Janice A. Oser, Esq.

An elderly relative commented recently that she did not consider herself the owner of various family treasures in her possession, but merely the steward of them, for the next generation. She was overlooking a salient feature of her ownership, namely, her right to select the next-generation stewards of the treasures by bequeathing them to heirs of her choosing.

The elderly relative was speaking of what is known in property law as “personal property,” as distinguished from “real property,” or, roughly, real estate. She did not have the same feeling of stewardship about the house that she and her husband owned, inasmuch as it was highly unlikely that any of their children would be in a position to occupy it. She could consider her husband and herself as the owners, simply, of their house, and they could choose to live out their days in it, or not.

In one neighborhood that was the subject of a highly controversial Supreme Court case, however, the owners of houses were their houses’ stewards, in the elderly relative’s sense of the word, in that the houses were passed down through generations. The neighborhood was the Fort Trumbull section of New London, Connecticut, where European immigrants settled in the late 1800’s and early 1900’s and never left.

The decision, Kelo v. City of New London (June 24, 2005), concerned a plan by the City of New London to buy up and clear a 9-acre area described by the Court as “distressed,” and in articles about the case as “depressed” or “faded.” In a book about the case, the area is described as a “hodgepodge of industrial properties, warehouses, and old small homes” (Little Pink House, by Jeff Benedict, Grand Central Publishing).

Many homeowners who have, like the elderly relative, rested secure in their ability to choose to live out their days in their houses and pass them on to the next generation, or not, have gotten a rude awakening when their local government exercised its power of eminent domain. Under a state statute and the Fifth Amendment of the U.S. Constitution, their local government could take their houses for public use.

The “takings" clause of the Fifth Amendment requires that “just compensation” be paid for exercise of this power of eminent domain, but a homeowner may not feel justly compensated for losing a home to a highway. Still, the exercise of this power has not usually raised an outcry beyond the protests of those immediately affected when it has been exercised for public uses such as a highway or a public utility – that is, put to use for the public.

The decision of the Supreme Court in Kelo, however, raised a hue and cry throughout the land. The Court took up a question that had gone unanswered for a surprising length of time, namely, the meaning of “public use” for purposes of the government’s exercise of its power of eminent domain.

In his majority decision (the vote of the Justices was 5-4), Justice John Paul Stevens cited a 1906 decision by Justice Oliver Wendell Holmes, and held that “public use” was properly defined as “public purpose” and that it encompassed governmental promotion of economic development by private developers.

The City of New London had created the New London Development Agency to buy up the Fort Trumbull neighborhood and find a developer to replace it with an “urban village” of hotels, stores, and condominiums that it hoped would draw shoppers and tourists. The city used the development plan and a package of financial incentives to persuade Pfizer, the giant drug company, to build a headquarters for its research division on 26 acres nearby.

The New London Development Agency was able, as the city’s agent, to purchase from willing sellers most of the property earmarked for the development plan. Fifteen homeowners, however, were unwilling to sell, and under Connecticut’s eminent-domain statute, the city initiated condemnation proceedings against those homeowners.

Among them was Susette Kelo, who had renovated a tiny Victorian waterfront house, the “Little Pink House,” at the edge of the Thames River, and who, along with the other unwilling homeowners, sued the city, in the case that reached the Supreme Court.

The Court in Kelo rejected a literal reading of “public use” in the “takings” clause of the Fifth Amendment as requiring that condemned property be put to use for the public. Although the eminent-domain power could not be used to take land simply to confer a private benefit on a particular private party, Justice Stewart wrote, he cited precedent for “the broader and more natural interpretation of public use as ‘public purpose.’”

In a dissenting opinion, Justice Sandra Day O’Connor wrote, “Under the banner of economic development, all private property is now vulnerable to being taken and transferred to another private owner, so long as it might be upgraded.”

In his majority opinion, Justice Stevens noted, however, that states remained free to place restrictions in their laws and constitutions on their use of the power of eminent domain. It seems that 43 states have done so and 7, including New York and New Jersey, have not.

“The decision provoked outrage,” said a New York Times article, “from Democrats and Republicans, liberals and libertarians, and everyone betwixt and between” (“THE NATION; Case Won On Appeal (To Public),” by Adam Liptak, July 30, 2006).

The Times article also said, however, that some argued that the case had provoked an overreaction. It quoted a law professor to the effect that the decision in Kelo inspired a level of reaction that denied power that “a rational community would like a city council to have” (such as zoning power, perhaps). Small comfort, however, to Susette Kelo and her fellow petitioners to the Supreme Court.

Pfizer, according to a more recent Times article, spent $294 million for a 750,000 square-foot complex in New London that opened in 2001, with an agreement that the company would pay just one-fifth of its property taxes for the first ten years. Now, eight years later, Pfizer has announced that it intends to leave New London and move most of its jobs there to a campus it owns in Groton, Connecticut, a few miles away (“Pfizer to Leave City That Won Land-Use Suit,” by Patrick McGeehan, November 13, 2009).

The “urban village” was never built. Ms. Kelo sold her “Little Pink House” for one dollar to a preservationist, who dismantled the house and moved it across town. There, unlike the never built “urban village,” it just might attract tourists.