texas a&m journal of real property law volume two number one

VOLUME 2 2014 NUMBER 1

CONTENTS

STUDENT ARTICLES EDITION

HELP ME, I’M DROWNING! USING THEFAIR HOUSING ACT TO PROTECT CITIESTHAT USE EMINENT DOMAIN TO SEIZEUNDERWATER MORTGAGES . . . . . . . . . . . . . . Emily D. Anderson 1

J.R.R. TOLKIEN GOES TO LAW SCHOOL:EXPLORING PROPERTY LAW JURISPRUDENCETHROUGH THE HOBBIT AND THELORD OF THE RINGS TRILOGY . . . . . . . . . . . . . . . . Colin P. Benton 25

THE FLOODPLAIN FIASCO. . . . . . . . . . . . . . . . . . . . Andrew J. Kubiak 53

FIELD OF DREAMS: IS THE MOVIE SITE’SCOMMERCIALIZATION A DREAM PLANWITH SIGNIFICANT BENEFITS OR ANIGHTMARE SCRIPT WITH CRIPPLINGEFFECTS? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Michael J. McGraw 73

SPANISH AND MEXICAN LAND GRANTSAND HEIRS’ RIGHTS TO UNCLAIMEDMINERAL ESTATES IN TEXAS . . . . . . . . . . . . . . . . . . .Rose Richerson 97

PROPERTY RIGHTS IN SPACE:ASTEROID MINING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .David Sarnacki 123

ROBBING PETER AND BLAMING PAUL:A COMMENT EXPLAINING HOWPROFESSOR ROBERT HOCKETTINCORRECTLY ASSESSES THE CAUSEOF THE UNDERWATER MORTGAGECRISIS AND AN AQUINIAN EXPLANATIONOF HOW HIS EMINENT DOMAINSOLUTION IS NEITHER ETHICALLYCORRECT NOR APPROPRIATE . . . . . . . . . Cooper Morgan Walker 147

HOW TO REMEDY THE COURT’S UNREASONABLEEXPANSION OF THE PUBLIC USE DOCTRINE . . . . Brian Walsh 169

www.realpropertyjournal.org

VOLUME 2 2014-2015 NUMBER 1

Board of Editors

Editor-in-ChiefDavid Sarnacki

Managing EditorWhitney Vaughan

Business Editor Executive EditorJeremy Brown Cooper Walker

Symposium Editor Executive Articles EditorKourtney Doman Sarah Burns

Survey Editor Technology EditorTodd Smith Robert Alvarez

Citation Editors Notes and Comments Editors Articles EditorsCatherine Griffith Colin Benton Stuart Keplar

Tyler Hood Andrew Kubiak Janelle PortugalWill Sweet Elizabeth Beck-Johnson

Staff

Mildred Ashley Jeremy Holden Rose RichersonHeather Awtrey Adrian Jackson Cassandra RosalesNatalie Bokman Kevin Jackson Blane SeidlerWilliam Brandt Andrea Johnson Shelby Sellman

Kendra Calhoun Gene Jung Yi-Wen ShihHannah Elsaadi Ashley Kennedy Lauren SmithRebecca English Michelle Maese Jimmy Tom

David Fulton Mitchell Monthie Gordan TruongBritni Gross Kenneth Moore Natalie Voels

Kathryn Hogan Benjamin Nystrom Simone WhiteChristopher Poorman

Staff AdvisorDeborah Barnett

Faculty AdvisorsProfessor Gabriel Eckstein Professor Gina Warren

STUDENT ARTICLES EDITION

HELP ME, I’M DROWNING! USING THE FAIRHOUSING ACT TO PROTECT CITIES THAT

USE EMINENT DOMAIN TO SEIZEUNDERWATER MORTGAGES

By Emily D. Anderson†

I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1II. THE CURRENT CRISIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

A. Eminent Domain as a Solution . . . . . . . . . . . . . . . . . . . . . . 4B. The Housing Crisis in Nevada and in Other States . . 7C. The Lenders’ Reactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

III. HISTORICAL LIMITATIONS ON LENDERS . . . . . . . . . . . . . . . . . 10A. Redlining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10B. The FHA and the ECOA . . . . . . . . . . . . . . . . . . . . . . . . . . . 12C. Lending Discrimination Causes of Action . . . . . . . . . . . 13D. Understanding Disparate Impact . . . . . . . . . . . . . . . . . . . . 15

IV. LENDERS’ THREATS AGAINST CITIES SEEKING TO USE

EMINENT DOMAIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18V. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

I. INTRODUCTION

A significant part of the American dream is home ownership.1However, this dream became a nightmare for many homeownerswhen the housing bubble burst in 2008.2 Prior to the collapse, therewere record numbers of Americans who owned their own homes.3When property values began dropping in 2006 and 2007, many Ameri-cans found that they owed more than their homes were currentlyworth.4 This led to a drastic decline in homeownership and a recordnumber of foreclosures.5 In response to this housing crisis, state andfederal governments have attempted to enact legislation or create pro-grams to assist homeowners, with varying degrees of success.6

† J.D. Candidate, May 2015, William S. Boyd School of Law. B.A., Psychologyand Criminal Justice, 2012, University of Nevada Las Vegas.

I would like to thank my faculty advisor Dean Ngai Pindell for his encouragementand assistance in focusing my topic. I would also like to thank Kerry E. Kleiman forher helpful feedback and comments on previous drafts. Lastly, I would like to thankmy family and friends for their love, advice, and support.

1. Peter W. Salsich, Jr., Homeownership—Dream or Disaster?, 21 J. AFFORDA-

BLE HOUS. & CMTY. DEV. L. 17, 23 (2012).2. Id.3. Id. at 20.4. Id. at 20, 28.5. Id. at 20–21.6. See Kathryn E. Johnson & Carolyn E. Waldrep, The North Carolina Banking

Institute Symposium on the Foreclosure Crisis: Overview, 14 N.C. BANKING INST. 191,203–213, 214–16 (2010) (discussing the following federal programs, “HOPE for

1

2 TEXAS A&M J. OF REAL PROPERTY LAW [Vol. 2

Although the crisis has been gradually improving, “analysts esti-mate that between 7.4 million and 9.4 million additional home loansare now in danger of default over the next six years. . . . [A]ssum[ing]no further price declines or interest rate rises.”7 As states get moredesperate to solve this crisis, they consider more drastic remedies.One such remedy is using the power of eminent domain to force lend-ers to sell their mortgage notes to the city.8 Once the city owns themortgage, the homeowner could either make monthly mortgage pay-ments to the city, or get out from underwater by refinancing their loanat current property values.9 Either way, the danger of foreclosure iseliminated.

The legality of this novel use of eminent domain remains uncertainand hotly contested.10 Lenders, afraid of losing millions of dollars,have filed suit in cities like Richmond, California—where the plan hasprogressed the furthest—however, the courts have yet to rule on theplan’s legality.11 Many cities have considered eminent domain as asolution, but backed down after lenders threatened to make creditmore expensive or withdraw credit entirely from these regions.12

Ultimately, though, if lenders were to follow through on thesethreats, the result would be unlawfully discriminatory. Since the late

Homeowners,” “Making Home Affordable,” “Helping Families Save Their HomesAct of 2009,” and “Neighborhood Stabilization Program”); see also Salsich, supranote 1, at 40–51; Aleatra P. Williams, Foreclosing Foreclosure: Escaping the YawningAbyss of the Deep Mortgage and Housing Crisis, 7 NW. J. L. & SOC. POL’Y 455, 461(2012).

7. Robert Hockett, Six Years on and Still Counting: Sifting Through the MortgageMess, 9 HASTINGS BUS. L.J. 373, 374 (2013).

8. Ngai Pindell, Nevada’s Residential Real Estate Crisis: Local Governments andthe Use of Eminent Domain to Condemn Mortgage Notes, 13 NEV. L.J. 888, 889–90(2013).

9. Id.10. See Josh Harkinson, Inside the Radical Plan to Fight Foreclosures With Emi-

nent Domain, MOTHER JONES (Jan. 7, 2013), http://www.motherjones.com/politics/2013/01/eminent-domain-mortgage-gluckstern.

11. Terrence Dopp, Newark Advances Eminent Domain Plan to Slow Foreclo-sures, BLOOMBERG (Dec. 5, 2013, 12:59 PM), http://www.bloomberg.com/news/2013-12-05/newark-advances-eminent-domain-plan-to-slow-foreclosures.html (“In Septem-ber, a judge dismissed a lawsuit by Bank of New York Mellon and Wilmington TrustCo. that sought to stop Richmond’s program, saying the case came too early to evalu-ate the legal merits.”).

