Indiana Law Review


Taking Back Eminent Domain: Using
Heightened Scrutiny to Stop

Eminent Domain Abuse

Michael A. Lang*

Introduction

Suppose you live in a small town that has struggled economically for

decades. You live in a nice house that you adore and you do not want to move
from it. You also own a small business located just around the comer from your
house. A white knight has come to save your town's struggling economy in the
form of a large company that will build a factory in your city. The company says
it will create about one thousand jobs, which will fill the town's coffers with tax

revenue. The deal sounds great until you hear the catch: the company will not
build its plant if it cannot build in a certain location—your neighborhood. You
do not want to sell your property for any price. Then the city sends you a notice
stating that your property is to be condemned. Finally, you seek your lawyer's

advice and ask if there is anything you can do to stop the eminent domain action.

After all, the city cannot really take your property and give it to a private

business, can they? Unfortunately, there is no clear answer.

The Fifth Amendment's Takings Clause states, "nor shall private property
be taken for public use, without just compensation."^ Some jurisdictions have
determined that condemning one person's property to transfer it to another

private entity satisfies the public use requirement. These jurisdictions state that

"economic development" that creates jobs, increases the state's or community's

tax base, or expands industry can be a valid public use. Thus, these jurisdictions

have determined that what many people would consider to be a private use
actually constitutes a public use.

Although the U.S. Supreme Court has long held that "a law that takes
property from A, and gives it to B would be contrary to the great first principles
of the social compact and cannot be considered a rightful exercise of legislative

authority,"^ the debate over what constitutes a public use has been raging since

the middle of the nineteenth century.^ By the early 1980s the debate seemed to
be resolved. In 1981, the Supreme Court of Michigan handed down its infamous
decision, Poletown Neighborhood Council v. City ofDetroit,'^ which allowed an

* J.D. Candidate, 2006, Indiana University School of Law—Indianapolis; B.A., cum
laude, 2003, Ball State University, Muncie, Indiana. The author would like to thank Megan
Mulford for her insightful comments regarding the substance and structure and the members
of the Indiana Law Review who edited this Note. The author also thanks his mother, Anna
M. Lang, M.A., for her assistance with grammar and style issues.

1. U.S. Const, amend. V.

2. James W. Ely, Jr., Can the "Despotic Power" Be Tamed?, 17 Prob. & PROP. 31, 32
(2003) (internal quotation marks omitted) (citing Calder v. Bull, 3 U.S. (3 Dall.) 386, 388 (1798)

(seriatim opinion of Chase, J,)).

3. See id. at 33.

4. 304N.W.2d455 (Mich. 1981) (per curiam), overrM/e<iZ7}; County ofWayne v. Hathcock,



450 INDIANA LAW REVIEW [Vol. 39:449

entire residential neighborhood to be condemned and subsequently transferred
to General Motors so it could build a new assembly plant.^ In 1984, in Hawaii
Housing Authority v. Midkijf,^ the United States Supreme Court implicitly
resolved the question of whether the Takings Clause's Public Use Clause allows
economic development to be a public use. Midkiff held that a legislature's

determination that a taking constitutes a public use should receive the greatest

degree ofjudicial deference.^ Despite these rulings, the debate rages on. Courts

in several jurisdictions have begun to reign in the legislature,^ and at least one

federal case has distinguished itself from Midkijf.^ Also, in 2004, the Supreme
Court of Michigan explicitly overruled Poletown,^^ and the U.S. Supreme Court
affirmed a Connecticut case that fully embraced the reasoning of both Poletown

and Midkiffwhen it interpreted federal and state constitutional issues. ^^ In 2005,
the U.S. Supreme Court handed down its controversial decision, Kelo v. City of
New London (Kelo H)}^ In addition to the Public Use Clause, forty-nine state
constitutions contain similar clauses,'^ which state courts may interpret
differently than the Fifth Amendment of the U.S. Constitution.

With this ongoing debate in mind, this Note argues for a much narrower
definition of what constitutes a "public use" and contends that courts should

analyze problematic takings cases with heightened scrutiny. Part n examines the
public use requirement and how the Supreme Court has interpreted the Fifth
Amendment's Taking Clause as well as how state courts have interpreted
analogous state clauses. Part m discusses problems associated with cases that
give broad meaning to the public use requirement. Part IV addresses why newer
cases that use a narrow meaning of public use have nonetheless not gone far

684 N.W.2d 765 (Mich. 2004).

5. Id.; see also Stephen J. Jones, Note, Trumping Eminent Domain Law: An Argumentfor

Strict Scrutiny Analysis Under the Public Use Requirement ofthe Fifth Amendment, 50 SYRACUSE

L. Rev. 285, 295 (2000).

6. 467 U.S. 229 (1984).

7. See id. at 241.

8. See, e.g., Sw. 111. Dev. Auth. v. Nat'l City Envtl., L.L.C., 768 N.E.2d 1 (111. 2002); Ga.

Dep't of Transp. v. Jasper County, 586 S.E.2d 853 (S.C. 2003).

9. See 99 Cents Only Stores v. Lancaster Redev. Agency, 237 F. Supp. 2d 1 123, 1 129 (CD.

Cal. 2001), appeal dismissed as moot, 60 Fed. Appx. 123 (9th Cir. 2003).

10. County of Wayne v. Hathcock, 684 N.W.2d 765, 787 (Mich. 2004).

11. Kelo V. City of New London {Kelo I), 843 A.2d 500, 528 (Conn. 2004), aff'd, 125 S. Ct.

2655, reh'g denied, 126 S. Ct. 24 (2005).

12. Kelo V. City of New London {Kelo 11), 125 S. Ct. 2655, reh'g denied, 126 S. Ct. 24

(2005).

13. Dana Berliner, Public Use, Private Use—Does Anyone Know the Difference?, SJ052
ALI-ABA 789, 791 (2004); see also ILL. CONST, art. I, § 15 ("Private property shall not be taken

or damaged for public use without just compensation as provided by law."); MiCH. CONST, art. X,

§ 2 ("Private property shall not be taken for public use without just compensation therefor being

first made or secured in a manner prescribed by law."). Indiana does not have a public use clause.

See IND. Const, art. I, § 21.



2006] TAKING BACK EMINENT DOMAIN 45

1

enough. Part V proposes a solution that, if adopted, would require courts to
apply heightened scrutiny to problematic public use cases. Finally, this Note

concludes with a call for political action, including constitutional amendment, by

the public and legislatures to narrow the scope of "public use."

n. The Public Use Requirement and Its Interpretation by Federal
AND State Courts

A. Federal Court Interpretation of the Public Use Requirement

1. Supreme Court Interpretation of the Public Use Requirement.—The
Supreme Court has clearly held for over fifty years that the Fifth Amendment'

s

Public Use Clause does not necessarily prevent the government from taking real
property from one private individual and transferring it to another. ^^ Also, for

over twenty years, the Court has held that states possess the same power. ^^ The
Court has determined that the rational basis test is the proper standard to analyze

the constitutionality of a taking.
^^

In Berman v. Parker, ^^ the Court held that Congress has the power to transfer
private land to another private entity to accomplish its urban renewal goals.

^^

Congress allowed an agency of the District of Columbia to take property to

remove blighted areas and slums fromWashington, D.C. Aplanning commission
determined that the area encompassing the appellants' department store was
blighted and sought to take the land through eminent domain. The agency
planned to subsequently transfer the land to other public and private entities.

^^

The department store, although located in a blighted area, was not part of the
slum.^° The Court rejected the argument that the taking primarily benefited the
private entity that received the land post-condemnation because the Court

determined that Congress had acted within the scope of its police powers over the

District of Columbia and in such a case the trial court's role "is an extremely
narrow one."^^ The Court also held that Congress could authorize the transfer of
sanitary and non-blighted land to private individuals because the goal of the

project was to ensure that blight and slums did not reappear.^^ Thus, Berman
represents an extremely broad interpretation of the Public Use Clause. As
Midkiffnot&d thirty years later, this interpretation is "coterminous with the scope

14. Berman v. Parker, 348 U.S. 26, 33-34 (1954).

15. See Haw. Hous. Auth. v. Midkiff, 467 U.S. 229, 240-41 (1984).

16. Ralph Nader & Alan Hirsch, Making Eminent Domain Law Humane, 49 ViLL. L. REV.
207, 211-12 (2004) (quoting Midkiff, 467 U.S. at 241).

17. 348 U.S. 26 (1954).

18. See id. at 33-34.

19. Mat 29-31.
20. Id. Sit 30.

21. Mat 32.
22. Id. at 34.



452 INDIANA LAW REVIEW [Vol. 39:449

of a sovereign's police powers."^^ Indeed, the Court's reading of the Public Use
Clause is so broad that it led the Court to state that the legislature, and not the

courts, "is the main guardian of the public needs" in eminent domain cases.^"^
The Court further expanded its definition of public use in Midkiff. In Hawaii

Housing Authority v. Midkiff, Hawaii condemned the fee simple title to certain
land and sold the title to the private entity leasing the land. The State did this
because almost all of Hawaii's privately owned land was owned by seventy-two
landowners, thus altering the fee simple market.^^ The Court gave maximum
deference to the legislature's determination of what the public use at issue was
and held that a taking is constitutional if it is rationally related to a legitimate

state interest.^^ To apply a greater level of scrutiny to takings, the Court thought,
would put courts in the precarious position of determining what is and is not a
governmental function, which the Court had found "impracticable in other

fields.
"^^ Indeed, to the Midkiff Court, eminent domain is but a means to

accomplishing a legislative end, that is, a public use.^^ Because the legislature

rationally provided for the condemnation ofthe land to further the legitimate goal

of decreasing an oligopoly, the statute met constitutional muster.^^ Midkiffalso

provided for a wide reading of the Public Use Clause by not requiring that the
public at large, or even a large part of it, benefit from the taking.

^°

The U.S. Supreme Court expanded its interpretation ofthe Public Use Clause
in Kelo II. In Kelo II, the plaintiffs' homes were condemned to make room for
a research park designed to complement a Pfizer facility that had just opened in

New London, Connecticut. New London touted the research park as a means to
create over one thousand newjobs, increase tax revenue, and revitalize the city's
downtown.^' The petitioners' property, which included homes that were not
blighted, were to be condemned to make way for "research and development
office space," retail shops, and parking, depending on the location of the

property.^^

In an opinion by Justice Stevens, the Court held that the takings served a

valid public purpose, and as such were constitutional, because the takings were

part of a "carefully formulated economic development plan" that the city

believed would "provide appreciable benefits to the community."^^ In arriving

23. Haw. Hous. Auth. v. Midkiff, 467 U.S. 229, 240 (1984).

24. Berman, 348 U.S. at 32.

25. M/J)t/^, 467 U.S. at 232-34.

26. Id. at 242-43.

27. Id. at 241 (quoting United States ex rel. Tenn. Valley Auth. v. Welch, 327 U.S. 546, 552

(1946)).

