Amicus Curiae Brief — City of Milwaukee Post No. 2874 Veterans of Foreign Wars v. Redevelopment Authority of Milwaukee

Supreme Court, U.S.

FILED

No. 09-1204 MAY 5 ~ 2010

i ee OF THE CLERIC

Sn The

Supreme Court of the Anited States

CITY OF MILWAUKEE POST NO. 2874 VETERANS OF

FOREIGN WARS OF THE UNITED STATES,

Petitioner.

f

REDEVELOPMENT AUTHORITY OF THE

CITY OF MILWAUKEE,

Respondent

On Petition For A Writ Of Certiorari

To The Supreme Court Of Wisconsin

BRIEF OF AMICUS CURIAE INSTITUTE FOR

JUSTICE IN SUPPORT OF PETITIONER

ILYA SOMIN INSTITUTE FOR JUSTICI

Associate Professor DANA BERLINER*

GEORGE MASON UNIVERSITY WILLIAM H, MELLOR

SCHOOL OF LAW ScoTr BULLOCK

3301 Fairfax Drive 901 North Glebe Road

Arlington, VA 22201 Suite 900

(703) 993-8069 Arlington, VA 22203

(703) 682-9320

UBerliner@1)j.org

‘Counsel of Record

Counsel for Amicus Curiae

»>CKLE LAW BRIEF PRINTING CO. (800) 225-6964

OR CALL COLLECT (402) 342-2851

QUESTIONS PRESENTED

Does the Just Compensation Clause of the

Fifth Amendment permit Wisconsin to use the

“undivided-fee” rule to completely deny a lease

holder any compensation whatsoever for the

taking of its property?

Does the Due Process Clause of the Fourteenth

Amendment allow states to deny owners any

compensation whatsoever for the taking of their

property without allowing them to present any

evidence of its value?

Page

QUESTIONS PRESENTED ......................... cece ee ees

TABLE OF AUTHORITIES ..........................00000 iv

INTEREST OF AMICUS CURIAE....................04.. ]

STATEMENT OF THE CASE. ................c cece ceeeee eee 2

REASONS FOR GRANTING THE PETITION..... 2

SITE oi vns ccenkdluncecedcussacananesasacnasstrasaenguiannenvonne 4

I.

(Il.

TABLE OF CONTENTS

THERE IS A MAJOR SPLIT OF AU-

THORITY BETWEEN THE HIGHEST

COURTS OF NUMEROUS STATES, AND

SEVERAL FEDERAL COURTS OF AP-

PII cn siacu valet a sakcinsvudueubensentsuaneadaxacnnusadastavnses

THE RESOLUTION OF THIS ISSUE IS

IMPORTANT TO NUMEROUS NON-

PROFIT, SMALL BUSINESS, AND LOW-

INCOME LEASEHOLDERS AROUND

Se SINE Gants uinchbchsncss naevsssencsscnaeceenenssst

THE UNDIVIDED-FEE RULE CON-

FLICTS WITH BASIC PRINCIPLES OF

JUST COMPENSATION EMBEDDED IN

THIS COURT’S PRECEDENTS .................

A. The Undivided-Fee Rule Violates The

Rule That Owners Of Condemned

Property Are Entitled To Fair Market

Value Compensation

B. ‘The Undivided-Fee Rule Forces. Indi-

vidual Property Owners To Bear Public

Burdens That Should Be Borne By The

Public As A Whole

14

11]

TABLE OF CONTENTS — Continued

Page

IV. THE COURT SHOULD ALSO GRANT A

WRIT OF CERTIORARI ON THE PETI-

TIONER’S DUE PROCESS CLAUSE

RINE ct os cnkcarrsavarcusioexatecan.vientemouaaceemeest= 19

A. The Due Process Clause Gives Prop-

erty Owners The Right To Present

Evidence Of The Value Of Their Prop-

erty In Eminent Domain Proceedings... 19

B. The Wisconsin Supreme Court Creates

A Split With The Fifth Circuit

CONCLUSION

TABLE OF AUTHORITIES

CASES

Alaska State Housing Auth. v. DuPont, 439

P.2d 427 (Alaska 1968)

Arkansas State Highway Comman. v. Fox, 32:

S.W.2d 81 (Ark. 1959)

Arlen of Nanuet, Inc. v. State, 258 N.E.2d 890

(N.Y. 1970)

Armstrong v. United States, 364 U.s. 40

(1960) :

A.W. Duckett & Co. v. United States, 266 U.S.

149 (1924)

Boston Chamber of Commerce v. City of Boston

217 U.S. 189 (1910)

Bragg v. Weaver, 251 U.S. 57 (1919)................ccseseees

City of Baltimore v. Latrobe, 61 A. 203 (Md.

City of Chicago v. Anthony, 554 N.E.2d 1381

(Ill. 1990)

City of Des Moines v. Housby-Mack, Inc., 687

N.W.2d 551 (Iowa 2004)

Cily of Greenwood v. Psomas, 155 S.E.2d 310

(S.C. 1967)

City of Milwaukee Post No. 2874 Veterans of

Foreign Wars v. Redevelopment Auth., 746

N.W.2d 536 (Wis. Ct. App. 2008) ........................ 9,14

TABLE OF AUTHORITIES — Continued

Page

City of Milwaukee Post No. 2874 Veterans of

Foreign Wars v. Redevelopment Auth., 768

PE Pe FO COIR BO vin vcecnscnsncccoverecessetsce@, 4, 9, ES

City & County of Honolulu v. Market Place,

Lde., O27 F208 7 UPEEW. VST) .....0.cccccccescccveesesss ieckisinoseen

Commonwealth v. Sherrod, 367 S.W.2d 844 (Ky.

