Property Rights

New Jersey Court Strikes Down Use of Eminent Domain to Take Property to "Bank" it for Possible Future Use

The court concluded that property may only be condemned for projects that will proceed in "the reasonably foreseeable future."

|The Volokh Conspiracy |

Charles Birnbaum, standing in front of his house, which the Casino Reinvestment Development Authority sought to condemn (Institute for Justice).

In CRDA v. Birnbaum, an important decision issued yesterday, a New Jersey appellate court ruled that the state's Casino Reinvestment Development Authority (CRDA) could not use eminent domain for the purpose of seizing private property in order to "bank" it for a possible future use. Under the New Jersey state constitution (like the federal constitution), land may not be taken by the government unless it is for a "public use." The Appellate Division of the Superior Court of New Jersey upheld the trial court's 2016 decision concluding that there cannot be a public use unless CRDA can provide "evidence-based assurances that" it will use the land for a project that "would proceed in the reasonably foreseeable future."

In this case, CRDA sought to condemn Charlie Birnbaum's house even though "[a]t the time of the [trial court] decision under review, the CRDA had no specific redevelopment plans under consideration for the Project; it had not issued a request for proposals (RFP) to prospective developers, and no developer had committed to redeveloping within the Project area." CRDA claimed that "it is statutorily entitled to bank land for future public use, without any temporal limitation."

Particularly since the US Supreme Court's controversial 2005 decision in Kelo v. City of New London, which ruled that private economic development projects are a permissible "public use," there has been a longstanding debate over exactly what qualifies as a public use under federal and state constitutions. Proponents of the "narrow view" of public use argue that it only covers publicly owned projects or private ones that the general public has a legal right to use. Advocates of the broad view (endorsed by the Kelo decision), contend that virtually anything that might potentially benefit the public in some way qualifies as a public use. I believe the narrow view is correct, for reasons outlined in detail in my book on the Kelo case. But even those who otherwise favor a broad view of public use should recognize that unlimited "banking" of property for a potential, as yet unspecified, future use doesn't qualify. In such a situation, there is no assurance that the government will ever use the condemned property at all, much less for a purpose that somehow benefits the public.

The trial court decision in the Birnbaum case (which I analyzed here), puts the point well:

In this Court's view, the CRDA is not empowered to condemn a property only to have it sit idly, for years on end, as they wait for the right project to present itself. This has already happened in many of the surrounding properties that sit vacant waiting for a project to come forward …..[T]o meet constitutional and statutory muster, to justify the taking of the Birnbaum property, there must be some reasonable assurance that the Birnbaums' property will be put to a public use within the next year or the next ten years.

Those who follow eminent domain and property rights issues may recall that CRDA is the same state government agency that in 1998 sought to condemn private homes in order to build a limo parking lot for one of Donald Trump's casinoes. That taking, too, was struck down by a state court as a violation of the New Jersey constitution, because it was not for a legitimate public use. The Birnbaum taking is arguably even more egregious than that in the Trump case. In the latter situation, at least Trump and the CRDA had a clear plan for what they were going to build on the condemned property. Both cases were litigated by the Institute for Justice, a prominent libertarian public interest law firm that has long been the nation's premier advocate of tightly enforcing constitutional constraints on eminent domain. For IJ's analysis of the Birnbaum ruling, see here.

In the aftermath of the Kelo decision, many states enacted legislation to try to limit the use of eminent domain for the benefit of influential private interests. While some states enacted valuable reforms that really do constrain eminent domain abuse, others enacted largely ineffective ones that only pretended to address the problem. New Jersey was the last of the 45 states that reformed their laws after Kelo, and its reform is one of the weakest, in some ways making things worse rather than better. But New Jersey courts have, under their state constitution, nonetheless imposed tighter limitations on the use of eminent domain than is the case in some other states, such as neighboring New York.

In the aftermath of yesterday's ruling, CRDA says that it will "respect" the court's decision. Hopefully, this will finally put an end to Charlie Birnbaum's prolonged struggle to save his family home. The agency is also said to have "largely shifted its focus from land acquisition and has sought to auction off some of its tax-exempt holdings." If so, it's about time for it to end its longstanding pattern of abusive condemnations.

NOTE: I have done pro bono work for the Institute for Justice in other eminent domain cases. However, I had no involvement in the Birnbaum litigation.

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  1. I wonder how many states’ highest courts imposed stricter eminent domain regulations under their own constitutions.

  2. The fact that the New Jersey legislature has empowered a bunch of bureaucrats to condemn private property, without any apparent constraint, for the purpose of building casinos tells me all I need to know about New Jersey.

  3. I am sympathetic to the result, but is there a manageable standard for how specific the plans have to be that doesn’t turn the courts into the planning commission?

