Posted by Ilya Somin:
Eduardo Penalver's Defense of Sotomayor's Didden decision:
http://volokh.com/archives/archive_2009_06_14-2009_06_20.shtml#1245196970
Eduardo Penalver, a prominent property scholar, has written an
interesting, but I think ultimately unsuccessful defense of Judge
Sonia Sotomayor's ruling in the Didden case, which I described and
criticized [1]here, [2]here, and [3]here. As readers will recall,
Didden involved a case where two businessmen's property was condemned
because they refused to pay $800,000 to Gregg Wasser, a developer
designated by the Village of Port Chester, NY as the primary
redeveloper of its "redevelopment area" under a 1999 agreement.
Here is Penalver's argument:
At first glance, the facts of the case sound like Kelo redux,
except with a developer on the receiving end of the condemnation
instead of elderly homeowners. But there is a wrinkle. Language in
Kelo left the door open for challenges to condemnations where the
stated reason for the condemnation (in this case, economic
redevelopment) is not the actual reason for the exercise of eminent
domain -- a sort of pretext challenge to condemnations. The
plaintiffs in this case alleged that, after Port Chester had
authorized the condemnation of land within the redevelopment
district but prior to the actual condemnation of their parcel, the
designated developer demanded an $800,000 payment from the
developer/landowner to walk away from his power to condemn the
parcel....
While I think there are some significant problems with the trial
court's opinion, and while I disagree with the Second Circuit's use
of a summary order, the case does not seem to me to be such a clear
slam dunk for the plaintiffs that it should cause Sotomayor any
serious trouble. The Liptak story [in the NY Times] made a great
deal of the demand for the $800,000 payment, and rightly so. But
the fact may be less obviously damning than initially appears to be
the case.
The demand for the payment was made, as I understand the facts, by
the developer granted by Port Chester the exclusive power to carry
out redevelopment within the designated redevelopment area. That
area included the plaintiffs' parcel. Now, I take it that the
redeveloper agreed to take on his role because he stood to make a
tidy profit from redeveloping the land within the redevelpoment
area pursuant to the comprehensive plan and empowered with the
ability to assemble parcels through the use of eminent domain. But
the redeveloper certainly looked at the economics of the entire
plan, and the profit to be earned from the plan as a whole. That
profit would not come from every parcel or every individual element
of the overall plan, but on the accomplishment of the redevelopment
plan as a whole.
In the redeveloper's negotiations with the plaintiffs, the
plaintiffs indicated that they wanted to redevelop their parcel
within the redevelopment area (as part of a project that would have
included some land they owned outside the redevelopment area)
themselves, keeping the profits from that project for themselves as
well. It appears to have been in the context of these negotiations
that the redeveloper asked for the $800,000 payment in order to
forgo condemnation and as his condition for allowing plaintiffs to,
in effect, remove their parcel from the larger redevelopment area.
The plaintiff quoted in the story called this extortion. But it's
not obvious to me that this is the best way to characterize the
dynamics of the situation. If the redevelopment of the plaintiffs'
parcel was one of the elements on which the redeveloper stood to
make a substantial profit, foregoing his own monopoly right to
redevelop that parcel (a right given to him by the city when it
designated him the developer for the redevelopment project) would
have altered (from his perspective) the economics of the larger
project as a whole. In other words, if I'm reading the facts
correctly... to earn the profits from that parcel would have
represented a significant opportunity cost to the redeveloper, and,
as such, his demand for some compensation for walking away strikes
me as less sinister.
The key problem with Penalver's rationale is that the redevelopment
agreement only gave Wasser the power to condemn property for the
purposes of advancing the goals of the redevelopment plan, which the
district court decision (available [4]here) quoted as "to revitalize
and beautify the Village�s long neglected waterfront, eliminate a
deteriorating downtown urban blighted area, bring sorely needed jobs
to the Village, add to the Village�s tax base, and importantly, bring
the public back to the Village�s downtown and waterfront." It did not
give him the power to condemn property solely because the current
owners refused to pay him money or grant other concessions in exchange
for his forbearance. Had the agreement done so, it would have been a
clear violation of federal constitutional restrictions on "pretextual"
takings intended to benefit a private party ([5]reaffirmed even in
Kelo v. City of New London, as Penalver notes), and possibly also a
violation of New York state law.
Penalver in effect suggests that, even if this taking wasn't needed to
promote the redevelopment of Port Chester, it was constitutionally
permissible because the owners' property helped to pay Wasser for his
services in redeveloping the area. However, neither Kelo nor any other
federal decision has ever held that the government can condemn the
property of one individual in order to compensate some other private
party for performing a public service. A program to pay public
officials by condemning private property and transferring ownership to
them would surely be unconstitutional. That conclusion is even more
clear if the property is transferred to a private individual who isn't
a government employee.
Penalver also argues that the Sotomayor panel's decision was justified
by the fact that the owners had not filed their claims in time under
the statute of limitations. As I noted in[6] an earlier post, this
point ignores the fact that Sotomayor's opinion decided the
substantive constitutional issue as well. Even if Sotomayor was right
about the statute of limitations question, she commmited a grave error
in her extremely cursory resolution of the constitutional issue. The
latter, of course, is vastly more important the former and is the
reason why the case has attracted so much attention.
Moreover, as I explained in [7]this amicus brief (pp. 14-16)
coauthored with several other property scholars, the Second Circuit's
resolution of the statute of limitations issue was in fact inseparable
from its resolution of the substantive question. The court had ruled
that the three year statute of limitations expired in 2002, three
years after the declaration of the 1999 redevelopment plan. However,
this simply ignores the fact that the owners were challenging not the
declaration of the plan as such, but rather Wasser's pretextual use of
it in November 2003 as leverage for extorting money from them. Our
amicus brief explains more fully why Kelo and other Supreme Court
precedents allow owners to challenge pretextual takings even in cases
where they occur within a redevelopment area. Indeed, as we explain
there (pp. 11-12) the Kelo majority actually cited a 2001 case where a
taking within a redevelopment area was invalidated as an example of
the kind of pretextual condemnation that they believed to be
unconstitutional.
References
1. http://www.volokh.com/posts/1243364120.shtml
2. http://volokh.com/archives/archive_2009_05_31-2009_06_06.shtml#1243972122
3. http://volokh.com/archives/archive_2009_06_14-2009_06_20.shtml#1245113908
4.
http://www.ij.org/images/pdf_folder/private_property/Didden-Cert-Petition.PDF
5. http://www.volokh.com/posts/1243364120.shtml
6. http://www.volokh.com/posts/1243364120.shtml
7.
http://www.ij.org/images/pdf_folder/private_property/didden/Professor-amicus-on-petition-for-cert.PDF
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