28. Id. at 240 (quoting Berman, 348 U.S. at 33).

29. Id. at 242.

30. Id. at 244 (quoting Rindge Co. v. L.A. County, 262 U.S. 700, 707 (1923)).

31. Kelo V. City of New London (Kelo 11), 125 S. Ct. 2655, 2659, reh'g denied, 126 S. Ct.

24 (2005).

32. Mat 2659-60.
33. Mat 2665.



2006] TAKING BACK EMINENT DOMAIN 453

at this result, the court rejected any distinction between the terms "public use"

and "public purpose."^"^ Also, after citing Berman, Midkiff, and other cases

extensively, the Court noted that its holding was necessary to give state courts

and legislatures the "great respect" that they were owed as the institutions that
respond to the varied and evolving needs of society.^^ Additionally, the Court

stated that it reviewed state action in a case like this to ensure that the state's end

was legitimate and "its means are not irrational."^^

The Court further rejected a bright-line rule that would have provided that
economic development could not be considered a public use or, in the alternative,

that the condemning authority had to prove that the benefits it asserted would

likely be achieved by the project for which eminent domain is used.^^ The Court
held that the better approach is to review the condemning authority's plan in its

entirety, and not on an individual basis, and to determine if the condemning

authority has a comprehensive plan and that it "thorough[ly] deliberat[ed]" the

plan prior to its adoption.^^ The Court did note that this rule was not intended to
provide a condemning authority with carte blanche to condemn as it pleased.
The Court stated that a taking occurring outside an "integrated development
plan" may indicate that condemning authority was taking the property for purely
private reasons.^^ Thus, Kelo II serves to solidify the Court's Takings Clause

jurisprudence and likely will be used to justify the constitutionality of the vast

majority of takings.

Berman, Midkijf, and Kelo //represent the broadest interpretations of"public

use.'"^^ Although the Court has acknowledged a narrow role for courts reviewing

eminent domain actions,"^^ it is quite difficult, absent explicit and complete

deference to the legislature, to find a broader interpretation of the Public Use
Clause. In addition, Berman, Midkiff, and Kelo II represented a sea change in

takings law. No longer is it impermissible to "take land from A and give it to
g»42

This extremely broad interpretation has led inexorably to the inability of the

34. See id. at 2663-64.

35. Id. at 2664 (internal quotation marks omitted) (quoting Hairston v. Danville & W. Ry.
Co., 208 U.S. 598, 606-07 (1908)).

36. Id. at 2667 (internal quotation marks omitted) (quoting Haw. Hous. Auth. v. Midkiff, 467

U.S. 229, 242 (1984)); see also id. at 2269 (Kennedy, J., concurring) (noting that the standard of

review under Berman and Midkijfis similar to the "rational-basis test used to review economic

regulation under the Due Process and Equal Protection Clauses").

37. Id. at 2666-67 (majority opinion).

38. Mat 2665.
39. Id. at 2667.

40. See Ely, supra note 2, at 34.

41. Midkiff, 467 V.S. at 240.

42. Derek Werner, Note, The Public Use Clause, Common Sense and Takings, 1 B.U. Pub.
Int. L.J. 335, 344-45 (2001); see also Calder v. Bull, 3 U.S. (3 Dall.) 386, 388 (1798) (seriatim

opinion of Chase, J.).



454 INDIANA LAW REVIEW [Vol. 39:449

Public Use Clause to protect individual property rights.'^^ Because the Court has
opted to give takings cases almost the lowest level of scrutiny, and by placing the
definition of "public use" within the ambit of the police power, the requirement

does not limit a government's eminent domain power because the legislative
body can generally always find some public purpose tojustify a taking."^ Indeed,
when the legislature has almost exclusive control of defining what constitutes a
public use, it could hardly run afoul of the Public Use Clause. Thus, absent an
external limitation on the taking, such as a violation of the Equal Protection

Clause of the Fourteenth Amendment, a court likely will not find the taking to be
barred by the Constitution. Therefore, the Public Use Clause, in most cases, will
not entitle one to a legal remedy for the wrongful taking of his land; it confines

the former owner to a political remedyj"^^ such as taking his grievances to the
polls in the next election.

2. Recent Lower Federal Court Interpretations of the Public Use
Requirement.—Although the Supreme Court has interpreted the Public Use
Clause broadly, several lower federal courts have found some takings limited by
the clause. Indeed, these courts found ways around the strict deference to the
legislature that Berman, Midkiff, and Kelo II demanded."^^ These cases did not

follow the traditional rational basis review rules, which require a court to find for

the government if the asserted public use is merely conceivable."^^ In these cases,

the court was not satisfied with the government's proffered public use and

required the government to show that the asserted use or benefit could be
achieved."^^ In one case, Daniels v. Area Plan Commission ofAllen County,^^ the

court of appeals held that an asserted public use that was "conclusory and largely

unsupported" would not meet the Public Use Clause.^^
One particular case has distinguished itself from the Supreme Court cases.

In 99 Cents Only Stores v. Lancaster Redevelopment Agency^^^ the Lancaster

Redevelopment Agency ("Agency") sought to condemn the leasehold interest of

43. This is hardly a new or novel concept. Over fifty years ago it was recognized that

Congress and state governments failed to see the Public Use Clause as a limitation upon the

government. Nader & Hirsch, supra note 16, at 209 (relying upon Comment, The Public Use
Limitation on Eminent Domain: An Advance Requiem, 58 YALE L.J. 599, 614 (1949)).

44. See id. at 212; see also Kelo v. City ofNew London {Kelo 11), 125 S. Ct. 2655, 2676-77,

reh'g denied, 126 S. Ct. 24 (2005) (O'Connor, J., dissenting).

45. For examples of political remedies, see Berliner, supra note 13, at 798-800 (noting, inter

alia, that public pressure forced developers to give up plans to demolish one-fifth of Pittsburgh's

downtown).

46. See Nicole Stelle Gamett, The Public Use Question as a Takings Problem, 71 Geo.

Wash. L. Rev. 934, 936 (2003).

47. W. at 935-36.

48. Id.

49. 306 F.3d 445 (7th Cir. 2002).

50. Id. at 463-64; Gamett, supra note 46, at 934.

51. 237 F. Supp. 2d 1 123 (CD. Cal. 2001), appeal dismissed as moot, 60 Fed. Appx. 123

(9th Cir. 2003).



2006] TAKING BACK EMINENT DOMAIN 455

99 Cents Only Stores ("99 Cents") in a shopping center location.^^ The Agency
sought condemnation to meet Costco' s demands for expansion of its local store
and to prevent Costco from relocating. When 99 Cents refused to sell its interest,
the Agency attempted to condemn the land so it could sell it to Costco for one
dollar.^^ The Agency attempted to assert as a public use the prevention of future
blight that could be caused if Costco relocated.^"^ The court distinguished this
case from Midkiffby fitting its decision into the narrow role that MidkiffcaivQd
out for judicial review.^^ The court held that because the Agency admitted that
it was only trying to appease Costco and because the goals of Costco could have
been met without interfering with 99 Cents's leasehold interest, the eminent
domain action would fail.^^ Also important to the 99 Cents Only Stores court
was that the Agency had not made any findings that future blight could occur,
and thus did not tie the taking to these findings; the Agency merely stated the
rationale once it was in court.^^ Thus, the 99 Cents Only Stores court was
unwilling to find a valid public purpose where there was no factually supported
legislative determination that a public purpose would be served by the taking.^^

Thus, some lower federal courts may be willing to use heightened level of
scrutiny when the condemning authority has not set forth any findings to
establish a public use. However, in light of these cases, future takings could be

justified with public uses that are established beforehand by findings that are

general enough to be upheld under the Berman and Midkiff standards. For
example, if the Agency in 99 Cents Only Stores had set forth findings ex ante,
whether grounded in reality or not, that the taking would create x jobs and
generate y tax dollars, it is more likely that a court would uphold the taking, even
though the taking only benefited Costco.

B. Interpretation ofPublic Use Requirements in State Constitutions

Although most state constitutions include public use requirements, only

about half of those jurisdictions have ever ruled on whether economic

development qualifies as a public use.^^ Currently, approximately half of the

states that have decided the issue have allowed transfers to private entities for the

purpose of economic redevelopment, and half have not.^^ Thus, there are two
basic rules from which the remaining states may choose.

1. Courts Using a Broad Interpretation of Their State's Public Use
Requirement.—Many state courts have interpreted their state's public use

52. Id. at 1126.

53. Id.

54. /J. at 1129.

55. Id. (quoting Haw. Hous. Auth. v. Midkiff, 467 U.S. 229, 240 (1984)).

56. Id.

57. Mat 1130.
58. Id.

59. Berliner, supra note 13, at 794.

60. Id.



456 INDIANA LAW REVIEW [Vol. 39:449

requirements as the Supreme Court interpreted the Fifth Amendment in Berman,
Midkiff, and Kelo II. These states also allow for maximum deference to the
legislature. These cases are a liberal variant of the public-benefit theory, which

holds that a taking is permissible if it furthers a permissible legislative end.^^

The broad interpretation of state public use requirements is best exemplified
by Poletown Neighborhood Council v. City ofDetroit.^^ Although overruled in
2004,^^ Poletown remains important because it has been repeatedly cited by
courts outside of Michigan.^ In Poletown, Detroit attempted to condemn its
Poletown neighborhood so that General Motors could build an assembly plant at

that location.^^ General Motors had threatened to remove approximately six
thousand jobs from Detroit if it was not allowed to build on the Poletown site.
Additionally, General Motors made several demands regarding the condition of
the site and paid a price significantly lower than market value for the site.^^

The Poletown court began its analysis by explicitly disavowing any
distinction between "public use" and "public purpose."^^ Once the court
extinguished that distinction, the court easily determined that in light of the

state's police powers, Michigan could use eminent domain to reduce

unemployment and its effects on society.^^ The court further held that although
a taking for a private purpose would violate the state's public use requirement,

the government can condemn the land and transfer it to a private entity when a
private use is incidental to the public purpose.^^ In many ways, the Poletown
court's conclusions became thejurisprudential model upon which Midkiffwould

be based three years later.^^ Indeed, in another parallel to Midkiff, the Poletown

court gave extreme deference to the legislature, citing Berman approvingly and
stating that after the public use is determined, the court has only a limited role in

reviewing it.^* Thus, Poletown' s brief per curiam opinion became the
quintessential case that justified an expansive interpretation of the Public Use
Clause.

Other states have followed the reasoning of cases like Poletown, Berman,

61. Thomas J. Posey, Note, This Land is My Land: The Need for a Feasibility Test in
Evaluation ofTakingsfor Public Necessity, 78 Chi.-KentL. Rev. 1403, 1407 (2003). The public-

benefit theory is in contrast to the actual-use theory which holds that all members ofthe public must

have access to and enjoy the actual use of the land. Id.

