Opinion ID: 2330535
Heading Depth: 2
Heading Rank: 3

Heading: Litigating the Pretext Defense

Text: Unfortunately, the Kelo majority did not define the term `mere pretext'. . . . Goldstein v. Pataki, 488 F. Supp. 2d 254, 287 (E.D.N.Y. 2007). See Kelo, 545 U.S. at 478, 125 S.Ct. 2655. However, as discussed above, see p. 168, we do know that promoting economic development is a valid public purpose and that it is not enough for the protesting landowner to demonstrate that private parties will benefit from the project. Furthermore, the government may rely on a private entity to implement its public purpose. See id. at 486, 125 S.Ct. 2655 (`The public end may be as well or better served through an agency of private enterprise than through a department of government. . . . (quoting Berman, 348 U.S. at 33-34, 75 S.Ct. 98)). On the other hand, the majority opinion in Kelo did suggest (without deciding) that a transfer of property from one private party to another, executed outside the confines of an integrated development plan, . . . would certainly raise a suspicion that a private purpose was afoot. . . . 545 U.S. at 487, 125 S.Ct. 2655. And it certainly would be relevant if the government proposes a transfer to a private party, but the projected economic benefits of the project [are] de minimus.  545 U.S. at 493, 125 S.Ct. 2655 (Kennedy, J., concurring). Some guidance may be provided by the Court's citation to 99 Cents Only Stores v. Lancaster Redevelopment Agency, 237 F. Supp. 2d 1123 (C.D. Cal. 2001), see 545 U.S. at 487 n. 17, 125 S.Ct. 2655, where the plaintiff alleged that the city of Lancaster was planning to condemn its property in order to give additional space to Costco, an anchor tenant in a regional shopping center. The district court considered whether Lancaster has presented a valid or [a] pretextual public use for its plan to condemn 99 Cents' leasehold interest. 99 Cents Only Stores, 237 F. Supp. 2d at 1129. Observing that [n]o judicial deference [to the legislature] is required . . . where the ostensible public use is demonstrably pretextual, id., the court granted summary judgment in favor of the holder of the lease, concluding that Lancaster's condemnation efforts violate the Public Use Clause of the Fifth Amendment. Id. at 1131. [T]he evidence [was] clear beyond dispute that Lancaster's condemnation efforts rest on nothing more than the desire to achieve the naked transfer of property from one private party to another. Id. at 1129. The district court rejected the city's argument that retaining Costco as a tenant was a public use because it would help prevent the reestablishment of blight. Id. The court noted, among other things, that there is simply no evidence in the record to suggest that so-called `future blight' was the actual reason underlying Lancaster's condemnation efforts at the time they were initiated. Id. at 1130. The idea of future blight simply embodies Lancaster's current litigation position; it is not supported by any evidence in the record. Id. Although the Supreme Court has not clarified the meaning of pretext, Justice Kennedy focused hypothetically on the insubstantial quality of touted public benefits, stating that transfers intended to confer benefits on particular, favored private entities, and with only incidental or pretextual public benefits, are forbidden by the Public Use Clause. 545 U.S. at 490, 125 S.Ct. 2655. In this formulation the word pretextual is used to characterize the public benefits that will flow from the taking, not the thought processes of legislators or other government officials. Nevertheless, the same sentence refers to intent (transfers intended to confer benefits), presumably the intent of the legislators. The terms purpose, motive, and intent sometimes are used (imprecisely) as if they were interchangeable. In the present context, it is important to remember that public purpose is the modern mode of expressing the constitutional requirement of a public use. See Kelo, 545 U.S. at 480, 125 S.Ct. 2655 (the Supreme Court has embraced the broader and more natural interpretation of public use as `public purpose'). Moreover, there are formidable barriers to discovering the motives [11] and intentions of individual legislators. [12] We conclude that a reviewing court must focus primarily on benefits the public hopes to realize from the proposed taking. [13] If the property is being transferred to another private party, and the benefits to the public are only incidental or pretextual, a pretext defense may well succeed. On the other hand, if the record discloses (in the words of the trial court) that the taking will serve an overriding public purpose and that the proposed development will provide substantial benefits to the public, the courts must defer to the judgment of the legislature. Harder cases will lie between these extremes. Other courts applying Kelo have inquired whether the record demonstrates a public purpose for the taking. See Mayor and City Council of Baltimore City v. Valsamaki, 397 Md. 222, 916 A.2d 324, 351-52 & n. 26 (2007) (invalidating quick-take condemnation designed to assist business expansion in the area because the city had presented sparse evidence of public use and had  no plan for the development of the Property; court suggests that in a regular condemnation proceeding city would have presented more evidence to satisfy its minimal burden of presenting a prima facie case as to public use/purpose.); Rhode Island Economic Development Corporation v. The Parking Company, L.P., 892 A.2d 87, 104 (R.I. 2006) (court concluded, based on the record developed before us, [that] the principal purpose for the taking in this case was not a valid public use). In the latter case, the Rhode Island Supreme Court noted that the taking could not possibly have served the purpose of increased parking asserted during litigation because no additional parking spaces were created. 