Experience

Case Heralded as Significant Condemnation Decision

By Virginia Bell

“The specter of condemnation hangs over all property” according to Justice Sandra Day O'Connor in her dissenting opinion in the United States Supreme Court Case of Kelo v. City of New London. The case is being heralded as one of the most significant condemnation decisions in the last 50 years. According to a 5-4 majority of Supreme Court Justices, the government may now take your property and give it to another private party even if your property is not blighted or otherwise harmful to the community. You may ask: What about the Fifth Amendment to the United States Constitution? Although the Fifth Amendment states that private property can be taken by the government for “public use,” the Supreme Court in Kelo and earlier decisions has chosen to read “public use” broadly. According to the Court, “public use” is not to be read literally to mean that condemned property must be put “into use for the general public.” Instead “public use” means “public purpose,” including economic development. In other words, the government may take your property and give it to another private party if the new owner will put it to a use that “will provide appreciable benefits to the community, including-but by no means limited to-new jobs and increased tax revenue.” According to Justice O'Connor in her dissent, the implications of this decision are dire: “Nothing is to prevent the State from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory.”

What does this decision mean for Minnesota? Has the law changed? Not necessarily.
The Minnesota courts and the Minnesota Legislature have already allowed condemnation of non-blighted property for purely economic development reasons. The most well-known example of this is the 1998 case of MCDA v. Opus Northwest, LL, where the Minnesota Court of Appeals upheld Minneapolis' condemnation of property held by one developer so that the property could be transferred to another developer. What was the city's public purpose? The recipient of the property from the city was going to locate a mid-sized retail store on the property along with parking and presumably skyway access. The city believed this would improve the downtown tax base and economy. According to the Court of Appeals this was sufficient to constitute “public purpose” under the Constitution. In 2002, the Minnesota Supreme Court appeared to back away from this position when it failed to rubber stamp the Housing and Redevelopment Authority's decision to condemn the Walser property on Interstate 494 in City of Richfield v. Walser Auto Sales, Inc. Based on Kelo, however, Minnesota court's will probably continue to accord “deference” to a city's decision to condemn an individual piece of property to further economic development goals.

Are there no checks on the power of cities and other units of government?
Although Kelo may seem far reaching, it does have some limitations. Most importantly, according to Justice Stevens, “a one-to-one transfer of property simply to benefit the second owner, executed outside the confines of an integrated development plan,” was not presented in the Kelo case and may therefore still be subject to attack. Justice Steven's language suggests that an economic development taking that is not part of an “integrated development plan” may not pass constitutional muster. His language also reaffirms that a taking whose sole purpose is to bestow a benefit on the private transferee is not constitutional. Yet, according to Justice O'Connor's dissent, the private and public benefits in an economic development case are so intertwined, it is almost impossible for the courts to separate out those takings whose sole purpose is to bestow a private benefit.

Another check on the potential reach of Kelo is the State Legislature. As the Court in Kelo made clear, individual states are free to enact legislation to restrict the power of eminent domain beyond the “base line” established by the United States Constitution. Legislation has, in fact, been introduced in Minnesota during the past two sessions that would impose additional restrictions on condemnors. Moreover, as of this writing, states around the country have been proposing legislation in response to Kelo. In addition, under current state law, condemning authorities must comply with procedural requirements before proceeding with condemnation.

Finally, regardless of the government's reason for taking private property, under the Fifth Amendment to the United States Constitution, the government must provide the owner with “just compensation” - the scope of which may well expand in the wake of Kelo. Indeed the obligation to provide “just compensation” and therefore the cost of condemnation may well be the most effective rein on the power of local governments to “take” private property.

If your property is targeted for potential condemnation, the key is to respond quickly. Contact your lawyer or a member of Maslon's real estate litigation team to help you through the condemnation process and determine if there is indeed a legitimate “public purpose” for taking your property, and if so, how much you are entitled to receive in “just compensation.”

Virginia Bell is a trial lawyer practicing in the areas of civil and commercial litigation, specifically focusing on real estate disputes. She regularly handles eminent domain and tax appeal matters as well as disputes between buyers and sellers, land use disputes, and real estate foreclosures and workouts.