62. 304 N.W.2d 455 (Mich. 198 1) (per curiam), overruled by County ofWayne v. Hathcock,

684 N.W.2d 765 (Mich. 2004).

63. Hathcock, 684 N.W.2d at 787.

64. E.g., Kelo v. City ofNew London {Kelo /), 843 A.2d 500 (Conn. 2004), aff'd, 125 S. Ct.

2655, reh'g denied, 126 S. Ct. 24 (2005).

65. Poletown Neighborhood Council, 304 N.W.2d at 457.

66. Id. at 467-70 (Ryan, J., dissenting).

67. Id. at 457 (majority opinion).

68. Id. at 458; see also Hathcock, 684 N.W.2d at 784-85.

69. Poletown Neighborhood Council, 304 N.W.2d at 458.

70. See Nader & Hirsch, supra note 16, at 218.
7 1

.

Poletown Neighborhood Council, 304 N.W.2d at 458-59.



2006] TAKING BACK EMINENT DOMAIN 457

and Midkijf. Most recently, in Kelo v. City ofNew London (Kelo /), the Supreme
Court of Connecticut simultaneously accepted the reasoning of Poletown and

applied Midkijf s rational basis testJ^ The Kelo I court based its decision not
only on the federal grounds that were affirmed by the U.S. Supreme Court in

Kelo II, but also on open state constitutional grounds. In so holding, the Kelo I

court determined, in light of the deference owed the legislature, that economic
development is a valid public purpose, similar to slum clearance.^^ In addition,

the Kelo I court, like the Poletown court, rejected the argument that transferring

the land to private parties for economic development primarily benefited the

private entities. ^"^ The court reasoned that because New London's goal was
economic redevelopment, private entities and transfers of this type had to be
involved.^^ Additionally, the court more clearly articulated the standard of
review that a court should use in these types of cases. The court determined that
courts are to look at whether the taking primarily benefits the public or a private

entity.^^ However, despite this judicial role, the Kelo I court left the issue to the

trier of fact, and thus reviewed the issue under the "clearly erroneous" standard.^^

Perhaps this formulation is a clear articulation ofthejudicial role the Berman and
MidkiffCourts provided.^^

Several other states have read their public use clauses broadly and approved

takings similar to those in Berman, Poletown, and Kelo I. The Supreme Court
of Kansas approved the taking of two businesses for the creation of an industrial
park that would be held by private owners after the court determined that
economic development is a legitimate public use.^^ In City ofDuluth v. State,^^

the Supreme Court of Minnesota gave Minnesota's public use clause an even
broader interpretation than those used in Poletown and Kelo l}^ The Duluth
court held that if the trial court can marshal any evidence to support a finding of

public purpose, then the court must uphold the taking unless to do so would be
"manifestly arbitrary or unreasonable."^^ These additional cases demonstrate that

jurisdictions adopting the broader interpretation of "public use" use more or less
the same deferential rational basis review. Absent arbitrariness and abuse, courts

72. 843 A.2d 500, 528 (Conn. 2004), aff'd, 125 S. Ct. 2655, reh'g denied, 126 S. Ct. 24

(2005).

73. Id. at 532.

74. Mat 536-37.
75. See id.

76. See id. at 541.

77. See id.

78. See supra notes 24, 42 and accompanying text.

79. Gen. Bldg. Contractors, L.L.C. v. Bd. ofShawnee County Comm'rs, 66 P.3d 873, 882-83

(Kan. 2003).

80. 390 N.W.2d 757 (Minn. 1986).

81. See id. at 763; see also Jennifer J. Kruckeberg, Note, Can the Government Buy

Everything?: The Takings Clause and the Erosion ofthe "Public Use" Requirement, 87 MESfN. L.

Rev. 543, 556 (2002).

82. Duluth, 390 N.W.2d at 763.



458 INDIANA LAW REVIEW [Vol. 39:449

in these jurisdictions will validate the legislature's determination of what
constitutes a public use.

2. Courts Using a Narrow Interpretation of Their State's Public Use
Requirement.—Somejurisdictions read their respective public use clauses more
narrowly than their aforementioned counterparts. These jurisdictions tend not

to view economic development as a public use, or at least give the legislature less
deference when deciding if the primary beneficiary of the taking is the private
recipient of the condemned land. Also, as the Kelo I court noted, it is possible
to harmonize some of the following cases with the holdings of cases such as
Berman, Midkiff, and PoletownP

One of the states that recently adopted a narrower view of the definition of
"public use" was Michigan. In County ofWayne v. Hathcock, the Supreme Court
of Michigan explicitly overruled Poletown and forbade the taJdng of the

defendants' property to create a business and technology park near Metropolitan

Airport.^"^ The Hathcock court held that the term "public use" is a legal term of
art that is a "positive limit on the state's power of eminent domain."^^ Also, the
court stated it would not be as deferential to the legislature as it was under
Poletown}^ The court also held that there is a distinction between "public
purpose" and "public use."^^ Under the Hathcock scheme, the former is not a
limit on the eminent domain power; on the other hand, the latter is a substantial
limit. Thus, the limitation gives the court a larger role in reviewing eminent

domain cases. The court asserted its independence by holding that
notwithstanding any legislative findings, it could determine if the legislature's

asserted public use was constitutional.^^

The Hathcock court also drew on Justice Ryan's Poletown dissent to hold
that although Michigan's public use clause is "not an absolute bar against the

transfer of condemned property to private entities," there are only three
circumstances justifying the transfer of condemned property to a private party.

^^

The first such situation is when the taking is required to satisfy a "public
necessity of the extreme sort otherwise impracticable" unless the condemned
land was transferred to a private entity.^^ To the court, this situation includes
canals, railroads, highways and "other instrumentalities ofcommerce."^* In these

83. See Kelo v. City of New London {Kelo I), 843 A.2d 500, 535 (Conn. 2004), ojfJ, 125

S. Ct. 2655, reh'g denied, 126 S. Ct. 24 (2005).

84. County of Wayne v. Hathcock, 684 N.W.2d 765, 770, 787 (Mich. 2004).

85. /c?. at 780.

86. See id. at 785.

87. /^. at 784.

88. Mat 785.
89. /J. at 781.

90. Id. (internal quotation marks omitted) (quoting Poletown Neighborhood Council v. City

of Detroit, 304 N.W.2d 455, 676 (Mich. 1981) (Ryan, J., dissenting), overruled by Hathcock, 684

N.W.2d 765)).

91. Id. (internal quotation marks omitted) (quoting Poletown Neighborhood Council, 304

N.W.2d at 675 (Ryan, J., dissenting)).



2006] TAKING BACK EMINENT DOMAIN 459

situations, eminent domain is allowed because the construction of a private

railroad could be halted by a single landowner who refused to sell an easement
to his property for anything less than a price above market value.^^

Hathcock's second justification for transferring condemned land to private
entities is when the private grantee remains responsible to the public.^^ This
situation allows for entities such as private utility companies to condemn land.
The overriding concern is that the private entity will use the condemned property
to benefit the public, and that the public controls the land ''independent of the

will ofthe corporation taking it.*'^"^ Finally, the court held that condemned land
can be transferred to private entities "when the selection of the land to be
condemned is itself based on public concem."^^ This situation covers cases such
as slum clearance where a reviewing court looks at the reason that the

condemning authority sought condemnation, instead of the land's post-
condemnation use, to determine if the public use requirement is met.^^ In cases

like slum clearance, the public use is the removal ofunfit and unsanitary housing;

the subsequent transfer to private parties is ancillary to the overriding use of

removing the unfit housing.^^

Based on this scheme, the court held that economic development to increase

public revenues and employment does not justify the use of eminent domain.^^
The court held that these benefits are only incidental to the taking.^^ They are
incidental because all lawful businesses contribute to the economy through
employment and taxes.

*^

The Supreme Court of Illinois also recently proclaimed a narrower view of
Illinois 's public use clause in Southwestern Illinois Development Authority v.

National City Environmental L.L.C}^^ The Southwestern Illinois Development
Authority ("SWIDA") had instituted condemnation proceedings against National
City Environmental ("NCE") so that NCE's land could be conveyed to a local
racetrack. The racetrack wanted to use the land as its parking lot. NCE initially
refused to sell its land to the racetrack. Eventually, the track convinced SWIDA
to condemn the land.^^^ SWIDA asserted the prevention and elimination of
blight, promotion of public safety by alleviating traffic, and the economic
redevelopment of the region as public uses.*°^

92. Mat 781-82.
93. Mat 782.
94. Id. (internal quotation marks omitted) (quoting Poletown Neighborhood Council, 304

N.W.2d at 675 (Ryan, J., dissenting)).

95. Mat 782-83.
96. M. at 783.

97. Id.

98. Mat 786-87.
99. Mat 786.

100. Id.

101. 768 N.E.2d 1 (111. 2002).

102. Mat 5-6.
103. Mat 8.



460 INDIANA LAW REVIEW [Vol. 39:449

The court began its analysis by noting that although the terms "public use"
and "public purpose" are similar in meaning, the terms are distinguishable and

not interchangeable. ^^"^ The court also noted that although all three asserted
public uses could be valid in certain cases, they were inapplicable to the instant

case because the racetrack was a private entity and only a "mere benefit to the
public [would] flow from the contemplated improvement."^^^ By rejecting
SWEDA's taking despite SWIDA's findings of public use, the court played a
largerjudicial role in public use cases. Thus, the court did not give the taking the

same deferential review that jurisdictions following the Poletown and Kelo I
models would have used. Also, the court indicated that it was willing to reverse
a taking designed merely to assist private entities in "accomplishing their goals

in a swift, economical, and profitable manner."*°^ The court in National City
Environmental inferred that SWIDA was interested in helping the racetrack
accomplish its goals because SWIDA advertised that it would condemn land for
private developers upon application and also from SWIDA' s lack ofan economic
plan encompassing the racetrack. ^^^ Thus, the court showed that it would not
uphold a taking designed to help a private entity reap profits, even if the taking

resulted in an incidental public benefit.
^°^

National City Environmental represents a substantial breakfrom the analysis

used in more deferential jurisdictions. However, as the Kelo I court noted, it is
possible to harmonize the National City Environmental court's analysis with the

analyses used in cases such as Kelo /, Kelo II, Poletown, and Midkiff.^^ The
Kelo I court stated that National City Environmental perhaps represents "the far

outer limit of the use of the eminent domain power for economic
development."*^^ However, although the Kelo I court thought that the nature of

National City Environmental' s facts rationalized the court's analysis,"* one

could argue that the facts presented in Kelo I are just as, if not more, egregious

than the facts presented in National City Environmental}^^ In Kelo /, many
private homes were taken,* *^ while in National City Environmental, the
condemned land was used by commercial enterprises.**"^

Other jurisdictions have also given their public use requirements narrow

104. Id.

105. Id. at 9 (quoting Gaylord v. Sanitary Dist. of Chicago, 68 N.E. 522 (1903)).

106. Mat 10.
107. Id.

108. /^. at 9-10.

109. Kelo V. City of New London (Kelo I), 843 A.2d 500, 535 (Conn. 2004) (dictum), ajfd,
125 S. Ct. 2655, reh'g denied, 126 S. Ct. 24 (2005).

