545 U. S. 469 (2005), argued 22 Feb. 2005, decided 23 June 2005 by vote of 5 to 4; Stevens for the Court, Kennedy concurring, O’Connor and Thomas in dissent. The Fifth Amendment provides that “private property [shall not] be taken for public use, without just compensation.” The acquisition of private property by eminent domain solely for private use would therefore be arbitrary and a violation of due process, and it would also run afoul of the public use requirement of the Fifth Amendment. On the other hand, government may take private property for transfer to another private entity that would employ it for a public use, such as a regulated common carrier obligated to serve the general public.
In Kelo, Connecticut had declared New London a “distressed municipality.” After the pharmaceutical manufacturer Pfizer Inc. announced that it would build a large research facility in the city, state and local officials hoped to use the facility as a catalyst for urban revitalization. Pursuant to an integrated development plan, a public agency condemned nearby non-blighted residential parcels for use in a project intended to create jobs, build tax revenue, and build momentum for the revitalization of the downtown area. Much of the land would be devoted to private shops, hotels, and offices complementing the Pfizer complex. By and large, these uses entailed no obligation to serve the general public.
Citing precedent, the Supreme Court concluded that “public use” should be interpreted broadly to encompass “public benefit,” and it stressed deference to legislative judgments concerning the need for eminent domain. It declined to require the city to demonstrate that the takings were likely to achieve claimed economic benefit. The Court majority relied upon Berman v. Parker (1954) and Hawaii Housing Authority v. Midkiff (1984). In Berman, a blighted area was condemned pursuant to a District of Columbia redevelopment plan. The owner of a non-blighted department store objected to the condemnation of his building, but the Court unanimously upheld the condemnation, insisting that officials could determine that successful revitalization required comprehensive redevelopment. The Court declared that promoting community redevelopment through private enterprise was within the purview of the public use requirement.
Similarly, in Midkiff, the Court unanimously upheld a state statute intended to break up a land oligopoly by condemning the fee interests of a few large landowners for transfer to their many tenants with long-term ground leases. In that case, the Court held that public use was “coterminous” with government's police powers to protect the public health, safety, welfare, and morals.
In Kelo, the Court acknowledged that the ostensible public purposes justifying condemnation had, on occasion, been pretexts for private gain. It asserted, moreover, that courts would view “with a skeptical eye” (p. 487) one-to-one transfers of property that were not part of an integrated development plan. Justice Anthony Kennedy's concurrence also stressed the importance of comprehensive planning, while also noting the possibility that abuse might necessitate heightened judicial scrutiny in narrow categories of condemnation for economic development.
Dissenting, Justice Sandra Day O’Connor argued that the Court's reasoning—that “the incidental public benefits resulting from the subsequent ordinary use of private property render economic development takings ‘for public use’ ” (p. 494)—conflates public and private use. She stressed that the Court's approval of condemnation in Berman was in the context of eliminating injurious conditions, and that the land oligopoly alleviated in Midkiff was “severe.” According to O’Connor, the conflation of the police and takings power in Berman—as well as her own assertion in Midkiff that “[t]he ‘public use’ requirement is coterminous with the scope of a sovereign's police powers”—constituted “errant language” (p. 501). In an often-quoted passage, O’Connor declared that, under the broad view of eminent domain adopted by the majority, “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” (p. 503). Justice Thomas, in a separate dissent, urged the Court to return to the original and narrower meaning of the public use clause, warning that the harm inflicted by economic development takings would fall largely on poor communities.