12. Shaila Dewan, More Cities Consider Using Eminent Domain to Halt Foreclo-sures, N.Y. TIMES, Nov. 15, 2013, available at http://www.nytimes.com/2013/11/16/busi-ness/more-cities-consider-eminent-domain-to-halt-foreclosures.html?_r=0 (“Severallocal governments that have considered the plan eventually backed away, includingSan Bernardino County and North Las Vegas.”); ALFRED M. POLLARD, FEDERAL

HOUSING FINANCE AGENCY, SUMMARY OF COMMENTS AND ADDITIONAL ANALYSIS

REGARDING INPUT ON USE OF EMINENT DOMAIN TO RESTRUCTURE MORTGAGES

(Aug. 7, 2013), available at http://www.fhfa.gov/webfiles/25418/GCMemorandumEmi-nentDomain.pdf.

2014] HELP ME, I’M DROWNING! 3

1960s, Congress has been regulating consumer transactions,13 includ-ing promulgating the Fair Housing Act of 1968 (“FHA”) and theEqual Credit Opportunity Act of 1974 (“ECOA”) to provide protec-tion in consumer lending.14 The FHA and ECOA were enacted toprotect would-be homeowners from discriminatory lending practicesthat plagued minority communities.15 Since the 1970s, these statuteshave been primarily used to fight against lenders who discriminatorilywithhold credit—in a process known as redlining—however, more re-cently, the FHA and ECOA have been invoked to combat lenderstargeting minorities for outrageous loans, destined to default—a pro-cess known as reverse redlining.16 Over the last forty years, these stat-utes and their enforcement, have proven flexible enough to fight newforms of discriminatory lending as they arise.17

This Note will demonstrate that the FHA and ECOA prohibit im-plementation of lenders’ threats to limit or refuse credit availabilitybecause the result would have a disproportionate effect on minorities.This Note will examine the legality of the lenders’ threats to withholdcredit and, in doing so, presumes that courts will find this novel use ofeminent domain constitutional. First, Part II will discuss the currentsituation. Section IIA will explain eminent domain and explore pre-cisely how cities hope to use it in the mortgage note context. SectionIIB will describe the growth of this plan and the cities that have con-sidered using it. Section IIC will elaborate on the threats that thelenders are making toward the cities that consider using eminent do-main. Second, Part III will discuss the various laws that regulate con-sumer transactions and how they have restricted lenders in the past.Section IIIA will give a brief history of redlining and its consequences.Section IIIB will discuss the circumstances surrounding the enactmentof the FHA and ECOA and exactly what actions these statutes pro-hibit. Section IIIC will discuss the three causes of action that ariseunder the FHA and the ECOA. Section IIID will further explore dis-parate impact and how courts have interpreted 24 C.F.R. Section

13. FRED H. MILLER & JOHN D. LACKEY, THE ABCS OF THE UCC: RELATED

AND SUPPLEMENTARY CONSUMER LAW 15–16 (2d ed. 2004).14. Policy Statement on Discrimination in Lending, 59 Fed. Reg. 18266-01, 18268

(Apr. 15, 1994); Fair Housing Act, 42 U.S.C. §§ 3601–3631 (2012); Equal Credit Op-portunity Act, 15 U.S.C. §§ 1691–1691f (2012).

15. Peter P. Swire, The Persistent Problem of Lending Discrimination: A Law andEconomics Analysis, 73 TEX. L. REV. 787, 797 (1995).

16. Charles L. Nier, III & Maureen R. St. Cyr, A Racial Financial Crisis: Rethink-ing the Theory of Reverse Redlining to Combat Predatory Lending Under the FairHousing Act, 83 TEMP. L. REV. 941, 945 (2011).

17. Policy Statement on Discrimination in Lending, 59 Fed. Reg. at 18267 (“Dis-crimination in lending on the basis of race or other prohibited factors is destructive,morally repugnant, and against the law. It prevents those who are discriminatedagainst from enjoying the benefits of access to credit. The Agencies will not toleratelending discrimination in any form.”).


100.500, which was enacted on March 18, 2013.18 Lastly, Part IV willapply disparate impact to the lenders’ threats and work through thedisparate impact analysis in detail to analyze the likelihood that theFHA and the ECOA will be successful in restricting the lenders’threats.

II. THE CURRENT CRISIS

A. Eminent Domain as a Solution

Eminent domain is provided for in the Takings Clause of the FifthAmendment.19 The Clause states that “private property [shall not] betaken for public use, without just compensation.”20 Historically, thegovernment used eminent domain to seize land for the “developmentof roads, drainage of land, construction of government buildings, andcompensation to property owners for flooding of their lands caused bylocal mills.”21 However, over the years, the definition of “public use”has evolved from a narrow view—requiring that the public actually beable to use the seized property—to a more abstract and broad view,which includes takings that “provide a public benefit or serve a publicpurpose.”22

There have been three landmark U.S. Supreme Court cases regard-ing the interpretation of public use.23 In Berman v. Parker, the Su-preme Court ruled that “promoting public welfare” was valid as apublic use and deferred much of the eminent domain review to thestate legislature.24 The Court emphasized that public use does not re-quire that the public actually use the property—private parties couldown the redeveloped property without issue.25 In Hawaii HousingAuthority v. Midkiff, the Supreme Court held that the “purpose of thetaking, not its mechanics,” is what must be justified as a public use. Inother words, the public does not need to be able to use the land aslong as taking the land accomplishes a public purpose.26 Moreover,the Court held that rational basis review was to be used when deter-mining whether there is a “conceivable public purpose.”27 Finally, in

18. 24 C.F.R. § 100.500 (2013).19. BLACK’S LAW DICTIONARY (9th ed. 2009), Takings Clause.20. U.S. CONST. amend. V, § 5.21. David B. Fawcett III, Comment, Eminent Domain, the Police Power, and the

Fifth Amendment: Defining the Domain of the Takings Analysis, 47 U. PITT. L. REV.491, 494 (1986).

22. Nancy Kubasek & Garrett Coyle, A Step Backward Is Not Necessarily A Stepin the Wrong Direction, 30 VT. L. REV. 43, 46–48, 46 n.22 (2005).

23. Id. at 50.24. Berman v. Parker, 348 U.S. 26, 32 (1954); Kubasek & Coyle, supra note 22, at

51.25. Berman, 348 U.S. at 33–34; Kubasek & Coyle, supra note 22, at 50.26. Hawaii Hous. Auth. v. Midkiff, 467 U.S. 229, 244 (1984); Kubasek & Coyle,

supra note 22, at 53.27. Hawaii Hous. Auth., 467 U.S. at 242–43; Kubasek & Coyle, supra note 22, at

53.


Kelo v. City of New London, the Supreme Court held that the legiti-mate public use required by the Takings Clause includes projects de-signed to create new jobs, generate taxes, or otherwise seek to“promot[e] economic development.”28

The Court’s broad definition of public use under the Fifth Amend-ment has paved the way for cities like Richmond, California, to turnto eminent domain as a means of reducing the ills associated with va-cant, uncared-for homes, while simultaneously generating much-needed tax revenue.29 Richmond argues that “[s]ixteen percent ofmortgages in the city have gone into foreclosure, which . . . has wors-ened crime, vacancy, and blight.”30 Under the Supreme Court’s broadand deferential definition of “public use,” here, it seems as thoughRichmond’s stated purpose is sufficient to properly invoke the state’spower of eminent domain.

The idea to use eminent domain to seize underwater mortgagenotes originated in San Francisco at an investment firm called Mort-gage Resolution Partners LLC (“MRP”). MRP plans to collaboratewith cities and counties greatly affected by the housing crisis to reducethe principals and monthly payments so people can keep theirhomes.31 To accomplish this, the cities will force the lenders to selltheir mortgage notes and will give the lenders fair market value inreturn.32 This is where MRP becomes essential: these struggling citiesdo not have the money to buy all of these mortgages, MRP will pro-

28. Kelo v. City of New London, 545 U.S. 469, 472, 489 (2005); Kubasek & Coyle,supra note 22, at 57. In the aftermath of Kelo, many states changed their eminentdomain laws to be much stricter on the definition of “public use.” However, this doesnot necessarily mean that the current mortgage plan will fail, as there are many differ-ences between seizing homes and seizing mortgage notes; see Pindell, supra note 8, at893–900.

29. Harkinson, supra note 10 (stating “how preventing a single foreclosure couldsave the city nearly $20,000 in lost taxes and other expenses.”); Shaila Dewan, Emi-nent Domain: A Long Shot Against Blight, N.Y. TIMES, Jan. 11, 2014, available athttp://www.nytimes.com/2014/01/12/business/in-richmond-california-a-long-shot-against-blight.html.