Cornell-Andrews Smelting Co. v. Boston &

Providence R.R. Corp., 95 N.E. 887 (Mass.

1911)

County of Hennepin v. Holt, 207 N.W.2d 723

(Minn. 1973)

County of Wayne v. Hathcock, 684 N.W.2d 765

(Mich. 2004)

First English Evangelical Lutheran Church v.

County of Los Angeles, 482 U.S. 304 (1987) 14

Gallatin Hous. Auth. v. Chambers, 362 S.W.2d

pe By EL ee A 5 ne re 6

Garella v. Redevelopment Auth., 196 A.2d 344

(Pa. 1964)

Gwathmey v. United States, 215 F.2d 148 (5th

Cir. 1954)

Harco Drug, Inc. v. Notsla, Inc., 382 So. 2d 1

RR ee ea sees Te

Hughes v. City of Cincinnati, 195 N.E.2d 552

v1

TABLE OF AUTHORITIES — Continued

Page

Jenkins v. McKeithen, 395 U.S. 411 (1969) ............... 19

Kelo v. City of New London, 545 U.S. 469

(11) ee Tr iene :. 8, 12

Kirby Forest Indus., Inc. v. United States, 467

U.S. 1 COR eas ,................. 3, 14,15

Lennep v. Mississippi State Highway Comm’n.,

SAT SO. Be ee ag ierircicccccse ccs cccccsssssesensoD

Lingle v. Chevron, Inc., 544 U.S. 528 (2005) ............. 17

Martin v. Hunter’s Lessee, 14 U.S. (1 Wheat.)

SOG Ce rein onsvcnsccee sc sc cece cecncee 7

Monongahela Navigation Co. v. United States,

CR 9

Most Worshipful Grand Lodge of Free &

Accepted Masons v. Norred, 603 So. 2d 996

(Ala. Tie ,......................... 13

Moore v. Kan. Tpk. Auth., 317 P.2d 384 (Kan.

Nat'l Adver. Co. v. State, 611 So. 2d 566 (Fla.

Dist. Ct. App. 1992)...... ia enveccccoesececsscesss 5

Nebraska v. United States, 164 F.2d 866 (8th

Cane, Fe ero eccceccccncc secs ccsccecccees 6

N.J. Sports & Exposition Auth. v. Borough of

East Rutherford, 348 A.2d 825 (N.J. Super.

Ct. Law Div. 1975)........ TEN gins a Bees 5

Olson v. United States, 292 U.S. 246 (1934).............. 16

Palozzolo v. Rhode Island, 533 U.S. 606 (2001)........ 18

Vil

TABLE OF AUTHORITIES — Continued

Page

People ex rel. Dep't of Pub. Works v. Lynbar,

Inc., 62 Cal. Rptr. 320 (Cal. Ct. App. 1967).............. 6

Poletown Neighborhood Council v. City of

Detroit, 304 N.W.2d 455 (Mich. 1981).............. 12,13

State v. Brown, 531 P.2d 1294 (Utah 1975)................. 5

State v. Burk, 265 P.2d 783 (Ore. 1954 ).........0.0c0csc00000: 6

State v. Cooper, 162 S.E.2d 281 (W.Va. 1968)..............5

State v. Cowan, 103 P.3d 1 (eV. ZOO) cscs cscccccssecessonses 6

State v. D&J Realty Co., 229 So. 2d 344 (La.

State v. Hy-Grade Auto Court, 546 P.2d 1050

(ivMiont. L970) digs Saas che aviawaEseh Cane eae tons en Sian take ssn at ee aebee ean o

State v. Mehta, 180 P.3d 1214 (Okla. 2008)................. 5

State v. Montgomery Circuit Court, 157 N.E.2d

State v. Platte Valley Pub. Power & Irrigation

Dist., 23 N.W.2G GOO CNeG. LOGS cassis ccccsecsisnssecsenacsd

State v. Spencer, 583 P.2d 1201 (Wash. 1978) ............. 6

State v. Ware, 86 S.W.3d 817 (Tex. App. 2002)............. 6

State ex rel. McCaskill v. Hall, 28 S.W.2d 80

i Ri >.) eee Rune Keaea pagans een oe geue eee aere eee 6

State Highway Comm’r v. Woodman, 115

PU Wee DO URRICE:. TIE) esc sisssivicccctcneccmccasscccas. Peers

United States v. 6.45 Acres, 409 F.3d 139 (3d

Ce I vvvevecccceccelendeu euckcseon ee 6

Vlll

TABLE OF AUTHORITIES — Continued

Page

United States v. 50 Acres of Land, 469 U.S. 24

cic cees sacsnesdvtaa ey nee aeaak as ended me 15,16

United States v. 480.00 Acres of Land, 557 F.3d

Re 6 ee ee ako ise osietoneeee o)

United States v. 499.472 Acres, 701 F.2d 545

DC OE So erectus citvesc chali conan ck sees beatae 6

United States v. 564.54 Acres of Land, 441 U.S.

Se oye cack pads acy antecedent 4

United States v. City of New York, 165 F.2d 526

OR ai WI vase hic die ndevicier's reareacecing bndnn date eocenaiee 6

United States v. Commodities Trading Corp.,

ee ee a ivectic etch etn ccsscnadsaceddpenticentetovanchs 16

United States v. Corbin, 423 F.2d 821 (10th Cir.

Dosa iach nieve sais aes nods do eusouie benaade cae ta sea 6

United States v. Gen. Motors Corp., 323 U.S.

gt 5k | RAND ORO ANA LACE RANT ATOR ET REA SCR Mie 16

United States v. Miller, 317 U.S. 369 (1943).............. 16

United States v. Petty Motor Co., 327 U.S. 372

CE ae ieres acces tenn eeks ese uaa aa eae ee ae 16

United States v. Seagren, 50 F.2d 333 (D.C.

