Michigan Ruling Gives Haddon Township NJ Property Owners Hope

By Dan Keashen

Poletown was a small neighborhood inside the city of Detroit with a bakery, night watch, and numerous churches.

This close knit community was involved in a historic Michigan state court ruling in 1981 on eminent domain. The ruling set the precedent for redevelopment and public consumption of private land across the United States to benefit the overall community.

After this court ruling 1,000 residents and 600 businesses were bought out and relocated.

The Poletown land was given over to private developers in order to build a large General Motors auto plant through the acquisition of private land through eminent domain.

Since the infamous ruling every neighborhood that has been faced with the prospect of redevelopment, including Haddon Township, has been susceptible to the possibility of losing private property under the guise of benefiting the community.

On July 30 in an historic case the Michigan Supreme Court over-turned the Poletown private property precedent. In a unanimous decision for County of Wayne v. Hathcock, the Court decisively rejected the notion that "a private entity's pursuit of profit was a 'public use' for constitutional taking purposes simply because one entity's profit maximization contributed to the health of the general economy."

According to sources, this means that private business and land owners in Haddon Township stand to have a renewed chance against what was looked at as an insurmountable opponent against the impending eminent domain.

The court called Poletown a "radical departure from fundamental constitutional principles."

"We overruled Poletown," the court wrote, "in order to vindicate our constitution, protect the people's property rights and preserve the legitimacy of the judicial branch as the expositor, not creator, of fundamental law."

This situation is not unique to Haddon Township; in fact the use of eminent domain for private development has blossomed into common practice throughout the United States.

According to Public Power, Private Gain, authored by David Berliner, there were 10,000 properties either taken or threatened with eminent domain for private parties in the U.S. between 1998 and 2002.

State supreme courts from Nevada to Connecticut have been dependent on the Poletown decision when supporting the condemnation of land for private parties.

Jim Rhoads the owner of the building that houses Loose Cuts on Haddon Avenue commented on his legal battles and alleged chicanery that the township has undertaken in redevelopment.

"I'm a real estate investor and the mayor invited me into town to check out this property in July of 2003, on Haddon Avenue.

"A few months later I found out my property fell within this new redevelopment zone that he [Mayor James Park Jr.] created with the developer," said Rhoads.

The only way for Rhoads to fight back eminent domain and to keep his property was to file a lawsuit. Rhoads and several other business owners have followed suit in order to hold on to their property.

"It has just turned into a mess and if I had full disclosure to begin with I probably wouldn't have bought this property.

"I'm in this for the long haul and I'm committed to seeing that the right thing will be done in court...I've already spent thousands of dollars in fees for lawyers," said Rhoads.

The Michigan ruling gave him hope that things can be settled by the courts.

Jim Rhoads has rented out his property to a small business owner Linda Ma-tousch-Rau who runs the high-end floral shop, Loose Cuts.

Rau and her husband David are extremely upset about their shop's property prospects in the current shadow of eminent domain.

"It's a sad scenario when a person opens a business only to realize that wealthy developers can come in and ruin the character of small town America with oversized and under planned ideas. Haddon Township will no longer be a town, just buildings," said Linda Matousch-Rau.

The Rau's do not want to lose their shop to a developer that sources say is not working in the community's best interest.

Using eminent domain to steal a person's property solely for the economic gain of another is wrong. Haddon Township does not need the Fieldstone project as it is clearly nothing more than an economic gain for one private developer and a personal loss to a dozen existing property owners.," said David Rau.

"Shame on our public officials for using eminent domain threats and brown-field scares to force the Fieldstone apartment project to the table," he added.

The County of Wayne vs. Hathcock decision passed down from the Michigan Supreme Court now has a direct correlation to Haddon Township.

This Court ruling has overturned an earlier precedent that gives hope to the dozen private business owners and residents that are residing in the wake of a controversial redevelopment decision in the township.

The war on private property rights is being fought for across the country and now a battle will be waged locally.

The Haddon Herald website: www.haddonherald.com
Eminent Domain


Property Takings To Lift Economy Fall In Michigan

By Dean Starkman

In a decision with wide implications for property rights nationally, the Michigan Supreme Court ruled that the state and local governments may not take property from one private owner and give it to another purely for the purpose of economic development.