30. Lydia DePillis, Wall Street Has So Far Crushed a Drastic Foreclosure Fix. OneCalifornia Town Could Change That, WASH. POST (Sept. 10, 2013), http://www.wash-ingtonpost.com/blogs/wonkblog/wp/2013/09/10/wall-street-has-so-far-crushed-a-dras-tic-foreclosure-fix-one-california-town-could-change-that/.

31. Home, MORTGAGE RESOLUTION PARTNERS, http://mortgageresolution.com/(last visited Jan. 26, 2014); Richard E. Gottlieb & Vivian I. Kim, Eminent Domain:Will Local Governments Attempt to Use This Extraordinary Power to Purchase Troub-led Residential Mortgages?, 31 No. 11 BANKING & FIN. SERVICES POL’Y REP. 1, 4(2012).

32. Carl Gibson, Richmond, California Mayor Occupies Wall Street, HUFFINGTON

POST, Oct. 17, 2013, http://www.huffingtonpost.com/carl-gibson/richmond-california-mayor_b_4118203.html; Emily Badger, Why Wall Street Is Very, Very Angry at Rich-mond, California, Right Now, THE ATLANTIC CITIES: PLACE MATTERS (Sept. 11,2013), http://www.theatlanticcities.com/housing/2013/09/why-wall-street-very-very-an-gry-richmond-california-today/6858/.


vide the capital in exchange for a flat fee of $4,500.00 per loan.33

MRP’s plan allows the lenders to conduct their own appraisals to en-sure that the lender receives adequate compensation.34 Once an ap-praisal is done, lenders could accept the payment from MRP and stillchallenge whether the amount was high enough in court.35 Once thecity owns the mortgage note, the homeowner could continue makingpayments to the city to pay the mortgage, or refinance the mortgagewith another lender at the current fair market value.36 Steven M.Gluckstern, the company’s chair,37 “calculates that a family . . . thatbought a $200,000 house that’s now worth $100,000 . . . would see itsmonthly payments decrease from between $800 to $300.”38

It is not surprising that the lenders are upset. MRP’s plan providesthe lenders with a mortgage’s current fair market value, but com-pletely ignores the amount of the original loan, so the lenders maylose money overall.39 In a complaint filed against Richmond, WellsFargo asserted that it could lose $200 million on the 624 mortgagesRichmond planned to seize.40

Gluckstern, however, believes that lenders like Wells Fargo are ex-aggerating estimated losses because they are outraged at having theirdominance of the financial system challenged. If it is true, as studiessuggest, that “80 percent of underwater mortgages owned by private-label securities will end up defaulting,”41 lenders would not be likelyto get much more than fair market value from a foreclosure sale—leaving a deficiency identical to the one under MRP’s plan.42 MRP’splan may well prove to be more economically beneficial to thesebanks because under MRP’s plan, banks would not have to pay up-keep on vacant homes before the homes can be sold. Indeed, Rich-mond has even begun “fining banks $1,000 a day if they fail to

33. Gottlieb & Kim, supra note 31, at 4; Harkinson, supra note 10; DePillis, supranote 30.

34. Gibson, supra note 32.35. Jon Prior, Still no partner for radical mortgage resolution, POLITICO (Jan. 16,

2013, 4:39 AM), http://dyn.politico.com/printstory.cfm?uuid=C1252E22-11FC-403D-8F06-D21F86EE27AA.

36. Pindell, supra note 8, at 889–90.37. Gottlieb & Kim, supra note 31, at 1; Management, MORTGAGE RESOLUTION

PARTNERS, http://mortgageresolution.com/management (last visited Jan. 26, 2014).38. Harkinson, supra note 10.39. See FAQS, MORTGAGE RESOLUTION PARTNERS, http://mortgageresolution.

com/faqs (last visited Jan. 26, 2014).40. Jody Shenn et al., Pimco, BlackRock Seek to Bar California Mortgage Seizures,

BLOOMBERG PERSONAL FINANCE (Aug. 8, 2013), http://www.bloomberg.com/news/2013-08-07/bondholders-sue-california-city-to-block-mortgage-seizures-1-.html.

41. Harkinson, supra note 10.42. BLACK’S LAW DICTIONARY (9th ed. 2009), deficiency (“The amount still owed

when the property secured by a mortgage is sold at a foreclosure sale for less than theoutstanding debt.”).


maintain the properties they own and they have collected $1.5 millionso far.”43

B. The Housing Crisis in Nevada and in Other States

Many cities across the nation that were hit especially hard by thehousing crisis have considered implementing eminent domain to helptheir struggling citizens. In June 2012, San Bernardino County wasone of the first to consider using eminent domain after a record num-ber of foreclosures and no relief in sight.44 After this first look, manyother cities and counties have considered or are actively trying to im-plement eminent domain. Together with San Bernardino County,Richmond County and the California cities of Fontana and Ontariohave formed a committee to explore the idea.45 Thirty other localgovernments followed suit,46 including the cities of: North Las Vegas,in Nevada;47 Sacramento,48 Berkeley,49 Pomona,50 El Monte,51 Oak-land,52 and Salinas53 in California; Seattle, in Washington;54 Yonkers55

43. Dewan, supra note 29.44. Mark Muckenfuss, SAN BERNARDINO: County Steps Forward on Housing

Idea, THE PRESS-ENTERPRISE (June 30, 2012, 4:52 PM), http://www.pe.com/local-news/san-bernardino-county/san-bernardino-county-headlines-index/20120630-san-bernardino-county-steps-forward-on-housing-idea.ece (“The rate in San Bernardinoand Riverside counties is one foreclosure per 179 homes, which is 31/2 times the na-tional average.”).

45. Muckenfuss, supra note 44.46. Prior, supra note 35.47. James Dehaven, North Las Vegas approves plan to use eminent domain to aid

underwater homeowners, LAS VEGAS REVIEW-JOURNAL (June 20, 2013, 10:49 PM),http://www.reviewjournal.com/news/las-vegas/north-las-vegas-approves-plan-use-emi-nent-domain-aid-underwater-homeowners.

48. Hudson Sangree, Eminent Domain Would Aid Underwater Owners, THE SAC-

RAMENTO BEE, Aug. 11, 2012, at A1.49. Oksana Yurovsky, Berkeley City Council explores solutions to home foreclo-

sures, THE DAILY CALIFORNIAN (Aug. 5, 2012), http://www.dailycal.org/2012/08/05/berkeley-city-council-explores-solutions-to-home-foreclosures/.

50. Monica Rodriguez, Pomona to hear eminent domain proposal, DAILY BULLE-

TIN NEWS (May 11, 2013, 9:00 PM), http://www.dailybulletin.com/general-news/20130512/pomona-to-hear-eminent-domain-proposal.

51. Shaila Dewan, A City Invokes Seizure Laws to Save Homes, N.Y. TIMES, July29, 2013, available at http://www.nytimes.com/2013/07/30/business/in-a-shift-eminent-domain-saves-homes.html?pagewanted=all&_r=0.

52. Labor Solidarity Comm., Special Oakland City Council Meeting to ConsiderResolution in Support of Richmond’s Proposed Mortgage Relief Program using Emi-nent Domain., OCCUPY OAKLAND (Oct. 27, 2013), https://occupyoakland.org/ai1ec_event/special-oakland-city-council-meeting-consider-resolution-support-richmonds-proposed-mortgage-relief-program-using-eminent-domain/?instance_id=.

53. ASF Submits Letter to Salinas, CA Opposing Proposed Eminent DomainAgreement with MRP, AMERICAN SECURITIZATION FORUM (Dec. 16, 2012), http://www.americansecuritization.com/content.aspx?id=8651#.UtiCxrRzLKc.

54. Alison Morrow, Underwater homeowners get a chance for relief in Seattle,KING5.COM (Dec. 11, 2013, 6:33 PM), https://web.archive.org/web/20140217091338/http://www.king5.com/news/cities/seattle/Underwater-homeowners-get-a-chance-for-relief-in-Seattle-235497161.html.


in New York; Newark56 and Irvington57 in New Jersey; Chicago;58 andBrockton59 in Massachusetts.

