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Portion of Eminent Domain Law Unconstitutional, Norwood Taking for Development Overturned

2005-0227, 2005-0228, 2005-1210, and 2005-1211. Norwood v. Horney, 2006-Ohio-3799.
Hamilton App. Nos. C-040683 and C-040783, 161 Ohio App.3d 316, 2005-Ohio-2448. Judgments reversed.
Moyer, C.J., Brogan, Pfeifer, Lundberg Stratton, O'Connor, O'Donnell and Lanzinger, JJ., concur.
James A. Brogan, J., of the Second Appellate District, sitting for Resnick, J.
Opinion: http://www.supremecourt.ohio.gov/rod/docs/pdf/0/2006/2006-Ohio-3799.pdf

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(July 26, 2006) In a multifaceted opinion, the Supreme Court of Ohio today clarified Ohio law on eminent domain, ruling 7-0 to reverse a Hamilton County appeals court and halt the taking of private homes by the City of Norwood to make way for a development complex. Among other findings, today's ruling: overturned as unconstitutional a portion of Ohio's eminent domain statute, established that an economic benefit to the community alone does not justify government taking of private property, and set a heightened level of scrutiny for Ohio courts to apply when considering eminent domain cases.

Justice Maureen O'Connor wrote the unanimous majority opinion that balances “two competing interests of great import in American democracy: the individual's rights in the possession and security of property, and the sovereign's power to take private property for the benefit of the community.”

The highly publicized case involved a challenge by several “holdout” homeowners to the City of Norwood's eminent domain action taking possession of their property in order to make way for two new city-owned parking garages and a large, privately owned commercial development intended to create jobs and increase local tax revenues.

In 2002, Rookwood Partners Ltd. approached Norwood city officials with a proposal to redevelop a 10-acre residential and commercial area of the city known as the Edwards Road Corridor into a major new apartment, retail and office complex to be known as the Rookwood Exchange. The city expressed interest and conducted public meetings to get citizen input on the proposed development, but initially declined to play an active role in the necessary land-acquisition process. Rookwood negotiated with property owners in the targeted area, and eventually secured private sale agreements with 66 of the 71 property owners.

Carl and Joy Gamble and Joseph Horney and his wife, Carol Gooch, were among five property owners in the affected area who declined all buyout offers from Rookwood. When it became clear that Rookwood could not privately negotiate the acquisition of these “hold-out” properties, Norwood hired a consultant to conduct an urban renewal study to determine if current conditions in the Edwards Road Corridor qualified it as a “slum, blighted or deteriorated area” or as a “deteriorating” area in danger of becoming blighted. If the area was found to fit in one of those categories, the Norwood city charter authorized the city to use its powers of eminent domain to acquire the land for redevelopment. Rookwood agreed to reimburse the city for the costs of conducting the urban renewal study.

The consultant, KKG, Inc., was selected and hired by the city and reported its findings to city officials. The KKG study found that, while most structures in the target area were sound, other conditions including the neighborhood's growing isolation from nearby residential areas, traffic safety issues and susceptibility to “piecemeal” conversion from residential to commercial uses in the future merited a classification of the area as “deteriorating.” The city planning commission reviewed the consultant's report and Rookwood's redevelopment plan, and recommended that Norwood City Council adopt the finding that the area was “deteriorating” and move forward with the Rookwood plan. Council held a public hearing at which comment was received from proponents and opponents of the plan. Council members then voted unanimously to adopt the Rookwood plan, and subsequently invoked the city's eminent domain power to acquire the remaining hold-out properties.

The Gambles, Horney and Gooch and other remaining property owners filed suit in Hamilton County Common Pleas Court contesting the city's right to take their property. The trial court ruled that the city council had not abused its discretion in determining the area to be deteriorating, and upheld Norwood's right under its city charter to take the Gamble and Horney properties for just compensation in order to implement the council-approved urban redevelopment plan. On review, the 1st District Court of Appeals affirmed the trial court's ruling.

The trial court subsequently conducted jury proceedings to establish the amounts of compensation the city must pay each of the displaced owners for their property. After depositing amounts determined by the court to be fair compensation for the remaining properties, the city transferred title to Rookwood, which then obtained court orders requiring the hold-out owners to vacate. Meanwhile, the Gambles and Horney appealed the 1st District's decision to the Supreme Court of Ohio. On Feb. 22, 2005, this Court issued an “emergency stay” to prevent Rookwood, which was already in the process of demolishing the other structures in the renewal area, from damaging the Gamble and Horney properties pending the outcome of their appeal.

On Sept. 29, 2005, the parties presented oral arguments before the justices on peripheral issues as part of an earlier appeal arising from the same dispute. Following those arguments, the Court voted on Oct. 22, 2005, to accept jurisdiction in this case, and hear arguments on the underlying legal issue of whether Norwood 's actions constituted an unlawful abuse of the city's eminent domain powers.

In today's ruling the Court found that:

“In addressing these important matters, we have benefited from the wisdom of other courts, which, by the masterly design of our government, are at the forefront of these critical constitutional questions,” O'Connor wrote. “Although the judiciary and legislature define the limits of state powers, such as eminent domain, the ultimate guardians of the people's rights, as evidenced by the appellants in these cases, are the people themselves.”

Justice O'Connor's opinion was joined by Chief Justice Thomas J. Moyer, Justices Paul E. Pfeifer, Evelyn Lundberg Stratton, Terrence O'Donnell and Judith Ann Lanzinger, and Judge James Brogan of the 2nd District Court of Appeals, who was assigned by the Chief Justice to sit for Justice Alice Robie Resnick, who recused herself.

Dana Berliner (Ohio counsel), 202.744.6482, for Joseph E. Horney, Carl and Joy Gamble et al.

Timothy M. Burke, 513.721.5525, for the City of Norwood.

Mark A. VanderLaan, 513.977.8200, for Rookwood Partners, Ltd.