110. /^.(dictum).

111. Id. (dictum).

112. See discussion supra Part II.B. 1

.

113. /i:^/o/, 843A.2dat511.

1 14. See Sw. 111. Dev. Auth v. Nat'l City Envtl., L.L.C., 769 N.E.2d 1, 4 (111. 2002); see also

Nader & Hirsch, supra note 16, at 225 (noting that the taking of a home is different than taking
property used for primarily economic purposes).



2006] TAKING BACK EMINENT DOMAIN 46

1

readings. For example, in Georgia Department of Transportation v. Jasper

County,
^^^

the Supreme Court of South CaroHna refused to allow property owned
by the Georgia Department of Transportation to be condemned to make way for
a stevedoring operation.

^^^ The court took one ofthe strongest possible positions
regarding transfers to private entities. The court stated that it would not allow
transfers of land to private entities "unless the property is taken for public use—

a

fixed, definite, and enforceable right of use, independent of the will of a private

lessor of the condemned property."^ ^^ The court took this approach because the
eminent domain power is in "derogation of the right to acquire, possess, and
defend property."^

^^

m. Problems Associated with Deferential and Broad
Interpretations of "Public Use"

The broad, deferential standards announced in cases such as Berman,

Midkiff, Kelo, and Poletown present four distinct problems. First, by giving a
large amount of deference to the legislature, a broad reading of the Public Use
Clause fails to protect individual private property rights. It also alters the takings

incentive structure, making it much more likely that the government will exercise
its eminent domain power. Additionally, the broad interpretations that allow

condemned property to be transferred to private entities encourage private
entities to engage in rent-seeking behavior. Finally, a broad interpretation fails

to assure that the asserted public use is actually achieved.

A. Broad, Deferential Interpretations of "Public Use " Fail to Protect

Private Property Rights

Although the Federal Constitution was established to protect individual
rights to life and liberty, it was also created to protect private property rights.

^^^

Courts adopting a broad interpretation of the public use requirement have failed

to give effect to this fundamental purpose. This overarching purpose receives

textual support from several provisions of the Constitution aside from the
Takings Clause. For example, the Fourth Amendment guarantees that all persons
shall "be secure in their . . . houses, papers, and effects, against unreasonable

searches and seizures."^^^ The Third Amendment also protects private property
by placing great restrictions on the government's ability to quarter troops in
private residences. ^^^ The Due Process Clauses of the Fifth and Fourteenth
Amendments protect against deprivations of property "without due process of

115. 586 S.E.2d 853 (S.C. 2003).

116. Mat 857.
117. Id.

118. Mat 856.
119. Nader & Hirsch, supra note 16, at 208.
120. U.S. Const, amend. IV.

121. See U.S. CONST, amend. HI.



462 INDIANA LAW REVIEW [Vol. 39:449

law."^22

In addition to the aforementioned explicit protections ofprivate property, the

U.S. government was structured in part to protect individual private property
rights. Indeed, the Framers believed that protecting private property rights was
essential to protect personal liberty. ^^^ James Madison believed that,
"Government is instituted to protect property of every sort; as well that which
lies in the various rights of individuals .... This being the end of government,

that alone is ajust government, which impartially secures to every man, whatever

is his own."'^"* Additionally Madison believed that disparities in property
ownership created the factions that government was instituted to control. ^^^ He
believed that the Constitution was necessary to control "[a] rage for . . . an
abolition of debts, for an equal division of property, or for any other improper or

wicked project."^^^ Thus, although courts have focused on the provisions of the

Constitution guaranteeing individual liberties, the Framers were also intensely

concerned with protecting private property rights.

Despite the Framers' intent to protect property rights, the broad, deferential

interpretation of the Public Use Clause has failed to effectuate that intent. The
U.S. Supreme Court has been quite unwilling to impose any standard that allows
courts a meaningful role in determining what qualifies as a public use. The
Midkijf Court did recognize that a successful taking requires a condemning

authority to stipulate a public purpose; however, it provided that this requirement

is satisfied when the condemnation is "rationally related to a conceivable public
purpose."^^^ A right is hardly protected when the only limit on the government's
ability to derogate the right is that the act be within the broad bounds of

rationality, i.e., the act must not be arbitrary. ^^^ Thus, without a meaningful

check on the legislature, the legislature could conceivably accomplish the

factional redistribution of wealth that the Framers feared.
^^^

122. U.S. Const, amend. V (providing that "[n]o person shall ... be deprived of life, liberty,
or property, without due process of law"); U.S. CONST, amend. XIV, § 1 (prohibiting states from

making deprivations "without due process of law").

123. 5^e Ely, 5M/7ra note 2, at 35.

124. Timothy J. Sandefur, A Natural Rights Perspective on Eminent Domain in California:
A Rationale for Meaningful Judicial Scrutiny of "Public Use," 32 Sw. U. L. REV. 569, 580 n,58

(2003) (internal quotation marks omitted) (quoting James Madison, Madison: Writings 515 (J.

Rakove ed., 1999)).

125. The Federaust No. 10, at 73-79 (James Madison) (Clinton Rossiter ed., 2003).

126. Id. at 19.

127. Haw. Hous. Auth. v. Midkiff, 467 U.S. 229, 241 (1984).

128. See discussion supra Part II.A. 1

.

129. Madison was concerned with mitigating the power of factions that would arise because

of wealth inequalities. 5^^ The Federaust No. 10, supra note 125, at 73. Although he regarded

the operation of a legislature as a way to maintain liberty, see THE FEDERALIST No. 49, at 313

(James Madison) (Clinton Rossiter ed., 2003), he believed that legislators were "advocates and

parties to the causes which they determine," The Federalist No. 10, supra note 125, at 74. Using

a bill regarding private debt as an example, Madison stated:



2006] TAKING BACK EMINENT DOMAIN 463

Thus, despite the conclusions reached in Midkiff, Poletown, and Kelo II,

many courts seem to believe the Public Use Clause is a limitation on federal and
state action. This conclusion is inconsistent with their analyses regarding what

constitutes a public use for two reasons. First, even if the concept of public use

is coterminous with police power, ^^^ the legislature can still abuse police

power.^^^ Thus, the limitation would not protect against the mischiefthe Framers
feared. Second, if a citizen has the right not to have her land taken for anything

but a public use, then the government has a corresponding duty to effectuate that

right. However, the rational basis standard of review allows the government to

fulfill its duty by stating a pretextual public purpose that may arise because of the
taking, like increased tax and employment bases. ^^^ Thus, under these courts'
analyses, a taking only would be unconstitutional if the legislature does not make
an attempt to fit the taking into the current body of case law. Such a rule is
problematic because it allows the general rule, that the government cannot take

private property, to be swallowed by the exception, that private property may be
taken for a public use. In a different context, the Supreme Court has stated that
the Takings Clause requires more than this type of pretextual justification. ^^^

The analysis employed by courts using the rational basis standard of review
is also inconsistent with the standards these courts use to protect individual

liberty. This inconsistency leads to the conclusion that courts have chosen not

to use the clause to protect individual property rights. As Ralph Nader and Alan
Hirsch note, although courts use heightened scrutiny to protect liberty and

autonomy interests, the courts have not protected the property rights essential to
meaningfully exercise these rights. '^'^ For example, the Supreme Court has
consistently protected private and intimate activities inside the home, but has

done little to protect the home itself. ^^^ However, although Nader and Hirsch

It is a question to which the creditors are parties on one side and the debtors on the

other. Justice ought to hold the balance between them. Yet the parties are, and must be,

themselves the judges; and the most numerous party, or in other words, the most

powerful faction must be expected to prevail.

Id.

130. MiWityQ^, 467 U.S. at 240.

131. See Jeffrey W. Scott, Public Use and Private Profit: When Should Heightened Scrutiny

BeApplied to "Public-Private " Takings ?,\2i. AFFORDABLEHOUSING&COMMUNITYDev. L. 466,
473 (2003).

132. See Kelo v. City of New London {Kelo /), 843 A.2d 500, 520 (Conn. 2004), affd, 125
S. Ct. 2655, reh 'g denied, 126 S. Ct. 24 (2005).

133. See Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1025 n. 12 (1992) (stating that simply

requiring a recitation of a "harm-preventing" rationale is ineffectual for regulatory takings "[sjince

such a justification can be formulated in practically every case [and] amounts to a test of whether

the legislature has a stupid staff'); see also Kelo v. City ofNew London (Kelo II), 125 S. Ct. 2655,
2675, reh'g denied, 126 S. Ct. 24 (2005) (O'Connor, J., dissenting).

134. See Nader & Hirsch, supra note 16, at 216.
135. See id. ; see also Kelo II, 125 S. Ct. at 2685 (O'Connor, J., dissenting). Several Supreme

Court cases have protected individual liberties as they relate to private conduct in one's home. See,



464 INDIANA LAW REVIEW [Vol. 39:449

limit the type of property that makes the exercise of liberty interests meaningful
to intimately personal property like one's home,^^^ private property rights in

general are necessary for individuals to be autonomous. Even investment and
commercial property can enable personal autonomy. For example, the First

Amendment's guarantees of freedom of speech and freedom of the press are
nearly meaningless if individuals are not allowed to own the means necessary to
communicate and publish information and opinions.

Ultimately, when courts such as the Midkijf and Kelo II courts analyze
property rights cases differently from liberty rights cases, one could conclude that

these courts do not view the Public Use requirement as a limitation on the
government. For example, the Supreme Court has employed heightened scrutiny
in many cases reviewed under the Fifth and Fourteenth Amendments where
deprivations of liberty rights were at issue. This type of analysis provides that

a government can abrogate liberty to a certain point, at which point it can go no

further.
^^^ However, the Court has refused to recognize such a limitation with

regard to property rights; the legislature's action must be only within the bounds

of rationality.'^^ However, the limitation of rationality is illusory'^^ because the

right to hold a particular piece of property is practically protected only to the

extent that the condemning authority does not want to take it. Thus, the right

practically exists only if the condemning authority chooses to recognize it. The
Just Compensation Clause mitigates many effects of the taking by requiring that
the property owner be reimbursed for his loss.''^^ However, it may be impossible
to completely compensate someone for the loss of his property. ^"^^ Additionally,

other burdens are usually visited upon the owner of condemned property, such
as the necessity of looking for a new home and establishing ties to a new
neighborhood.'"^^

B. The Broad Interpretation of "Public Use " Alters the Takings
Incentive Structure

The broad interpretation of the Public Use Clause makes takings of private

e.g., Lawrence v. Texas, 539 U.S. 558 (2003) (protecting the right of adult homosexuals to engage

in private, consensual intimate conduct); Griswold v. Connecticut, 381 U.S. 479 (1965) (protecting

the right of married couples to use contraception).

136. See Nader & Hirsch, supra note 16, at 216.
137. Planned Parenthood of Se. Pa. v. Casey, 505 U.S. 833, 847 (1992) (stating that the

Constitution promises "a realm of personal liberty which the government may not enter").