Unfortunately, most of these cities have succumbed to the pressureput on them by national lenders and the Government-Sponsored En-terprises (“GSEs”) Fannie Mae and Freddie Mac.60 However, Rich-mond, California has refused to back down and has taken MRP’sproposal further than any other city.61 Richmond’s mayor, Gayle Mc-Laughlin, is adamant that eminent domain will help struggling home-owners in Richmond lower their monthly payments and stay in theirhomes:

The foreclosure crisis hit Richmond hard. When one home goes intoforeclosure, nine other homes are impacted. That invites blight,crime, and affects the city’s tax base as a result. When there areneighborhoods with lots of vacant homes, that means there aren’tenough homeowners with money to spend in local economies, tosend their kids to our schools, to support local business. So this isaddressing all of that.

We want to stop homelessness, and we want to keep families in theirhomes, living and working in our community. We’ve got peoplehanging on by their fingernails right now. And we’ve bailed out thebanks to the tune of $2 trillion. We just want them to not stand inour way.62

Still, Richmond has not actually implemented eminent domain.63 InJuly 2013, the city sent out letters to the lenders of 624 homes askingthem to sell their mortgage notes at fair market value—unsurprisingly,all lenders declined.64 Currently, two banks have brought lawsuitsagainst Richmond challenging the legality of the program and pushing

55. The Daily Voice, Yonkers City Council Explores Program To Help Homeown-ers In Foreclosure, YONKERS: DAILY VOICE (Nov. 20, 2013), http://yonkers.dailyvoice.com/news/yonkers-city-council-explores-program-help-homeowners-foreclosure.

56. Dopp, supra note 11.57. Dewan, supra note 12.58. Micah Maidenberg, Alderman wants to explore fighting foreclosures with emi-

nent domain, CHICAGOREALESTATEDAILY.COM (July 30, 2012), http://www.chi-cagorealestatedaily.com/article/20120730/CRED03/120739989/alderman-wants-to-explore-fighting-foreclosures-with-eminent-domain#.

59. Eleazar David Melendez, Brockton, Massachusetts, Considers Eminent Do-main To Address Foreclosures, HUFF POST: BUSINESS (Jan. 15, 2013), http://www.huffingtonpost.com/2013/01/11/brockton-eminent-domain-foreclosure_n_2458369.html.

60. See infra Part I Section C.61. Dewan, supra note 29.62. Gibson, supra note 32.63. Christina Mlynski, Eminent domain remains minor headwind as housing recov-

ers, HOUSINGWIRE (Nov. 15, 2013, 10:12 AM), http://www.housingwire.com/articles/27985-eminent-domain-remains-minor-headwind-as-housing-recovers; Gibson, supranote 32.

64. DePillis, supra note 30; Shenn, et al., supra note 40.


for an injunction against the city; however, both have been dismissedas not ripe.65

C. The Lenders’ Reactions

To prevent local governments from implementing this plan, lendershave began bullying cities that consider it.66 The Federal Housing Fi-nance Agency (“FHFA”)67 released a statement in August 2013, stat-ing that FHFA may:

[I]nitiate legal challenges to any local or state action that sanctionsthe use of eminent domain to restructure mortgage loan contractsthat affect FHFA’s regulated entities; act by order or by regulationto direct the regulated entities to limit, restrict or cease businessactivities within the jurisdiction of any state or local authority em-ploying eminent domain to restructure mortgage loan contracts.68

Likewise, the Securities Industry and Financial Markets Association(“SIFMA”) asserted in a statement, following Richmond’s decision tocontinue exploring eminent domain, that “the plan . . . could deterprivate capital from returning to the housing markets and make homeloans harder to access and more expensive for all Richmond re-sidents.”69 This prediction that lenders will cease activity in these ar-eas is particularly potent because if followed through with, these citieswill face a chilling effect where “no one will give credit to cities thatshow they’re willing to seize property like this” and the ones that dowill “hike up interest rates” until the loans are basically infeasible.70

Illustratively, in August 2013, Richmond attempted to sell a highlyrated set of bonds, but was unsuccessful:71

Just days after Richmond became the first city in the country to usethe threat of eminent domain to obtain underwater mortgages, WallStreet spurned its efforts to refinance its highly rated municipalbonds, an unusual snub that cost the city nearly $4 million inlost savings . . . . Bonds are a crucial funding mechanism for localgovernments, which depend on them to finance public projects likeroads, schools and utilities. Being unable to sell or refinance bonds

65. See Mlynski, supra note 63.66. See Harkinson, supra note 10; Dewan, supra note 12.67. About Us, FED. HOUS. FIN. AGENCY, http://www.fhfa.gov/AboutUs (last vis-

ited June 15, 2014) (“[The FHFA is an] independent regulatory agency responsible forthe oversight of vital components of the secondary mortgage markets—the housinggovernment sponsored enterprises of Fannie Mae, Freddie Mac and the FederalHome Loan Bank System.”).

68. Media Statements, FED. HOUS. FIN. AGENCY, http://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Statement-on-Eminent-Domain.aspx (last visited Sept. 12,2014).

69. SIFMA Statement Following Richmond Vote on Eminent Domain, SIFMA(Sept. 11, 2013), http://www.sifma.org/newsroom/2013/sifma-statement-following-richmond-vote-on-eminent-domain/.

70. Badger, supra note 32; Harkinson, supra note 10; Shenn, et al., supra note 40.71. Dewan, supra note 29.


to lower interest rates could hurt a city’s ability to meet its long-term obligations.72

Realistically, if lenders are able to restrict access to credit in thesecities, this action would “stop the [eminent domain] program immedi-ately.”73 Therefore, this threat, coupled with the inevitable legal bat-tles,74 have understandably caused several local governments to backdown.75

III. HISTORICAL LIMITATIONS ON LENDERS

Essentially, the lenders want to decline to do business in cities thatimplement eminent domain. Historically, through a process nowknown as “redlining,” lenders categorically refused to do business incertain geographic areas because of the region’s racial or ethnic com-position.76 Although the lenders’ motives in the current situation areslightly different—they are refusing business not because of race butbecause of the cities’ actions—their motives are irrelevant becausetheir policy will have a disparate impact on citizens of a minority raceor ethnicity.

A. Redlining

Around the 1930s, lenders began considering factors other than thevalue of the borrower’s collateral before approving a loan, such as thelocation of the collateral and characteristics of the applicant.77 Thus,in order to bring some stability and consistency to residential mort-gage loans, Congress enacted the National Housing Act of 1934,which created the Federal Housing Administration.78 To achieve na-tional consistency in lending practices, the Federal Housing Adminis-tration published a manual that covered, among other topics,

72. Carolyn Said, Eminent domain plan may have spooked investors, SFGATE

(Aug. 29, 2013, 11:00 PM), http://www.sfgate.com/realestate/article/Eminent-domain-plan-may-have-spooked-investors-4773720.php.

73. Alejandro Lazo, Lt. Gov. Gavin Newsom alleges ‘threats’ against mortgageplan, LOS ANGELES TIMES, Sept. 11, 2012, http://articles.latimes.com/2012/sep/11/busi-ness/la-fi-eminent-domain-20120911.

74. FAQS, supra note 39 (however, MRP has stated that they will pay the costs ofthese legal challenges).

75. James Dehaven, North Las Vegas rejects use of eminent domain to rescuehomeowners, LAS VEGAS REVIEW-JOURNAL (Sept. 4, 2013, 8:55 PM), http://www.reviewjournal.com/news/government/north-las-vegas-rejects-use-eminent-domain-res-cue-homeowners; Jean Tepperman, Fearing Wall Street Reprisals, Oakland CouncilAbandons Anti-Foreclosure Plans, EAST BAY EXPRESS (Nov. 20, 2013), http://www.eastbayexpress.com/SevenDays/archives/2013/11/20/fearing-wall-street-reprisals-oak-land-council-abandons-anti-foreclosure-plans; Dewan, supra note 29.

