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Landmark Supreme Court Case Upholds Government’s Right to Seize Private Property for Economic Development

By: Rick E. Rayl

Today, a sharply divided U.S. Supreme Court issued a landmark decision, Kelo et al. v. City of New London et al. The case involved efforts by the City of New London, Connecticut, to redevelop a waterfront area by condemning 15 properties, including homes and businesses (after obtaining title to the other 135 properties in the development area through voluntary purchases) and transferring those properties to private developers for construction of a riverfront hotel, health club, and offices. The City sought to do this for purposes of economic development alone; no argument existed that the properties being condemned were "blighted or otherwise in poor condition."

The property owners argued that this expansive use of the government’s power of eminent domain for purposes of economic development violates the Fifth Amendment’s limitation on takings to "public use[s]" -- but the Supreme Court disagreed. In a 5-4 opinion authored by Justice John Paul Stevens, the Court sided with the government, holding that economic development qualifies as a "public purpose" sufficient to satisfy the Fifth Amendment’s "public use" requirement. Specifically, the Court held that the economic goals of revitalizing a neighborhood to create jobs and generate tax revenues qualifies as a public use, even where the seized property would be transferred to private developers. The Court cautioned, however, that this rule would not extend to situations in which the taking was designed to benefit a "particular class of identifiable individuals."

This case will likely be viewed as a landmark decision that gives credence to the ever-expanding role of government redevelopment agencies in seeking more economically beneficial uses for property. Kelo’s apparently broad scope, however, may not be as sweeping as it appears, especially in California. The Court makes clear that its ruling is based on the federal constitution’s Fifth Amendment, and that many states have stricter laws on what is required in order to condemn property. The Court specifically identifies California Health and Safety Code sections 33030-33037 as restricting condemnation for economic development to "blighted areas." And Justice Kennedy, in a concurring opinion, cautions that "[a] court confronted with a plausible accusation of impermissible favoritism to private parties should treat the objection as a serious one and review the record to see if it has merit."

Justice Sandra Day O’Connor wrote a strongly worded dissent that was joined by Chief Justice William Rehnquist and Justices Antonin Scalia and Clarence Thomas. Those Justices opined, quite simply, that "economic development takings [are not] constitutional."

To view a copy of the decision, click here.

Nossaman will circulate additional information on the Kelo decision and the impact it may have in California in the near future. If you would like additional information, please feel free to contact Rick Rayl at 949 833-7800 or

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