West Brandt Found., Inc. v. Carper, 652 P.2d

BP CRB iicivinnsesctncvscencesticiesumeeaeeaaaeenuen 13

RULES

gM ae, He See | SRR re Be ere Crete RRR A RAEN ERO ET 72 28

TABLE OF AUTHORITIES — Continued

OTHER PUBLICATIONS

OU Trustees Approve Controversial $1 Lease

For Retirement Community Site, Athens News

(Athens, Ohio), June 27, 2004, available at

http://www.athensnews.com/news/local-news/

14586-ou_trustees_approve_controversial_1_

lease_for

Brief for Becket Fund for Religious Liberty as

Amicus Curiae in support of Petitioners, (No.

04-108), 2004 WL 2787141

James W. Ely, Jr., “Poor Relation” Once More:

The Supreme Court and the Vanishing Rights

of Property Owners, Cato Sup. Cr. Rev. 39

Maria Galo, Condo Plan Threatens Cosme-

tology School Lease, CHI. TRIBUNE, July 7,

2000

Peter Goonan, Social Center Signs $1 Lease,

THE REPUBLICAN (Springfield, Mass.), Feb. 23,

2010, available at http://www.masslive.com/

springfield/republican/Andex.ssf ?/base/news-27/

126691523080170.xml&coll=1

Alex Hummel, Vet Museum Start Pushed Back,

OSHKOSH NORTHWESTERN (Oshkosh, Wis.), Aug.

TER + RAS ER ees rel ae min PP UNE Sh MERC te CAR 10

Kimbriel Kelly, Native American Art Gallery

Proposed, CHI. DAILY HERALD, Sept. 15, 2004

TABLE OF AUTHORITIES — Continued

Dan Monk, Another Eminent Domain Fight

Gets Ugly, Bus. COURIER (Cincinnati, Ohio),

May 21, 2004

Kieran Nicholson, Carrying On After Life

Carried Off A Resettled Katrina Evacuee

Faces Losing Her New Home While Fighting

For An Insurance Claim. Still, She’s Grateful

For Each Day, DENVER Post, Aug. 29, 2007......

Dan O’Kane, Caddie Improves Kuehne’s Game,

TULSA WORLD, JUMES G, LOD .. «0.6 ..cscccccccecscsessssess.

Wendell E. Pritchett, The “Public Menace” of

Blight: Urban Renewal and the Private Uses

of Eminent Domain, 21 YALE L. & POLICY

ne ded eid aakaes

Larry Rohter, Avant Garde Film Group Gets

New Home, Cheap, N.Y. TIMES, May 27, 2009 ..

Ilya Somin, Controlling the Grasping Hand:

Economic Development Takings after Kelo, 15

Sup. CT. Econ. Rev. 183 (2007)

Ilya Somin, Overcoming Poletown: County of

Wayne v. Hathcock, Economic Development

Takings, and the Future of Public Use, 2004

pe Re ae a” |

John Warren, City May Be Building Dredge

Site Where Shopping Center Sits, VIRGINIAN-

Pr es Gis Bic iivincsrencndccncnccsrsesnsstanvecnaese

CORREO EEE OEE EEE EERE HEED HEHEHE EROS HEEEO EEO HE EES

Page

ve iat

ads 13

spans 10

‘asics 13

INTEREST OF THE AMICUS CURIAE'

The Institute for Justice (IJ) is a non-profit,

public interest law center committed to defending the

essential foundations of a free society and securing

the constitutional protections necessary to ensure

individual liberty. A central pillar of IJ’s mission is to

protect property rights, both because an individual’s

control over his own property is a tenet of personal

liberty and because property rights are inextricably

linked to all other civil rights.

IJ is the nation’s leading legal advocate against

the abuse of eminent domain. IJ represented the

property owners in Kelo v. City of New London, 545

U.S. 469 (2005) and in many other federal and state

eminent domain cases throughout the co

°

wmtwrs Twn stan

si.22% = eaare , 4 oa ‘ suo

work representing and assisting condemnees, IJ has

seen the profound effects of eminent domain on

businesses and institutions that lease their premises.

It has seen, too, the lack of uniformity in the treat-

ment of condemnees and how that affects their

continued survival. IJ therefore has an interest in the

development of a consistent rule of law on what

constitutes just compensation, so that courts can

' This brief is filed pursuant to the written blanket consents

on file with this Court. No counsel for a party authored this brief

in whole or in part, nor did any person or entity, other than

Amicus or its counsel, make a monetary contribution intended to

fund the preparation or submission of this brief

>

protect people, businesses, and institutions that are

forced to undergo eminent domain.

— ¢

STATEMENT OF THE CASE

The Amicus Curiae incorporates by reference the

description of the facts outlined in the petition for

writ of certiorari. Pet. for Cert. at 6-10.

—

REASONS FOR GRANTING THE PETITION

This case presents an excellent opportunity for

this Court to address an important unresolved issue

of constitutional law, one that has caused a deep

division among state supreme courts. The question is

the status of the “undivided-fee” rule under the Just

Compensation Clause of the Fifth Amendment. The

rule, sometimes also referred to as the “unit rule,”

holds that when a property in which more than one

owner has an interest is condemned, compensation

will be awarded as if the land in question belonged to

only one person.

Some state supreme courts have applied this rule

categorically, others reject it, and still others have

accepted it only partially. Overall, some twenty-eight

state supreme courts have ruled on the question, as

have several federal circuit courts. Their approaches

3

vary greatly. This split of authority has led to

enormous confusion and regional variation over an

important constitutional issue.