76. BLACK’S LAW DICTIONARY (9th ed. 2009), redlining.77. ROBERT SCHAFER & HELEN F. LADD, DISCRIMINATION IN MORTGAGE LEND-

ING 4 (1981).78. Stephen M. Dane, Eliminating the Labyrinth: A Proposal to Simplify Federal

Mortgage Lending Discrimination Laws, 26 U. MICH. J.L. REFORM 527, 534–35(1993).


creditworthiness of the applicant and adequacy of the collateral.79 Fora decade or so after its creation, this manual actually required lendersto decline loans to minorities who wished to live in non-minorityneighborhoods.80 Likewise, the American Institute of Real EstateAppraisers Manual ranked minorities in order of their impact on aneighborhood’s value.81

The Housing Administration officially eliminated race-based lend-ing criteria from its manual in the 1960s, but this did not stop theprivate lenders from continuing to employ its discriminatory tenets.82

During the 1960s and 1970s, Congress passed legislation, such as theFHA and the ECOA, to combat this private lending discrimination.83

However, rather than discontinuing these practices altogether, lendersmerely utilized more subtle methods of discrimination that were diffi-cult to detect and prove.84 These methods allowed the discriminationto continue almost entirely unchecked until several years after theFHA had been enacted.85 This discrimination was often seen in theform of “redlining,” which is where banks and lenders refuse to ex-tend credit to certain geographic locations, such as those with highminority or low-income populations.86 Redlining usually refers to thebroader exclusion of people from a certain geographic location and itis not dependent on the race of the prospective borrower.87 Ulti-mately, although officially prohibited by the FHA and ECOA, redlin-ing continued as a pervasive lending practice in many low-income andinner city areas until the 1990s.88

79. Id. at 535.80. Id.81. Id. at 534.82. Id. at 536.83. Dane, supra note 78, at 537.84. Id. (One such method is prescreening and another is to manipulate the terms

and conditions of the loan to take advantage of minorities who may not know it isdisfavorable or who do not have any other option); Id. at 537 n.37.

85. Robert G. Schwemm, Introduction to Mortgage Lending Discrimination Law,28 J. MARSHALL L. REV. 317, 319–20 (1995).

86. Policy Statement on Discrimination in Lending, 59 Fed. Reg. 18266-01, 18268(Apr. 15, 1994) (to be codified at 24 C.F.R. pt. 100) (Redlining refers to “the illegalpractice of refusing to make residential loans or imposing more onerous terms on anyloans made because of the predominant race, national origin, etc., of the residents ofthe neighborhood in which the property is located.”); BLACK’S LAW DICTIONARY (9thed. 2009), redlining.

87. Swire, supra note 15, at 800–01 (“Some institutions that would not lend toblacks entering white neighborhoods would indeed provide mortgages once a neigh-borhood had become clearly black. But many lenders had policies of not makingloans in black neighborhoods. Agencies often refused to insure loans secured byproperties in black neighborhoods . . . .”); Schwemm, supra note 85, at 319 (In Lauf-man v. Oakley Building & Loan Co., the plaintiff was a “white individual who boughta house in a racially diverse area of Cincinnati and felt that the defendant did notprovide equal loans in that area. . . . [H]e claimed that he was discriminated againstnot because of his race, but because of the racial make-up of the area where hewanted to buy a house.”).

88. Schwemm, supra note 85, at 321; Nier & St. Cyr, supra note 16, at 947.


As redlining gained media attention, some unscrupulous lenders re-alized that they could exploit the minorities and the low-income citi-zens who were being denied credit by other lenders. Accordingly,“reverse redlining”—the practice of targeting communities that hadbeen victims of redlining in the past for subprime or unfair loans—began in the late 1900s.89 Redlining facilitated the growth of thesesubprime loans because many minority communities that had beencontinuously denied credit were both desperate and unsophisticatedenough for lenders to target and exploit.90 Typical reverse redliningpractices include unreasonable interest rates or fees, fraudulent ormisleading marketing, and high rates of refinancing.91 This type oflending “result[ed] in devastating personal losses, including bank-ruptcy, poverty, and foreclosure.”92 It has disproportionately affectedminority borrowers and neighborhoods, and has consequently“strip[ped] assets and wealth from communities of color, and exacer-bate[d] the wealth gap between black and white families.”93 Althoughthis lending appeared to be somewhat different from the redlining ofthe past, the outcome was the same—minority groups were targetedand exploited.

B. The FHA and the ECOA

Plaintiffs have used both the FHA and the ECOA to combat differ-ent types of lending discrimination.94 The Department of Housingand Urban Development (“HUD”) regulates the implementation ofthe FHA, and the Federal Reserve Board (“FRB”) regulates theECOA.95 Congress enacted the FHA in 1968 as Title VIII of the CivilRights Act of 1968,96 amended in 1988,97 and its purpose is to provide“fair housing throughout the United States.”98 Section 3605 of theFHA makes it “unlawful for any person or other entity whose busi-ness includes engaging in residential real estate-related transactions todiscriminate against any person in making available such a transac-tion, or in the terms or conditions of such a transaction, because of

89. Nier & St. Cyr, supra note 16, at 942, 944.90. Id.91. Id. at 946.92. Id. at 945 (“Subprime loans also move more quickly into foreclosure than

prime loans do.”).93. Id. at 946, 948 (predatory lending leads to “increased debt, lost equity, in-

creased foreclosures, and neighborhood devaluation.”).94. See Dane, supra note 78.95. Fair Housing Act, 24 C.F.R. § 100.1 (2013); Equal Credit Opportunity Act, 12

C.F.R. § 202.1 (2013).96. Civil Rights Act of 1968, Pub. L. No. 90-284, 82 Stat. 73.97. Fair Housing Amendments Act of 1988, Pub. L. No. 100-430, 102 Stat. 1619

(codified at 42 U.S.C. § 3601).98. Fair Housing Act, 42 U.S.C. § 3601 (2012).


race, color . . . or national origin.”99 The FHA regulations providespecific examples of some prohibited practices.100

Likewise, Congress enacted the ECOA in 1974 as Title VII, anamendment to the Consumer Protection Act,101 and was lateramended in 1976.102 The ECOA’s original purpose was to “makecredit available with fairness, impartiality, and without discriminationon the basis of sex or marital status.”103 However, the 1976 amend-ment added language to prevent discrimination based on race, color,religion, and national origin.104 The ECOA regulations provide spe-cific examples of some practices that are prohibited.105 Together, theFHA and ECOA provide comprehensive legislation against lendingdiscrimination.106

C. Lending Discrimination Causes of Action

To protect minority borrowers effectively, it is necessary to under-stand what lending discrimination is, and how to prove a lending dis-crimination case. There are three recognized categories of lendingdiscrimination. The first category is overt discrimination.107 This oc-curs when a prohibited factor is clearly the basis for a lender’s deci-sion.108 Today, there are fewer instances of overt discriminationbecause lenders are more aware of the requirements imposed on themby the FHA and ECOA, and realize that there are significant conse-quences for discriminatory behavior.109

The second category of lending discrimination is disparate treat-ment.110 This occurs when a lender uses a prohibited factor, such asrace, as a basis to treat applicants differently;111 however, this type ismore difficult to prove than overt discrimination, and often requiresthe use of “testers” to provide evidence that a lender has discrimi-nated in treatment.112

99. 42 U.S.C. § 3605 (2012).100. See 24 C.F.R. §§ 100.120, 100.130, 100.400 (2013).101. Equal Credit Opportunity Act, Pub. L. No. 93-495, 88 Stat. 1500.102. Equal Credit Opportunity Act Amendments of 1976, Pub. L. No. 94-239, 90

Stat. 251.103. Equal Credit Opportunity Act, Pub. L. No. 93-495, § 502, 88 Stat. 1500.104. Equal Credit Opportunity Act Amendments of 1976, Pub. L. No. 94-239,

§ 701, 90 Stat. 251; Equal Credit Opportunity Act, 15 U.S.C. § 1691 (2012).105. Equal Credit Opportunity Act, 12 C.F.R. §§ 202.4(b), 202.5–202.7 (2013).106. See Schwemm, supra note 85, at 326–27; Dane, supra note 78, at 546–50.107. Policy Statement on Discrimination in Lending, 59 Fed. Reg. 18266-01, 18268

(Apr. 15, 1994) (to be codified at 24 C.F.R. pt. 100).108. Id.109. See Dane, supra note 78, at 537; Schwemm, supra note 85, at 328.110. Policy Statement on Discrimination in Lending, 59 Fed. Reg. at 18268.111. Id.112. Schwemm, supra note 85, at 329.


The third category of recognized discrimination is disparate im-pact.113 This occurs when a lender applies a policy equally to all appli-cants, but the policy results in a discriminatory effect on a prohibitedfactor.114 Because overt discrimination is all but non-existent, and dis-parate treatment is not applicable to the situation in Richmond, thisNote will only focus on disparate impact.

