Condemnees Successfully Challenge City of Nanticoke’s Use of Eminent Domain

The Pennsylvania City of Nanticoke tried using its power of eminent domain to take private property so it could develop a multi-purpose building. To say that its plan backfired would be an understatement. Not only did Pennsylvania’s Commonwealth Court deny the City’s right to take, but its decision imposes more restrictions on eminent domain. Here’s what happened and why other jurisdictions should take heed of this excellent decision.

The Project

The name of the matter is In re Condemnation by the Gen. Mun. Auth. It involved the General Municipal Authority of Nanticoke as the condemnor and the owners of an apartment building as the condemnees. The Authority initiated condemnation proceedings in 2022 to acquire private property for a mixed‑use development. The development was supposed to include a public transportation center, public and resident parking, commercial space, and forty low‑income senior housing units. The Authority intended to take the property and immediately transfer it to a private developer, New Horizons. However, there was no written agreement binding New Horizons to complete the project. As we’ll soon see, this would not turn out well for the condemnor.

The Trial Court Decision

The condemnees challenged the Authority’s right to take the property. The trial court found that the Authority’s project served multiple public purposes as required under PA’s Municipality Authorities Act (MAA) including affordable housing and public transportation. Although there is a general prohibition of transferring property taken by eminent domain to a private entity under the Property Rights Protection Act (PRPA), the court found that the taking fell within an exception: low-income housing and incidental commercial use. The court also found that the taking wasn’t excessive. Therefore, it upheld the Authority’s use of eminent domain.

Appeal to Commonwealth Court

The condemnees appealed the trial court’s decision. On appeal, the Commonwealth Court considered three main arguments. First, whether the MAA authorized the use of eminent domain since the property was immediately transferred to a private developer. Second, whether the taking fell within the low-income housing exception under the PRPA. Third, whether the taking’s true purpose was for a public or private benefit.

Papers, Please!

The Commonwealth Court determined that the transfer to a private developer fell under the low-income and mixed housing exception. Moreover, it found that the commercial use was incidental and didn’t thwart the otherwise lawful use of eminent domain. But it was the third issue, whether the taking was for public or private benefit, which really gave the court pause. In doing so, it had to consider what bound the developer from carrying out the proposed project. Could it “change its mind” and build a commercial facility instead? Doing so would completely undermine the purpose of eminent domain: taking private property for a public benefit. To be clear, the Supreme Court’s decision in Kelo v. City of New London considers economic development a valid public purpose. However, PA does not. If the Authority wanted to take the property, it was going to have to assure the court that the proposed project was guaranteed.

The Authority argued that restrictive covenants ensured that the property would be used for a public purpose. The court disagreed. It found that restrictive covenants are an inadequate substitute for enforceable commitments in writing. Here, there was nothing in writing binding the Authority from carrying out the project. Without a written agreement, the Authority could theoretically abandon the public use. Therefore, the Commonwealth Court disallowed the taking.

Conclusion

It’s no secret that eminent domain is one of the most awesome powers in the government’s toolbox. But that doesn’t mean it may be wielded without restrictions. Condemnors must be mindful of constitutional restrictions when using eminent domain. In this case, the condemnees successfully relied on the PRPA, a state law that offers greater protections against eminent domain abuse than the federal standard under Kelo. Requiring an enforceable written agreement can help ensure that eminent domain is used for legitimate public purposes. We applaud the Commonwealth Court for its well-reasoned decision and hope that other jurisdictions follow suit.

To read the full opinion, click here. For further discussion about the Commonwealth Court’s decision, click here.