The 7-0 decision handed down Friday night overturns a landmark 1981 case in which the same court allowed the city of Detroit to take 1,000 homes and 600 businesses to make way for a General Motors Corp. plant. The earlier case, called Poletown after the neighborhood that was condemned, was widely cited by state courts around the country in cases that vastly expanded local governments' power to take private property for public purposes.

"We overrule Poletown in order to vindicate our constitution, protect the people's property rights and preserve the legitimacy of the judicial branch as the expositor, not creator, of fundamental law," the court wrote.

Dana Berliner, a lawyer for Institute for Justice, a Washington-based property-rights law firm that filed a brief in the case, said she expects the decision to have broad impact, since other state courts have long relied on Poletown to uphold condemnations. Now they can no longer do so and may revisit the question altogether, as the Michigan high court did, she said.

Wayne County drew support from real-estate trade groups and the National Congress for Community Economic Development, a Washington based association representing 3,600 local community-development groups, which warned in a friend-of-the-court brief that a reversal of Poletown would "impose new constitutional restraints on takings that could destroy the public's ability to take property where necessary to achieve community-development goals."

Mark Zausmer, a lawyer for Wayne County, said the ruling will restrict cities' powers to spur their local economies, making some projects "impossible because an individual owner can simply decide that he doesn't want to sell."

The federal and most state constitutions, including Michigan's, require that government takings of private property serve a "public use." Citing Poletown, state courts have allowed local governments to stretch the definition from more traditional projects, such as roads, bridges and slum clearance, to include the taking of nonblighted property on the principle that another private owner could better create jobs and increase tax revenue. As a result, local governments began taking property for private developments such as office parks, big-box stores, racetracks and the like.

Cities and redevelopment agencies argue that economic development is a valid "public use." Property owners argue that takings for strictly private businesses are unconstitutional and lead to abuses.

The recent case stemmed from efforts by Michigan's Wayne County to spur economic development through the construction of a business and technology park near the Detroit Metropolitan Wayne County Airport. After assembling all but 40 acres of a 1,300-acre site, the county in 2001 sued to take the remaining parcels owned by Edward Hathcock, a local property owner, and others, and transfer the property to private developers.

On Friday, the court resoundingly sided with property owners. In its 85-page ruling, the court said it rejected the principle that "a private entity's pursuit of profit was a `public use' for constitutional takings purposes simply because one entity's profit maximization contributed to the health of the general economy."

Wall Street Journal website: www.wsj.com


Poletown's Revenge

(Note: This was the lead editorial in The Wall Street Journal on August 3 2004)

It must come as cold comfort to the citizens of Poletown, who back in 1981 had their homes taken away from them by the city of Detroit and bulldozed for a car factory. But the Michigan Supreme Court has finally stated the obvious: What's good for General Motors wasn't so good for the people -- and it sure didn't justify violating their "sacrosanct" Constitutional property rights.

Though Friday's decision comes nearly a quarter-century after an earlier Michigan Supreme Court cleared the way for Detroit to condemn the homes, churches, schools and hospitals of Poletown on behalf of a Cadillac plant, it's hard to overstate the significance of this reversal. By expanding the justifications for eminent domain seizures to include "economic development," the earlier decision not only ushered in the destruction of a neighborhood. It set a woeful precedent that continues to embolden unseemly coalitions of private developers and tax-hungry municipalities using government powers to take other people's land.

Friday's decision was unanimous. The lead opinion put it this way: "Poletown's 'economic benefit' rationale would validate practically any exercise of the power of eminent domain on behalf of a private entity. After all, if one's ownership of private property is forever subject to the government's determination that another private party would put one's land to better use, then the ownership of real property is perpetually threatened by the expansion plans of any large discount retailer, 'megastore,' or the like."

Exactly. Remember, we're not talking about a public highway or bridge. To the contrary, today we have governments taking land from Peter because they'd rather Paul have it. In the Michigan case, Wayne County was fighting to condemn the property of a handful of owners after they refused to sell land the county wanted to use for a business and technology park.

In one sense you can hardly blame the planners. Once the Poletown case shifted the test from "public use" to "public benefit," it put any limits on eminent domain on a slippery slope. State and local governments all across America have been happily sliding down it ever since -- and citing Poletown as their justification. The Institute for Justice reckons that between 1998 and 2002 some 10,000 private properties were either taken by or threatened with eminent domain on behalf of other private parties.