138. See Haw. Hous. Auth. v. Midkiff, 467 U.S. 229, 241 (1984).

139. See supra text accompanying notes 132-33.

140. See U.S. CONST, amend. V.

141. Nader & Hirsch, supra note 16, at 217 (noting that in Poletown, the owners of the
condemned property did not lose merely income, but also the non-pecuniary attachment they had

to their home and neighborhood).

142. See generally Gamett, supra note 46, at 951-61 (describing negative consequences of

condemning land that can result even when compensation is made).



2006] TAKING BACK EMINENT DOMAIN 465

property much more likely because it virtually eliminates one of the limitations
on the eminent domain power. This problem is exacerbated in situations where

the condemned property will be transferred to a private party. In such a situation,
the other limitation, the requirement of just compensation, is likely removed.

The U.S. Constitution and most state constitutions have two provisions that deter
the government from exercising its eminent domain power: the Public Use
Clause and the Just Compensation Clause. ^"^^ The Just Compensation Clause
requires that the condemned property's owner be paid for the taking. ^"^"^ Thus,
when a broad interpretation of the Public Use Clause is used, and the private
party receiving the condemned land pays all of the expenses related to the
condemnation, the government will not be easily deterred from using eminent

domain because it will not have to expend its own resources. ^"^^

The theory behind the incentive structure of the Takings Clause is that even
if a government can justify a legitimate public use, it will still be reluctant to

abuse its power to take the property because it will have to payjust compensation
and other expenses such as legal fees.^"^^ The lower the cost to the condemning
authority, the more likely the condemning authority is to exercise the taking
power, especially when a public purpose can be assumed. Indeed, in some cases,
the condemning authority may actually have incentive to condemn private
property for transfer to another private entity if the entity seeking the

condemnation not only pays for the taking, but also pays a fee for the privilege.
^"^^

This incentive structure is incompatible with the rational basis standard ofreview

applied in Public Use cases. If the legislature is the sole institution charged with
protecting people from improper uses of its eminent domain power, ^"^^ it must

surmount a tremendous conflict of interest before doing so. This conflict will be

difficult to overcome, especially in cases where the land could be put to "more

productive" uses and generate revenue that exceeds current tax revenue.

Although some condemning authorities will resist the conflict of interest, others
will not.^"^^ Thus, in many cases, the broad interpretation of the Public Use
requirement is inconsistent with its justification for deference to the legislature.

In addition, many transfers ofcondemned property to private entities alter the
takings incentive structure because they change the political equation the

condemning authority must balance before declaring eminent domain. In a
traditional exercise of the eminent domain power, such as condemning land to
build a highway, the government has to weigh the political consequences of the

143. See U.S. CONST, amend. V; see also Berliner, supra note 13, at 793.

144. See Berliner, supra note 13, at 793.

145. See id.

146. See id.

147. See, e.g., Sw. 111. Dev. Auth. v. Nat'l City Envtl., L.L.C., 768 N.E.2d 1, 4 (111. 2002)

(stating that SWIDA required a fee of six to ten percent of the acquisition fee of the property to be
paid for the service of condemning the property).

148. See supra text accompanying note 24.

149. See, e.g. , Nat'l City Envtl., 768 N.E.2d at 10 (noting that SWIDA advertised that it would
condemn land for private entities for a fee).



466 INDIANA LAW REVIEW [Vol. 39:449

taking. To finance the taking, the government will have to impose the costs of
the taking on all of its citizens. When faced with either increased taxes or
decreased services to finance the taking, taxpayers may be likely to bring
political pressure to bear on the government' s officials. Presumably, the officials

will have to weigh the costs and benefits of expending their political capital

before affecting the taking. However, when the government sells property to a
private party that pays all the condemnation costs, the government officials do

not have to expend as much political capital because they have placed almost all
of the community's costs squarely on the owners of the condemned property and
the private transferee. '^^ In such a situation, the community as a whole will be
less likely to oppose the taking because the vast majority of people will feel no

negative effect from the taking. Thus, if the condemning authority selects the
"right" individual or group on which to impose the costs of the taking, it will

suffer little or no opposition. The "right" group may sometimes be a group of
poor and politically powerless individuals,^^^ but it could also be a commercial

enterprise, which although fairly successful, is largely unsympathetic.*^^

C. A Broad, Deferential Interpretation of *'Public Use " Encourages
Rent-Seeking Behavior

A rational basis standard for reviewing eminent domain actions encourages
rent-seeking behavior because property value is generally greater post-

condemnation.*^^ The current eminent domain system gives this "surplus" value
entirely to the post-condemnation owner. ^^"^ This is done to promote the efficient

use of resources and to discourage pre-condemnation owners from engaging in

rent-seeking behavior themselves—that is, charging a greater price than their
"opportunity cost."*^^ This efficiency is generally necessary because the pre-

condemnation owners' rent-seeking behavior can add substantial costs to the

public project. *^^ Thus, in a traditional takings case, the efficiency helps

taxpayers because taxes will not be increased and services will not be decreased.

However, when condemned property is transferred to a private, profit-
seeking entity, this rationale partly disappears. Of course, if the government

1 50. Professor Gamett notes that one of the reasons that compensation for takings is required

is because it prevents the government from "singhng out" and "exploiting poUtically unorganized

and vulnerable persons." Gamett, supra note 46, at 949 (internal quotation marks omitted) (citing

Saul Levmore, Takings, Torts, and Special Interests, 11 Va. L. Rev. 1333, 1344-45 (1991)).

151. See Nader & Hirsch, supra note 16, at 223.
152. See, e.g., 99 Cents Only Stores v. Lancaster Redev. Agency, 237 F. Supp. 2d 1 123, 1 129

(CD. Cal. 2001), appeal dismissed as moot, 60 Fed. Appx. 123 (9th Cir. 2003); Nat'l City Envtl.,

768N.E.2dat4.

153. See Thomas W. Merrill, The Economics of Public Use, 72 CORNELL L. REV. 61, 85

(1986).

154. See id. at S6.

155. /J. at 76, 86.

156. See id. at S5.



2006] TAKING BACK EMINENT DOMAIN 467

gratuitously transfers the property to a private entity, it is better economically to

pay a lower price for the property. However, when a private owner pays the
condemnation costs, it makes much less sense to give the private entity the
surplus. In such a case, one hundred percent of the costs are imposed on a

private entity that has actively sought out the condemned land. Thus, the
taxpayers do not benefit from the financial savings that eminent domain provides.

In addition, the surplus created also encourages private parties to engage in

rent-seeking behavior. ^^^ Eminent domain is attractive for private entities

because they can obtain the land they want at prices below market value. ^^^ For

this reason, private entities compete with each other in order to gain this

economic surplus. ^^^ These competition costs can eliminate any surplus and lead

to the inefficiency that eminent domain originally addressed. ^^^ Even if entities
are not competing for the surplus, if the private entity has to make expenditures
to defend the taking, then the surplus begins to disappear.

^^^

Rent-seeking behavior by private entities is undesirable because it gives one
entity a windfall at the expense of another. In a traditional eminent domain case,
where the government will ultimately possess the land, the condemnee will at
least receive the right to use a new or improved highway as a benefit. However,
in cases where the condemned land is given or sold to a private entity, the pre-
condemnation owner is involuntarily supplying land for a new use^^^ and must
surrender the surplus without being compensated for it. Thus, the new owner of
the land receives a windfall that it did nothing to earn, and it owes no service or
right of use to the pre-condemnation owner. This windfall is one of the key

reasons that private entities keep seeking to use eminent domain. As long as
governments are willing and able to provide for-profit entities with a windfall,

the private parties will continue to seek it. The broad, deferential interpretation
of "public use" promotes rent-seeking behavior because a profit-seeking entity

can use almost any reason to justify its request to the condemning authority.

D. The Current Interpretation of "Public Use " Fails to Assure That

the Asserted Use Is Achievable

Frequently, when a government asserts economic redevelopment, increased
taxes, or increased employment as a public use, it fails to require that the asserted
use actually benefit the community. ^^^ Several jurisdictions have legislatively

and contractually created "clawback" provisions that give the condemning
authority the right to take back some or all of its investment costs if the

157. Mat 86.
158. See Gamett, supra note 46, at 958.

159. Merrill, supra note 153, at 86.

160. Id.

161. See id.

162. Id.

163. See Gamett, supra note 46, at 978.



468 INDIANA LAW REVIEW [Vol. 39:449

contemplated benefit is not received. ^^"^ Because these measures are legislative

or contractual, the legislature is not obligated to make use of them in future
takings. Thus, the provisions are not a substantial protection against legislative

action. Under the rational basis standard, the state has no constitutional
requirement to assure that the public benefit is actually achieved. In Midkiff, the

Court stated, "[WJhere the exercise of the eminent domain power is rationally
related to a conceivable public purpose, the Court has never held a compensated

taking to be proscribed by the Public Use Clause."^^^ Thus, when analyzing a
taking ex ante, as long as the asserted public use could happen, the taking is

constitutional. There is no requirement that the public actually benefit from the

taking.

When the condemning authority does not hold the private transferee of the
condemned property accountable for not creating the asserted public use, the
public suffers harm because it does not receive the anticipated use. Additionally,
the pre-condemnation owner suffers a greater harm than he would have
otherwise. In this case, the pre-condemnation owner not only suffers the loss of
his property, he also does not share in the anticipated benefit.

In other cases, the taking's costs outweigh any possible benefit that could

result from the taking. For example, in Poletown, Detroit paid $200 million for

all of the condemned land. It sold the land to General Motors for eight million
dollars. ^^^ In such a case, for a net economic benefit to accrue to the city and its

residents, the benefits of economic redevelopment would have to exceeded at
least $192 million. In addition, the social and political costs imposed by the
taking, which in Poletown included displacement of the neighborhood's

residents, ^^^ must be balanced against the social and political benefits that

actually do result from the taking. Such a social or political benefit could include

increased employment in the area. However, considering the combination of
economic, political, and social costs and benefits, one is hard pressed to find that

overall a net benefit actually accrued from the taking.

Under the broad interpretation ofthe Public Use Clause, the courts have little
ability to determine if the public will actually benefit from the asserted use. The
legislature is likely the only entity able to completely weigh the costs against the

benefits. The legislature is not required to follow many of the procedural and
evidence rules that courts use and it does not have to afford fact-finders any

deference as courts exercising appellate review must. Indeed, the Supreme Court

has found that determining what constitutes a public use can be

"impracticable."^^^ However, there are cases where the asserted benefits are

164. /J. at 978-79.

165. Haw. Hous. Auth. v. Midkiff, 467 U.S. 229, 241 (1984) (emphasis added).

166. Jones, supra note 5, at 295.

167. See Gamett, supra note 46, at 953-55.

168. See Midkiff, 467 U.S. at 240-41 (quoting United States ex rel. Tenn. Valley Auth. v.

Welch, 327 U.S. 546, 552 (1946)); see also Berman v. Parker, 348 U.S. 26, 32 (1954) (noting that

in some cases the "purposes of govemment[] . . . [are] neither abstractly nor historically capable

of complete definition").



