Authors: Damon Root
Not since the New Deal had a federal appellate court (the highest level short of the U.S. Supreme Court) struck down an economic regulation for violating the economic liberties secured by the Fourteenth Amendment. And it had done so in spite of the extraordinary judicial deference it was required to extend to lawmakers under the rational-basis test. “This measure,” the Sixth Circuit announced, “is not animated by a legitimate governmental purpose and cannot survive even rational basis review.”
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IJ had just scored a landmark victory, but there was no time to rest on its laurels. Indeed, the game was now afoot. In Oklahoma, a similar IJ lawsuit was then underway against that state's nearly identical casket-sale licensing regulation. But in an unwelcome twist, the U.S. Court of Appeals for the Tenth Circuit voted in August 2004 to uphold the Oklahoma statute in the case of
Powers v. Harris.
To add insult to injury, Mellor was blindsided by that outcome. “During the oral argument it went so well in our favor, in terms of just the dynamic in the courtroom and everything,” he recalled, “that the attorney for the state of Oklahoma came up afterwards and all but admitted defeat.” As Mellor later acknowledged, he felt great when he stepped out of the courtroom that day. “And then not only did we lose, we lost three-zip.”
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In retrospect, that feeling of optimism makes sense. In its ruling, the Tenth Circuit essentially agreed with IJ's main argument and conceded the state's failure to provide any sort of rational public health or safety justification for its licensing law. But then the Tenth Circuit turned the tables and said the government had yet another arrow in its quiver of conceivable justifications: the economic protection of the state's funeral industry from unwelcome competition. “While baseball may be the national pastime of the citizenry, dishing out special economic benefits to certain in-state industries remains the favored pastime of state and local governments,”
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the Tenth Circuit observed. And under the judicial deference demanded by the rational-basis test, the court held, those lawmakers are fully entitled to dish out the goods. “As a creature of politics, the definition of the public good changes with the political winds,” the Tenth Circuit wrote. “There simply is no constitutional or Platonic form against which we can (or could) judge the wisdom of economic regulation.”
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Put differently, it remained illegal in Oklahoma to sell a box without a government-issued license.
No lawyer likes to lose a big case, and this was no exception. But Mellor and his colleagues did identify one potential upside to the Tenth Circuit's ruling. As Clint Bolick had argued in
Unfinished Business,
from the perspective of a public-interest litigator, every losing case is also a potential winner, since that loss may still be appealed to a higher court, and perhaps even reach the U.S. Supreme Court. So the loss in
Powers v. Harris
still fit within the organization's long-term litigation strategy. What's more, IJ's loss at the Tenth Circuit had created what's known as a “circuit split,” meaning the Tenth Circuit and the Sixth Circuit had now issued clashing opinions on the same legal issue, a fractured state of affairs that normally prompts the Supreme Court to step in to settle the controversy.
Thanks to IJ's litigation, the stage was now at least partially set for a showdown before the highest court in the land. The Tenth Circuit's ruling “creates a split on the basic question of whether pure economic protectionism is a legitimate state interest under the rational basis test,” IJ told the Supreme Court in a November 2004 petition seeking review of the case. “If permitted to stand, the Tenth Circuit's decision would drain rational basis review of all content and would convert the right to earn a livingâwhich this Court has consistently recognized since its earliest daysâinto a mere privilege.”
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Unhappily for IJ, however, the justices declined to take the case. As is customary, the Court gave no explanation for its rejection of the appeal, though the most likely reason is the Court's deeply ingrained habit of judicial restraint. The justices did not wish to enter the thicket.
The Institute for Justice lost that battle, but the larger campaign is far from over. In a span of just five years, IJ's lawyers secured not only a landmark victory for economic liberty at the Sixth Circuit, they presented the Supreme Court with a clear circuit split on the same issue. Those libertarian precedents remain on the books, ready to be used
by a future Supreme Court that is willing to grapple with the issue of economic liberty and the Fourteenth Amendment.
“Taken for a Public Use”
The rational-basis test has been a thorn in the libertarian side since the New Deal. It has been a pain in property-rights cases for nearly as long.
According to Footnote Four of the famous 1938
Carolene Products
decision, while the Supreme Court would henceforth presume the constitutionality of economic regulations and grant significant deference to the lawmaking bodies that passed them, “more exacting judicial scrutiny” would still be appropriate in other types of cases. For instance, “when legislation appears on its face to be within a specific prohibition of the Constitution, such as those of the first ten amendments,”
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the Court would carefully examine the government's actions to make sure no part of the Bill of Rights had been violated.
Or at least that's what the Supreme Court said. What the Court has done is something different. Consider the issue of eminent domain. According to the Fifth Amendment, “private property [shall not] be taken for public use without just compensation.” Also known as the Takings Clause, this provision authorizes the government to wield the power of eminent domain in limited circumstances. In the classic example, the government turns to eminent domain when it needs to acquire privately owned land in order to build a road or a bridgeâtwo undeniable instances of use by the publicâand then compensates the former landowner at fair market value from the public treasury.
Yet in the 1954 case of
Berman v. Parker,
the Supreme Court ignored its own
Carolene Products
framework and quietly introduced rational-basis-style deference into its treatment of the Takings Clause, despite the fact that the clause is clearly a part of the Bill of Rights. At issue in
Berman
was a so-called slum clearance
measure from Washington, D.C. Essentially, government officials had determined that a poor neighborhood in southwest Washington was beyond repair, and they therefore wanted to seize all privately held property in the area, raze it, and start over from scratchâan approach also known as “urban renewal.” Among the properties targeted for condemnation was a department store, whose owner loudly objected to the government's plans to bulldoze his non-blighted, non-slum property.