The application of the undivided-fee rule in many

states severely undermines the constitutional prop-

erty rights of leaseholders that hold interests for

which they pay below-market rent. Such arrange-

ments are especially common among non-profit

organizations and charities, including churches. Non

profits often rent property for below-market rent

when landowners are willing to allow them to do so

out of charitable impulses. Relatively poor and

politically weak non-profits are especially vulnerable,

since such organizations are often targeted for

condemnation by local governments seeking te

increase tax revenue or satisfy the demands of

politically influential interest groups that covet their

land. Small businesses also often lease property at

below-market rates, as do many poor individuals who

obtain such arrangements with the aid of charities or

government agencies.

The use of the undivided-fee rule also often leads

to the troubling result that owners of leasehold

interests get little or no compensation for the loss of

their property. It severely undermines the _ long-

“Tjlust compensation’

means in most cases the fair market value of the

property on the date it is appropriated.” Kirby Forest

standing principle that

See cases cited in Part I, infra

Indus. Inc. v. United States, 467 U.S. 1, 10 (1984)

(quoting United States v. 564.54 Acres of Land, 441

U.S. 506, 511-13 (1979))

The rule further runs counter to the principle

that “[t]he Fifth Amendment’s guarantee that private

property shall not be taken for a public use without

just compensation was designed to bar Government

from forcing some people alone to bear public burdens

which, in all fairness and justice, should be borne by

the public as a whole.” Armstrong v. United States,

364 U.S. 40, 49 (1960). When a property owner is

denied compensation for the taking of his property

because of the undivided-fee rule, he is unques

tionably “alone .. . bear[ing] a public burden.” /d.

The Court should also grant a writ of certiorari

on the Veterans of Foreign War’s Due Process Clause

claim. By holding that the VFW had no right to

present evidence of the value of their condemned

property, the Wisconsin Supreme Court went against

Supreme Court precedent and created a split of

authority with the United States Court of Appeals for

the Fifth Circuit.

ARGUMENT

I THERE IS A MAJOR SPLIT OF AUTHOR-

ITY BETWEEN THE HIGHEST COURTS

OF NUMEROUS STATES, AND SEVERAL

FEDERAL COURTS OF APPEAL.

State supreme courts and several federal circuit

courts are deeply divided over the application of the

undivided-fee rule in takings cases. Sixteen state

supreme courts and lower courts in two other states

apply the undivided-fee rule rigidly, as the Wisconsin

’ . . }

Supreme Court did in the present case.” By contrast,

six state supreme courts and the United States Court

of Appeals for the District of Columbia Circuit, have

held that it violates the Just Compensation Clause."

Harco Drug, Inc. v. Notsla, Inc., 382 So. 2d 1, 6 (Ala

1980): Natl Adver. Co. v. State, 611 So. 2d 566, 569 (Fla. Dist

Ct. App. 1992); City & County of Honolulu v. Market Place, Ltd.,

517 P.2d 7, 14 (Haw. 1973); City of Chicago v. Anthony, 554

N.E.2a 1381, 1384 (111. 1990); State v. Montgomery Circuit Court

157 N.E.2d 577, 578 (Ind. 1959); Moore v. Kan. Tpk. Auth., 317

P.2d 384, 390 (Kan. 1957); Commonwealth v. Sherrod, 361

S.W.2d &44, 848 (Ky. 1963); State v. D&I Realty Co., 229 So. 2d

344, 347 (La. 1969); Cornell-Andrews Smelting Co. v. Boston &

Providence R.R. Corp., 95 N.E. 887, B8Y (Mass. 1911); State

Highway Comm’r v. Woodman, 115 N.W.2d 90, 92-93 (Mich

1962); County of Hennepin v. Holt, 207 N.W.2d 723, 727 (Minn

1973); Lennep v. Mississippi State Highway Comm'n., 347 So. 2d

341, 343 (Miss. 1977); N.J. Sports & Exposition Auth. v. Borough

of East Rutherford, 348 A.2d 825, 829-30 (N.J. Super. Ct. Law

Div. 1975); Arlen of Nanuet, Inc. v. State, 258 N.E.2d 890, 893

(N.Y. 1970); Hughes v. City of Cincinnati, 195 N.E.2d 552, 556

(Ohio 1964): State v. Mehta, 180 P.3d 1214, 1220 (Okla. 2008):

City of Greenwood v. Psomas, 155 S.E.2d 310, 313 (S.C. 1967);

State v. Brown, 531 P.2d 1294, 1295 (Utah 1975): State v

Cooper, 162 S.E.2d 281, 284-85 (W.Va. 1968); City of Milwaukee

Post No. 2874 Veterans of Foreign Wars v. Redevelopment Auth..,

768 N.W.2d 749, 759 (Wis. 2009).

‘ Arkansas State Highway Commun. v. Fox, 322 S.W.2d 81,

82-83 (Ark. 1959); United States v. Seagren, 50 F.2d 333, 335

(D.C. Cir. 1931) (appeal from the Supreme Court of the District

of Columbia); City of Des Moines v. Housby-Mack, Inc., 687

N.W.2d 551, 553 (lowa 2004); City of Baltimore v. Latrobe, 61 A

203, 206 (Md. 1905); State v. Platte Valley Pub. Power &

(Continued on following page)

6

Finally, courts in several states (including six state

supreme courts), as well as five federal circuit

courts, use the undivided-fee rule as a rule of

convenience but depart from it when it would lead to

inadequate compensation.

In deciding whether to grant the writ of

certiorari, this Court gives preference to cases where

“a state court of last resort has decided an important

federal question in a way that conflicts with the

decision of another state court of last resort or of a

Irrigation Dist., 23 N.W.2d 300, 311-12 (Neb. 1946); Garella v

Redevelopment Auth , 196 A.2d 344, 348 (Pa. 1964).