2006] TAKING BACK EMINENT DOMAIN 469

hardly likely to match the costs imposed upon society and upon the former
owners of the condemned land. Under the standard of review used in cases like

Midkiffand Kelo II, the public use asserted by the legislature as a public use must

merely be conceivable.*^^ In such a case, the court will only be able to strike

down takings where the costs could not possibly match the benefits of the taking,
i.e., where there is no conceivable public purpose. The legislature generally has
free reign to determine what is a legitimate government activity or public use.

However, if it appears likely that the social, political, and economic costs of the

taking will exceed its actual or asserted benefits, a presumption arises that the

taking was really designed for private benefit and that the public use was only
incidental. *^^ The rational basis standard ofreview precludes courts fromlooking
behind the asserted public use, even when the "red flag" of the costs obviously
out\yeighing the benefits is waved.

*^*

IV. Recent Cases Offering a Narrower Interpretation of "Public
Use" Do Not Adequately Protect Individual Property Rights

Although many recent cases have taken a narrower view of what constitutes
a "public use" than Berman, Midkiff, and Kelo II, they have not gone far enough

to protect private property rights. In many respects, these cases still allow a
condemning authority to take a fairly broad view of what constitutes a "public

use" when using eminent domain. The cases have not gone far enough to protect
individual property rights because they do not establish a comprehensive

standard that can be applied consistently by trial and appellate courts.
These cases undoubtedly use some form of heightened scrutiny and usually

state a general test or definition of public use. However, in many cases, the
court's analysis provides little guidance for courts facing different sets of facts.

Even in Georgia Department of Transportation v. Jasper County, which offers
the narrowest definition of "public use,"*^^ the court' s analysis is thin. Although

the case stated that "a fixed, definite, and enforceable right of use, independent

of the will of a private lessor of the condemned property" is necessary to meet
South Carolina's public use clause, it provided little analysis as to what factors

courts should look to in determining whether the taking contemplated "a fixed.

169. See Midkiff, 467 U.S. at 241; Kelo v. City of New London {Kelo /), 843 A.2d 500, 528
(Conn. 2004) (stating that analyzing takings under the federal and Connecticut public use

provisions requires a "deferential and purposive approach"), aff'd, 125 S. Ct. 2655, reh'g denied,

126 S. Ct. 24 (2005).

170. Many courts have held that if the taking is primarily to benefit a private party, the taking

is unconstitutional. See, e.g.. Gen. Bldg. Contractors, L.L.C. v. Bd. of Shawnee County Comm'rs,

66 P.3d 873, 883 (Kan. 2003).

171. See Midkiff, 467 U.S. at 243 (stating that federal courts are not to engage in "empirical

debates over the wisdom of takings—no less than debates over the wisdom of other kinds of
socioeconomic legislation").

172. See Ga. Dep't of Transp. v. Jasper County, 586 S.E.2d 853, 857 (S.C. 2003).



470 INDIANA LAW REVIEW [Vol. 39:449

definite, and enforceable right of use."*^^ However, this statement is not as
comprehensive as it seems. Without elaboration, the standard leaves open the
question whether a private entity such as a utility or a railroad could use eminent

domain to accomplish its goals. ^^"^ Thus, although the general standard reads
well, it creates many practical difficulties that a comprehensive standard would
remedy.

Hathcock follows the pattern of Georgia Department of Transportation.

Although the Hathcock court set out three circumstances that could justify
condemning property and transferring it to a private entity, ^^^ the court did not
set a comprehensive standard that would prevent a condemning authority from
abusing its eminent domain power. For example, one circumstance justifying
transferring condemned land to a private party is slum clearance. ^^^ In such a
case, the public use is the very selection of the land to be condemned and not its
post-condemnation use. This circumstance is problematic as it allows a

condemning authority to assert a "public concern"'^^ that is similar to slum
clearance and then justify the taking by noting the importance of the taking

relative to its police powers and the putative public concern. For example, a

condemning authority could assert that the taking is necessary to effectuate city

or county planning purposes. Such a justification could supplant the

justifications of increased taxes, increased employment, and economic

redevelopment as the fallback "public use" to be asserted when no other
justification seems to fit. Indeed, the principal problem is that if the taking itself

and not its subsequent use can be justified by an exercise of a power derivative
of the condemning authority's police power, then this limitation is virtually

indistinguishable from Midkijfs holding that the public use requirement is

"coterminous with the scope of a sovereign's police powers."*^^

In other cases, the courts examine the facts without reference to any clearly

annunciated standard of review when determining if the asserted use is
constitutional. For example, in National City Environmental, the court stated

that "[t]he public must be to some extent entitled to use or enjoy the property, not
as a mere favor or by permission of the owner, but by right." ^^^ However, the

court did little to analyze the case in light of this standard. The court merely
made the conclusory statement that the "condemnation clearly was intended to
assist [the racetrack] in accomplishing their goals in a swift, economical, and

173. See id. at 856-57.

174. See id. at 856 (stating that the phrase "public use implies possession, occupation, and

enjoyment of the land by the public at large or by public agencies" (citing Edens v. City of

Columbia, 91 S.E.2d 280, 283 (S.C. 1956))).

175. See County of Wayne v. Hathcock, 684 N.W.2d 765, 781-83 (Mich. 2004); see also

supra notes 89-97 and accompanying text.

176. 5ee //or/icocA:, 684 N.W.2d at 782-83.

177. Mat 783.
178. See Haw. Hous. Auth. v. Midkiff, 467 U.S. 229, 240 (1984).

179. Sw. 111. Dev. Auth. v. Nat'l City Envtl., L.L.C., 768 N.E.2d 1, 9 (111. 2002) (alteration in

original) (internal quotation marks omitted).



J

L

2006] TAKING BACK EMINENT DOMAIN 47

1

profitable manner."^^^ It also noted that SWIDA was acting in an overtly ultra
vires manner.'^* This analysis is unfortunate because although it reaches a

desirable result, it does little to help future courts decide takings cases. Because

the analysis centered in large part around the facts presented, the decisions are

easily distinguishable in future cases.
^^^

V. A Proposed Heightened Scrutiny Test for Analyzing
Problematic Eminent Domain Cases

The overarching purpose of any test that analyzes takings should be to
protect private property from being condemned to advance the ends of other
private entities. To this end, with the exception of a narrow range of cases, any
proposed taking where the land will subsequently be transferred to a private

entity should be automatically suspect and subjected to heightened scrutiny. The
purpose of the standard of review delineated below is to set forth the type of

heightened scrutiny that should be used in such a case. In addition, the main
purpose of this standard of review is to prevent condenming authorities from
using increased revenue, increased employment, or economic redevelopment as

a mere pretext to meet the Public Use Clause. This is not to say that it is
impermissible to take account of these asserted uses or benefits when assessing
a taking's constitutionality. In addition, the proposed standard of review

recognizes that a bright-line test is simply impracticable because it is impossible

to determine all problematic takings. As times change, new problematic takings
will arise. This impracticability occurs whether the bright-line test is phrased as

"condemned land may be transferred to a private entity in any case with the
following exceptions" or "condemned land may never be transferred to a private
entity except in the following circumstances."

Before using the test, a threshold question must be answered. The court must
first determine whether the possessory interest in the land, be it freehold or

leasehold, will inhere in the sovereign or its agencies, a political subdivision or

its agencies, a railroad, or a state-regulated public utility company, such as

electric, gas, or water companies.*^^ If one of these entities will hold the ultimate

possessory interest in the land, then the court should analyze the case according

to traditional principles of eminent domain jurisprudence. These cases should
be analyzed under traditional principles because the public uses in these cases

have generally been uncontroversial.*^"^ If the taking does not meet one of the

180. Mat 10.
181. See id.

182. See supra notes 109-1 1 and accompanying text.

183. See Scott, supra note 131, at 475 (noting that, as a factor of his proposed test, the

property must be owned or leased by a private entity, because that is the "essential element of a

public-private taking").

184. See Berliner, supra note 13, at 791; see also Scott, supra note 131, at 466 (noting that,

in the past, condemned land transferred to private individuals has led to benefits such as electrical

lines and railroads).



472 INDIANA LAW REVIEW [Vol. 39:449

conditions set forth in the threshold question, the court should proceed with the

following test. In these cases, the property's taking and subsequent transfer to
a private entity raise an issue that is neither routine nor well-settled.

A. Three-Prong Analysisfor Using Heightened Scrutiny

If a taking does not satisfy the threshold question posed above, then the

condemning authority must defend the taking by passing the following three-
pronged test by clear and convincing evidence. ^^^ The first prong requires the
condemning authority to show that transferring the land to a private entity is the
only practicable way of accomplishing a legitimate objective. The second prong
requires the condemning authority to demonstrate before taking the property that
the asserted public use will accrue to the public in a reasonable period of time.

Finally, the condemning authority must also prove that the private transferee of
the land will not receive the benefit ofthe surplus value that condemning the land
creates.

1. Prong One: Only Practicable Method of Accomplishing a Legitimate
Objective.—The first prong requires the condemning authority to show that
transferring the condemned property from one private entity to another is the
only practicable method of accomplishing a legitimate objective. ^^^ This prong
is worded similarly to the first circumstance stated in Hathcock that justifies
transferring condemned property to a private entity. ^^^ However, this prong is not
intended just to cover cases involving "highways, railroads . . . and other

instrumentalities of commerce,"^^^ but rather may be used in all cases that
involve a legitimate objective. A legitimate objective is a goal that the

185. This burden of proof and level of persuasion requirement is a loose adaptation of

Professor Ely's proposals regarding the type of takings at issue in this Note. See Ely, supra note

2, at 36. Specifically, Professor Ely believed that people should not have their property rights

coercively abrogated "without a compelling justification" and that the "courts should place the

burden on the condemnor to make a convincing case for the acquisition." Id. ; see also Kelo v. City

of New London (Kelo J), 843 A.2d 500, 587-88 (Conn. 2004) (Carella, J., dissenting), ajf'd, 125

S. Ct. 2655, reh'g denied, 126 S. Ct. 24 (2005).

186. Thomas Posey argues that a feasibility test should be used when "the government is

highly unlikely to use the condemned land to complete the necessity project." Posey, supra note

61, at 1417. His "highly unlikely" standard differs from this prong because it is a threshold

question that determines how the burden of persuasion is allocated. See id. Additionally, under

his test the government needs only a rational basis to meet its burden of proof. Id. at 1418.

Rational basis review is inconsistent with the underlying rationale of the test proposed in this Note.

1 87. See County ofWayne v. Hathcock, 684 N.W.2d 765, 78 1 (Mich. 2004) (dictum) (stating

that condemned land may be transferred to a private entity when the case "involve[s] 'public

necessity of the extreme sort otherwise impracticable'" (quoting Poletown Neighborhood Council

V. City of Detroit, 304 N.W.2d 455, 675 (Mich. 1981) (Ryan, J., dissenting), overruled by County

of Wayne v. Hathcock, 684 N.W.2d 765 (Mich. 2004))).