In Mississippi, the state legislature tried to use eminent domain to take private land belonging to an African-American family and hand it over to a Nissan plant. In Ohio, the town of Norwood has declared some private homes "blighted" so they can get a new mall. In Arizona, one town invoked eminent domain when it tried to replace a brake shop with a hardware store. In the New Jersey shore town of Long Branch, the city is trying to take oceanfront homes from the present homeowners and build expensive new condos for yuppies.

On it goes, to the point where the "economic development" argument has essentially vitiated what the Founders intended by putting property rights in the Constitution in the first place: to prevent the rich and powerful from manipulating the law to take property from those less well connected. The good news is that this latest Michigan ruling should force a major rethink. We have in mind Connecticut, whose high court now finds itself in something of a pickle as a result of the Michigan ruling.Earlier this year, the Connecticut Supreme Court, in a controversial 4-3 ruling, upheld a bid by the city of New London to seize some perfectly fine waterfront homes and replace them with an office building -- and of course invoked Poletown to do it. The Poletown decision, the majority opinion declared, illustrates "amply how the use of eminent domain for a development project that benefits a private entity nevertheless can rise to the level of a constitutionally valid public benefit."

Actually, what it really illustrates is that a little fudge in language and definition can lead to gross violations of fundamental Constitutional protections. Right now the U.S. Supreme Court is deciding whether to hear the New London appeal. What better opportunity to remind greedy governments what an earlier U.S. court once called eminent domain: "the despotic power."

Wall Stret Journal

Eminent Domain Revisited

The Michigan Supreme Court has overturned its ruling that allowed the government to forcibly buy private land for a General Motors plant.

Unadorned by legal obfuscation, the 1981 Poletown case said the government could, at any time, use eminent domain for the economic purposes of a private entity. The standard was public benefit (jobs, taxes). The means was government as bully boy.

The Michigan court said this is intolerable: "... (I)f one's ownership of private property is forever subject to the government's determination that another private party would put one's land to better use, then the ownership of real property is perpetually threatened ... ."

In the instant case, owners of property scattered throughout hundreds of acres acquired by the government for a private commercial park stood in the way of what is claimed would be spectacular public benefit.

But was it a public "use"? Absolutely not.

Private property trumps the collective. Government is limited -- and for very good reason. We've seen the treacherous threat of eminent domain raised in unrealized plans for Downtown Pittsburgh, and how it presaged a tyranny of the incompetent.

The threat itself is a useful tool for petty, scheming tyrants if the courts will not, like Michigan's has, render their threats hollow.

Praise be private property and those who defend it.

© 2004 by The Tribune-Review Publishing Co.
California Eminent Domain

Eminent Domain Abuse Curbed

by Mike Perez

Eminent domain — the government’s right to "take" private property after paying compensation to the owner — is specifically allowed by the U.S. Constitution for "public uses," which traditionally was understood to mean projects such as highways, courthouses and schools. In recent years, however, government agencies have been abusing that power to benefit private interests, especially developers who build big-box stores, stadiums, auto malls and other tax-generating retail centers favored by city officials.

A number of court cases triggered the eminent-domain feeding frenzy on behalf of the private sector, but the Poletown decision is widely recognized as the most ugly and egregious precedent.

Before that, cities justified their eminent domain actions as a way to clean up blight. In the Poletown case, the city couldn’t possibly call the pleasant, clean and civilized neighborhood "blighted," and instead made grandiose arguments about the need to take the properties to boost economic development throughout an economically hard-hit region. The potential justifications for the use of eminent domain were thereby greatly broadened.

Michigan’s high court was asked to revisit the Poletown case because of other pending cases involving the taking of private property for non-public interests favored by the government. At issue was Wayne County’s effort to create a 1,300-acre business park by using eminent domain. The county’s justifications echoed those used by Detroit and General Motors in the Poletown case.

In last week’s decision, the court did not completely reject the transfer of property to other private owners, but argued that such transfer can be allowed only when the new owner is undertaking a decidedly public use, such as laying railroad track on behalf of the government. The court slammed the Poletown decision for its "radical and unabashed departure from the entirety of this court’s pre-1963 eminent domain jurisprudence .... The Poletown majority concluded, for the first time in the history of our eminent domain jurisprudence, that a generalized economic benefit was sufficient ... to justify the transfer of condemned property to a private entity."