' Alaska State Housing Auth. v. DuPont, 439 P.2d 427, 431

(Alaska 1968); People ex rel. Dep’t of Pub. Works v. Lynbar, Inc.,

62 Cal. Rptr. 320, 327 (Cal. Ct. App. 1967); State ex rel

McCaskill v. Hall, 28 S.W.2d 80, 82 (Mo. 1930); State v. Hy-

Grade Auto Court, 546 P.2d 1050, 1053-1054 (Mont. 1976): State

v. Cowan, 103 P.3d 1, 4 (Nev. 2004); State v. Burk, 265 P.2d 783,

801 (Ore. 1954); Gallatin Hous. Auth. v. Chambers, 362 S.W.2d

270, 275-76 (Tenn. Ct. App. 1962); State v. Ware, 86 S.W.3d 817,

824 (Tex. App. 2002); State v. Spencer, 583 P.2d 1201, 1205

(Wash. 1978).

United States v. 6.45 Acres, 409 F.3d 139, 147-48 (3d Cir.

2005) (holding that the rule is not “to be applied rigidly”); United

States v. 499.472 Acres, 701 F.2d 545, 549 (5th Cir. 1983)

(holding that “where required by the special circumstances of

the case” unit rule need not be used): United States v. Corbin,

423 F.2d 821, 828 (10th Cir. 1970) (finding that “the aggregation

of the values of the separate components seems to be the most

logical manner of stating the ultimate award”); United States ¢

City of New York, 165 F.2d 526, 528 (2d Cir. 1948) (L. Hand, J.)

(noting that the unit rule is not authoritative); Nebraska v

United States, 164 F.2d 866, 868-69 (8th Cir. 1947) (holding that

the “rule is not autocratically absolute”)

United States court of appeals.” Sup. CT. R. 10(b). It

is difficult te imagine a more extensive and confusing

split among lower courts over “an important federal

question” than this one. Some twenty-eight state

supreme courts and six federal circuit courts have

ruled on the issue. They have come up with at least

three distinct approaches.

In the present case, the Wisconsin Supreme

Court acknowledged that “[sleveral courts in other

states have, as the VFW urges, departed from the

unit rule when the aggregate value of partial

interests in the condemned property exceeds the

value of an undivided interest.” City of Milwaukee

Post No. 2874 Veterans of Foreign Wars ov.

Redevelopment Auth., 768 N.W.2d 749, 760 (Wis.

2009). It cited some of the numerous divergent cases

from other jurisdictions. Jd. at 760-61.

The discord in the states over this issue

undermines the crucial function of the Constitution

as a uniform national! baseline of fundamental rights

that all states must respect. As Justice Joseph Story

explained, one of the most important reasons why

this Court has ultimate jurisdiction over federal

constitutional issues is “the importance, and even

necessity of uniformity of decisions throughout the

whole United States, upon all subjects within the

purview of the constitution.” Martin v. Hunter's

Lessee, 14 U.S. (1 Wheat.) 304, 347-48 (1816) (Story,

J.) (emphasis in original).

8

Uniformity with respect to the Just Compen-

sation Clause of the Fifth Amendment is particularly

important because this Court has long emphasized

the essential nature of this provision. It has refused

to defer to state governments in setting compen-

sation, even as it has given them more leeway on

other issues related to the Takings Clause. See, e.g.,

Kelo v. City of New London, 545 U.S. 469, 488-90

(2005) (refusing to “second guess” state determi-

nations that a particular taking serves a “public

purpose” sufficient to justify condemnation under the

Public Use Clause). As Professor James W. Ely, Jr., a

prominent historian of constitutional property rights

points out, “[fJederal courts have long insisted that

the determination of just compensation for a taking of

property is a judicial, not a legislative, responsibility.”

James W. Ely, Jr., “Poor Relation” Once More: The

Supreme Court and the Vanishing Rights of Property

Owners, 2005 Cato Sup. Cr. Rev. 39, 63. Since at

least the Nineteenth Century, this Court has empha-

sized the importance of uniformity in this area, and

the minimal scope of deference due to state and

federal legislative decisions regarding compensation:

It doves not rest with the public, taking the

property, through congress or the legislature,

its representative, to say what compensation

shall be paid, or even what shall be the

rule of compensation. The constitution has

declared that just compensation shall be

paid, and the ascertainment of that is a

judicial inquiry.

2

Monongahela Navigation Co. v. United States, 148

U.S. 312, 327 (1893).

Just as legislatures cannot determine “what shall

be the rule of compensation” under the Fifth Amend-

ment, id., state courts also cannot create wildly

inconsistent rules of compensation under the Fifth

Amendment. The Constitution cannot tolerate such

profound divergence in the application of a crucial

principle of the Bill of Rights.

The present case is an excellent vehicle for

resolving this ambiguity because the facts are

extremely clear. “[I]t is undisputed that the leasehold

interest [that the VFW lost to condemnation] is of

great monetary value.” City of Milwaukee Post No.

2874 Veterans of Foreign Wars v. Redevelopment

Auth., 746 N.W.2d 536, 543 (Wis. Ct. App. 2008),

rev'd, 768 N.W.2d 749 (Wis. 2009). And there is no

doubt that compensation was denied because of the

Wisconsin Supreme Court’s application of the

undivided-fee doctrine.

Il. THE RESOLUTION OF THIS ISSUE

IS IMPORTANT TO NUMEROUS NON-

PROFIT, SMALL BUSINESS, AND LOW.

INCOME LEASEHOLDERS AROUND THE

COUNTRY.

The application of the undivided-fee rule to cases

like this one imperils the interest of many leasehold

owners around the country. Non-profit organizations,

10

small businesses, and other leaseholders lacking in

political influence are particularly at risk.