1 88. See Hathcock, 684 N.W.2d at 78 1 (internal quotation marks omitted) (quoting Poletown

Neighborhood Council, 304 N.W.2d at 675 (Ryan, J,, dissenting)).



2006] TAKING BACK EMINENT DOMAIN 473

condemning authority has the power to bring about, notwithstanding any takings

issues. For example, in the case of Congress, the prong only allows a taking

when it exercises one of its enumerated powers.
The prong requires a state's action to be within the bounds of its police

powers and its constitution. In addition, when something is the only practicable
method of accomplishing a goal, it is the only feasible method of accomplishing

the goal.^^^ This does not necessarily mean that the taking is the only possible
method that could accomplish the goal, but that it is the only method that could

reasonably be considered when accomplishing its goal. Thus, it is similar to the
concept of narrow-tailoring that is used to analyze cases under the Due Process
and Equal Protection Clauses of the Fourteenth Amendment.

^^°

This prong of the test offers several advantages. First, it partially follows

Berman, Midkijf, and Kelo II by allowing the legislature, and not the courts, to

generally determine what is a legitimate use of its powers. ^^^ This assuages the

courts' fears that they will be meddling in the affairs traditionally allocated to the

legislative branch. A related advantage is that in many cases, the courts can
easily review whether the asserted purpose or use of the contemplated taking is

even within the condemning authority's power. For example, in a case such as

National City Environmental, where the condemning authority was not a
sovereign or one of its political subdivisions, but rather a municipal corporation

with limited purpose, ^^^ the court can very easily test if an entity such as this is

acting ultra vires.

This prong also has several advantages with regard to protecting individual

property rights. First, it drastically limits the number ofcircumstances that allow
a condemning authority to transfer one person's land to another private party

because the post-condemnation transfer will only occur in cases where it would
be nearly impossible to accomplish the legislative objective otherwise. Second,

the prong provides more protection than the traditional rational basis standard.
This prong guarantees that the courts will thoroughly examine the rationale

underlying the taking before granting its approval. Thus, it lessens the judicial

deference to the legislature because the condemning authority will have tojustify
the taking and show how condemning the property and then transferring it to
another private entity will fulfill that justification. It must also show that
virtually no other means can accomplish the goal. The condemning authority
will not be able to merely state as a pretext that increased taxes, increased

employment, or economic redevelopment may arise from transferring the

189. Black'sLawDictionary 1210 (8th ed. 2004).

190. For a discussion of narrow-tailoring, see generally Grutter v. Bollinger, 539 U.S. 306

(2003) (discussing narrow-tailoring with regard to affirmative action). In addition, although this

prong is similar to the narrow-tailoring portion of strict scrutiny analysis, it does not require a

compelling state interest.

191

.

See Berman v. Parker, 348 U.S. 26, 32 (1954) (stating that "[t]he definition [ofthe police

power] is essentially the product of legislative determinations addressed to the purposes of

government, purposes neither abstractly nor historically capable of complete definition").

192. See Sw. 111. Dev. Auth. v. Nat'l City Envtl., L.L.C., 768 N.E.2d 1, 3 (111. 2002).



474 INDIANA LAW REVIEW [Vol. 39:449

property to a private entity. This prong changes the question from "Can a
legitimate legislative end rationally result from the taking?" to "Is the taking the
only reasonable way that the legislature can accomplish its goal?" The questions
are distinct and the latter greatly mitigates undue judicial deference that the
former allows.

^^^

This prong also provides for strong protection of property rights. The prong
rebalances the takings equation by emphasizing the individual's right to own the
private property and by deemphasizing the condemning authority' s power to take
private property. This reemphasis on private property rights attempts to bring
eminent domain jurisprudence in line with the other provisions of the
Constitution that protect private property and the Framers' view that the

Constitution was designed to protect private property rights.
^^"^

In addition to increasing the protection of private property rights, the first

prong also enables courts to substantively treat derogations of property rights

similarly to derogations of "fundamental" liberty interests. ^^^ This prong may
provide for different protection for private property rights than substantive due

process analysis provides for "fundamental" liberty interests. However, the

prong sets discemable boundaries that represent the extent of the state's ability

to derogate private property rights.
*^^

The high standard that the proposed test's first prong sets will undoubtedly
have many detractors. Many legislators, governors, mayors, and officials
heading entities with eminent domain power believe that they need the ability to
take land cheaply and easily to accomplish their state or city' s redevelopment and

economic goals. ^^^ Some courts and judges undoubtedly find this view
persuasive. For example. Justice Freeman expressed concern in his National City

Environmental dissent that the Supreme Court of Illinois 's enhanced standard of
review would be the death knell of "legislation in furtherance of economic

development and revitalization."^^^ Indeed, many states and cities believe that
economic redevelopment is necessary to increase tax revenues that are needed to

pay for government services. ^^^ These critics could claim that this prong would

eliminate a state or city's ability to redevelop and revitalize because any other

practicable option must be unavailable or exhausted before eminent domain can

be used to affect the legislative goal.

The potential fears of these critics would be misplaced. Underlying this

193. See discussion supra Parts II.A.l, II.B.l, III.

194. See discussion supra Part III.A.

195. See discussion supra Part III.A.

196. See supra text accompanying note 137.

1 97. See Matthew Tully, House OKs Higher Pricefor Eminent Domain, INDIANAPOUS STAR,

Feb. 22, 2005, at B4.

198. Sw. 111. Dev. Auth. v. Nat'l City Envtl., L.L.C., 768 N.E.2d 1, 26 (111. 2002) (Freeman,

J., dissenting).

199. See, e.g., id. at 20-21 (noting that unemployment has increased state needs to pay for

public assistance programs and that if the unemployed residents leave to find employment, tax

revenues will be reduced to pay for these obligations).



2006] TAKING BACK EMINENT DOMAIN 475

prong is the assumption that in most cases there will be another feasible way to
accomplish the legislative goal. Thus, economic redevelopment can still be

accomplished. This prong simply forces a condemning authority to change some

of the methods by which it accomplishes its goals. For example, if a city wanted

to revitalize, it could alter its plans, focusing on takings requiring a lesser

standard of review, enticing the current owners of the land to move through
increased payouts or tax incentives. The condemning authority would be
required to exhaust reasonable alternatives before exercising its eminent domain

powers.

In addition, instead offoreclosing the possibility ofeconomic redevelopment,

the prong assures that economic redevelopment is the true issue and not merely

pretextual. The more a condemning authority insists on condemning a certain
parcel of land that a private entity desires, the more reasonable is the inference

that a taking is only "to achieve the naked transfer of property from one private

party to another."^°° Such an inference militates against calling a taking a "public

use."

2. Prong 2: Assuring that the Asserted Public Use Will Accrue in a
Reasonable Time.—^The second prong of the three prong test requires a
reviewing court to determine if an asserted public use has a reasonable chance

of accruing in a reasonable amount of time.^°' For example, if a state or city

wishes to condemn property for the construction of a shopping mall, it will have
to justify how the construction is a public use and what the use's benefits are.
Once the court determines the end being pursued by the legislature, this prong is
used to determine if the taking and the subsequent transfer to a private entity can

actually fulfill the asserted public use in a reasonable period of time. Thus, if the

aforementioned shopping mall's purpose is to stimulate other economic growth

in the area, that reviewing court must determine that the shopping mall's

construction could reasonably accomplish that goal.

This prong remedies cases where land is condemned and transferred to a
private entity and the benefit to be derived from the asserted use does not accrue

to the public at all or at least within a reasonable time.^^^ Additionally, this prong

is designed to deter a condemning authority from asserting a pretextual public

use. Pretextual assertions will be decreased because if the condemning authority

is able to produce only minimal evidence that a benefit could accrue, it will be

easier for the trier of fact to conclude that the taking was actually designed to
benefit a private party when analyzing this prong.

To give complete effect to this prong, a reviewing court should require the

200. 99 Cents Only Stores v. Lancaster Redev. Agency, 237 F. Supp. 2d 1 123, 1 129 (CD.

Cal. 2001) (explaining that the only reason that eminent domain was declared was to satisfy

Costco' s expansion demands), appeal dismissed as moot, 60 Fed. Appx. 123 (9th Cir. 2003).

201. Brief for Petitioner at 36, Kelo v. City of New London (Kelo 11), 125 S. Ct. 2655 (No.
04-108), reh'g denied, 126 S. Ct. 24 (2005) (arguing that use of eminent domain to achieve

"economic redevelopment" should only be authorized if "there is reasonable certainty" that public

benefits will accrue).

202. See discussion supra Part lU.D.



476 INDIANA LAW REVIEW [Vol. 39:449

condemning authority to present statistics and other relevant data to support its
assertions. This is a noted departure from the rational basis test offered by
Berman and Midkiff. This prong requires a court to look at the taking ex ante to
determine if the asserted benefits are likely to occur. This is in stark contrast to

the Midkiff approach which only requires that the condemning authority
"rationally could have believed that the [Act] would promote its objective."^^^ By
requiring the condemning authority to provide evidence that the benefit from the
use is likely to accrue, this prong substantially limits the deference given to

legislative findings and their determinations regarding what constitutes a public

use.

Furthermore, because the court will require evidence that the public use will

result from the taking, the public at-large will also have access to detailed
information regarding the proposed taking and subsequent transfer to a private

entity. This also enables increased media scrutiny of the taking, which is
especially valuable if the taking is controversial. Additional access to

information will allow the pre-condemnation owners of the land and other

members of the public to seek not only legal, but political redress against the
government. Because political redress will be more effectively sought, the
takings incentive structure will be altered so that it is more in line with the
incentive structure for a traditional taking, such as a highway.^^ The information
allows the incentive structure to be altered because the media and other interested

parties will have access to the information necessary to engage the public at-

large. The incentive structure will also be changed because the interested parties
have the burden of proving that the asserted benefit will likely not accrue or that

the taking is a poor policy choice. Inertia or lack of resources will likely prevent

the interested parties fromproving these matters. If interested parties do not have

access to the requisite information, they will never persuade the public at-large.

This prong can also be fulfilled through the use of contractual or legislative

"clawback" provisions that take title back from the private transferee if the new
owner fails to effectuate the asserted public use.^^^ Although these provisions
alone will not fulfill prong two in most cases, they can provide evidence that a

measurable benefit will accrue to the public. It is reasonable to assume that if a

private entity will be penalized for not bringing about a certain result, then that

private entity will likely put forth effort to achieve the result. Additional

incentives and disincentives may be used to supplement proof of the likelihood
that the benefit will be achieved.

This prong could result in a condemning authority being reluctant to

condemn property if there is a risk that a benefit will not occur. Thus, this prong
could result in opportunities that could provide a high return on the social,

economic, and political capital being lost because the condemning authority

203. Haw. Hous. Auth. v. Midkiff, 467 U.S. 229, 242 (1984) (emphasis added) (alteration in

original) (internal quotations omitted) (quoting W. & S. Life Ins. Co. v. State Bd. of Equalization,
451 U.S. 648,671-72(1981)).

