First Lawsuit of Its Kind Filed in Federal Court to Enforce Federal Bond Amendment in Florida Eminent Domain Case

The first reported lawsuit seeking the court's interpretation of the federal Bond Amendment while challenging the government's ability to condemn property for a private-to-private taking in the name of economic development has been filed in federal court today.

Keystone Properties, LLC (Keystone) filed a complaint in the United States District Court for the Middle District of Florida seeking to stop the Jacksonville Port Authority (Jaxport) from using federal funds to condemn its 65-acre St. Johns River parcel being developed into a large-scale coal/bulk cargo terminal.

Related Results

In November of 2005, Jaxport filed a petition in Circuit Court of Duval County to condemn Keystone's property for port development to be an "economic engine" for Jacksonville. It was later discovered that Jaxport planned to enter into a 20-year multimillion dollar lease of the Keystone parcel to a competitor, Drummond Coal. Drummond Coal planned to use the property for a purpose similar to that of Keystone -- to develop a coal and bulk cargo terminal. Keystone is challenging the taking in the Circuit Court, in part, because the taking is not for a legitimate public purpose.

"This is a case of a government entity overstepping its bounds," said Simon Bloom of Powell Goldstein, Keystone's lead counsel. "Condemning one owner's (coal depot) property just to lease it back to a competitor planning to use it for essentially the same purpose threatens to trample our client's constitutionally protected private property rights. We're not going to let this happen."

The federal complaint alleges that any federal funds used by Jaxport to support the proposed condemnation would violate the federal Bond Amendment, which was added to a U.S. Senate appropriations bill earlier in the year in an effort by Congress to minimize the impact of the controversial United States Supreme Court Kelo v. City of New London decision. The Bond Amendment prohibits the use of funds appropriated through the Act to support local projects that "seek to use the power of eminent domain, unless eminent domain is employed only for a public use." The Act states that economic development that primarily benefits private entities does not meet the definition of public use.

Specifically, Keystone alleges that Jaxport has commingled the federal funds with its general budget and used those funds to support the condemnation. In addition, Jaxport spent its federal funds on other projects that would ordinarily be paid for by operating revenues or state grants.

"We intend to determine if the Bond Amendment means what it says," said Andrew Brigham of Brigham Moore, co-counsel representing Tom Scholl, president of Keystone. "We want to see if the intent behind the Senate Act will hit its target."

For eight years, Tom Scholl, a third generation coal man who once worked in the mines of West Virginia, sought to secure property along the St. Johns River in Jacksonville to develop a deep water bulk cargo depot for Keystone Coal and affiliated companies to offload coal, coke and anthracite from sources throughout the world.

After attempts to lease an alternative site from Jaxport failed, Scholl finally closed on the property in February of 2006, which had been under contract for many months. Jaxport had passed on purchasing this property twice before. Keystone's site development work has progressed over the past six months.

Next Steps

In its federal lawsuit, Keystone is asking a federal judge to declare that: 1) Jaxport's proposed condemnation would violate the public use doctrine of the Bond Amendment; 2) Jaxport may not use any resources from U.S. HUD or U.S. DOT received in fiscal year 2006 to support the condemnation; and 3) that Jaxport may not use any funds to support the condemnation because money is fungible. In addition, Keystone requests that the federal judge enjoin Jaxport from using its funds to support the proposed condemnation.

The original lawsuit in the Circuit Court is progressing. Depositions are being taken by both sides and a hearing is scheduled before Circuit Court Judge Jean Johnson in Jacksonville on November 26, 2006.

State and Federal Governments Reaction to Kelo

On the eminent domain front, as many as 36 states have proposed initiatives that seek to respond to the Kelo decision, and the Florida Legislature actually passed Bills 1567 and 1569 in the last session seeking to tighten up abuses by CRAs to condemn "blighted" property and curbing the use of condemnation for private-to-private takings. Furthermore, Florida's voters will also have a chance to clarify constitutional intent by voting on Amendment 8 November 7, 2006 which would require a 3/5 vote of Florida's Legislature before eminent domain is used by a division of state or local government to force a private-to-private transfer of private property without the owner's consent.

At the federal level, in addition to passing a resolution "expressing its grave disapproval regarding the Kelo v. City of New London decision," the U.S. House of Representatives passed Resolution 4128 a/k/a the Sensenbrenner Bill or "Private Property Rights Protection Act of 2005," which seeks to respond in decisive fashion to the overbroad interpretation of the public purpose language contained in the Kelo decision. The bill is now pending in the United States Senate. On June 23, 2006 President Bush issued an Executive Order: Protecting the Property Rights of the American People, which directs federal departments and agencies to limit the taking of private property for public uses benefiting the general public and not merely advancing the economic interest of another private party.