It is common for non-profit. organizations such as

churches, charities, and veterans groups (including

the VFW) to rent property at rates below-market

value; sometimes, they are able to rent for a merely

nominal price, as occurred in the present case where

the VFW paid only $1 per year in rent for the lease

in question. Landowners frequently donate below-

market value leases to such organizations out of

charitable impulses, or even allow them to rent land

virtually for free.’ The same is also true of low income

" See, e.g., Peter Goonan, Social Center Signs $1 Lease,

THE REPUBLICAN (Springfield, Mass.), Feb. 23, 2010, available

at http://www.masslive.com/springfield/republican/Andex.ssf ?/base/

news-27/126691523080170.xml&coll=1 (non-profit community

organization gets $1 per year annual rent for valuable property

in Springfield, Massachusetts); Larry Rohter, Avant Garde Film

Group Gets New Home, Cheap, N.Y. TIMES, May 27, 2009

(heavily discounted lease for non-profit Film-Makers’

Cooperative in New York City); Kimbriel Keily, Native American

Art Gallery Proposed, CHI. DAILY HERALD, Sept. 15, 2004, at C5

($1 per year lease for non-profit art gallery); OU Trustees

Approve Controversial $1 Lease For Retirement Community Site,

ATHENS News (Athens, Ohio), June 27, 2004 ($1 per year lease

on an 80 acre property for non-profit retirement community),

available at http://www.athensnews.com/news/local-news/14586

ou_trustees

approve_controversial 1 lease_for; Alex Hummel, Vet Museum

Start Pushed Back, OSHKOSH NORTHWESTERN (Oshkosh, Wis.),

Aug. 4, 2003, at 1C ($1 per year 99 year lease for non-profit

veterans museum).

11

renters who sometimes get below-market leases with

. . ‘ze : ° 8

the aid of charities or government agencies.

Small businesses also often secure below-market

rents. Amicus Institute for Justice is aware of many

situations where a small business operates under a

favorable lease because the business spotted an up-

and-coming area before anyone else did, because the

tenant has renewed a long-term lease, because the

landlord and tenant have a_ business’ venture

together, or simply because the landlord and tenant

are friends. Any tenant with favorable below-market

lease terms will suffer when the government

exercises eminent domain and the tenant is unable to

find another property to rent on comparable terms.”

See, e.g., Kieran Nicholson, Carrying On After Life Carried

Off A Resettled Katrina Evacuee Faces Losing Her New Home

While Fighting For An Insurance Claim, Still, She’s Grateful For

Each Day, DENVER Post, Aug. 29, 2007, at 1 (heavily discounted

leases for Hurricane Katrina refugees).

” See, e.g., John Warren, City May Be Building Dredge Site

Where Shopping Center Sits, VIRGINIAN-PILOT, Sept. 28, 2008

(tenants acquired long-term leases for retail stores before area

became more popular); Dan O’Kane, Caddie Improves Kuehne’s

Game, TULSA WORLD, June 6, 1999 (golf driving-range had

below-market lease from family friend); Maria Galo, Condo Plan

Threatens Cosmetology School Lease, CHI. TRIBUNE, July 7, 2000

(school had long term lease at below-market rates); Dan Monk,

Another Eminent Domain Fight Gets Ugly, BUS. COURIKK

(Cincinnati, Ohio), May 21, 2004 (new lease for chili restaurant

would be three times rent from family member at current

location).

12

In such situations, it can easily happen that the

non-profit lessee’s interest is worth more than the fair

market value of the property in question as an

undivided unit. The property taken as a whole may

have relatively little value because of encumbrances,

regulatory violations, or other factors that do not

materially diminish the value of the non-profit’s

leasehold.

Non-profit institutions are particularly likely

targets for the sorts of “economic development”

takings that this Court ruled to be constitutional in

Kelo v. City of New London, 545 U.S. 469 (2005).

Because non-profits generally do not pay taxes on

their property and often produce little in the way of

economic development, they make tempting targets

for local governments hoping to increase tax revenue

or to boost the regional economy. See Br. for Becket

Fund for Religious Liberty as Amicus Curiae

Supporting Pet’rs, Kelo v. City of New London, 545

U.S. 469 (2005), (No. 04-108), 2004 WL 2787141, at

*8-11 & n.20 (explaining the special vulnerability of

religious non-profits and listing numerous examples

where they have been targeted by economic-

development takings). For example, numerous

churches and other non-profit institutions were

condemned in the notorious 1981 Poletown case in

Detroit, where an entire neighborhood was taken in

order to clear the way for a new General Motors

13

factory." Ilya Somin, Overcoming Poletown: County of

Wayne v. Hathcock, Economic Development Takings,

and the Future of Public Use, 2004 Micu. Sr. L. REv.

1005, 1017-18 (2004). Property owned or rented by

poor and politically weak individuals is also often

targeted for condemnation for transfer to politically

influential interest groups. See Ilya Somin, Con-

trolling the Grasping Hand: Economic Development

Takings after Kelo, 15 Sup. Cr. ECON. REv. 183, 190-

203, 267-71 (2007) (describing some of the reasons

why this occurs); Wendell E. Pritchett, The “Public

Menace” of Blight: Urban Renewal and the Private

Uses of Eminent Domain, 21 Yale L. & Policy Rev. 1

(2003) (discussing history of condemnation of prop-

erty occupied by the poor and politically weak

minoamty orniinec )

Te a ee: ee ee eee ee

Property leased by non-profit institutions is also

often exempt from taxation, and generally does not

produce as much economic development as that used

for commercial purposes. See, e.g., Most Worshipful

Grand Lodge of Free & Accepted Masons v. Norred,

603 So. 2d 996, 1000 (Ala. 1992) (holding that

property tax exemption is based on “the exclusive use

of the property at issue for religious worship, schools,

or charity” and that “[glenerally, who owns the

property at issue 1s unimportant”); West Brandt

'° This condemnation was upheld by the Michigan Supreme

Court in Poletown Neighborhood Council v. City of Detroit, 304

N.W.2d 455 (Mich. 1981), overruled by County of Wayne v.