    1. At the very least, the government should be required to demonstrate that it has a specific purpose in mind for the property and that it has taken concrete steps to implement it. And those are questions of fact.

    2. +1. IMHO, courts/legislatures need to spend energy on the “just compensation” side. Even something as simple as “defendant gets to pick between 3-4 different valuation theories (e.g., total decrease in value of all holdings, sale price of parcel, time evaluated before/after announcement, etc)” or even “price < 120% of FMV is presumed to be unjust" would solve almost all the issues here.

      1. Valuation of property is sometimes quite easy, and sometimes not at all easy.
        The value of property depends in large part on what use you intend to put it to. (So, for example, the value of a business as a going concern might be vastly different from its value as the sum of its parts. A parcel being used as a single-family home has a different value than a parcel that’s 1/20 of a working farm, and way different as a part of a piece of land where a semiconductor fab plant is built. Which value is “correct”?)

        1. Exactly… Hence my proposal that the landowner get to pick among several different valuation theories, including one of a complete buyout.

          1. Why not just let the landowner pick a number out of thin air?

  4. Overturns the Trump/Kushner modus operandi, I guess. Look at Atlantic City and Long Branch history.

    1. Yes… its trump and kushners fault, not the liberal governance the last 80 years. Astute observation idiot.

  5. CRDA is the same state government agency that in 1998 sought to condemn private homes in order to build a limo parking lot for one of Donald Trump’s casinoes

    I understand that it is necessary to bring Trump into an Ilya Somin post, but the plural of casino is normally casinos.

    1. Your high school English teacher would be proud of you.

      1. Ehhhh, Potato, Potaho, Potatoe…

  6. “even those who otherwise favor a broad view of public use should recognize that unlimited “banking” of property for a potential, as yet unspecified, future use doesn’t qualify.”

    Meh. Maybe the agency just wants to get a property it knows it’s going to want or need, at a time when the property’s FMV is low.

    Compare Disney’s two parks, in California and Florida. In the first, they bought land, built, and then watched the adjacent parcels significantly increase in value to the point where they can’t afford to buy them to expand. So when they built in Florida, they bought way more land than they planned to use, so they’d be able to expand later. The company learned, and put it’s knowledge to use. I’m not averse to government learning lessons from private enterprise.

    1. Agreed, except for the involuntary nature of ED.

      (I do not think Disney used ED to gain any of its Florida property, but that’s based on my recollection at the time…I might be wrong about this.)

      1. “Agreed, except for the involuntary nature of ED”

        Changing the timing of the condemnation doesn’t alter the involuntary nature of eminent domain.

        Disney incorporated part of its Florida holdings as a city, in part to put eminent domain into their toolbox, but the initial acquisition wasn’t done by eminent domain, but by secrecy. They didn’t let anyone know who the buyer was until all the property was acquired, which prevented any speculation from driving the price up.

      2. Agreed, except for the involuntary nature of ED.

        The pills don’t actually magically solve the problem — you still have to become aroused. Fantasies can help here to enc…

        Oh, sorry.

        1. *slow clap*

        2. *slow clap*

    2. If they want to get the property when the value is low, then they don’t need eminent domain. Just buy it.
      If they can’t buy it at the price they want, then by definition the value wasn’t as “low” as they thought.

      No, James, there is no moral justification for what the CDRA tried to do here.

      1. “If they want to get the property when the value is low, then they don’t need eminent domain. Just buy it.”

        Buying a property isn’t as easy as Monopoly makes it seem. It’s also sometimes harder to collect $200.

  7. This leads to an intriguing question. If governments don’t have the authority to seize property by eminent domain in order to “bank” it, unused, for future use, I would expect it to logically follow that governments are similarly barred from enacting “green belt” or “urban growth boundary” laws, which have the same effect: forcibly keeping large areas of land which the government doesn’t even own from ever being developed until and unless the government gets around to redrawing the boundary to take them out of the “bank”. After all, banning any profitable use of land is certainly tantamount to seizing it even if the hapless original owner still retains the unusable, so-called ownership of it.

    1. I was thinking the same thing re condemning land for greenbelts and wilderness areas. That would be condemning land to just sit there, although perhaps “using” it as a recreation area is a sufficient immediate use. But what about condemning land, for instance, for a national forest without logging contacts in place? Would that not be prohibited?

    2. I would tend to disagree because wilderness preservation is an immediate use.

      That logic assumes that the restricted land is, in fact, wilderness. I don’t think you could make the same argument to create an “urban growth boundary” over farmland.

      1. Farmland preservation is just as immediate as wilderness preservation is.

  8. “This robbery is too blatant even for New New Jersey. Our ruling is therefore for the homeowner.”