892 A.2d at 105. Furthermore, the taking would enable the Rhode Island Airport Corporation to avoid the terms of its pre-existing contract with the property owner and would result in a multi-million dollar windfall to the Corporation. Id. at 104-06. In a subsequent order the Supreme Court of Rhode Island characterized its opinion as conclud[ing] that condemnation was a ruse by which Rhode Island Airport Corporation (RIAC) could avoid the contract between the parties. . . . Rhode Island Economic Development Corp. v. The Parking Company, L.P., 909 A.2d 943 (R.I. 2006). See also MHC Financing Ltd. P'ship v. City of San Rafael, 2006 WL 3507937, at  (N.D. Cal. Dec. 5, 2006) (denying city's motion for summary judgment; inquiry into claim of pretext was necessary). Cf. Goldstein v. Pataki, 488 F. Supp. 2d 254, 288-91 (E.D.N.Y. 2007) (conclusory allegations were not sufficient to state a pretext claim; plaintiffs concede[d] that the Project will create large quantities of housing and office space, as well as a sports arena, in an area that is mostly blighted; they did not allege any facts suggesting that any Defendant had any reason to bestow a benefit on any private party). Explaining why it was satisfied that there was no illegitimate purpose in Kelo, the Supreme Court emphasized several factors revealed by the record in that case. Although the affected area of New London, Connecticut, was not blighted, the government's determination that the area was sufficiently distressed to justify a program of economic rejuvenation [was] entitled to . . . deference. 545 U.S. at 483, 125 S.Ct. 2655. It was reassuring that the identities of the private parties who would benefit were not known when the plan was adopted. 545 U.S. at 478 n. 6, 125 S.Ct. 2655. Moreover, the takings were to be executed pursuant to a comprehensive development plan, and thorough deliberation [had] preceded its adoption, so it was appropriate to resolve the challenges of the individual owners, not on a piecemeal basis, but rather in light of the entire plan. 545 U.S. at 484, 125 S.Ct. 2655. Because that plan unquestionably serve[d] a public purpose, the takings challenged [in Kelo ] satisf[ied] the public use requirement of the Fifth Amendment. Id. Mr. Franco argues that the taking at issue here fails the public use requirement because some of the factors mentioned in Kelo are not present. (He argues especially that the identities of the benefiting private parties were known before the taking was authorized by the legislature and that there is no comprehensive plan for redeveloping the area.) However, nothing in Kelo suggests that the items of evidence mentioned there set constitutional standards. Indeed, there are suggestions that the most important, perhaps determinative, consideration was that the plan unquestionably serve[d] a public purpose. 545 U.S. at 484, 125 S.Ct. 2655. We are, of course, aware of the related decision in Franco v. District of Columbia, 456 F. Supp. 2d 35 (D.D.C. 2006), which at first glance may appear to be inconsistent with our ruling. The United States District Court addressed many of the same allegations we consider here, and it held that the defendants have sufficiently shown that the Skyland Legislation serves a `conceivable public purpose.' Id. at 40 (quoting Midkiff, 467 U.S. at 241, 104 S.Ct. 2321). It is important to consider the procedural posture of that case, however. The court had previously dismissed the suit, concluding that the plaintiffs' claims were not ripe, see 422 F.Supp. 2d 216, 225 (D.D.C. 2006), and was addressing a motion to alter or amend the judgment. Moreover, it considered its role to be limited  to determine whether the taking was facially unconstitutional. 456 F. Supp. 2d at 39. In this context the court ruled that, [b]ecause the taking was for a public use, and was not facially unconstitutional, the plaintiffs must first pursue state remedies for uncompensated takings before seeking relief in federal court. Id. at 40. Ruling on a facial challenge, the court had not held any evidentiary hearings, and it did not rule on the claim of pretext. Here, by contrast, we have held that Mr. Franco has sufficiently pleaded a defense of pretext. That defense must now be resolved on its merits. We emphasize that further proceedings, including discovery, should honor the longstanding policy of deference to legislative judgments concerning the public purpose of a taking. Kelo, 545 U.S. at 480, 125 S.Ct. 2655. The Supreme Court has explained, and reiterated, that [t]he role of the judiciary in determining whether th[e] power [of eminent domain] is being exercised for a public purpose is an extremely narrow one, Berman, 348 U.S. at 32, 75 S.Ct. 98; accord, Midkiff, 467 U.S. at 240, 104 S.Ct. 2321, and Kelo did not repudiate those statements. Moreover, `[o]nce the question of the public purpose has been decided, the amount and character of land to be taken for the project and the need for a particular tract to complete the integrated plan rests in the discretion of the legislative branch.' Kelo, 545 U.S. at 489, 125 S.Ct. 2655 (quoting Berman, 348 U.S. at 35-36, 75 S.Ct. 98). And resolving the pretext defense does not necessarily require a trial. We simply hold that in this case the defense may not be rejected as a matter of pleading.