The Ohio Supreme Court's unanimous decision in Norwood v. Horney, issued today, is an important victory for property rights. It is probably the most important judicial decision on eminent domain since Kelo v. City of New London. Perhaps the most significant element of the decision is the fact that the Court went beyond banning "economic development" condemnations of the sort permitted by the U.S. Supreme Court in Kelo, and also suggested that there are state constitutional limitations on the governments' power to condemn property that is designated as "blighted." The Ohio Supreme Court has also become the 11th state supreme court to ban Kelo-style condemnations under its state constitution, a decision which largely negates the shortcomings of Ohio's woefully inadequate post-Kelo "reform" law.

I. Banning Economic Development Takings.

First and most obviously, Norwood bans the condemnation of property for transfer to another private party in order to promote "economic development." The Ohio Supreme Court has now become the eleventh state high court to ban Kelo-style takings under its state constitution, and the second to do so since Kelo was decided (following Oklahoma):

Although we have permitted economic concerns to be considered in addition to other factors, such as slum clearance, when determining whether the public-use requirement is sufficient, we have never found economic benefits alone to be a sufficient public use for a valid taking. We decline to do so now....

We hold that an economic or financial benefit alone is insufficient to satisfy the public-use requirement of Section 19, Article I [of the Ohio Constitution]. In light of that holding, any taking based solely on financial gain is void as a matter of law and the courts owe no deference to a legislative finding that the proposed taking will provide financial benefit to a community.

Unfortunately, there is an important problem here, because the Ohio Court still permits "economic concerns to be considered in addition to other factors, such as slum clearance, when determining whether the public-use requirement" has been met. If this exception is interpreted broadly, it could greatly undermine the impact of Norwood, since local governments can often cite some "other factor" to justify a condemnation that is in reality undertaken for development purposes. A categorical ban on the "economic development" rationale would have been better. If the "other factors" are sufficient to justify condemnation in their own right, well and good. But it is a mistake to allow otherwise inadequate factors to go through because of claims that the condemnation will also promote development. Hopefully, Ohio courts will interpret the "other factor" exception narrowly.

II. Potentially Limiting Blight Condemnations.

The most unique and original aspect of the Norwood decision is the way in which it may limit "blight" condemnations, as well as those purely for "economic development" purposes.

As I have pointed out in both blog posts (e.g., here), and in my academic work (see here and here), broad definitions of blight of the sort which are all too common in state legislation can undermine a ban on economic development takings by licensing local officials to declare virtually any area blighted, thereby allowing the property there to be condemned. Recent state court decisions have concluded that such areas as Times Square and downtown Las Vegas are "blighted," thereby justifying condemnation of property to build a new heaquarters for the New York Times and new parking lots for politically influential Las Vegas casinos. See Las Vegas Downtown Redev. Agency v. Pappas, 76 P.3d 1 (Nev. 2003) (Las Vegas case); In re W. 41st St. Realty v. N.Y. State Urban Dev. Corp., 744 N.Y.S.2d 121 (N.Y. App. Div. 2002) (Times Square case).

The Norwood decision can help put a stop to such abuses, especially if courts in other states choose to adopt its reasoning. In Norwood, numerous homes in relatively good condition were condemned by a local government under an ordinance that allows condemnatin of property that was in a "slum" area, "blighted," or "deteriorated." Only the third of these ("deterioration") was claimed to be present by the government in the Norwood case. The Ohio Supreme Court refused to permit condemnation under this rationale because the city's definition of "deterioration" would permit condemnation of virtually any property in any neighborhood:

As defined by the Norwood Code, a “deteriorating area” is not the same as a “slum, blighted or deteriorated area,” the standard typically employed for a taking. And here, of course, there was no evidence to support a taking under that standard. To the contrary, the buildings in the neighborhood were generally in good condition and the owners were not property-tax delinquent...

The Norwood Code sets forth a fairly comprehensive array of conditions that purport to describe a “deteriorating area,” including those found by the trial judge in this case: incompatible land uses, nonconforming uses, lack of adequate parking facilities, faulty street arrangement, obsolete plotting, diversity of ownership. In addition, the trial court identified the following factors as supporting the determination that the neighborhood was deteriorating: increased traffic, dead-end streets that impede public safety vehicles, numerous curb cuts and driveways, and small front yards. But all of those factors exist in virtually every urban American neighborhood. Because the Norwood Code’s definition of a deteriorating area describes almost any city, it is suspect.

(emphasis added).

Although Norwood addressed only the issue of condemnations of "deteriorated" areas rather than "blighted" ones, the exact same reasons why the Ohio Supreme Court rejected the City of Norwood's "deterioration" rationale can also be used to strike down overly broad definitions of blight.

Up until now, no other state supreme court has confronted the contradiction between banning "economic development" takings and permitting blight condemnations under a virtually limitless definition of "blight." Hopefully, other states will resolve this issue in a way similar to Ohio's approach.

III. Connection to Post-Kelo Legislation.

The Norwood decision is also noteworthy because Ohio recently enacted one of the least effective of all post-Kelo reform statutes. As I explain in greater detail in a forthcoming article (pp. 69-71), the new Ohio law accomplishes almost nothing. The centerpiece of the law is the establishment of a commission to consider eminent domain reform - a commission stacked with representatives of interest groups that benefit from economic development takings.

The conjunction of the Norwood decision and Ohio's virtually useless post-Kelo law emphasizes the need to recognize that we cannot rely exclusively on the political process to protect constitutional property rights, a point I previously stressed here and here. Sometimes, judicial intervention is also needed.

CONFLICT OF INTEREST WATCH: As noted here, I once briefly worked for the Institute for Justice, the public interest law firm that represented the property owners in Norwood and Kelo, and have written several pro bono amicus briefs for them.

UPDATE: I should have also noted the significance of the Ohio Supreme Court's holding that "Courts shall apply heightened scrutiny when reviewing statutes that regulate the use of eminent domain powers." This potentially could limit ALL uses of eminent domain, not just those that transfer the condemned property to private parties (as in Kelo and other "economic development" cases). Two other states (Michigan and Delaware) apply heightened scrutiny to condemnations that greatly benefit particular private interests, but Ohio will be the first state to apply it all uses of eminent domain. It is not yet clear exactly how demanding Ohio's "heightened scrutiny" doctrine is going to be, but it certainly strengthens protection for property owners against eminent domain abuse.

UPDATE #2: A small correction: the Norwood ordinance ultimately at issue in the decision is not the one that permits condemnations of blighted, slum, or deteriorated areas, but a similar one that allows the taking of "deteriorating" property. I missed this distinction in my first reading of the opinion, and thank Institute for Justice attorney Dana Berliner for correcting me.