There is a new regulation that “formalizes [HUD’s] long-held rec-ognition of discriminatory effects liability under the Act [the FHA]and, for purposes of providing consistency nationwide, formalizes aburden-shifting test for determining whether a given practice has anunjustified discriminatory effect . . . .”115 The rule, effective on March18, 2013, and codified in 24 C.F.R. Section 100.500, provides that “[a]practice has a discriminatory effect where it actually or predictablyresults in a disparate impact on a group of persons or creates, in-creases, reinforces, or perpetuates segregated housing patterns be-cause of race, color, . . . or national origin.”116 The purpose of thisregulation is to cover two types of discriminatory effects: “(1) harm toa particular group of persons by a disparate impact; and (2) harm tothe community generally by creating, increasing, reinforcing, or per-petuating segregated housing patterns.”117

The regulation then provides what constitutes a prima facie caseand discusses the burden-shifting framework.118 In a typical disparateimpact claim, there is generally only one component to a prima faciecase.119 The plaintiff must show that “a challenged practice caused orpredictably will cause a discriminatory effect.”120 A plaintiff cannotmerely assert or provide their general perception that a policy dispro-portionately excludes people on a prohibited basis,121 and must gener-ally present statistical evidence showing that higher percentages ofminorities are excluded than are non-minorities.122 Notably, discrimi-natory intent is not required.123

113. Policy Statement on Discrimination in Lending, 59 Fed. Reg. at 18268.114. Id.; Implementation of the Fair Housing Act’s Discriminatory Effects Stan-

dard, 78 Fed. Reg. 11460-01, 11460 (Feb. 15, 2013) (to be codified at 24 C.F.R. pt.100); Fair Housing Act, 24 C.F.R. § 100.500(a) (2013); Stephen M. Dane, Disparate-Impact Analysis in the Mortgage Lending Context, 115 BANKING L.J. 900, 906 (1998).

115. Implementation of the Fair Housing Act’s Discriminatory Effects Standard, 78Fed. Reg. at 11460.

116. 24 C.F.R. § 100.500(a).117. Implementation of the Fair Housing Act’s Discriminatory Effects Standard, 78

Fed. Reg. at 11469.118. See 24 C.F.R. § 100.500(c).119. Id. § 100.500(c)(1); Schwemm, supra note 85, at 331.120. 24 C.F.R. § 100.500(c)(1).121. Policy Statement on Discrimination in Lending, 59 Fed. Reg. 18266-01, 18269

(Apr. 15, 1994) (to be codified at 24 C.F.R. pt. 100); Implementation of the Fair Hous-ing Act’s Discriminatory Effects Standard, 78 Fed. Reg. at 11472.

122. Schwemm, supra note 85, at 331; Policy Statement on Discrimination in Lend-ing, 59 Fed. Reg., at 18269.

123. 24 C.F.R. § 100.500(c)(1).


After the plaintiff demonstrates that a lender’s policies have a dis-criminatory impact, the burden shifts to the defendant-lender todemonstrate that “the challenged practice is necessary to achieve oneor more substantial, legitimate, nondiscriminatory interests of the de-fendant;”124 however, the interests cannot be “hypothetical or specu-lative.”125 Afterwards, even if the lender has successfully provided alegitimate, nondiscriminatory reason for the practice, a plaintiff maystill prevail by demonstrating that “the substantial, legitimate, nondis-criminatory interest(s) supporting the challenged practice could beserved by another practice that has a less discriminatory effect.”126

Again, this evidence cannot be “hypothetical or speculative.”127 If theplaintiff cannot provide a less-discriminatory alternative method toaddress the defendant’s legitimate interests, the case fails because thedefendant has provided a legally sufficient justification for the dispa-rate impact.128

D. Understanding Disparate Impact

Because disparate impact allows a legitimate justification of dis-criminatory practices as a defense, fully understanding disparate im-pact requires a discussion of how the courts should interpret theseterms. For example, it is important to explore which justificationstend to be “substantial, legitimate, and nondiscriminatory;” along withhow strict the standard is for evaluating if a “challenged practice couldnot be served by another practice that has a less discriminatory ef-fect;” and lastly, what “hypothetical or speculative” means.129

HUD has clarified its regulation regarding the implementation ofthe FHA’s discriminatory effects standard. First, HUD clarified twoof the terms in the phrase “substantial, legitimate, and nondiscrimina-tory” from 24 C.F.R. Section 100.500(b)(1)(i). HUD defines “sub-stantial” as “a core interest of the organization that has a directrelationship to the function of that organization.”130 HUD also statesthat determining which “goals, objectives, and activities” are substan-tial enough to qualify as a legitimate justification for discrimination isa “case-specific, fact based inquiry.”131 One commentator askedHUD to include examples of interests that would meet the necessarystandard but HUD declined to do this, choosing only to reiterate thatit is a “case specific inquiry.”132 Additionally, the term “legitimate”

124. Id. § 100.500(c)(2).125. Id. § 100.500(b)(2).126. Id. § 100.500(c)(3).127. 24 C.F.R. § 100.500(b)(2).128. Id. § 100.500(b)(1)(i)–(ii).129. Id. § 100.500(b)(2), (c)(2)–(3).130. Implementation of the Fair Housing Act’s Discriminatory Effects Standard, 78

Fed. Reg. 11460–01, 11470 (Feb. 15, 2013) (to be codified at 24 C.F.R. pt. 100).131. Id.132. Id. at 11471.


requires that the interest be objectively genuine and not false,fabricated, or pretextual.133 HUD specifically rejected the term “busi-ness necessity” already used in other areas of discrimination law be-cause HUD was concerned that courts and litigants wouldmisinterpret that standard to apply only to businesses rather than the“full scope of practices covered by the Fair Housing Act, which ap-plies to individuals, businesses, nonprofit organizations, and public en-tities.”134 It is important to note that, although HUD rejected thelanguage of “business necessity,” the statute requires that a defendantshow the “challenged practice is necessary” to achieve a legitimateinterest.135 HUD used the word “necessary” in 24 C.F.R. Section100.500(b)(1)(i) because this broad language best achieves the goal ofthe FHA, and it is consistent with the historical disparate impact doc-trine that also required it be necessary.136

Second, HUD clarified the requirement that the defendant’s “chal-lenged practice could not be served by another practice that has a lessdiscriminatory effect” from 24 C.F.R. Section 100.500(b)(1)(ii). HUDdeclined to articulate a standard to use to interpret this language.Commenters suggested adding language that would help clarify theparameters of this requirement, such as saying that the less discrimina-tory practice be “equally effective” or “at least as effective”; however,HUD decided not to elaborate on the requirement. HUD stated thatadding a standard such as “equally effective” would be inappropriategiven the “wider range and variety of practices covered by the Actthat are not readily quantifiable.”137 HUD emphasized that in prov-ing that a less discriminatory alternative exists, the plaintiff must alsoshow that the alternative “effectively address the lender’s concerns”that are allegedly being protected or advanced by the discriminatorypractice.138

Third, HUD clarified the terms “hypothetical or speculative” asused in 24 C.F.R. Section 100.500(b)(2). HUD stated that this lan-guage excludes relationships that are imagined out of “speculation,hypothesis, generalization, stereotype, or fear”—the defendants mustprovide actual evidence that there is a relationship between an appro-priate interest and the challenged practice.139

133. Id. at 11470.134. Id. (“[Business necessity has been used with] judicial interpretations of the

Fair Housing Act, with HUD’s regulations governing Fannie Mae and Freddie Mac,and with the Joint Policy Statement.”).

135. 24 C.F.R. § 100.500(b)(1)(i).136. Implementation of the Fair Housing Act’s Discriminatory Effects Standard, 78

Fed. Reg. at 11470–71; 12 C.F.R. § 1002.6(a)(2) (Supp. I 2014).137. Implementation of the Fair Housing Act’s Discriminatory Effects Standard, 78

Fed. Reg. at 11473.138. Id. at 11473.139. Id. at 11471.


Since its enactment, there have been only a few cases interpreting24 C.F.R. Section 100.500. In Boykin v. Gray, the court granted thedefendant’s motion for summary judgment on a disparate impactclaim.140 In Boykin, the plaintiff claimed that the city violated theFHA by closing down a ninety-bed homeless shelter because the clo-sure disproportionately affected African-Americans and Hispanics.141

The court determined that the statistical evidence proffered by theplaintiff was inadequate to show a disparate impact.142 The statisticsfocused on the fact that minorities were overrepresented in the city’shomeless population.143 However, the court emphasized that becausethe homeless shelter only had ninety beds, only a small proportion ofthe homeless population felt the negative impact of its closure.144

Moreover, the shelter’s closure was not the result of an adverse policy,but a new policy that the city believed would better serve the home-less population.145

In Mt. Holly Gardens Citizens in Action, Inc. v. Township of MountHolly, the third circuit vacated and remanded a grant of summaryjudgment to the defendants on a disparate impact FHA claim.146

Plaintiffs claimed that the town destroyed existing homes in a neigh-borhood occupied predominately by minorities and replaced themwith more expensive homes.147 The court held that the statistical evi-dence provided was sufficient to satisfy the prima facie case. Theplaintiffs used census data to show that 23% of African-Americanhouseholds and 32% of Hispanic households in Mount Holly wouldbe destroyed, as compared to 3% of white households.148 Moreover,after the new homes were built, only 21% of the minority householdswould be able to afford them, as opposed to 79% of whitehouseholds.149

After establishing a prima facie case, the township stated that itsjustification was “alleviating blight”—which is clearly a legitimate in-terest. However, the issue then becomes whether the city could have

140. Boykin v. Gray, 986 F.Supp.2d 14, 23 (D.D.C. Sept. 30, 2013).141. Id. at 16.142. Id. at 19–20 (“The fundamental defect in the plaintiffs’ argument is that the

adverse impact of which they complain was suffered not by the entire homeless popu-lation in the District of Columbia, nor even by a significant portion of its more than6,000 members. . . . Rather, the loss of La Casa Shelter—which had just ninety beds—was felt by a much smaller subset of that population.”).