Tlathcock, 684 N.W.2d 765 (Mich. 2004).

14

Found., Inc. v. Carper, 652 P.2d 564, 567 (Colo. 1982)

(“Eligibility for exemption is determined by exam-

ining the use to which the property is put, not the

character of the owner’).

When property leased by non-profit institutions

is condemned, as happens all too often, non-profit

organizations need compensation in order to be able

to continue their operations elsewhere. And they may

not get it if the undivided-fee rule applies. The same

is true of numerous small businesses and low-income

renters who benefit from below-market rents.

lif, THE UNDIVIDED-FEE RULE CONFLICTS

WITH BASIC PRINCIPLES OF JUST

COMPENSATION EMBEDDED IN THIS

COURT’S PRECEDENTS.

“'T|he Court has frequently repeated the view

that, in the event of a taking, the compensation

remedy is required by the Constitution.” First

English Evangelical Lutheran Church v. County of

Los Angeles, 482 U.S. 304, 316 (1987). The level of

compensation is generally determined by “the fair

market value of the property on the date it is

appropriated.” Kirby Forest Indus., Inc. v. United

States, 467 U.S. 1, 10 (1984).

In the present case, the VF'W’s property right

was unquestionably taken by the government and “it

is undisputed that the leasehold interest is of great

monetary value. City of Milwaukee Post No. 2874

Veterans of Foreign Wars v. Redevelopment Auth., 746

15

N.W.2d 536, 543 (Wis. Ct. App. 2008), rev'd, 768

N.W.2d 749 (Wis. 2009)."' Yet the VFW was denied

fair market value compensation for the condemnation

of its property interest. Indeed, it received no

compensation whatsoever. Pet. for Cert. at 1.

The application of the undivided-fee rule to this

case undermines two longstanding principles that lie

at the core of the Just Compensation Clause. These

include the mandate of fair market value compen-

sation and the rule that the Clause is intended to

“bar Government from forcing some people alone to

bear public burdens which, in all fairness and justice,

should be borne by the public as a whole.” Armstrong

v. United States, 364 U.S. 40, 49 (1960).

A. The Undivided-Fee Rule Violates The

Rule That Owners Of Condemned

Property Are Entitled To Fair Market

Value Compensation.

The Supreme Court has repeatedly held that fair

market value is the usual method for estimating the

compensation due to owners of condemned property.

See, e.g., Kirby Forest Indus. Inc. v. United States, 467

U.S. 1, 10 (1984); United States v. 50 Acres of Land,

‘' The Wisconsin Supreme Court questioned elements of the

VFW’s estimate of the lease’s value, but nonetheless “accept ed]

fer purposes of our review the VFW’s contention that its

leasehold interest had value.” City of Milwaukee Post No. 2874

Veterans of Foreign Wars, 768 N.W.2d at 755 n.10.

16

469 U.S. 24, 29 (1984): United States v. Miller, 317

U.S. 369, 374 (1943); Olson v. United States, 292 U.S.

246, 255 (1934). “Deviation from this measure of just

compensation has been required only ‘when market

value has been too difficult to find, or when its

application would result in manifest injustice to

owner or public.’” 50 Acres of Land, 469 U.S. at 29

(quoting United States v. Commodities Trading Corp.,

339 U.S. 121, 123 (1950)). No such deviation is

necessary in the present case.

Leasehold interests are property and their con-

demnation by the government must be compensated

just like that of other property rights. See, e.g.,

United States v. Gen. Motors Corp., 323 U.S. 373, 378

(1945); A.W. Duckett & Co. v. United States, 266 U.S.

149, 151 (1924). “The constitutional provision is

addressed to every sort of interest the citizen may

possess.” Gen. Motors, 323 U.S. at 378 (emphasis

added).

When a leasehold interest is condemned, “[t]he

measure of damages is the difference between the

value of the use and occupancy of the leasehold for

the remainder of the tenant’s term, plus the value of

the right to renew |lif any] ... less the agreed rent

which the tenant would pay for such use and

occupancy.” United States v. Petty Motor Co., 327 U.S.

372, 381 (1946). In this case, therefore, the

appropriate measure of fair market value compen-

sation would have been the value of the remaining

years left on the VF'W’s ninety-nine year term, minus

the $1 per year rent.

17

By applying the undivided-fee rule, the

Wisconsin Supreme Court unquestionably denied fair

market value compensation to the VFW. Indeed, it

denied it any compensation whatsoever.

It is irrelevant that the value of the building

considered as an undivided interest might be less

than sum of the individual interests that belong to

different owners. As Justice Oliver Wendell Holmes

emphasized in his classic opinion for this Court in

Boston Chamber of Commerce v. City of Boston, “the

Constitution does not require ...a parcel of land to

be valued as an unencumbered whole when it is not

held as an unencumbered whole.” 217 U.S. 189, 195

(1910). Courts must assess the value of the interest

taken from each individual separately because the

Just Compensation Clause “deals with persons, not

with tracts of land.” Jd.

B. The Undivided-Fee Rule Forces Indi-

viduai Property Owners ‘lo Bear

Public Burdens That Should Be Borne

By The Public As A Whole.

The undivided-fee rule also violates this Court’s

Just Compensation Clause doctrine by “forcing some

people alone to bear public burdens which, in all

fairness and justice, should be borne by the public as

a whole.” Armstrong v. United States, 364 U.S. 40, 49

(1960). The Court has consistently “emphasized [the]

role” of the Takings Clause in enforcing this principle.

