5/10/2007

Eminent domain flashpoint: St Louis MO Post-Dispatch, 4/25/07

By William C. Lhotka and Tim O'Neil

The condemnation of prime land in downtown Clayton [MO] for a $210 million redevelopment got a setback Tuesday and a fast-track ride to the Missouri Supreme Court for a review of the taking of private property for commercial use.

It was the first victory for three landowners who insist it was ridiculous to declare their upscale buildings blighted to make way for an office-retail project by the Centene Plaza Redevelopment Corp.

Although not conclusive, Tuesday's ruling of the Missouri Court of Appeals signaled a rethinking of the controversial development tactic. Three judges in an unsigned opinion said the southwest corner of Hanley Road and Forsyth Boulevard cannot be taken because it is not blighted.

Stan Wallach, chairman of the Missouri Bar Association Eminent Domain Committee, called it a "very significant" finding in the first court test of a new statute, passed in August, that he helped draft. Advertisement

The law permits local legislative bodies, such as the Clayton Board of Aldermen, to determine whether a redevelopment target is blighted.

"It's exceedingly rare or never that the Missouri courts will disturb a legislative finding on blight," Wallach said. "Any time the courts second-guess a local legislature on such an issue, it's big news."

Judges Clifford H. Ahrens, Mary K. Hoff and Nannette Baker stopped short of reversing the ruling in January of St. Louis County Circuit Judge James R. Hartenbach, who authorized the condemnation.

Instead, they stopped the project and sent the issue to the state Supreme Court "because of the general interest and importance of the issues presented in this case."

"This sends a clear message that the abuse of eminent domain is not to be tolerated," said Dan Sheehan, who with Debbie Pyzyk and David Danforth are suing to preserve their holdings. "Clayton is taking private property and giving it to a developer for his gain, and that's not the American way."

Pyzyk, a teacher and widow of developer Jon Pyzyk, said, "For the first time, someone has validated what we know is right."

In ordinances passed in December 2005, the Clayton aldermen gave land-taking power to Centene for a project that could create as many as 1,000 new jobs.

Centene Chairman and CEO Michael F. Neidorff warned Tuesday that the company will abandon plans to expand in Clayton, with 800 of those jobs, unless it prevails. "Make no mistake that if this project does not go forward, the real loss will be for the city of Clayton, the people that live and work in Clayton and the region as a whole."

He said he is "hopeful of an expedited and favorable ruling by the Missouri Supreme Court."

Centene bought the main parcel, the former Library Ltd. property, for $12.25 million in 2004 without condemnation. At $7.4 million an acre, it was the highest price ever paid for property in the St. Louis area, said Gerard T. Carmody, an attorney for Centene's opponents.

Of the three properties in dispute, two are fully leased and one is partially leased.

One tenant, Maharam Fabrics, remodeled its space at a cost of $300,000, or an amount comparable to what it paid for remodeling at its outlet in New York City, according to court testimony.

Of the 13 cars parked Tuesday in front of the "blighted" buildings in the 7700 block of Forsyth, two were BMWs, one was a Lexus SUV and one was a bright yellow Ferrari.

"I can cancel my therapy sessions, now that I'm no longer working in the slums," quipped F. Carl "Skip" Schumacher, at Financial Support Services. "We like being here — it's convenient for our clients. No one wants to have to move."

Said Aleksandr Grinberg, a Ukranian immigrant who runs Decker Tailoring Co. in one of the buildings, "It's not a bad neighborhood. It's a fancy location. It has good atmosphere."

Carmody had emphasized in oral arguments to the appeals judges that Clayton failed to show the current properties were both economic and social liabilities, a requirement under the statute.

Centene's attorney, Thomas Weaver, contended there was sufficient evidence of blight, and argued that judges reviewing a condemnation finding should be limited to determining whether the aldermen acted arbitrarily and capriciously.

Wallach said "the linchpin of this opinion" was a finding that the city did not establish that the area was a "social liability."

The appellate judges said social liability has never been specifically defined by statute or case law, but that a historical review led them to conclude it "focuses upon the health, safety and welfare of the public."

Based on that, they said, there was "insufficient evidence" for the Clayton condemnation.

A study for Clayton by PGAV, a planning firm, concluded the area was an economic liability because of the age and physical decline of some of the properties, but the study reached no conclusions about social liability, the appellate court noted.

City Manager Michael Schoedel, who had pushed for the Centene plan, issued a statement saying the trial court had been right to affirm the blight finding, and asserting that Centene "is a critical component of the long-term vitality of the City of Clayton and the entire St. Louis region."

The law calls for courts to expedite hearing of blight cases ahead of all litigation except election cases. The circuit court ruled Jan. 19, and the appellate court heard arguments two weeks ago.

"This is the first expedited appeal," Wallach said. "It's amazing how fast this went from Circuit Court level to the Court of Appeals and now to the state Supreme Court."


St Louis MO Post-Dispatch: http://www.stltoday.com