If general economic benefit makes a project a public use, then property rights no longer exist in America. Any time a government agency could find a use for a property that paid more in taxes or created more jobs than the current use, it would be allowed to take the property by force under the argument made in the Poletown case.

Michigan’s high court exercises no jurisdiction in Texas, but we hope officials and politicians here will take note of this ruling. No private company has a greater right to your property than you do.


Wayne v. Hathcock and Philadelphia's Neighborhood Transformation Initiative

Alan Krigman has written a "letter to the editor" of the Philadelphia Daily News discussing the implications of this case on the city's Neighborhood Transformation Initiative. The text of the letter, as submitted (and not yet published), is as follows:

Many low- and moderate-income Philadelphia residents have been rightly worried about the city's use of eminent domain. This legal principle lets a government body acquire real estate "for public use" at what is essentially fair market value, even if the owner doesn't want to sell. Eminent domain is important in Philadelphia today principally because of the Neighborhood Transformation Initiative. At issue are viable buildings or vacant lots in nominally blighted areas at prices that may, indeed, represent fair market value but aren't enough for the owners to buy comparable replacements.

The trend during the past several decades has been to define "public use" increasingly broadly. Interpretations of this phrase such as "for public benefit" or "for the greater good," have often been accepted. A decision just rendered by the Michigan Supreme Court may now halt that trend.

In the case at hand, Wayne County wanted to take land and sell it to a developer who would build a high-tech industrial park. The County argued that a "public purpose" would be served through greater real estate tax revenues and job creation. The Court agreed that the facility would provide a public benefit, but found that the project was not a "public use" and therefore violated the specific conditions for "takings" in the Michigan Constitution — conditions which appear in identical form in the US and most state, including Pennsylvania's, Constitutions as well.

This decision will force government entities to substantiate the public use requirement of eminent domain. This may be impossible in some Neighborhood Transformation Initiative situations when property is turned over to a private developer. However, people who believe they can now keep their homes in areas identified for Neighborhood Transformation Initiative revitalization should bear two caveats in mind. First, the Michigan Court specifically allowed condemnation of property so blighted that it threatened health and safety, recognizing that the protection afforded by seizure and demolition is a public use, regardless of its subsequent disposition. Second, if the property is taken for purposes such as parks or schools, or is to be developed and ownership retained by a government agency such as the Philadelphia Housing Authority, or by a tightly regulated utility, the public use requirement is satisfied.


One Court Tries to Curb the Misuse of Eminent Domain

By James Kilpatrick

On July 19, counsel for Susette Kelo filed a petition for review in the U.S. Supreme Court. On July 30, the Michigan Supreme Court filed a blockbuster opinion in the case of Edward Hathcock and others. We are talking big news here - news of potentially huge importance to property owners, legislators and developers everywhere.

Specifically, we are talking about restraining the power of "eminent domain," the power of a government to take private property for public use. The power is widely abused.

Mrs. Kelo purchased her two-bedroom Victorian house in 1997. Now the New London, Conn., Development Corp. wants to take it away from her. Hathcock is among a dozen property owners in Wayne County, Mich. The county wants to throw them out of their homes - with due compensation, of course - in order to turn their property over to private developers.

At the heart of these cases lies the Fifth Amendment to the Constitution. In words every schoolboy can understand, the amendment says that government may not take private property for "public use" without payment of just compensation. The key words are "public use." They are not difficult words. They are simple words. Their definition requires no law degrees.

Notice that the Constitution does not speak gauzily of "public purpose" or "public benefit." It speaks with perfect clarity of "public use." Except for the power to declare war, the power of eminent domain is the most essential and most dangerous of all powers vested in government. It is perilous precisely because it is most often employed by good men seeking to do good.

Consider the Connecticut case now pending in the Supreme Court. We may give the city fathers of New London credit for wishing to upgrade their Fort Trumbull neighborhood along the Thames River. This is not a slum. The area has nothing in common with the slums of southwest Washington, D.C., that figured famously in the Berman case of 1954. There the city was coping with an area in which 58 percent of the housing had only outside toilets, 60 percent had no baths and 29 percent had no electricity.

