Pleading Kelo Pretext: What About Justice Kennedy?

In Goldstein v. Pataki, No. 07-2537-cv (Feb. 1, 2008), the US Court of Appeals for the Second Circuit held that a property owner failed to state a claim for Kelo "pretext."  While paying lip service to the notion that in reviewing a motion to dismiss under Fed. R. Civ. P. 12(b)(6), the district court and the court of appeals are supposed to take as true the factual allegations in the complaint and view them in the light most favorable to the plaintiff (see slip op. at 3-4), the court held that the complaint did not plead enough facts to show pretext.

The crux of the issue in Goldstein was whether factual allegations of pretext could be trumped by the invocation of the Berman-Midkiff-Kelo legal standard of conceivable public use.

In other words, the appellants have effectively conceded what Rosenthal found to have been a complete defense to a public-use challenge: that viewed objectively, the Project bears at least a rational relationship to several well-established categories of public uses, among them the redress of blight, the creation of affordable housing, the creation of a public open space, and various mass-transit improvements.

Slip op. at 13-14.  Here's the Second Circuit's rationale in a nutshell:

We need not go further. As Berman and Rosenthal illustrate, the redevelopment of a blighted area, even standing alone, represents a “classic example of a taking for a public use.”

Slip op. at 15.  In other words, according the court, it doesn't matter one whit whether a taking was accomplished by ignoring or subverting the public process, whether a taking was designed to bestow private benefit on a government insider, or whether a taking was accomplished to punish a landowner for wanting to develop her property.  Under the Goldstein holding, such facts are not relevant unless some conceivable post-hoc linkage between the project and public benefit cannot be be conjured up from the record by government lawyers or a court.  Fat chance of that happening since -- as Justice Scalia noted -- government agencies generally do not employ "stupid staffs" who cannot paper a record with some possible public benefits that may stem from just about any project or regulation. 

The Second Circuit's decision seems to turn both Kelo and the notion of notice pleading inside out.  If Justice Kennedy's deciding vote and concurring opinion in Kelo mean anything, they mean that factual allegations of pretext should be taken seriously, and cannot be ignored simply because the record contains some evidence of public benefit:

A court applying rational-basis review under the Public Use Clause should strike down a taking that, by a clear showing, is intended to favor a particular private party, with only incidental or pretextual public benefits, just as a court applying rational-basis review under the Equal Protection Clause must strike down a government classification that is clearly intended to injure a particular class of private parties, with only incidental or pretextual public justifications.

Kelo v. City of New London, 545 U.S. 469, 491 (2005) (Kennedy, J., concurring).  Justice Kennedy added:

A court confronted with a plausible accusation of impermissible favoritism to private parties should treat the objection as a serious one and review the record to see if it has merit, though with the presumption that the government’s actions were reasonable and intended to serve a public purpose.

The Second Circuit's holding doesn't treat the government's claim of public purpose as a mere presumption, it treats it as an irrebuttable conclusion.   

My earlier post on the Goldstein case here, the District Court pleadings including the complaint are posted here, and Professor Gideon Kanner posts his thoughts on the decision here.