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Post Kelo Cases Suggest Heightened Judicial Scrutiny of Procedural Due Process Aspects of Municipal Redevelopment Plans

Article

NJPA Real Estate Journal

February 24, 2006

The United States Supreme Court’s decision Kelo v. City of New London, Connecticut, has substantially limited the judiciary’s review of the exercise of eminent domain powers by being overly deferential to government determinations as to what constitutes a “public use.” Still however, courts remain vigilant with respect to reviewing whether or not adequate evidence supports the determination that a particular project furthers a public interest.

After Kelo, it would appear that the power of eminent domain may be unleashed so long as there is some perceived public benefit, which after the Kelo decision may consist of only general economic development undertaken with the hopes of increasing tax revenue. While it may have become more difficult for a court to invalidate the exercise of eminent domain as not in furtherance of a “public use,” subsequent cases demonstrate an apparent heightened judicial scrutiny as to the procedural aspects of municipal redevelopment. It may be inferred that the strict scrutiny given to the procedural aspects of redevelopment projects is part of the backlash generated by the Kelo decision even though the case is not expressly mentioned in some of the post-Kelo decisions.

As an example, the Second Circuit Court of Appeals recently issued an opinion reversing a district court’s entry of summary judgment in favor of the Village of Port Chester, New York (the “Village”). In so holding, the court held that certain notice provisions of the New York Eminent Domain Procedure Law (“EDPL”) violated a property owner’s Fifth Amendment Due Process right to notice and an opportunity to be heard on the question of whether a particular use was a “public use” so as to justify the condemnation of the plaintiff’s property in connection with a municipal redevelopment project seeking to revitalize a waterfront district.

In the case of Brody v. Village of Port Chester, The plaintiff filed suit in the Southern District of New York alleging that the Village violated his Fifth Amendment Due Process rights by failing to provide adequate notice of the Village determination to condemn his property as well as his right to challenge the Village’s determination that the “public use” limitation upon eminent domain was satisfied. It was undisputed that the notice published by the Village complied with the provisions of the version of the EDPL in force at the time of the decision. Pursuant to the EDPL, the Village had published a statutorily required synopsis of its determinations and findings which triggered the running of a 30 day appeal period within which an affected property owner could appeal the determination. Direct mailing of the notice to affected owners was not required under this version of the EDPL. The notice, even though compliant with the EDPL, did not contain any language advising affected property owners of their rights to appeal the determination within 30 days of publication of the synopsis. Plaintiff denied seeing the published notice and contended he would have appealed the determination regarding his property in a timely manner had he known of the limited appeal period.

The Second Circuit reversed the lower court’s entry of summary judgment. In so doing, the Court invalidated the notice provisions of the EDPL. The Court rejected the Village’s argument that the challenged determination was a legislative act for which notice was not required. Instead, the Court found that the question of what is a public use remains a judicial question that courts must review in enforcing the Federal Constitution. The Second Circuit explained:

…While the legislative decision to condemn is not reviewable, the purpose of the condemnation is. The role of the judiciary, however narrow, in setting the outer boundaries of public use is an important constitutional limitation. To say that no right to notice or a hearing attaches to the public use requirement would be to render meaningless the court’s role as an arbiter of a constitutional limitation on sovereign’s power to seize property.

Based upon the foregoing, the Court held that notice of the Village determination was required to be mailed to all affected property owners and further held that the notice must also advise affected property owners of the right to appeal the determination.

In a New Jersey case, the court scrutinized the evidential record relied upon by the City of Perth Amboy in finding that a certain area of the city constituted An “area in need of redevelopment.” Under New Jersey law, property may be declared “in need of redevelopment” where any one of a number of statutorily enumerated factors are found to be present. The statutory factors generally describe what would commonly be understood as “blighted” properties. In ERETC, L.L.C. v. City of Perth Amboy, (A-2035-04T2) the Appellate Division of the Superior Court of New Jersey reversed the judgment of a trial court dismissing the plaintiff’s challenge to a municipal redevelopment project.

The Appellate Court scrutinized the evidential record relied upon by the city in declaring plaintiff’s property to be in need of redevelopment and therefore subject to acquisition by eminent domain. The evidential record consisted primarily of a report prepared by the city’s planner. The Court found that the city planner’s report was essentially a net opinion, devoid of any real analysis and filled with bare conclusions parroting the statutory criteria. There was no evidence to support the report’s conclusion that the buildings were “substandard, unsafe, unsanitary, dilapidated, or obsolescent.” The Appellate Division further criticized the lack of any investigative effort in support of the report. The city planner admitted that he did not inspect the interiors of the buildings and did not conduct any investigation as to whether the buildings were properly utilized or fully productive. The Court concluded that the evidence before the city was insufficient to permit the finding that the subject properties satisfied the statutory criteria for designation as an area in need of redevelopment. Given the paltry evidential record presented, the traditional deference to government determinations was not warranted in the case.

The post Kelo landscape will surely be further shaped as cases make their way through the legal system. In addition to judicial scrutiny of redevelopment projects, numerous states as well as Congress have introduced legislation to limit the use of eminent domain in response to the Kelo decision that will further define the post-Kelo landscape. Another interesting element of the post – Kelo response is the reaction of private industry.

Most recently it was announced that BB&T Corp., described in published reports as the nation’s ninth largest financial services company, will not finance redevelopment projects that rely upon eminent domain. Some commentators have characterized this announcement as a public relations ploy that will not affect the company’s actual business. Nonetheless, the announcement is significant in that it represents an apparent attempt by the private marketplace to limit the practical reach of the Kelo decision. Although the initial decision in Kelo raised the spectre of unlimited government power to acquire private property, the resultant backlash, particularly in the form of proposed legislation and private actions such as those instituted by BB&T, appear to illustrate the working of a democratic dialectic aimed at limiting or even reversing the practical reach of a decision of the United States Supreme Court that many perceive as too threatening to the rights of private ownership of property.