Check out this recent Second Circuit decision (H/T to Robert Loblaw) as an example of how the appellate courts are applying the U.S. Supreme Court’s controversial 2006 decision in Kelo v. New London. Kelo allows the state to seize private property to facilitate private re-development as a legitimate form of "public use" under the U.S. Constitution.

Kelo has been widely criticized for creating perverse incentives for politically well-connected real estate developers to exercise their political clout where negotiation with private property owners didn’t generate the developers’ desired result. The Second Circuit case involves the huge redevelopment plan in downtown Brooklyn that will primarily benefit Bruce Ratner, a wealthy New York real estate developer. In addition to the ubiquitous office buildings and high-rise condos involved in such deals, the redevelopment will include a new arena for the New Jersey (soon to be Brooklyn) Nets NBA basketball club. Although most of the property to be contributed to the development is public land, the redevelopment plan also requires the state to seize several tracts of private property through exercise of its eminent domain power.

The private property owners sued and argued that the state’s claim of public benefit is a facade, as the Second Circuit puts it, "to benefit Bruce Ratner, the man whose company first proposed it and who serves as the Project’s primary developer. Ratner is also the principal owner of the New Jersey Nets. In short, the plaintiffs argue that all of the ‘public uses’ the defendants have advanced for the Project are pretexts for a private taking that violates the Fifth Amendment."

The Second Circuit upheld U.S. District Court dismissal of the property owners’ claims, explaining that the massive private benefits to Ratner do not trump the state’s judgment that the project will also benefit the public. Moreover, even though the costs to the property owners may far outweigh the public benefits, the Second Circuit concludes that type of cost/benefit analysis is irrelevant under Kelo:

At the end of the day, we are left with the distinct impression that the lawsuit is animated by concerns about the wisdom of the Atlantic Yards Project and its effect on the community. While we can well understand why the affected property owners would take this opportunity to air their complaints, such matters of policy are the province of the elected branches, not this Court.

Given such dubious "public" ventures as this, the implications of the foregoing interpretation of Kelo are downright frightening.