No such allegations complicate the New London story. The New London Development Corp., a public entity, wants to grab 90 acres of absolutely unoffending property. The middle-income owners would be compensated, the land would be cleared, and private developers would do what private developers do. They would make money. The city envisions more tax dollars and more construction jobs. Susette Kelo and her neighbors envision eviction. Their homes are their castles. They want to stay put.

In their Supreme Court petition, the owners cite disturbing statistics. Between 1998 and 2000 alone, "there were over 12,000 filed or threatened condemnations that involved private-to-private transfers of property in 41 states." Private to private! The proposals are not for public roads, public schools, public firehouses, public dams or waterworks. One proposal in Atlantic City six years ago involved the condemnation of a widow's home to benefit Donald Trump's casino across the street.

The Institute for Justice in Washington, D.C., is spearheading Mrs. Kelo's petition to the Supreme Court. The institute also participated in the Michigan case of Edward Hathcock and others. The important thing here is that the Michigan Supreme Court unanimously overruled its landmark decision in the Poletown case of 1981. That widely cited opinion "allowed the city of Detroit to bulldoze an entire neighborhood, complete with more than 1,000 residences, 600 businesses and numerous churches, in order to give the property to General Motors for an auto plant." The Poletown opinion was the first to uphold eminent domain for purposes other than public use or necessity.

Speaking for the Michigan court, Judge Robert P. Young Jr. held that Wayne County had abused its power of eminent domain in attempting to seize private property for construction of a 1,300-acre business and technology park. The idea was to transfer the condemned properties to private parties "in a manner wholly inconsistent with the common understanding of 'public use' at the time our Constitution was ratified."

There was ample evidence in the Michigan case that the project would provide a public benefit - it would create jobs in a struggling economy and add to tax revenues - but would it be a project for public use? No way.

Write to James J. Kilpatrick in care of Universal Press Syndicate, 4520 Main St., Kansas City, MO 64111, or via e-mail to kilpatjj@aol.com.

© 2004 The Sun Herald and wire service
Real Estate Attorneys

Supreme Court asked to review use of eminent domain
San Diego Daily Transcript, 7/27/04

The U.S. Supreme Court has been asked to rule on whether local governments may use eminent domain for economic development when the property being taken is not blighted.

In a July 19 petition, the Washington, D.C.-based Institute for Justice asked the court to review a recent Connecticut state Supreme Court ruling that approved the taking of non-blighted homes for economic development. Officials in New London, Conn., want to take 15 homes and businesses owned by seven families and give the land to a private developer to create facilities to complement the nearby Pfizer (NYSE: PFE - news) research center.

If the Supreme Court agrees to hear the case it could resolve an issue that has divided the states as more localities, including San Diego, use eminent domain powers in the pursuit of increased tax revenues and jobs. At question is when does a city's appetite for revenue and jobs crash head on with the constitutional rights of a private property owner?

"If jobs and taxes can be a justification for taking someone's home or business, then no property in America is safe because anyone's home can create more jobs if it is replaced by a business and any small business can create greater taxes if it is replaced by a bigger one," said Dana Berliner, senior attorney with the Institute for Justice.

The Fifth Amendment allows the government to use eminent domain to take private property for "public use." Institute for Justice lawyers are asking the Supreme Court to clarify the definition of public use, which historically has included amenities such as public roads, schools and parks. In a 1954 decision in Berman v. Parker, the U.S. Supreme Court approved the use of eminent domain to remove blight and for urban renewal.

The issue is pending in court here as Ahmed Mesdaq, owner of the Gran Havana Cafe and Cigar Shop in the Gaslamp section of downtown, fights city efforts to condemn his newly renovated property. The San Diego City Council voted 8-1 on April 27 to condemn the shop in favor of a new $70 million, 334-room Marriott Renaissance Hotel.

A Nov. 19 trial date has been set for the condemnation case brought by the city, according to Mesdaq's attorney, Catherine Richardson, a partner with the firm Thorsnes Bartolotta & McGuire. Richardson is also representing Mesdaq in a lawsuit against the city because it refused to consider his own development plans prior to the condemnation, and a separate federal claim to prevent the city from condemning the property.

"Before, cities were using redevelopment to clean up blighted areas," Richardson said. "Look at the Gaslamp district and Mr. Mesdaq's property, it's not blighted in any sense of the word."