143. Id.144. Id. at 21.145. Boykin, 986 F.Supp.2d at 21.146. Mt. Holly Gardens Citizens in Action, Inc. v. Twp. of Mt. Holly, 658 F.3d 375,

377 (3d Cir. 2011).147. Id.148. Id. at 382.149. Id.


used a less discriminatory alternative.150 The court stated that the dis-agreement among residents, policy makers, and experts raised a ques-tion of material fact, and therefore, summary judgment wasimproper.151

IV. LENDERS’ THREATS AGAINST CITIES SEEKING TO USE

EMINENT DOMAIN

To determine if disparate impact is likely to work to prevent lendersfrom following through on their threats to withhold or drastically limitcredit to regions seeking to use eminent domain to seize mortgagenotes, we must go through the steps discussed above.152 First, we mustidentify the facially neutral policy and demonstrate that “[the] chal-lenged . . . [policy] caused or predictably will cause a discriminatoryeffect” based on race.153 Second, we must anticipate and counter pos-sible “nondiscriminatory interests” that the lenders will proffer.154

Lastly, we must identify “another practice that has a less discrimina-tory effect” that could also serve the lenders’ nondiscriminatoryinterest.155

Here, the facially neutral policy at issue is the lenders’ threat againstRichmond, and similar cities, that they will either refuse to extendcredit entirely, or raise interest rates so drastically that accessingcredit would be, effectively, impossible.156 This policy is facially neu-tral because there is nothing to indicate that lenders would considerrace when determining to extend or deny credit to the citizens inRichmond. Rather, the policy seems like a blanket denial of credit toall citizens of Richmond in response to the city’s actions.

Having identified a facially neutral policy, next we must show thatthese threats will have a discriminatory effect on minorities. “Gluck-stern said on the Center for American Progress panel last week that. . . ‘[t]he communities we are furthest along with in these talks aremostly communities of color’ . . . .”157 Moreover, a report by theWoodstock Institute found that in Chicago, “[b]orrowers in communi-ties of color are more than twice as likely as are borrowers in whitecommunities to have little to no equity in their homes,” and that“[a]lmost three times as many properties in communities of color areseverely underwater compared to properties in white communi-

150. Id. at 385 (although this case was decided before 24 C.F.R. § 100.500, the courtfollowed the appropriate burden-shifting framework, except for the least discrimina-tory alternative).

151. Mt. Holly Garden, 658 F.3d at 386–87.152. See supra Part II Section C.153. Fair Housing Act, 24 C.F.R. § 100.500(c)(1) (2013).154. § 100.500(c)(2).155. § 100.500(c)(3).156. See supra Part I Section C.157. Prior, supra note 35.


ties.”158 In addition to the Woodstock Report, a study conducted bythe Pew Research Center found that “[f]rom 2005 to 2009, the medianlevel of home equity held by Hispanic homeowners declined by half—from $99,983 to $49,145”; while “black homeowners . . . [fell] from$76,910 in 2005 to $59,000 in 2009”; and “white homeowners, . . . [fell]from $115,364 in 2005 to $95,000 in 2009.”159 Therefore, this data sug-gests that home equity was affected more severely in minority com-munities than it was in white communities.

Furthermore, according to census data, the targeted cities havelarge minority populations. For example, in Richmond, according tothe 2010 census data, only 17.1% of its population responded that theywere both white and neither Hispanic nor Latino; this is in contrast tothe overall 40.1% in California.160 This discrepancy indicates that anenormous percentage of Richmond’s population is either a racial oran ethnic minority. Similar to Richmond, several other California cit-ies also have a white, non-Hispanic population that is far below theexpected percentage when considering the overall census data for Cal-ifornia.161 This racial discrepancy is also present when comparing theracial composition of the City of North Las Vegas (31.2% white, non-Hispanic) to the overall population of Nevada (54.1%).162

Considering the discrepancy between the overall white, non-His-panic population of these states and the white, non-Hispanic popula-tions of the cities threatened by banks and lenders, it seems clear thata policy refusing to extend credit to an entire city like Richmondwould have a disparate impact on minorities. Here as in Mt. HollyGardens, if the City of Richmond filed suit to prevent lenders frominstituting a credit freeze, the census data would likely be strongenough to establish a cognizable claim of disparate treatment, andwould therefore allow Richmond to, at a minimum, survive a motionto dismiss.

Moreover, these threats affect all citizens within the city. Unlike inBoykin, where the closure of one moderate-sized homeless shelter

158. Spencer Cowan & Katie Buitrago, Struggling to Stay Afloat: Negative Equity inCommunities of Color in the Chicago Six Count Region, WOODSTOCK INSTITUTE

(Mar. 2012), available at http://www.woodstockinst.org/sites/default/files/documents/stayingafloat_policybrief_mar2012_0.pdf.

159. Rakesh Kochhar et al., Wealth Gaps Rise to Record Highs Between Whites,Blacks, and Hispanics, PEW RESEARCH SOCIAL & DEMOGRAPHIC TRENDS at *2, 4(July 26, 2011), http://www.pewsocialtrends.org/2011/07/26/wealth-gaps-rise-to-record-highs-between-whites-blacks-hispanics/.

160. State & County QuickFacts, U.S. CENSUS BUREAU, http://quickfacts.census.gov/qfd/states/06/0660620.html (last visited Jan. 26, 2014).

161. State & County QuickFacts, U.S. CENSUS BUREAU, http://quickfacts.census.gov/qfd/states/06/0664000.html (last visited Jan. 26, 2014) (These cities and their corre-sponding white, non-Hispanic population percentages are: Sacramento (34.5%); Po-mona (12.5%); El Monte (4.9%); Oakland (25.9%); and Salinas (15.5%)).

162. State & County QuickFacts, U.S. CENSUS BUREAU, http://quickfacts.census.gov/qfd/states/32/3251800.html (last visited Jan. 26, 2014).


only affected a small portion of the homeless population, here thelenders’ threats are against the entire city. Indeed, if the lenders re-fuse to extend credit or raise the interest rates, every citizen will beaffected by this moratorium, either directly or indirectly.

The second step in the burden-shifting framework requires thatlenders provide legitimate interests that support the threatened policy.There are plausible explanations for the lenders’ desire to limit creditavailability to the City of Richmond: the first, and perhaps the morelikely reason of the two, is to retaliate against Richmond for under-mining the authority of the financial system; and the second explana-tion is that the lenders believe that they are losing money, and willcontinue to lose money if the city government is free to seize any fu-ture notes the lenders issue. While the first explanation—retalia-tion—may be an understandable motive, it is not a legally justifiabledefense to discrimination. And, although the second interest may ini-tially appear legitimate, closer examination reveals that it is merelyspeculative and impulsive.

Interestingly, lender retaliation has already occurred. After initialapproval of the eminent domain plan, Richmond needed to refinanceits municipal bonds. These bonds are important for a city becausecities “depend on them to finance public projects like roads, schoolsand utilities [and] [b]eing unable to sell or refinance bonds to lowerinterest rates could hurt a city’s ability to meet its long-term obliga-tions.”163 The bonds Richmond sought to refinance had an A- rating;a rating that would normally interest lenders very much—but not thistime. Councilman Nat Bates insisted that Richmond’s eminent do-main plan was “exactly the reason the bonds were rejected,” claimingthat it was necessary for Richmond to “get back in good graces withfinancial institutions.”164 Ultimately, the municipal bond debacle costthe city “nearly $4 million in lost savings,”165 and could cost themmuch more if Wall Street continues to refuse their bonds. This behav-ior by the lenders provides insight into what they think about this situ-ation. If lenders are willing to refuse to refinance highly-rated bonds,how far will they go to get back at Richmond?

