MN Supreme Court: Redevelopment authority need not have binding development agreement in order to condemn property

Yesterday, the Minnesota Supreme Court issued its opinion in Eagan Economic Development Authority v. U-Haul Co. of Minnesota, No. A08-767 (July 29, 2010). The state supreme court reversed a 2009 appellate court decision which invalidated a "quick-take" condemnation on the basis that the Eagan Economic Development Authority (EDA) exceeded its authority to acquire property via eminent domain as the city had not executed "a binding development agreement respecting the project."

In 2007, the EDA filed a "quick-take" condemnation petition in order to obtain title to several parcels of private property for a redevelopment project in the Cedar Grove area, to “reawaken the spirit and vitality of [that] part of Eagan” and to “replac[e] a market obsolete regional shopping center.” The lower court found that the EDA had a valid public purpose for acquiring private property and granted the condemnation petition. Three property owners appealed and the court of appeals reversed, concluding that the EDA exceeded the scope of its authority in condemning the property without first securing a binding development agreement for the property. (See Robert Thomas's blog here for more background on this case and an article by Erin Johnson for Thisweek Newspapers.)

However, yesterday the Minnesota Supreme Court overturned the appellate decision and held that:

The Eagan Economic Development Authority is bound by the prohibitions and requirements of the “Redevelopment Plan for the Establishment of the Cedar Grove Redevelopment Project Area” it prepared, adopted, and submitted to the Eagan City Council for approval, which approval was granted.

Subsection 1-8 of the “Redevelopment Plan for the Establishment of the Cedar Grove Redevelopment Project Area,” which deals with the proposed reuse of property, does not require the Eagan Economic Development Authority to have a binding development agreement before it can condemn private property in this circumstance.

To reach its decision, the Minnesota Supreme Court considered the "enabling resolution," the initial resolution that established the EDA, which was not presented to the district court and was, therefore, not in the record for the court of appeals to consider. The Court explained: "Usually, an appellate court 'may not consider matters not produced and received in evidence below.'...But we have taken judicial notice of public records and have said we have the 'inherent power to look beyond the record where the orderly administration of justice commends it.'” (Opinion p. 12, citations omitted).

The Court found that the enabling resolution "provided the EDA with the powers of a housing and redevelopment authority under Minn. Stat. §§ 469.001-.047, the powers of a city under Minn. Stat. §§ 469.124-.134, and the powers of an economic development authority as contained in Minn. Stat. §§ 469.090-.108, which include the power to acquire property and to exercise eminent domain." (Opinion p. 15).

In its opinion, the Court then sought to interpret other resolutions and agreements, including the Redevelopment Plan and TIF Plan, to determine that the EDA did not go beyond the scope of its authority. In reviewing these documents, the Court notes that the Redevelopment Plan , specifically Subsection 1-8, and TIF Plans are "poorly drafted" and that the "imprecise language" makes interpretation "challenging." The Court concluded that the EDA did not exceed the scope of its authority when it acquired the private properties of the respondents. However, the justices did offer 2 caveats. First, the justices indicate that this opinion is in no way an endorsement of a universal interpretation of such drafting or substantive policy, as the drafting was poor and the interpretation challenging. Second, the Court notes that the EDA drafted these documents and could have taken greater care in its drafting. Nonetheless, Subsection 1-8 of the Redevelopment Plan as drafted does not require that the City enter into a binding development agreement prior to the EDA acquiring property. (Opinion pp. 31-32).

Finally, the court held that:

Because the court of appeals invalidated the quick-take order on the ground that the EDA exceeded the scope of its eminent domain authority, it did not address the property owners’ other claims that the taking was not necessary for public use and that the EDA was not entitled to use quick-take procedures. Therefore, we reverse and remand to the court of appeals to consider the property owners’ other claims.

(Opinion p. 32)

There will be more to come as this case goes back to the appellate court for consideration of the public use necessity and of the EDA's authority to utilize "quick-take" eminent domain procedures.

