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Overview

The Ohio Supreme Court issued its landmark decision in City of Norwood v. Horney, on July 26, 2006, reframing the standards for the exercise of eminent domain powers in Ohio. The Ohio Supreme Court, in a unanimous decision, held it violated Ohio’s constitution to take property solely to achieve economic benefits. The ruling reversed the First District Court of Appeals which had upheld the City of Norwood’s authority to use eminent domain to take property in a Cincinnati suburb for redevelopment purposes from unwilling home owners. Their property was not blighted, but instead was in danger of “deteriorating” into blight. ____ Ohio St.3d ___, 2006-Ohio-3799.

The Decision

The Ohio Supreme Court is the first state supreme court to examine the issue of whether economic development alone is a proper public purpose for appropriating property following the U.S. Supreme Court’s decision in Kelo v. City of New London last Summer. 1255 S. Ct. 2655, 2005 U.S. LEXIS 5011 (June 23, 2005)  Although the U.S. Supreme Court’s Kelo decision held that economic development in and of itself is a valid public purpose for which property may be taken under the U.S. Constitution, the Court acknowledged that States were free to adopt more stringent standards. The Ohio Supreme Court, acting on this invitation, held that under the Ohio Constitution, economic development alone is not a valid public purpose for exercising eminent domain powers.

The key holdings of the Horney decision are:

1. It is unconstitutional to take property through the exercise of eminent domain to obtain a financial or economic benefit alone. Thus, taking property solely for economic development purposes does not satisfy the public-use requirements of Section 19, Article 1 of the Ohio Constitution. This decision sets Ohio apart from the U.S. Supreme Court’s decision in Kelo which ruled that under the U.S. Constitution economic development is a valid public purpose for which private property can be taken.
2. Statutes that give appropriating entities the right to take property based on the standard that is in a “deteriorating area” are unconstitutional. The term “deteriorating area” is void for vagueness because it does not give property owners fair notice of the standard for taking property. The term also imper-missibly incorporates speculation about the future condition of the property, rather than basing the appropriation on the condition of the property at the time of the taking. Eliminating a “deteriorating area” does not satisfy the public use requirements of Section 19, Article 1 of the Ohio Constitution.
3. Courts in Ohio will apply a heightened scrutiny and will not simply yield to the discretion of legislative bodies when reviewing statutes and ordinances that regulate the use of eminent domain powers. The actions of legislative bodies will be afforded some deference, but courts will be the final arbiters of whether those actions satisfy proper public purpose requirements.
4. A court can enjoin or stop the appropriating entity from taking and using the property appropriated during the pendency of an appeal.

Standards for Future Eminent Domain Cases

The Ohio Supreme Court stated that although economic factors may be considered in determining whether private

property may be appropriated, the fact that the appropriation would provide economic benefit, standing alone, does not satisfy the public use requirement of Section 19, Article 1 of the Ohio Constitution. 

The Horney decision reaffirmed that a municipality can take a slum, blighted or deteriorated property and it remains proper to do so when the city transfers the property to a  private party for redevelopment. Accordingly, the economic benefits of a project may be considered as long as the eminent domain actions seek to appropriate blighted property, or seek to take property for any other traditionally recognized public purposes, including roads, hospitals, parks, etc. 

While the Court recognized the “reluctance of courts” to intervene in legislative determinations that find a “sufficient public benefit supported the taking”, the Court held that the legislative body cannot invoke its police powers to “virtually immunize all takings from judicial review.”

Finally, although the Court held that a property owner may seek a stay to prevent the taking of property until the appellate process is complete, the process for reviewing such cases will be expedited.

Conclusion

In Kelo, the U.S. Supreme Court held that courts must give deference to local government’s decisions to take property for economic development, within certain specified guidelines. The Ohio Supreme Court found today in Horney that the Takings Clause in Ohio’s Constitution is more narrow and does not have the “sweeping breadth” that the U.S. Supreme Court upheld last year in Kelo under the Fifth Amendment.

For More Information

Please contact Thomas J. Coyne, Robert M. Curry, Darrel R. Davison, William W. Jacobs, Scott A. King, Thomas J. Kirkwood, Mario J. Suarez, or Robin M. Wilson or any member of our Business Litigation or Real Estate practice groups for more information.

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