A Supreme Chance to Fight Crony Capitalism

A Supreme Chance to Fight Crony Capitalism

At a time when big government, big labor and big business seem cozier than ever before, it will be interesting to see whether the Supreme Court decides to reconsider previous precedent on the issue of eminent domain. If the court agrees to hear Ilagan v. Ungacta and sides with the plaintiff, essential property rights will be re-instituted, as the precedent set in 2005 by Kelo v. City of New London, CT enabled government to not only choose winners and losers, but nearly guaranteed that winners will have wealth and political connections.

In Kelo, the Supreme Court went beyond what the vast majority of Americans thought possible by endorsing a city’s (New London, CT) decision to take one person’s (Susette Kelo) home and give it to a private corporation for commercial development. Because of Kelo, local, state and even the federal government can decide which persons are most deserving of “prime real estate” in the interest of the public good (i.e. more tax revenue and jobs). No wonder the Kelo decision was opposed by over 80 percent of the public.

Ironically, New London’s “cash cow” property, stolen from Susette Kelo, now sits idly as a brownfield. Susette is left with only memories of her cherished home and once-vibrant neighborhood, robbed by her own big-brother government.

The case that could reverse Kelo also involves a chillingly-Orwellian story. In Ilagan v. Ungacta, the Ilagan family is contending that their local government (in the U.S. Territory of Guam) went too far when condemning a portion of their property and transferring its ownership to their neighbors – the Ungactas. The Ungactas are a wealthy and powerful family. In fact, the public official who played a key role in instigating the condemnation of the Ilagan’s property was then-Mayor Felix Ungacta.

The Ilagans are arguing that the use of eminent domain power in their case went beyond even what Kelo would allow. If the Supreme Court takes up the case, the Kelo precedent will be on the table.

Many stand to benefit from revisiting the question of whether the Constitution allows government to forcibly transfer property between private parties, in particular the small-business community.

Small businesses were left extremely vulnerable by the Kelo decision because they will never bring the money and political clout (corrupt or otherwise) that big business and the wealthy can bring to the table. In the Keloworld of eminent domain-gone-wild, whole blocks of Main Street businesses are at risk of being wiped out by the crony capitalism of big business-big government partnerships.

An NFIB Small Business Legal Center amicus brief in the Ilagan case points out that small businesses usually “lack the political clout of large enterprises, and are often undercompensated for their losses.” In our brief, we strongly urged the Supreme Court to take up important questions left open by Kelo. The amicus coalition on the case has also asked the Court to reconsider Kelo in light of consistent and widespread public criticism.

Justice Scalia has said that he “do[es] not think the Kelo opinion is long for this world,”  describing it as one of the “very few” cases where the Court has erred in “estimating how far … it could stretch the Constitution without provoking overwhelming public criticism and resistance.” Let us hope that he is right. Until Kelo is reversed, the politically well-connected may be the only ones safe from the reach of a government’s eminent domain power.

Karen R. Harned is executive director of the National Federation of Independent Business Small Business Legal Center.