Writing for a unanimous Supreme Court, Justice William O. Douglas took the government's side. According to Douglas, the judiciary had no business second-guessing whether or not a particular exercise of the eminent domain power counted as a valid public use. That determination rested solely with the legislature. “When the legislature has spoken,” Douglas wrote, “the public interest has been declared in terms well nigh conclusive.”
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Indeed, he declared, so long as just compensation has been paid, “the rights of these property owners are satisfied.”
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Although the public use requirement is a “specific prohibition of the Constitution,” the
Berman
Court ignored Footnote Four and failed to provide “more exacting judicial scrutiny” on its behalf.
Unsurprisingly, the lawyers at the Institute for Justice have a fundamental disagreement with this deferential approach, and from day one they were on the lookout for a property rights case strong enough to challenge the status quo. They hit the jackpot in 1994 when they took on the matter of
Casino Reinvestment Development Authority v. Coking.
The case originated in Atlantic City, New Jersey, where local authorities sought to condemn the home of an elderly widow named Vera Coking, who lived just off the city's famous beachfront boardwalk, in order to turn her land into a limousine parking lot for the neighboring Trump Plaza, the high-rise hotel and casino owned by real estate tycoon Donald Trump. As Coking saw it, there was nothing
remotely public-minded about the government's demolishing her home of more than thirty years in order to provide extra parking spots for Trump's customers. The lawyers at the Institute for Justice could not have agreed more, so they took up Coking's case, fought it out in court, and ultimately prevailed, allowing her to remain in her home.
It was a flagrant example of eminent domain abuse, and it was also precisely the sort of David against Goliath story that journalists love to cover. As a result, IJ also won a resounding victory in the court of public opinion, earning sympathetic coverage from outlets ranging from
The Economist,
which called it a battle between those who value “thrusting, self-promoting moguls” and those who value “small businesses, families and property rights,”
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to the
New York Times,
which described IJ's courtroom triumph with the words “today, the little guys won.”
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But that publicity also had far-reaching consequences that extended well beyond the Atlantic City boardwalk. Some 250 miles to the north, in the modest city of New London, Connecticut, a small band of property owners were fighting their own uphill battle to save their homes and neighborhood from the forces of eminent domain. Once those folks learned about IJ's victory over Trump, they knew right where to turn for the legal help they so desperately needed.
The Little Pink House
The saga officially began on February 3, 1998, when the pharmaceutical company Pfizer announced its plans to build a giant new research and development facility in New London, Connecticut. As part of the deal, city officials agreed to refurbish the surrounding area, including the adjacent neighborhood of Fort Trumbull, a ninety-acre working-class enclave. The idea was for New London to buy out existing property owners and then turn their land over to a private developer who would construct a new
luxury hotel, apartment buildings, office towers, and other upscale amenities to complement the new Pfizer facility. This redevelopment scheme was supposed to lure new businesses to the area, create new jobs, and broaden the tax base.
The driving force behind this massive project was the New London Development Corporation (NLDC), a quasi-public entity endowed by the city with tremendous governmental powers, ultimately including the authority to seize private property on the city's behalf via eminent domain. Heading up the NLDC at this time was a woman named Claire Gaudiani, who also served as the president of nearby Connecticut College. As it happened, Gaudiani had a number of close ties to Pfizer's local power brokers, a friendly arrangement that helped smooth the eventual real estate deal. For one thing, her husband was a Pfizer employee who worked under company executive George Milne Jr., president of Pfizer's central research division. For another, Milne sat on the board of trustees at Connecticut College. Based on that relationship, Milne accepted Gaudiani's offer to join the NLDC board in 1997. Within a year, Milne was pushing Pfizer to partner with the NLDC and build its new research and development facility in New London.
Among the local residents who took a dimmer view of the city's plans was Susette Kelo, a registered nurse and divorced mother of three. In August 1997, Kelo had purchased a run-down house in Fort Trumbull, which she picked for its stunning views of the nearby Thames River, and had immediately gone to work fixing it up. As she would tell the press time and again as the conflict unfolded, she loved her “little pink house” and did not want to see it bulldozed by the city for the benefit of Pfizer and other private interests. Her principled opposition would eventually form the backbone of a local property rights movement that in turn sparked the high-profile lawsuit against the redevelopment scheme.
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Enter the Bull
Senior Attorney Scott Bullock has been a fixture at the Institute for Justice from day one. A self-described libertarian since high school, as an undergraduate at Grove City College in western Pennsylvania Bullock studied Austrian economics, a branch of the field closely associated with such free-market thinkers as Friedrich Hayek and Ludwig von Mises. At the same time, he later explained, “I always had an interest in legal issues and in particular in the Constitution, and I saw constitutional law as a way of combining the principles of liberty with the ability to do something about it.”
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That growing interest led him to enroll in law school at the University of Pittsburgh in 1988, though it was during his summer breaks that he really laid the foundation for his future legal career. During his first summer off from law school, Bullock served as the inaugural intern at the Cato Institute's new Center for Constitutional Studies. The next year, Bullock spent the summer working for Clint Bolick, who had since left the Reagan administration in order to practice law at the Landmark Legal Foundation's Center for Civil Rights. One day over lunch, Bolick told him about his and Chip Mellor's plans to open an explicitly libertarian public interest law firm and said Bullock should come work for them once he had his law degree in hand. On the spot, Bullock made up his mind to do precisely that.
Now fast-forward to May 2000. Bullock was working at his desk one day when he came upon a letter mailed to the Institute for Justice by a man named Peter Kreckovic of New London, Connecticut. Kreckovic turned out to be a local artist working with Susette Kelo and several of her neighbors in their fight against New London's proposed use of eminent domain against their properties. After that group learned about IJ's role in the Trump fight, Kreckovic was deputized to draft a letter to the organization asking for its help.