The 5-4 decision lifts a cloud over redevelopment projects across the country that hinge on local authorities using eminent-domain powers to assemble parcels for private investors to develop commercially. Several projects could lead to the condemnation of property for conversion to shops or other uses that will feed off the primary development. The threat of condemnation, developers say, encourages holdouts to sell.
The court's ruling came in a case out of New London, Conn., a depressed manufacturing city whose economic hopes were buoyed in 1998 when New York drug maker Pfizer Inc. announced plans to open a research facility there. City authorities proposed to redevelop the adjacent residential Fort Trumbull neighborhood to capitalize on Pfizer's presence, including a hotel and a pedestrian "riverwalk." Most landowners sold willingly. Nine refused, and the city condemned their property.
The Fifth Amendment prohibits the government from taking private property "for public use without just compensation." The landowners sued, claiming that the redevelopment wasn't a "public use." The Connecticut Supreme Court rejected that theory, prompting an appeal to the U.S. Supreme Court.
Historically, the court has given government wide discretion to decide what constitutes public use. In 1954, it endorsed postwar urban-renewal efforts that paved over neighborhoods in a bid to eradicate blight.
No one argued, however, that working-class Fort Trumbull had fallen into blight, and the homeowners, backed by property-rights activists, asked the high court to draw a line between clearing slums and simply trying to boost the local economy.
The court's opinion, by Justice John Paul Stevens, refused to make such distinctions. "Promoting economic development is a traditional and long-accepted function of government," he wrote, an aim sometimes better achieved through promoting private enterprise than state ownership.
In dissent, Justice Sandra Day O'Connor warned that now "the specter of condemnation hangs over all property. 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."
Several states have restricted takings for economic development, including Michigan, whose Supreme Court last year reversed an earlier decision that had allowed such condemnations.
Developers said the ruling was a relief. James G. Koman, president of Koman Properties Inc., of St. Louis, has five projects that hinged on the outcome. "There's no way a city can rebuild its urban core or rundown sections of town unless you have this type of law behind you," he said.
