New Legal Setbacks For Eminent Domain

A ruling strengthens owners' rights, but the issue remains a hot one

NJBIZ — Monday, July 30, 2007

Martin C. Daks


Foes of eminent domain last week cheered a state appellate panel decision that denied a bid by the borough of Lodi to seize private properly for redevelopment.

The ruling, LBK Associates LLC et al. v. Borough of Lodi et al., was the latest to favor businesses and homeowners in the wake of a June 13 state Supreme Court ruling that limited the right of municipalities to seize properly to boost tax collections.

"We're pleased with the Lodi ruling," says Phyllis Salowe-Kaye, executive director of the watchdog group New Jersey Citizen Action. "The State Supreme Court decision defined the eminent domain process and strengthened protections for people and businesses, making it less likely that they'll lose their homes or shops."

But hold on: A different appeals panel earlier this month upheld the town of Mount Holly's bid to knock down a housing complex and replace it with more expensive homes, demonstrating that the highly controversial issue of eminent domain remains far from settled.

What is clear is that, in light of the Supreme Court ruling in a case called Gallenthin Realty Dev. Inc. v. Borough of Paulsboro, local governments can no longer simply declare a properly blighted and seize it in the expectation that they prevail. Towns could previously condemn property just by declaring that it wasn't being utilized "in the most productive manner."

"The Gallenthin case tells judges that blight reports have to prove their point with substantial credible evidence," says William Ward, a partner with the Florham Park law firm Carlin & Ward, who represents a homeowner in Long Branch who is appealing the town's eminent domain decision.

The LBK Associates decision affirmed a lower-court ruling that slapped down a Lodi planning board declaration that a 20-acre stretch of land, made up of two trailer parks and several businesses, was "in need of redevelopment" and could be seized from its owners.

In the strongly worded lower court decision, Bergen County Superior Court Judge Richard Donohue called the planning board's determination "arbitrary, capricious and unreasonable."

In affirming that ruling last week, the appeals court followed in the footsteps of its own July 11 ruling in a case known as HJB Associates Inc v. Council of the Borough of Belmar et at. The panel in that case struck down an attempt by the shore town to seize a bakery's properly that had been characterized as "underutilized" but not blighted.

Two weeks ago Essex County Superior Court Judge Marie Simonelli blocked Newark's attempt to use eminent domain to seize a nine block swath of downtown properly for redevelopment purposes.

"The court agrees that the city should be entitled to utilize the tools of redevelopment to allow it to once again take its place as the state's most important and prominent city," Simonelli wrote in the case, Mulberry Street Area Property Owner's Group v. City of Newark. "However, it cannot do so in the manner in which it has done here."

Simonelli took note of the "thousands of dollars" of political contributions that the prospective developer, Newark Redevelopment Corp. (NRC), had made to city officials including former Mayor Sharpe James, who last week pleaded not guilty to federal corruption charges.

Of the NRC contributions, and to alleged below-market land purchases by the company, Simonelli said: "This evidence certainly provides cause to question the results and validity of the [city's] redevelopment investigation."

In Mount Holly, by contrast, an appellate decision said the town could redevelop Mt. Holly Gardens, a 43-acre, 327-unit residential complex with a largely black and Hispanic population.

The ruling in Citizens In Action et al. v. Township of Mt. Holly et al. found ample photographic and other evidence that much of the complex was dilapidated and overcrowded-conditions that apparently went a long way to satisfying the standards for seizure under Gallenthin.

"We demonstrated the clear connection between the well-documented conditions in the area and the problems those conditions caused regarding the public's health, safely and welfare," says Janice Talley the principal planner of H2M Associates, a Totowa engineering firm that prepared the redevelopment plan.

"We knew that some residents would object and that we would be sued," says Talley. "So we knew we'd have to provide a detailed evaluation that could stand up in court."

Eminent domain was formerly used mostly for public-use projects like highways. But as properly values headed upwards, local governments began eyeing underutilized properties that generated little tax revenue. The plan was to declare them blighted and then buy them up cheaply and sell the land to developers that promised to build upscale retail and residential establishments.

The practice got a legal boost two years ago when the U.S. Supreme Court ruled in Kelo et al. v. City of New London et al. that the Connecticut city could condemn and seize residential property for redevelopment even if the underlying properly was not blighted.

That decision galvanized opponents of eminent domain and spurred New Jersey Public Advocate Ronald Chen to issue a series of reports detailing alleged abuses in the state's use of eminent domain and calling for changes to safeguard the rights of properly holders.

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