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  10. Wow.
    California allows pictures of guns, and New Jersey lets an individual keep his house even though a petty local politician wants it. Reported on the same day.
    MAGA

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  12. Of course, the Casino Reinvestment Development Authority could simply buy Mr. Birnbaum’s house from him privately if they were willing to negotiate the purchase price fair and square. Just like regular American citizens do every day. But it’s more fun pretending to be highly intellectual legal scholars analyzing the nuances of a living, breathing, leftward-ratcheting constitution, rather than admitting that the takings clause has become another corrupted, rotting parody of its original self that now serves politically-connected private financial interests that in turn grease the appropriate political cogs and receive commensurate “justice” from politicians in black robes.

    1. “the Casino Reinvestment Development Authority could simply buy Mr. Birnbaum’s house from him privately if they were willing to negotiate the purchase price fair and square.”

      They can’t if Mr. Birnbaum doesn’t want to move. They’d have to offer a premium over the FMV.

      (FMV is the price that would be reached by a willing seller and willing buyer in an open market. If you don’t have a willing seller, the only way to get to FMV is to offer the “seller” no holdout option.)

      1. commienot didn’t say anything about the fair market value. He said if the CRDA could buy it if they were willing to negotiate the purchase price fair and square. That that would have involved a premium because Mr. Birnbaum doesn’t want to move doesn’t make the negotiations unfair.

        1. “commienot didn’t say anything about the fair market value.”

          No, that was me. You can tell because my name appears in front of it.

          1. Which is what makes it such a stupid response to his comment.

            1. No comment is so stupid that you can’t show up and out-stupid it.

    2. “But it’s more fun pretending to be highly intellectual legal scholars analyzing the nuances of a living, breathing, leftward-ratcheting constitution. . . .”

      I guess you’re trying to make a point here but I certainly can’t figure it out.

  13. They can’t if Mr. Birnbaum doesn’t want to move. They’d have to offer a premium over the FMV.

    You keep saying this like it’s a problem.

    1. I said it once.

      It’s a problem if, as a taxpayer, you want the government to carefully marshal its resources, and try not to waste any. I guess if you don’t care if the government is wasteful, it’s not a problem.

      1. No, James.

        The net cost to all taxpayers, is the same, since Birnbaum is presumably a taxpayer. The government’s savings by buying his house for less than he wants comes out of his pocket.

        Besides, I don’t want the government “to carefully marshal its resources” if the definition of doing so involves using ED to buy property at less than “just compensation” (not FMV) for no purpose whatsoever.

        1. “The government’s savings by buying his house for less than he wants comes out of his pocket.”

          No, it doesn’t, because it was never IN his pocket and should not be.

          If the IRS sends me a tax refund of $78,000 instead of $78, then demands that I give it back, it’s not $77,922 “out of my pocket”.

          If I try to charge a government procurement contract $822 for a hammer, but they pay only $14 because it’s still got the $12 Walmart pricetag on it when I deliver it, that’s not $808 “out of my pocket”.

          1. it was in his pocket….The owner was the rightful owner of the property, and that property was taken away.

            The question is how much do we need to pay him to make him whole. The problem with FMV is that it is (necessarily) less than his expectation value (or he already would have sold the property). Thus, FMV forces the current owner to take a loss.

            In commercial law, this would be uncontroversial. For some reason, eminent domain does things differently.

            1. “it was in his pocket….The owner was the rightful owner of the property, and that property was taken away.”

              The property was taken away. If the property is worth $10, then having it condemned and being given $10 is not having anything taken out of anyone’s pocket, even if the (former) property owner would have rather had $20.

              When I buy a lottery ticket, and they tell me it has the wrong numbers on it, they haven’t taken $250 million dollars out of my pocket. They took $2 out of my pocket.

  14. This is similar to the North Carolina Map Act, which condemned land with a legitimate public use in mind (public highway corridors), but with no timeline on the projects and no compensation until the project was undertaken (sometimes for over a decade) AND a limit on development so as not to affect fair market value before the project was undertaken. Finally ruled unconstitutional by NC Supreme Court in 2016.

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    2. “Is there any way to get rid of these trolls BS’ing about how to make money on Google, etc.”

      Sure. They could take their cue from Electronic Arts, and implement a microtransaction model. Pay your fee for every comment you want to post. Back in the olden times, that’s how newspapers limited the number of letters-to-the-editor they got… the government charge a flat fee for every one delivered to the newspaper.

  17. Using NJ’s argument, why couldn’t the state condemn every square inch of the state and bank it for “future development”?

    1. They have to pay FMV for the property they condemn, and the FMV of “all the property in the state” is probably above the credit limit for the state’s Visa card.

      1. I’m sure they’ll lease it back to the existing occupier on very attractive terms.

  18. Didn’t the Maoists call this sort of thing, “agrarian reform”?

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