Legal Briefs

Interpreting the Rules

State court decision illustrates conflicting opinions on eminent domain.

Since the U.S. Supreme Court's decision on Kelo v. City of New London, which permitted a local government to use the power of eminent domain to take private property for economic development, at least 47 states have revisited their eminent domain laws. State courts may exercise their rights to define the "public use" standards that justify the taking of private property. For example, Rhode Island's Supreme Court recently reminded developers that the power to take private property has its limits. In Rhode Island Economic Development Corporation v. The Parking Company, LP, the Court struck down the temporary taking of a parking garage at the state's largest airport on the grounds that the taking was not for public use.

Case Background

The Parking Co. and the Rhode Island Airport Corp. were parties to a 20-year arrangement by which TPC would operate the airport's parking concession. As part of the concession, TPC's predecessor had constructed the 750-space Garage B. The concession was scheduled to end in December 2007, at which time TPC would convey the fee-simple ownership of Garage B to RIAC. However, during the term of the agreement, RIAC had the option to purchase Garage B for an amount that decreased every year up to 2007. In 2004, that price was approximately $2.7 million. RIAC and TPC also had agreed that the first four levels of Garage B were to be used for valet parking and the top two levels were dedicated to overflow parking from an adjacent facility, Garage A.

On Oct. 3, 2003, RIAC informed TPC that it wanted TPC to move valet parking out of Garage B or end it altogether so that Garage B could be used for daily parking. As the Rhode Island Supreme Court stated, negotiations between the parties "stalled, and the relationship of the parties began a steep descent and crash-landed."

In February 2004, RIAC asked its parent corporation, RIEDC, which was empowered by eminent domain to take real property for economic development, to condemn the valet amendment. However, as TPC pointed out, RIEDC's power of eminent domain did not extend to contracts. As a result, TPC continued to operate Garage B pursuant to the original contractual agreement.

Taking of Property

On June 28, 2004, RIEDC tried again and voted to condemn "a temporary easement in Garage B during the term of which [RIEDC] would have the exclusive use of the interior of Garage B, as well as all entrances and egresses therefrom." The "temporary easement" was just that; it was set to expire a month before TPC had to convey Garage B to RIAC under the concession agreement.

A month later on July 28, 2004, pursuant to Rhode Island's quick-take statute, RIEDC successfully petitioned a trial judge on ex parte basis to condemn the temporary easement. RIEDC deposited $685,000, the value of the property according to RIAC's appraisers, into the registry of court.

TPC quickly appealed the decision, alleging that the ex parte taking violated its due process right to a hearing prior to the taking and that the taking was not for a public use. After wrestling with a jurisdictional challenge by RIEDC, the Rhode Island Supreme Court denied TPC's argument that Rhode Island's quick-take statute was unconstitutional on the theory that TPC was entitled to a hearing before its property could be seized by eminent domain. Rather, TPC had a post-deprivation right to challenge the taking either by way of appeal, as in this case, or through a collateral proceeding.

TPC had better luck challenging that the taking was for a public use under the Fifth Amendment to the Constitution and its analog in the Rhode Island Constitution. RIEDC contended that airport parking was a public use, but the Rhode Island Supreme Court rejected that argument and sided with TPC.

In reaching that conclusion, the Rhode Island Supreme Court referred to the U.S. Supreme Court's decision in Kelo, which held that the process through which the sovereign took property was crucial. In Kelo, the U.S. Supreme Court was favorably impressed by both the careful preparatory steps that the municipal authorities in New London had taken prior to the condemnation and the fact that the taking was part of a larger economic development plan.

The Court Decides


By contrast, RIEDC had addressed neither of those considerations. The Rhode Island Supreme Court found that the taking of the temporary easement in Garage B was "motivated by a desire for increased revenue." The Court particularly was bothered by the fact that RIAC had an option to purchase the property for $2.7 million - a salient fact RIEDC omitted at the ex parte hearing -- and instead told the judge that the property should be valued at $685,000. The Court also noted that the taking would not add any parking capacity; it would merely increase revenues to RIAC.

The Court also was disturbed by RIAC's manipulation of the "temporary easement." In Rhode Island, "temporary easements" typically are reserved to guarantee state contractors physical access to land during construction projects. In this case, the Court found that the use of a "temporary easement" for a parking garage was a "pretextual and inappropriate device" and that the exercise of the eminent domain power was in bad faith.

While some industry observers have suggested that the U.S. Supreme Court's Kelo decision is a green light to eminent domain in the name of economic development, The Parking Company is an important case to keep in mind. The Rhode Island Supreme Court's decision reminds property owners, economic development authorities, and the courts that the use of eminent domain requires all parties to look beyond superficial labels that describe the putative public use.

The Parking Company also outlines key issues that everyone in the eminent domain process should consider, specifically in this case: Was the taking of property part of a comprehensive plan to promote economic development or an attempt to renegotiate a bad contract? While the reasoning in The Parking Company was constructed on both state and federal constitutional grounds, it's important to consider if there were state constitutional protections that go beyond the federal constitution's protections. Other factors that must be weighed are the motivations of those exercising the eminent domain power and if they are acting in good faith: Is there justification for the taking aside from increasing revenue? Is the taking a pretext for something else not permitted by the Constitution? If one thing is clear, it's that Kelo is far from the last word in eminent domain litigation.

Jon M. Anderson, JD

Jon M. Anderson, JD, is counsel with Edwards Angell Palmer & Dodge in Providence, R.I. Contact him at (401) 276-6493 or janderson@eapdlaw.com.

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