Monday, November 16, 2015

Lovett on Public Use and Third-Party Transfer Limits

LovettJohn Lovett (Loyola New Orleans) has posted Somewhat at Sea: Public Use and Third-Party Transfer Limits in Two US States (Book Chapter) on SSRN.  Here's the abstract:

This article analyzes how two states, Michigan and Louisiana, have defined the scope of a permissible public use for expropriation and imposed constitutional, statutory and judicial limits on state and local governmental power to expropriate private property and transfer it to other private parties and other public actors. Both states have played prominent roles in debates over the propriety of economic development takings in the last several decades.

In Michigan, the highest court famously permitted such takings in Poletown Neighborhood Council v. City of Detroit before reversing itself in County of Wayne v Hathcock. After Kelo v. City of New London, Michigan moved to impose strict constitutional prohibitions on economic development takings and strengthened compensation rights for residential property owners, residential tenants and other parties affected by expropriation. The first part of this paper traces that history and highlights the crucial role played by the constitutional framework developed by Michigan Supreme Court Justice Thomas M. Cooley in several late 19th century decisions and in his well-known treatise on constitutional law.

Louisiana enacted strict constitutional prohibitions on economic development takings and third-party transfers in reaction to Kelo. After Hurricane Katrina, however, Louisiana struggled to modify those strict limits as it became clear that the demands of post-disaster community revitalization would require a more flexible approach to blight expropriation and subsequent thirty-party transfers. Moreover, at least one state court decision threatens to create a significant loophole in Louisiana’s strict constitutional limits on third-party transfers by approving an expropriating entity’s creative, but formalistic disguise of such transfers in quasi-feudal property forms.

The article demonstrates that in states in which expropriation plays a crucial role responding to economic crises and natural disasters, courts and legislatures’ control over expropriation can reveal significant internal contradiction even as courts and legislatures display skepticism regarding the propriety of post-expropriation third-party transfers. Public use restrictions, third-party transfer prohibitions and compensation rules can prove to be highly malleable legal concepts.

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