Hotel developer Ramin Samimi, principal owner of GRH LLC, has agreed to cover the city's condemnation costs. Samimi has acquired nine parcels of land along Fifth, Sixth and Island avenues and J Street since the 1990s. Mesdaq has operated the cafe at its current location at the corner of Fifth and J Street for nearly three years and about 10 years in another location.

Mesdaq has plans to add 10 loft condominiums to the property and claims he did not know of the hotel development plans when he purchased the land. The city approved an $800,000 renovation of the property shortly after it was purchased.

The cafe is not blighted, but it is in an area that has been defined as such under the city's redevelopment plan, which includes about 1,500 acres of land in the downtown area, according to David Allsbrook, manager of contracting and public works with the Centre City Development Corp. (CCDC).

State redevelopment guidelines allow local governments to condemn property and pay its owner market value. The city may then sell the parcel to a developer or use it for public use such as a park or road.

CCDC has recommended that the City Council use its eminent domain powers 14 times since the city began redeveloping downtown San Diego in 1992, according to a l ist of projects supplied to the council in March. In four separate projects, eminent domain was used to take homes or businesses in favor of a larger private development, while the rest were taken to relieve a blight or nuisance, or for public use. The biggest use of this power resulted in the development of Petco Park. According to the CCDC's accounting, 56 condemnation cases were filed for the ballpark, which opened this year. Forty-nine cases settled out of court, one is still pending and six cases proceeded to trial.

The document states that the redevelopment has generated significant taxes for the city and an "unpredicted physical transformation" of downtown.

"We've used the power of eminent domain, I think, judiciously since the plan was adopted," Allsbrook said July 27.

A national problem

But cities like San Diego all across the country are taking their power too far, and too often at the behest of developers peddling convention hotels or national retailers like Costco (Nasdaq: COST - news) and Target (NYSE: TGT - news), according to Scott Bullock, a senior attorney at the Institute for Justice. He called the relationship an "unholy alliance" that frequently results in the developer paying for blight studies and condemnations. In a 2003 report titled "Public Power, Private Gain," the institute found that between 1998 and 2002 there were more than 10,000 filed or threatened condemnations that involved private-to-private transfers of property in 41 states. California is among the most active states that have condemned property for the benefit of other private parties, with San Jose listed among the "worst" cities engaged in the practice, according to the report. Bullock said the trend began in 1981 with the landmark decision in Poletown Neighborhood Council v. Detroit by the Michigan state Supreme Court. The ruling allowed Detroit to condemn a Polish neighborhood so that General Motors (NYSE: GM - news) could develop a plant there. The city argued at the time that the plant would help turn around its deteriorating economic condition. The state court is reconsidering that decision and is expected to issue a ruling July 31. The Institute for Justice hopes the Supreme Court will be compelled to hear the case because of numerous conflicting appellate court decisions on the issue. Bullock said the court is likely to make its decision in October. Seven state supreme courts have upheld the right of cities to take non-blighted property for economic development, while eight states forbid private-to-private transfers where there is no blight. Another three are preparing to rule such condemnations unconstitutional, according to the institute's petition to the court. California is not included in any category.

Wayne County v. Hathcock, a Landmark Decision

Commentary by Alan Krigman

In what may prove to be a landmark decision, the Michigan Supreme Court has overturned a 1981 decision, and ruled that a government's power of eminent domain to take private property must be in the interest of bona fide "public use" rather than some ill-defined notion of "public purpose." The ruling was based on the explicit requirement of "public use" in Article 10, Section 2 of the Michigan constitution ("Private property shall not be taken for public use without just compensation"). The same wording is found in the 5th Amendment to the Constitution of the United States ("nor shall private property be taken for public use, without just compensation"). For residents of Philadelphia concerned about the overzealousness of the city's Historical Commission, it may also be noted that the phraseology is identical in Article 1, Section 10 of the Pennsylvania Constitution ("nor shall private property be taken or applied to public use, without authority of law and without just compensation being first made or secured").

Among other things, this ruling has strong implications for the condemnation of viable buildings to clear tracts of land for subsequent sale to developers. It also comprises a further strengthening of objections to the historic designation of individual structures and districts when such an action imposes restrictions on or otherwise encumbers owners.

For the complete text of the Court's opinion, Wayne v. Hathcock (PDF).