9/30/2004

Property-Rights Dispute Gets U.S. High Court Review
Bloomberg LP, 9/28/04

By Greg Stohr

The U.S. Supreme Court will use a case connected to a Pfizer Inc. research plant in Connecticut to decide when local governments can take over private property in the name of economic development.

The justices agreed to hear an appeal by a group of homeowners who say the city of New London illegally tried to raze a residential neighborhood to make room for a five-star hotel, luxury condominiums and office buildings near the Pfizer facility. The city says it is trying to reverse decades of economic decline.

The case will address what property-rights advocates say is an increasingly common practice: the use of government "condemnation" power to make room for "big box" retail stores, shopping malls and office buildings.

"It is a growing trend among local governments to condemn property for the purpose of raising tax revenue," said Dana Berliner, an attorney at the Washington-based Institute for Justice, which represents the New London homeowners.

The Supreme Court ruled in 1954 that government agencies can condemn blighted property as long as they compensate the owners. Thirty years later, the court said governments could take over property to break up an oligopoly on land ownership.

The latest question is whether – and under what conditions – officials can take over property that isn't blighted and doesn't involve an oligopoly.

Public Use

"If you read the language in those opinions, it was not limited to the specific facts of those cases," said Wesley Horton, New London's lead attorney in the Supreme Court case. "It was a general opinion about the police power of the state.'"

The appeal centers on the U.S. Constitution's takings clause, which requires government agencies to pay just compensation when they take over private property. The 15 homeowners argue in their appeal that the takings clause also requires a public use and that the government must do more than simply point to the possibility of economic revitalization.

The decision by the Connecticut Supreme Court, which upheld the takeover, "drains the public use requirement of the U.S. Constitution of any meaning or substance," the appeal said.

The city's development plan, enacted in 2000, calls for the takeover of 115 homes and small businesses in the 90-acre Fort Trumbull neighborhood adjacent to the Pfizer facility. The city also set up a private entity, the New London Development Corporation, to manage the project.

The plan coincided with the decision by Pfizer, the world's largest drugmaker, to open a new research headquarters in New London.

15 Homeowners

Pfizer isn't directly involved in the litigation, and its property isn't at issue in the high court case.

The company at one point committed to providing support for the hotel development project and guaranteeing a line of credit for the development corporation, according to Pfizer spokeswoman Kate Robins. Those commitments have expired, and the company has no financial interest in the project, Robins said.

The Institute for Justice represents the homeowners who have refused to sell their land. The group includes Wilhelmina Dery, who was born in her Fort Trumbull house in 1918.

The homeowners sued after the New London Development Corp. sought to acquire their property through a tool known as eminent domain. The Connecticut Supreme Court, in a divided opinion, said the city and development corporation were acting legally.

The justices will hear arguments and rule by July. The case is Kelo v. City of New London, 04-108.


Bloomberg LP: www.bloomberg.com
Greg Stohr: gstohr@bloomberg.net