Lingle v. Chevron, Inc., 544 U.S. 528, 537 (2005); see

18

also Palozzolo v. Rhode Island, 533 U.S. 606, 617-18

(2001) (noting that “the purpose of the Takings

Clause ... is to prevent the government from ‘forcing

some people alone to bear public burdens which, in all

fairness and justice, should be borne by the public as

a whole.’” (quoting Armstrong v. United States, 364

U.S. at 49)).

The application of the undivided-fee rule to cases

such as the VFW’s is a particularly egregious

violation of the principle that lies at the heart of “the

purpose of the Takings Clause.” Palozzolo, 538 U.S. at

617-18. ln such cases, owners of leasehold interests

are forced to bear a grossly disproportionate share of

the burden of the public project facilitated by con-

demnation, while receiving little or no compensation

for their losses. In the VFW’s case, there was no

compensation at all. The VFW lost some fifty-nine

years of a valuable leasehold interest whose value the

Wisconsin Court of Appeals estimated at roughly

$300,000. Pet. for Cert. at 8-9.

(Jnder the ruling below, therefore, the VFW will

be forced to shoulder a substantial part of the cost of

the public use for which its property was condemned

and in exchange will receive literally nothing. Other

similarly situated lessees find themselves in the same

position. They too bear a burden that the Just

Compensation Clause was created to spread to the

public as a whole.

LY

IV. THE COURT SHOULD ALSO GRANT A

WRIT OF CERTIORARI ON THE PETI-

TIONER’S DUE PROCESS CLAUSE CLAIM.

The Wisconsin Supreme Court ruled that the

VEFW had no right to present any evidence to the jury

on the value of its property interest that the

government had condemned. This ruling conflicts

with this Court’s precedents and creates a potential

split with United States Court of Appeals for the

Fifth Circuit.

A. The Due Process Clause Gives Property

Owners The Right To Present Evidence

Of The Value Of Their Property In

Eminent Domain Proceedings.

This Court has emphasized that “[t!he right to

present evidence is ... essential to the fair hearing

required by the Due Process Clause.” Jenkins ov.

McKeithen, 395 U.S. 411, 429 (1969). That is

especially true in situations “where government

action seriously injures an individual, and the reason-

ableness of the action depends on fact findings.”

Greene v. McElroy, 360 U.S. 474, 496 (1959). In such

cases, “the evidence used to prove the Government's

case must be disclosed to the individual so that he

has an opportunity to show that it is untrue.” Id.

(emphasis added). In this case, the government’s

action in refusing to pay compensation undoubtedly

“seriously injured” the VFW, and the reasonableness

of that action depended at least in part on factual

findings regarding the value of the VFW’s interest.

ZU

Yet the VFW had no “opportunity to show” that the

sovernment’s claims were “untrue” because Wisconsin

courts prevented it from presenting any evidence to

contest that of the government. /d.

This Court has held that the Due Process Clause

applies to eminent domain compensation determi-

nations, emphasizing that “it is essential to due

process that the mode of determining the compen-

sation be such as to afford the owner an opportunity

to be heard.” Bragg v. Weaver, 251 U.S. 57, 59 (1919)

The same due process requirements that apply to

other litigation apply to Just Compensation Clause

cases. Thus, the Wisconsin Supreme Court’s decision

in the present case runs counter to this Court’s

interpretation of the Due Process Clause.

B. The Wisconsin Supreme Court Creates

A Split With The Fifth Circuit.

The Wisconsin Supreme Court’s decision on the

due process issue creates a split with the Fifth Circuit

Court of Appeals. In Gwathmey v. United States, 215

F.2¢ 148 (5th Cir. 1954), the Fifth Circuit invalidated

a condemnation proceeding in which the government

sought to condemn 236 properties at once and did not

allow each individual owner to present evidence of

the value of his particular property. Jd. at 151, 154-

57. The Fifth Circuit held that “the individual

landowner’s Constitutional right to due process and

just compensation” requires an opportunity to present

evidence of the value of his or her specific property

21

Id. at 156; cf. United States v. 480.00 Acres of Land,

557 F.3d 1297, 1314 (11th Cir. 2009) (“A court may

violate constitutional due process if it chooses an

adjudication mechanism designed to preclude land-

owners from producing relevant evidence opposing

that offered by the Government.”).

The facts of the present case are actually more

egregious than those of Gwathmey. The Gwathmey

property owners at least were allowed to present

some generalized evidence of value that applied to

all 200 tracts. See Gwathmey, 557 F.2d at 151-52

(discussing evidence presented by owners’ attorneys).

By contrast, the VFW was not permitted to present

any evidence of the value of its property whatsoever.

Pet. for Cert. at 28.

The grant of a writ of certiorari is particularly

appropriate when “a state court of last resort has

decided an important federal question in a way that

conflicts with the decision of another state court of

last resort or of a United States court of appeals.”

Sup. Cr. R. 10(b) (emphasis added). The Due Process

Clause issue in this case qualifies.

¢

y

CONCLUSION

For the foregoing reasons, the Court should grant

the petition for a writ of certiorari.

Respectfully submitted,

ILYA SOMIN

Associate Professor

GEORGE MASON UNIVERSITY

SCHOOL OF LAW

3301 Fairfax Drive

Arlington, VA 22201

(703) 993-8069

INSTITUTE FOR JUSTICE

DANA BERLINER*

WILLIAM H. MELLOR

SCOTT BULLOCK

901 North Glebe Road

Suite 900

Arlington, VA 2220

(703) 682-9320

DBerliner@ij.org

*Counsel of Record

May 5, 2010