Phizer Leaving New London 5 years after Supreme Court Eminent Domain Ruling

June of 2005. Mariah Carey’s We Belong Together was number 1 on the Billboard charts. Batman Begins was the number 1 movie at the box office, for the second week in a row. The U.S. Supreme Court had just decided a case called Kelo v. City of New London.

This was one of those rare Supreme Court cases that grabbed the public’s attention.

And why not? Its facts hit close to home for a lot of people: private homes and small businesses were bought by the government, without the owners’ consent in some cases, and demolished, in order to build a new business district (with a corporate campus for the Phizer drug company being the centerpiece), with the hopes of revitalizing an economically depressed city. Some owners brought their case all the way up to the U.S. Supreme Court, arguing that the government’s eminent domain power under the Fifth Amendment to the U.S. Constitution (“private property [shall not] be taken for public use, without just compensation”) did not extend to the taking of private property, for the purpose of transferring it to another private party (in this case, Phizer and some private developers), and that “public use” meant that the land taken must actually be used and owned by the public.

The Supreme Court, in a 5-4 decision, disagreed, and found that the taking served a “public purpose”, in that the new development would attract businesses, create jobs, and increase tax revenue, which would be used to expand or maintain public services. As a result, the taking went forward, the last few holdouts were removed, and the complex was built.

The reaction to this case was almost universally negative, across the political spectrum. Conservatives and libertarians argued that it allows governments to take private property for almost any reason, with barely a pretense of the taking serving some public necessity. Liberals argued that the decision amounts to a handout to any big private developer which happens to have some political connections. In short, the decision made almost nobody happy. As a result, many states passed laws limiting the use of eminent domain by local governments.

Being almost 5 years old, this case hasn’t garnered much attention lately, until now. It was just announced that Phizer is closing the facility that was the center of this dispute, taking with it 1,400 jobs, and leaving a vacant office park and a bunch of empty lots where homes and businesses used to be.

What does this say about the merits of the Kelo decision? Well, from a strictly legal standpoint, not much. The Supreme Court, if it ever decides to revisit the issues raised in Kelo, would probably say that it doesn’t matter what happens after the fact, even if the taking ends up not benefiting the public in any significant way. After all, developers and governments can’t see the future.

As a practical matter, this might be an indication that governments aren’t very good at making these kinds of decisions.

However, if LegalMatch case statistics from the last 12 months are any indication, the average person probably has little reason to fear the government swooping in and condemning their property. According to our data, relatively few clients sought lawyers for eminent domain issues in the last year. Of those, a plurality of cases are still in their early stages (the property has been appraised or the government has made an initial offer to buy). At this point, it is far from a sure thing that a taking will actually occur.

This may reflect more the changed state of the economy (not too good, in case you haven’t noticed), and less a governmental policy switch on the use of eminent domain.  Stay tuned.