Last June, the U.S. Supreme Court’s ruling in Kelo v. New London left states scrambling to clarify eminent domain laws. While Kelo gave the federal go-ahead by permitting condemnation of private property to create an economic benefit for the overall community, 25 state legislatures have responded with new takings laws that go the other way — explicitly restricting the use of eminent domain. Similar measures have passed in three more states and are awaiting gubernatorial signatures.

Whether those laws will prevail is up to state courts — the first test is now pending. But, in the meantime, the drama that seemed to have climaxed with the Supreme Court decision is still playing out in New London, Conn. There, Suzette Kelo is still in her house despite a June 5 vote by the New London City Council to evict her, according to Scott Bullock, her lawyer.

“We are trying to see if there might be something that we can work out,” Bullock says. “Suzette really wants to hold onto her house and is trying to do everything she can, despite enormous pressure on the part of the government that has ordered her out.”

Bullock is the senior attorney at the Institute for Justice, a Washington, D.C.-based libertarian advocacy group. When the City of New London used eminent domain authority to take several homes for redevelopment by a private developer, the Institute for Justice helped Kelo and some of her neighbors fight the move all the way to the U.S. Supreme Court.

On June 23, 2005, U.S. Supreme Court justices voted 5-4 to uphold a Connecticut court’s opinion that the takings in New London would benefit the public by boosting the local economy, meeting the Fifth Amendment’s “public use” condition to allow the use of eminent domain.

However, while it upheld the Connecticut decision, the Supreme Court essentially invited the states to consider their own eminent domain standards. In his majority opinion, Justice John Paul Stevens emphasized that some states observe narrower eminent domain limitations in their state constitutions or statutes, and “nothing in our opinion precludes any state from placing further restrictions on its exercise of the takings power.”

Lawmakers in dozens of states acted on that invitation to clarify their own eminent domain positions this year. Of the 45 legislatures that were in session, 28 approved eminent domain reforms that have either been adopted or are awaiting signatures by governors, according to a June 20 report by the Institute for Justice.

Most state legislatures have adjourned for 2006, although those in New York and New Jersey are still in session and both have eminent domain measures scheduled for consideration, according to Mandy Hagan, director of state and local affairs at the National Association of Industrial & Office Properties (NAIOP). Hagan tracks eminent domain legislation in states where NAIOP has chapters.

Although legislative action in response to the Kelo decision is winding down, Hagan expects eminent domain to remain a hot issue into 2007 and beyond. Why? Because new laws enacted by legislatures around the nation on eminent domain will be tested in the courts. It could take years for relevant cases to reach state supreme courts, finally giving justices an opportunity to interpret new and existing laws and determine whether new legislation is workable.

“It won’t end with the legislative changes that we’re seeing here,” Hagan says. “The battle will move to the courtroom.”

That transition to the courts is already occurring: The first eminent domain case to reach a state supreme court since the Kelo decision is the City of Norwood, Ohio vs. Joseph Horney and several other property owners. The Ohio Supreme Court heard arguments in the case on Jan. 11 and is expected to deliver an opinion on it later this year.

In Norwood vs. Horney, the City of Norwood used eminent domain authority to compel the sale of a few remaining homes and businesses in a neighborhood where private developer Rockwood Partners already had purchased other properties for a planned mixed-use project. A study commissioned by the city and funded by the developer found the area to be “deteriorating,” although none of the 99 parcels in the area were behind on property taxes. That determination enabled the city to take the properties through eminent domain proceedings in order for Rockwood to carry out a redevelopment plan for the neighborhood.

“This being the first case after Kelo, it will provide a real indication as to which way the state courts are likely to go on this issue,” says Bullock of the Institute for Justice, which is representing the property owners in the Ohio case.

“The court in [Norwood v. Horney] has a very stark choice,” Bullock says. “They can either take the route that the U.S. Supreme Court did in Kelo and say essentially the sky’s the limit for the use of eminent domain, or they can say, under our own state constitution, we are going to more carefully reign in governments that use eminent domain for private development.”