US loses spot among top nations protecting private property rights

According to the 2010 Index of Economic Freedom published by The Heritage Foundation and The Wall Street Journal, 16 countries rank higher than the United States in protecting private property rights. From the report: "The United States’ economic freedom score is 78.0, making its economy the 8th freest in the 2010 Index. Its score is 2.7 points lower than last year, reflecting notable decreases in financial freedom, monetary freedom, and property rights."

A ranking of 17, behind such countries as Hong Kong, Singapore, Norway and Germany, in the protection of property rights is hardly satisfactory. The constitutional right of private property ownership is a fundamental principle of American society and liberty. As a bedrock principle that is constitutionally guaranteed, protection of property rights should be a priority for American citizens and our government. Yet, given the government's power to exercise eminent domain, protection of private property rights often succumbs to the power of the government.

The opportunity to improve the country's poor international standing on the protection of property rights lies with each individual state. Should lawmakers in states such as New York and California enact effective statutory changes to protect private property rights, as many states have done in the five years since Kelo, the position our country holds among other nations in the economic freedom index, and particularly the property right index, will most certainly rise.

Overdue payment for Missouri property taken by eminent domain finally paid

Property taken by eminent domain in the Bottle District of St. Louis.
Photo credit: KMOX.com

KMOX.com reports here that just compensation has finally been paid to St. Louis property owner Bill Simon for the 2 acre commercial property he owned in the Bottle District of downtown St. Louis. In 2005, the Land Clearance and Redevelopment Authority (LCRA) seized Mr. Simon's land by eminent domain for the purpose of redevelopment.

The city valued Simon's property at $1.2 million, however, the property owner and his appraiser valued the property at $3.6 million. Mr. Simon's attorneys, Robert Denlow and Paul Henry, argued the case before a jury in July 2008. The jury verdict awarded Mr. Simon $2,871,200, an increase of approximately $1.6 million over what he had initially been offered. A judgment was entered against the LCRA requiring the city agency to pay the verdict amount plus $317,427 in pre-trial interest and $475 per day in interest thereafter. The LCRA appealed and an appellate court upheld the verdict. On March 23, 2010, the Missouri Supreme Court declined to hear the LCRA's final appeal. In the KMOX report referenced above, Simon's attorney, Bob Denlow, has indicated that the city of St. Louis and Clayco Construction have now paid the amount of just compensation awarded by the jury, plus interest, totalling $3.5 million. (See our previous posts related to this story here and here.)

The property, which spans an entire city block just north of the Edward Jones Dome in downtown St. Louis, was to be given to developer Clayco Construction for its planned $226 million entertainment destination complex. When the economy soured, the project stalled. Today, Simon's former property is an empty lot guarded by a giant bottle of Vess Soda (see KMOX photo above). Plans for the Bottle District entertainment area and complex remain undetermined.

Disclosure: Robert Denlow is the Missouri Member of OCA.

Update: See also STLtoday.com 7/24/2010 article: Former land owner finally gets check in Bottle District case. This article discusses the fact that the delay in payment by the City (through the LCRA, its agent) to the former property owner was partly due to the City's insistence that the compensation to the property owner would be paid upon receipt of same from the developer. However, as attorneys Denlow & Henry have insisted the responsibility for paying just compensation for the taking of private property rests with the City as the authority exercising eminent domain.

Denlow said that he recently targeted the city and the assets of the LCRA, suggesting that that had prompted the payment.

Ultimately, the city could not avoid payment by saying that the benefits of the condemnation went to the Bottle District developers, he said.

"Legally, the city owed the money because it's the city that did the condemnation and it's the city that turned the property over to the developer," Denlow said.

City officials could have protected themselves by ensuring that the developer had a letter of credit or some type of bond, he said.

"The real lesson is that the city should not partner up with a developer unless the city is fully protected," he said. "At the end of the day, the taxpayers were liable."

St. Louis property owner waiting for just compensation to be paid for property taken by eminent domain

In July 2008, a jury awarded Bill Simon $2,871,200, an increase of approximately $1.6 million over what he had initially been offered. (See our previous post about the case here.) The court entered a judgment against the Land Clearance and Redevelopment Authority (LCRA) requiring the city agency to pay the verdict amount plus $317,427 in pre-trial interest and $475 per day in interest thereafter. The LCRA appealed and an appellate court upheld the verdict. The LCRA then appealed to the Missouri Supreme Court, which on March 23, 2010 declined to hear the city's appeal.