204. See discussion supra Part III.B.

205. See supra notes 163-64 and accompanying text.



2006] TAKING BACK EMINENT DOMAD^J 477

refuses to take the risk. Although it is true that a condemning authority might not

take advantage of some potentially high-yield transactions, the prong does not
require the condemning authority to absolutely convince the court that the

asserted benefit will definitely occur or is extremely likely to occur; such a level

of proof would be difficult or impossible to meet. A condemning authority
would only need to prove that it is likely that the asserted benefit will occur. The
purpose of this prong is to prevent the condemning authority from declaring

eminent domain based on a public purpose that is merely speculative and from

asserting the public use only when litigation ensues from a challenged taking.
In addition, although some high-yield transactions will be foregone, one must

remember that many high-yield transactions will be high-yield not because the
benefits to the condemning authority will be exceedingly high, but rather because

the costs to the city will be exceedingly low.^^^ In many cases, the cost is so low
because the condemning authority has singled out the condemned property owner
and because the authority has passed on the economic costs to the private

transferee.^^^ Thus, in such a case, many of the high-yield transactions do not
require the condemning authority to subject itself to much risk.

3. Prong 3: Private Transferee Does Not Receive the Surplus Created by
the Taking.—The final prong of the proposed test requires the government to
show that the private transferee of the land will not receive gratuitously the
surplus value that represents the difference between the pre-condemnation and

post-condemnation values. This prong is needed to prevent much of the rent-
seeking behavior engaged in by many private entities.^^^ To achieve this purpose,
it is necessary for the private transferee of the land to pay the post-condemnation

market value of the land. This is not to say that the pre-condemnation owner of
the land will receive this total amount as part of his compensation for the land.^°^

Rather, the post-condemnation transferee will be required to pay the fair market

value for the land and pay to make the necessary improvements to the land.
Successful implementation of this prong will help repair the incentive

structure that has been harmed by the current abuse ofthe Public Use Clause. By
subjecting the private transferees to market pressures, they will be less likely to

seek eminent domain as a means to accomplish their ends. Eminent domain is
currently attractive to corporations because they could get the land that they want

at substantial savings ;^^° thus, it follows that these corporations will be much less
likely to seek eminent domain to take the land if they face increased economic

and political costs. Thus, if private parties are less willing to seek out eminent

domain as a means to achieve their ends, the government will be less likely to use
it as well, even if the costs imposed on it remain low.

In addition, the takings incentive structure is repaired because it reduces the

206. See supra notes 146-47 and accompanying text.

207. See supra note 150 and accompanying text.

208. See discussion supra Part III.C.

209. It should be noted that this prong of the test is not designed to alter the analysis of what

constitutes just compensation. See U.S. Const, amend. V.

210. See Berliner, supra note 13, at 793.



478 INDIANA LAW REVIEW [Vol. 39:449

likelihood that property owners will be singled out.^^^ The pre-condemnation
owners of land will be less likely to be singled out because the condemning
authority will be less likely to use eminent domain. In addition, because private

entities will seek eminent domain less often, the government will attempt to use
other incentives to accomplish its redevelopment objectives. For example, a state

or local government could use property tax abatements to further its goals.

However, to some extent eminent domain will always result in some singling out
because only a finite group ofpeople will have their land taken in any given case.

This prong is designed, in part, to mitigate the singling out.

Unfortunately, it is nearly impossible to design an incentive scheme that
simultaneously decreases the desire of the government and of a private entity to

use eminent domain. This is because increased cost to one increases the desire

of the other to use eminent domain. However, it is likely best for the test to

subject private entities to greater economic costs because those costs are more
likely to deter them from seeking eminent domain. As Professor Gamett notes,
"compensation alone may underdeter the government from exercising the power
of eminent domain."^^^ Professor Gamett states that this is true "[b]ecause
government actors respond to political, not market, incentives."^^^ As a matter
of policy, it is better to place the financial costs on the party that will be most

deterred by their imposition.

This prong still makes it possible for governments to accomplish their

redevelopment goals despite the imposition of greater costs on the private

transferee. First, fair market value for the property may still be a good deal. A
private developer can realize gains even by paying fair market value. In addition,

because the market value of the property should be measured in light of the new
use, the private transferee could realize gain if the development does better than

expected or if new businesses and development are attracted to the area as a
result of the redevelopment.

In addition, this prong does not foreclose the possible use ofother incentives.

Incentives such as tax increment financing or offering to buy a certain quantity

of the business' s products can be used to entice businesses to come into an area
and redevelop it.^^"^ Many of these incentives could still be used in conjunction
with eminent domain or by themselves.

B. Defending the Test

The test as a whole will undoubtedly be criticized. It will likely face two

211. See supra note 1 50 and accompanying text.

212. Gamett, 5M/7ra note 46, at 956.

213. Id. (alteration in original) (internal quotation marks omitted) (quoting Daryl J. Levinson,

Making Government Pay: Markets, Politics, and the Allocation ofConstitutional Costs, 67 U.Chi.

L. Rev. 345, 347 (2000)).

214. Professor Gamett provides a partial list of additional incentives that have been used to

entice corporations to relocate and includes some extreme examples. Id. at 958. She also notes that

there is evidence that these incentives do not accomplish their purpose because of competition. Id.



2006] TAKING BACK EMINENT DOMAIN 479

principle criticisms. Some will argue that strict scrutiny or another form of
heightened review should be used to analyze these types of cases. Others will

contend that the test does not go far enough in protecting private property rights

because property rights are not given the same protection as liberty rights.

Many commentators who have analyzed the problem posed by the broad,
deferential standard of review offered by cases such as Berman and Kelo II have
argued that the strict scrutiny used to analyze violations of Due Process and
Equal Protection rights should be used to analyze eminent domain cases.^^^

Others have argued that heightened scrutiny should be applied when certain
elements or factors are present.^^^ Although strict scrutiny or a general form of

heightened scrutiny would be successful in limiting the occurrence of

problematic takings,^^^ these methods of review do not specifically address the

problems occasioned when private transferees receive condemned property.
Thus, the proposed test attempts to eliminate the problems caused by problematic

takings rather than simply looking for problematic takings and applying a one-

size-fits-all test. Additionally, the test proposed provides a predetermined

framework so condemning authorities can analyze their actions ex ante. In

contrast, under strict scrutiny and some heightened standards, absent prior
precedent, the condemning authority will never be certain whether or not a court

will deem a taking's justification "compelling."^^^
Some critics could argue that this test does not go far enough in preventing

abuses of property rights because the protection it provides is not the same
protection afforded to liberty rights. It is true that the above test does not provide

protection identical to that of liberty rights. However, property rights are

different than liberty rights, and therefore merit different, although equal, kinds

of protection. Different problems arise with property rights as opposed to liberty

rights. The test and its implications provide a high level of protection for cases
where one private party will be forced to sell his land to another private entity.

This is principally accomplished by the requirement that there be no other
practicable method of achieving the legislative interest. The requirement erects
a substantial barrier to transferring condemned property to private entities after
the taking occurs.

In addition, property rights merit a different type of protection than liberty

rights because of the ability of the government to take property for public use.

The United States has a long history of taking private land to be given to another
private individual.^*^ Thejustifications for some of these takings have been long

215. See, e.g., Nader & Hirsch, supra note 16, at 224.
216. See, e.g., Scott, supra note 131, at 474-79.

217. See Adarand Constructors, Inc. v. Pena, 515 U.S. 200, 237 (1995) (stating that strict

scrutiny has been accused of being "strict in theory, but fatal in fact" (quoting Fullilove v.

Klutznick, 448 U.S. 448, 519 (1980) (Marshall, J., concurring in judgment))).

218. See id. (noting that the strict scrutiny test is satisfied when action is "necessary to further

a compelling interest" and satisfies "the 'narrow tailoring' test").

219. Scott, supra note 131, at 468.



480 INDIANA LAW REVIEW [Vol. 39:449

established.^^^ As time moves forward and technology changes, it is important
to have a standard, that while vigorously protecting private property rights, also

permits the establishment of new public uses that allow the government to
accomplish its tasks more effectively.

Conclusion

There is substantial disagreement among jurisdictions regarding where the
line between public use and private use is drawn and which branch of
government is the appropriate one to draw it. Thus, it truly matters which
jurisdiction's law controls when determining if a post-condemnation transfer of
land to a private developer is constitutional. Many jurisdictions have taken the
view that the legislature gets to determine what the public use is and can use

eminent domain in any rational way to affect that goal. Otherjurisdictions have
used a variety of approaches that take a much narrower view of what the Public
Use Clause demands.

The jurisdictions that have adopted a broad interpretation of "public use"
have done so in error. The deferential interpretation primarily fails to give effect
to the Framers' intent that individual private property rights should be protected.

These jurisdictions fail to give effect to the Framers' intent by not treating

property rights as equivalent to liberty rights. The broad interpretation of the
Public Use Clause is bad public policy because it makes the government more
likely to take private property because the interpretation alters the takings

incentive structure and encourages private entities to engage in rent-seeking

behavior. Also, it is bad public policy to allow a private person's land to be

taken and transferred to another private entity when the government has not
shown that any benefit is likely to accrue.

Additionally, jurisdictions that utilize a narrower interpretation of "public

use" and apply some level of heightened scrutiny have not gone far enough in
protecting private property rights. Although the cases discussed above may
represent the beginning of a movement to use heightened scrutiny in public use
cases, such a movement has not fully materialized. Many of these cases contain
language that future courts could abuse in future takings cases or do not provide

clear standards for reviewing courts to utilize. Also, in some cases, it is possible
to harmonize the courts' holding with cases like Berman and Midkiff, which
allowed for a broad interpretation of "public use."

Courts should go farther and adopt a comprehensive test that provides for

heightened scrutiny of takings when the condemned property is to be
subsequently transferred to a private entity. Such a test should remedy the

problems that the broad, deferential standard of review has created. At the same

time, the standard should be flexible enough to allow for changes in society and

technology that the legislature will have to meet. However, the standard should

in every case assure that property rights are held on an equal, although not

identical, plane as liberty rights.

220. See id. at 475.



2006] TAKING BACK EMINENT DOMAIN 48

1

This Note has proposed a change in the jurisprudence interpreting existing

provisions. To the extent that a jurisdiction finds its courts unwilling to affect
a doctrinal shift, legislative or constitutional changes may be required to bring
about change.^^^ Such a change will undoubtedly require active engagement of

the legislature and, in many cases, the public. Such changes may be difficult to
accomplish, but, if faced with a court that will not change its jurisprudential

position, it may the be the only option available if a person' s right to own private
property is to be adequately protected.

221. As of this writing, a bill is pending in Congress that would deny federal funding to

projects that utilize eminent domain for economic development. H.R. 3135, 109th Cong. § 2

(2005). The bill also forbids the U.S. government from using economic development as a

justification for its exercise of eminent domain. Id.