed Poletown, the last racially integrated neighborhood in the city, and gave the property to General Motors to build a plant.3 The closely-knit, historic community could not be replaced, and the plant did not live up to its promise of bringing economic prosperity to the city. Likewise, when the city of Oakland decided that it didn't want the Raiders football team to move to Los Angeles, it tried to exercise eminent domain, take ownership of the team and force them to stay.4

The Supreme Court decision in Hawaii Housing Authority v. Midkiff5 eviscerated the "public use" requirement of the federal constitution. At issue in that case was whether a Hawaiian law -- designed to break up a unique concentration of land owners dating back to the islands' kingly days and carried through to modern times -- was constitutional. Instead of holding that the pure transfer of land from owners to lessors violated the Constitution, the Court essentially said anything goes. It stated that it "will not substitute its judgment for a legislature's judgment as to what constitutes a public use unless the use be palpably without reasonable foundation." According to the Court, "public use" has no meaning apart from that given to it by the legislature.

Midkiff left the door wide open for the kinds of condemnations taking place in Atlantic City and elsewhere. All over the country, governments take property unnecessarily, with no public purpose, and transfer it to private parties. But without legal limitations, government has no incentive to restrain itself.

The Coking case in Atlantic City asks the New Jersey courts to read three important words of its Constitution-the requirement that a taking be "for public use"-and force local governments to comply. Until there is a ruling that returns substantive meaning to these words, government entities will continue to try to take property for any reason at all.

As the Supreme Court recently stated, "Individual freedom finds tangible expression in property rights."6 The choices a person makes concerning her home or business are among the most personal and important decisions she will ever make. When government exercises eminent domain, it can take someone's home or livelihood, exacting enormous personal costs. The way that government actions affect those who have relatively limited economic means to defend themselves against such outrages can be especially disturbing.

The U.S. Supreme Court also has begun to notice some of the abuses of local governments. In a series of cases, the Court declared that the actions of local governments constituted takings.7 In each of the cases, the local government argued that it had not "taken" the property and so did not owe compensation. Before these cases, courts strayed from the text and read the Constitution in a way that maximized government power. The Court has not considered a major eminent domain case since its infamous Midkiff decision. However, "Midkiff embodies the lavish deference to governmental regulation of property rights from which the Court has retreated" in the last ten years.8 The time may be ripe for reexamination of the public use requirement for takings.

If private property may be condemned and given to another private individual for private profit, and if the determination of which properties are to be condemned may be delegated to the person benefiting from the condemnation, and if the public purpose of the condemnation project may not be reviewed by the courts, and if the question of the necessity of the condemnation may be delegated to the beneficiary and may not be reviewed by the courts, then are there any limits on the exercise of this government power? In a system that does not require a governing body to weigh the necessity of the condemnation against the harm to be done, this type of analysis will not take place. Without accountability or constitutional constraints, all the incentives promote aggressive, unbridled use of the eminent domain power, regardless of the impact on innocent property owners. It is time to shift the balance away from government power and back to its citizens.

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1. The brief also raises statutory and procedural problems with the appellate decision.
2. See Midkiff v. Hawaii Housing Authority, 702 F.2d 788 (9th Cir. 1983), rev'd 467 U.S. 229 (1984) for a lengthy and thorough discussion of the history of eminent domain and its constitutional constraints.
3. See Poletown Neighborhood Council v. City of Detroit, 304 N.W.2d 455 (Mich. 1981).
4. The California court held that this might satisfy a public purpose, City of Oakland v. Oakland Raiders, 646 P.2d 835 (1982), although the takeover was rejected eventually on different legal grounds.
5. 467 U.S. 229 (1984).
6. United States v. James Daniel Good, 114 S. Ct. 492, 505 (1993).
7. See Dolan v. City of Tigard, 114 S. Ct. 2309 (1994); Lucas v. South Carolina Coastal Commission, 112 S. Ct. 2886 (1992); Nollan v. California Coastal Commission, 483 U.S. 825 (1987).
8. Steven Eagle, Regulatory Takings 126 (1995).