DC Court of Appeals Decision on Pretextual Takings After Kelo:

The District of Columbia Court of Appeals (DC's highest Court) has issued its opinion in Franco v. National Capital Revitalization Corp., an important decision on the status of "pretextual takings" claims in the wake of Kelo v. City of New London (hat tip: PropertyProf Blog). The DC Court of Appeals ruled that a property owner could challenge the condemnation of his property as "pretextual," even though the condemnation was part of a plan to alleviate "blight" in an area formally designated as blighted by the DC government. The case raises two important post-Kelo issues:

1. Can a property owner can challenge a taking as "pretextual" even if it is part of a redevelopment plan? The DC Court of Appeals implicitly held that the answer is "yes."

2. What kind of evidence is needed to prove that a taking is pretextual after Kelo?

I think that the court decided the first issue correctly, though its reasoning is flawed. The Court's answer to the second question is maddeningly vague.

I. Pretextual Takings Within a Redevelopment Plan.

In Kelo, the Supreme Court decided that the Public Use Clause of the Fifth Amendment does not forbid condemnations that transfer property to new private owners in order to promote "economic development," and that decisions to condemn for such purposes should receive virtually absolute deference from courts so long as they are part of an "integrated development plan" (Kelo is unclear about what the constitutional rules are for economic development takings adopted without a plan). Courts were forbidden to "second-guess" the quality of the plan in question, even if that plan were seriously flawed (as was the one in Kelo itself). For more detailed analysis, see Part III of my article on Kelo. The constitutionality of "blight condemnations was upheld by the Court in its 1954 decision in Berman v. Parker, which upheld the forcible displacement of some 3000 mostly poor and African-American Washington DC residents in order to promote "urban renewal" in the area. Kelo's very broad deference to the planning process is extremely important because nearly all blight and economic development takings are enacted as part of a plan of some kind.

At the same time, however, Kelo reiterated the longstanding principle that the Public Use Clause forbids "pretextual" takings - takings where the ostensible "public use" was just a pretext for an effort to benefit a private party. This raises the question of whether property owners can raise pretext challenges to condemnations adopted as part of a redevelopment plan.

In Franco, the DC Court of Appeals implicitly answers this question in the affirmative. Unfortunately, however, the persuasiveness of its reasoning is weakened by the court's failure to consider the pro-planning reasoning in Kelo itself, or even to recognize that Kelo seems to require far greater deference to condemnations undertaken as part of a plan than to those enacted without one.

The court also fails to discuss Didden v. Village of Port Chester, a recent Second Circuit case that decided the same issue the other way. Along with six other property law professors, I filed an amicus brief urging the Supreme Court to grant cert in Didden and overrule it; unfortunately, however, we were unsuccessful. In my view, the DC Court of Appeals reached the right decision on this issue. But their discussion of it is not nearly as thorough as it should be.

II. Proving Pretext after Kelo.

Assuming that a property owner can raise a pretext challenge, what kind of evidence does he need to win? As I see it, there are three types of pretext claims that need to be considered:

1. The owner shows that the government intends to use the property for a completely different purpose than it claims (e.g. - it claims that the land is being taking in order to build a highway, but actually transfers it to a private developer).

2. The government is telling the truth about what will happen with the property after it is taken (e.g. - it really will be given to Developer X, just as they say). But the owners proves that the government is lying about its motives for deciding to go forward with the condemnation (e.g. - it claims that the general public will benefit from the taking, but in actuality doesn't really believe this and is only condemning the property in order to benefit a private interest).

3. Government officials genuinely believe that the public will benefit (perhaps they are engaging in self-deception), but in reality the evidence proves that any such benefits are unlikely and most of the benefits of the taking will be captured by the new private owner of the condemned land.

Virtually everyone agrees that Scenario 1 would be an unconstitutional pretextual taking; but that scenario is not what's at issue in Franco. The hard question is what to do about Scenarios 2 and 3. In my view, Kelo probably precludes Scenario 3 claims. Scenario 2 claims are probably permitted, but it's very hard to tell how much evidence you need to prove that the government's motives were illegitimate.

As recounted in the DC Court of Appeals opinion, Franco's evidence against the DC authorities in fact amounts to some combination of these two possibilities. The Court ultimately decided that his evidence was good enough to enable his case to go to trial in the trial court. Unfortunately, however, it gives the trial court very little guidance as to how to decide whether or not the evidence is enough to prove that the taking was pretextual:

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.

This standard is extremely vague, and fails to distinguish between Scenarios 2 and 3. I suspect that whoever loses in the trial court will appeal the case, and the Court of Appeals will have to explain its approach more fully in the future.