LCRA officials have explained to Mr. Simon's attorneys, Bob Denlow and Paul Henry, that their client will get paid the additional amount only after the developer has paid the city. But Denlow and Henry argue that eminent domain does not work that way. Bob Denlow explained to Fox News, "...the city exercised the power of condemnation...when you take somebody's property in condemnation, you're responsible to pay. It's required under the Constitution."

For more about this case see Heather Ratcliffe's 5/12/2010 article here from the St. Louis Post Dispatch online.


UPDATE: The law firm of Denlow & Henry (see disclosure below) has posted here a calculation that currently totals $2.2 million with accrued interest due to this property owner for the condemnation of his property by the LCRA.

Disclosure: Robert ("Bob") Denlow, Esq., represents this property owner and is the OCA Member attorney for Missouri.  Visit Fox News website here to view an interview with Mr. Denlow and property owner, Bill Simon.

New Missouri law requires greater public notice concerning local government meetings on eminent domain and other issues

On Tuesday, July 13, Missouri Governor Jay Nixon signed into law Senate Bill 851 and House Bill 1444, which contain identical provisions that require local governmental bodies to provide at least four days’ public notice before meetings on eminent domain, tax increases or redevelopment plans financed with public funds can take place. Additionally, the new law prohibits voting on such items prior to allowing the public to comment on these items.

Missouri's current law requires only 24-hour notice for such meetings or votes to take place. The new law requiring 4-days advance public notice goes into effect Aug. 28, 2010.

KY3 News reports here that some supporters of the bills argued that city officials sometimes give developers more notice than the general public when they consider development incentives. As a 24THSTATE blogger points out, with the additional 3 days notice, this law enables the public to participate in such governmental meetings on topics concerning tax increases, redevelopment plans and projects for which eminent domain would be utilized. With 4 days advance notice, Missouri's citizens might have a chance to actually attend such meetings, speak out for or against the use of public funds for such projects and perhaps, be on a more level playing field with developers and others who might have a more direct contact with the local government officials.

Update: See also Alan Ackerman's blog here - Alan points out the Due Process issue that arises when government entities and public agencies are not required to provide notice to an owner who's property is slated to be taken by eminent domain. (Disclosure: Alan Ackerman is the Michigan Member of OCA.)

SCOTUS Nominee Kagan on Property Rights

During the Senate confirmation hearings held this week, Supreme Court Nominee Elena Kagan did provide a somewhat direct response to Senator Grassley's questions concerning her position on property rights. From the exchange between Sen. Grassley and Ms. Kagan:

GRASSLEY: The president who appointed you, in “Audacity For Hope,” his book, said our Constitution places the ownership of private property at the very heart of our system of liberty. Do you agree with that statement?

KAGAN: Well, I do think that property rights are a foundation stone of liberty, that the two are intimately connected to each other in our society and in our history.

As Professor Ilya Somin points out in his analysis (at the Volokh Conspiracy blog) of the exchange between Grassley and Kagan, although it's nice to hear that Kagan believes that property rights are a “foundation stone of liberty...intimately connected to each other in our society and history” and that “the job of the courts.. with respect to [property] rights, as any other, is to ensure that government does not overstep its proper bounds.” It is, however, not suggestive that she will rule in favor of property rights when such cases are before the Court. As Professor Somin explains in his writings, the Court has recently provided only minimal protection to property rights as compared to other constitutional rights and it is unlikely Kagan would stray from the Court's “oft-repeated pattern.”

Nonetheless, we also have seen a sign of progress for property rights protection and agree with Prof. Somin's point that property rights has now become a topic upon which Senators will question SCOTUS nominees, particularly because property rights are “a foundation stone of liberty.”

For a more complete transcription of Sen. Grassley's questioning of Ms. Kagan and a much more detailed analysis of same, visit the Volokah Conspiracy blog here. Additionally, to review Prof. Somin's analysis of the recent history of the Supreme Court's property rights jurisprudence see “Taking Property Rights Seriously? The Supreme Court and the 'Poor Relation' of Constitutional Law.”