By William Branigin
Washington Post Staff Writer
Thursday, June 23, 2005; 3:02 PM

The Supreme Court today effectively expanded the right of local governments to seize private property under eminent domain, ruling that people's homes and businesses -- even those not considered blighted -- can be taken against their will for private development if the seizure serves a broadly defined "public use."

In a 5-4 decision, the court upheld the ability of New London, Conn., to seize people's homes to make way for an office, residential and retail complex supporting a new $300 million research facility of the Pfizer pharmaceutical company. The city had argued that the project served a public use within the meaning of the Takings Clause of the Fifth Amendment to the Constitution because it would increase tax revenues, create jobs and improve the local economy.

A group of homeowners in New London's Fort Trumbull area had fought the city's attempt to impose eminent domain, arguing that their property could be seized only to serve a clear public use such as building roads or schools or to eliminate blight. The homeowners, some of whom had lived in their house for decades, also argued that the public would benefit from the proposed project only if it turned out to be successful, making the "public use" requirement subject to the eventual performance of the private business venture.

The Fifth Amendment also requires "just compensation" for the owners, but that was not an issue in the case decided today because the homeowners did not want to give up their property at any price.

Writing for the majority, Justice John Paul Stevens said the case turned on the question of whether New London's development plan served a "public purpose." He added, "Without exception, our cases have defined that concept broadly, reflecting our longstanding policy of deference to legislative judgments in this field."

The majority endorsed the view that local governments are better placed than federal courts to decide whether development projects serve a public purpose and will benefit the community, justifying the acquisition of land through eminent domain. In his opinion, Stevens wrote that "for more than a century," the high court has favored "affording legislatures broad latitude in determining what public needs justify the use of the takings power."

New London officials "were not confronted with the need to remove blight in the Fort Trumbull area, but their determination that the area was sufficiently distressed to justify a program of economic rejuvenation is entitled to our deference," Stevens wrote. "The City has carefully formulated an economic development plan that it believes will provide appreciable benefits to the community, including--but by no means limited to--new jobs and increased tax revenue."

Stevens added that "because that plan unquestionably serves a public purpose, the takings challenged here satisfy the public use requirement of the Fifth Amendment."

He was joined in that view by justices Anthony Kennedy, David H. Souter, Ruth Bader Ginsburg and Stephen G. Breyer.

Dissenting were justices Sandra Day O'Connor, Antonin Scalia and Clarence Thomas, as well as Chief Justice William H. Rehnquist.

In a strongly worded dissenting opinion, O'Connor wrote that the majority's decision overturns a long-held principle that eminent domain cannot be used simply to transfer property from one private owner to another.

"Today the Court abandons this long-held, basic limitation on government power," she wrote. "Under the banner of economic development, all private property is now vulnerable to being taken and transferred to another private owner, so long as it might be upgraded -- i.e., given to an owner who will use it in a way that the legislature deems more beneficial to the public -- in the process."

The effect of the decision, O'Connor said, "is to wash out any distinction between private and public use of property -- and thereby effectively to delete the words "for public use" from the Takings Clause of the Fifth Amendment."

The ruling has broad potential implications nationwide, giving cities wider authority to condemn homes and businesses to make way for more lucrative developments.

According to the Institute for Justice, a Washington-based property rights group that represented the Fort Trumbull homeowners, local governments have used or threatened to use eminent domain to transfer property to private parties in more than 10,000 instances between 1998 and 2002.

Over the years, the power of local governments to take private property through eminent domain has gradually grown. Although that authority historically had been used to acquire land needed for roads, bridges or other infrastructure fitting the "public use" requirement, the Supreme Court in 1954 broadened the definition of the term to allow local governments to condemn slums or other blighted areas for the purpose of redevelopment.

The court's ruling today upheld the Connecticut Supreme Court, which had ruled 4-3 that New London's property condemnations were constitutional.

The case had been brought by nine holdout owners of 15 homes in the Fort Trumbull area, which sits on a peninsula jutting into the Thames River and includes a total of about 115 privately owned properties.

Among the holdouts was Susette Kelo, who moved into Fort Trumbull in 1997 and made major improvements to her house, which she prized for its water view. Another petitioner was Wilhelmina Dery, who was born in her Fort Trumbull house in 1918 and has lived in it with her husband for the past 60 years. In fact, the home, originally purchased by her grandmother, has been in her family for more than a century.

Although the area is described as a working-class neighborhood, the majority opinion written by Stevens noted that "there is no allegation that any of these properties is blighted or otherwise in poor condition; rather, they were condemned only because they happen to be located in the development area."

New London adopted its redevelopment plan in January 2000, two years after Pfizer announced plans to build a new research facility nearby. The plan called for a waterfront hotel and conference center surrounded by restaurants and stores, marinas for recreational and commercial use, 80 new residences in an urban neighborhood, office space for research and development, parking lots and other retail services. The site also includes an existing state park and space reserved for a new U.S. Coast Guard Museum.

During oral arguments before the court, it emerged that the land parcels at issue were earmarked for office space and "support" for the park or marina, possibly meaning a parking lot.

In a separate decision, the Supreme Court today rejected a bid by Exxon Mobil Corp. for a new trial in a class-action lawsuit filed by gas station owners. The 5-4 ruling means the world's largest publicly traded oil company will have to pay the station owners up to $1.3 billion in damages for failing to make good on discounts it promised them on fuel purchases over several years.

Exxon, based in Irving, Tex., had sought a new trial and asked the court to overturn a ruling by the U.S. Court of Appeals for the 11th Circuit on grounds that some of the station owners were improperly included in the class-action suit. The suit was originally filed in 1991 on behalf of more than 10,000 station owners in 34 states and Washington, D.C.

Justice Kennedy wrote the opinion for the court's majority, which also included Rehnquist, Scalia, Souter and Thomas. Dissenting were Stevens, Breyer, Ginsburg and O'Connor.