On July 26, 2006, the Ohio Supreme Court overturned a decision on eminent domain by both the Hamilton County Court of Common Pleas and the First Ohio District Court of Appeals. The state’s Supreme Court ruled in Norwood v. Horney that eminent domain cannot be exercised simply because economic benefit would result from its application. The court stated that “although economic factors may be considered in determining whether private property may be appropriated, the fact that the appropriation would provide an economic benefit to the government and community, standing alone, does not satisfy” the Ohio Constitution’s code determining what the state considers public use when implementing eminent domain.

The court’s decision stands in opposition to the United States Supreme Court’s decision last year in Kelo v. New London that stated the seizure of private property for an economic development project to be completed by a private party is a valid use of the power of eminent domain under the Fifth Amendment to the U.S. Constitution. While approving the use of eminent domain for this purpose, the court also specified that state legislatures should determine what public needs justify the use of the taking power under such circumstances.

The Ohio Supreme Court case began when the city of Norwood was approached by a developer who was interested in purchasing dilapidated properties along Interstate 71. The developer had plans of creating a mixed-use development that would reinvigorate the area. The community of Norwood is located directly along I-71 and has fallen into hard times since the 1970s. Many of the homes and buildings in the area have become dilapidated over the years and the mixed-use development would have improved the area through the building of new apartment complexes, offices and retail spaces along the busy driving route.

The developer assured the city of Norwood that the mixed-use development would generate approximately $2 million in income to the area if it were built. Thus, the city and community leaders supported the project and pushed for its fruition. The developer was able to acquire most of the property needed for the development, but two property owners, Joseph Horney and Carl and Joy Gamble, refused to sell. Thus, the city conducted an urban renewal study that examined the properties that would be affected by the project.

The study determined that the area was in deteriorating condition and would only worsen with the passage of time. Based upon these findings, the city took the necessary steps to implement eminent domain for the seizure of the two remaining properties. The property owners, greatly upset about the actions of the city of Norwood and the developer, filed a suit in the Hamilton County Court of Common Pleas.

The court and, subsequently, the First Ohio District Court of Appeals, agreed that the study had determined that eminent domain was a necessary tool the city could use for acquiring the properties and launching the mixed-use development. The courts agreed that the study adequately proved the need for economic development in the area as the study outlined that the community faced a deteriorating future.

Yet, the Ohio Supreme Court decided against both courts’ rulings. The court noted that eminent domain should only be used as a last resort and that the city behaved in an improper manner by using the measure as a tool for community improvement in a cash-strapped neighborhood. The court did not feel that this decision by Norwood was a valid public use based upon the terms outlined in Ohio's Constitution. Specifically, the court’s decision noted that “any taking based solely on financial gain is void as a matter of law."

The court also stated that the city could not implement eminent domain based upon the vagueness of the term “deteriorating area” in relation to the community that would have been affected by the mixed-use development. The court deemed it an unconstitutional standard for the taking of land “because the term inherently incorporates speculation as to the future condition of the property to be appropriated rather than the condition of the property at the time of the taking.”

The court stipulated that this was a “standardless standard” that did not provide property owners with fair notice of due process regarding the future of their homesteads. The determination, thus, could not be based upon future predictions, but must be based on the current standard for a blighted property.

“This ruling makes it imperative that where we are being asked to insure title coming out of a taking or appropriation by the use of the state’s powers of eminent domain, detailed knowledge of the transaction must be ascertained,” said Robert Wasserman, the vice president and counsel of Ohio Republic’s east central division. “Issues such as the purported ‘public use,’ as well as the standards used in justifying the taking, and whether the property is ultimately being transferred to a private entity must be carefully scrutinized.”

Norwood area residents delighted in the decision by the Ohio Supreme Court and many held small celebrations throughout the community. One group of revelers, including the Gambles who had lost their property in the easier rulings, held a small cookout behind a local bar where approximately 40 celebrated the court’s decision.

“What we went through wasn’t for nothing,” said Joy Gamble in an interview with The Cincinnati Enquirer. “Now, if any developer comes sniffing around, you don’t have to sell your house to him if you don’t want to (sell it).”

The Ohio Supreme Court’s decision has sent shockwaves through many other states and cities that have faced eminent domain issues since the U.S. Supreme Court’s Kelo v. New London. More than 40 states have either enacted eminent domain legislation or have placed eminent domain reform legislation on the upcoming November ballot. However, the ruling by the Ohio Supreme Court is the first to denounce what the U.S. Supreme Court deemed appropriate.

One of the states considering future constitutional amendment is Michigan. There, voters will have the opportunity to vote on the issue in November. The proposed legislation would both strengthen property owners’ rights and would require a community to prove that a property is actually blighted before it could be seized for economic development.

“This provision would uphold the reasonable idea that people should not lose their property just because a neighbor or a stranger two blocks away has abandoned a home,” said Patrick Wright, a legal analyst for the Mackinac Center for Public Policy in Midland, Michigan. “Michigan has long needed to close its ‘blight’ loophole. The Ohio decision makes such reform even more important, or else homeowners and small business owners threatened with bogus blight seizures may find a more congenial environment south of Michigan’s border.”

Following the Ohio Supreme Court’s decision, the state’s Eminent Domain Study Task Force convened its final session. Many of the city and county officials who left the session believed that they had won the battle against having a constitutional amendment placed upon the upcoming November ballot. But, at the last minute, several members of the committee cast absentee ballots that tipped the scales in favor of the amendment while one member submitted his vote late and, thus, the decision to support a constitutional amendment passed 12-to-11.

The constitutional amendment, if enacted, would establish a single, statewide standard for eminent domain. The use of a single standard was developed because communities often have different qualifications for what they consider blighted property. What may be considered a blighted property in Cleveland might not fulfill the qualifications for a blighted property in Cincinnati. Therefore, many state legislators, such as Representative Bill Seitz and Senator Tim Grendell, have supported the legislation because it would more closely align county and city governments about what is considered a blighted, or dilapidated property.

“In a word, private property rights must be protected the same in Ashtabula as in Zanesville,” said Seitz in an interview with Columbus’ This Week. “Of all the task force recommendations, none is more important than the proposed constitutional amendment.”

The task force, which met extensively for more than six months, focused upon three different types of seizures, those for economic development, for urban renewal and for traditional uses, such as the building of roads, government facilities and railroads. If enacted, the amendment would also prohibit the seizure of properties simply for economic development. 

The Ohio Supreme Court ruled against the two lower courts' rulings because it questioned the use of eminent domain in this particular situation. To find out what the court said regarding its decision, please visit Source of Title, a leading online provider of title insurance news and industry analysis.

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