Although more legally sound than retaliation, a defense premisedon the lenders’ claims of lost money would fail because it is hypotheti-cal and speculative. Fear of losing money is certainly a substantial,legitimate, nondiscriminatory interest. However, here, it is uncertainwhether there would be an actual loss, and if so, how much that losswould be. The city and MRP plan to give the lenders fair marketvalue for the mortgage notes that they seize. The loss of money thatthe lenders are discussing is based on the presumption that the home-

163. Said, supra note 72.164. Id.165. Id.


owners who are still current on their payments will not default.166

However, empirical evidence suggests that “80 percent of underwatermortgages owned by private-label securities will end up defaulting.”167

If homeowners default on their outstanding loans, the lenders willonly get fair market value, or perhaps less, from the foreclosure sale.This outcome would place the lenders in a position similar to, orworse than, the situation resulting from eminent domain. Ultimately,the high probability of homeowner default on current mortgageswould likely make this interest fail to persuade a court that discrimi-natory practices were necessary or legal.

Assuming arguendo, that courts accept the lenders interests as valid,we will proceed to the last step: showing that the legitimate interests“could be served by another practice that has a less discriminatoryeffect.”168 As discussed above, the evidence supporting this alterna-tive practice cannot be “hypothetical or speculative.”169 It is possiblethat there are many alternative practices that could protect the lend-ers’ financial interest, but the most promising alternative is a compro-mise between the city and the lenders. Lenders could voluntarilyreduce the principal on all of the loans that the city would have other-wise seized, resulting in an affordable monthly payment that reducesthe likelihood of default.

In essence, Richmond’s plan is to invoke the power of eminent do-main to reduce the principal amounts owed on every loan. Therefore,rather than denying credit to an entire city, a less-discriminatory alter-native practice would be for the lenders to reach a compromise withthe city wherein the city does not seize the mortgage notes, and thelenders reduce the principals on the loans by a significant amount, butnot all the way down to fair market value of the property.

A compromise like this would keep homeowners in their homes; ascenario where everyone wins. First, the lenders continue to receivethe monthly payments from the homeowners and, because themonthly payments are lower, the likelihood of default is reduced;thus, the lender may actually make more money over time than theywould have if the overvalued principle had not been reduced. Second,the city lessens the chance that the homeowner will default, and bykeeping homes occupied, the city gets property taxes, prevents blightcaused by vacant and unmaintained homes, and ensures the stabilityof the local economy.

Understandably, lenders are hesitant to reduce the principals onloans because they write off a large chunk of money when they dothis, so they do not want to set a precedent of writing down principalswhenever home values go down. However, the proposed compromise

166. See Harkinson, supra note 10.167. Id.168. Fair Housing Act, 24 C.F.R. § 100.500(c)(3) (2013).169. § 100.500(b)(2).


is a solution to a widespread acute problem that we, as a society, hopewill not happen again. It is not a go-to solution whenever housingvalues drop in one neighborhood. The housing market crash was anational crisis that affected hundreds of thousands of homeownersand this extreme situation requires a solution that reaches outside ofthe box.

V. CONCLUSION

The prevalence of redlining in the early and middle 20th centurycreated a housing vacuum in many minority communities, which cre-ated the “underworld of real estate finance,”170 where the only optionavailable to potential borrowers were subprime mortgages offered byunscrupulous lenders.171 African-American borrowers were “6.1% to34.3% more likely than white borrowers to receive a higher rate [ofinterest on a] subprime mortgage.”172 Thus, when the housing bubbleburst, homeowners not only lost the equity in their homes, but werealso stuck with exorbitant interest rates and monthly payments thatthey simply could not afford.173 It is estimated that towards the end of2008 nearly 7.6 million homes were underwater, with another 2.1 mil-lion on the cusp.174 Because their homes were now underwater, it wastoo difficult to sell or refinance, so homeowners either had to struggleto try to remain in their homes or simply walk away.175

MRP came up with a solution for cities that still have many home-owners who are stuck with underwater homes.176 Their plan—to useeminent domain to force lenders to sell the mortgage notes of 624underwater homes in Richmond, California—has caused a lot of con-troversy and has greatly upset lenders.177 Historically, the govern-ment could only use eminent domain to seize tangible property tobuild structures for public use, but under the Court’s most recent in-terpretation of “public use,” the government can seize property topromote economic development.178 MRP and the mayor of Rich-mond argue that seizing underwater mortgage notes qualifies as a law-ful exercise of the state’s eminent domain power because vacant

170. Swire, supra note 15, at 801.171. Marcia Johnson, Will the Current Economic Crisis Fuel a Return to Racial Poli-

cies That Deny Homeownership Opportunity and Wealth?, 6 THE MODERN AMERI-

CAN 25, 29 (2010).172. Nier & St. Cyr, supra note 16, at 947.173. Id. at 946.174. Eamonn K. Moran, Wall Street Meets Main Street: Understanding the Financial

Crisis, 13 N.C. BANKING INST. 5, 31 (2009).175. Id.176. Home, supra note 31.177. Gibson, supra note 32; DePillis, supra note 30.178. Fawcett, supra note 21, at 494; Kelo v. City of London, 545 U.S. 469, 472, 489

(2005).


homes cause blight, and alleviating that blight is essential to promot-ing Richmond’s economic development.179

The lenders, however, are upset at the prospect of only getting paidfair market value on a loan that was originally worth much more, sothey have been threatening to stop extending credit or drastically raiseinterest rates in cities investigating MRP’s proposed plan.180 WallStreet has already begun to carry out these threats by refusing to refi-nance Richmond’s highly rated municipal bonds, which Richmondhad not had trouble refinancing in the past.181

If the lenders do carry out their threats and make credit unavailableor impracticable for citizens to access, the FHA and the ECOA willprotect the cities targeted by the credit freeze because the lenders’actions would have a discriminatory effect on minorities. To show dis-criminatory effect, first the city will need to demonstrate that the lend-ers threats of denying credit or raising interest rates “[have] caused orpredictably will cause a discriminatory effect” based on race or ethnic-ity.182 In Richmond’s case, the city will be able to demonstrate thisbecause census data shows that Richmond has a large minoritypopulation.183 Moreover, the Woodstock Institute Report foundthat “[a]lmost three times as many properties in communities of colorare severely underwater compared to properties in white com-munities.”184

Second, after Richmond proves its prima facie case, the burden willthen shift to the lenders to demonstrate that “the challenged practiceis necessary to achieve one or more substantial, legitimate, nondis-criminatory interests of the defendant.”185 Moreover, the interestscannot be “hypothetical or speculative.”186 The financial interest thatthe lenders will proffer will fail because it is too speculative. The lend-ers presume that they will lose money because the homeowners arestill preforming on their mortgages; however, data suggests that “80percent of underwater mortgages owned by private-label securitieswill end up defaulting.”187 Thus, when the homeowner defaults, thelender will get fair market value or less from the foreclosure sale,which would be equal to or less than what the city would give themthrough eminent domain.

Third, assuming arguendo that the court allows this financial inter-est to carry the lenders’ burden, the city would then have to demon-

179. DePillis, supra note 30; Dewan, supra note 29.180. SIFMA, supra note 69; Media Statements, supra note 68; Shenn, et al., supra

note 40.181. Said, supra note 72.182. Fair Housing Act, 24 C.F.R. § 100.500(c)(1) (2013).183. State & County QuickFacts, supra note 160.184. Cowan & Buitrago, supra note 158.185. 24 C.F.R. § 100.500(c)(2).186. Id. § 100.500(b)(2).187. Harkinson, supra note 10.


strate that the “interest(s) supporting the challenged practice could beserved by another practice that has a less discriminatory effect.”188

Richmond will likely prevail because there is an alternative practicethat would serve the lenders’ financial interest. The lenders could vol-untarily reduce the principal on all of the loans that Richmond wouldhave been able to seize to an amount that would result in an afforda-ble monthly payment, thereby reducing the likelihood of default. Thefinancial interest of the lenders would be sufficiently served becausethey would continue to receive the monthly payments from the home-owner; and because the monthly payments are lower, the likelihood ofdefault is reduced, so over time the lender may actually make morethan the fair market value of the home. Because this alternative inter-est would be sufficient, the city’s claim of disparate impact under theFHA and the ECOA would succeed and the lenders’ threats would beunlawful.

Therefore, if lenders were to implement a credit freeze, Richmond,and other similarly situated cities, could sue the lenders for violationof the FHA and the ECOA. Ultimately, because the lenders’ threatsare unlawful, cities like Richmond should continue to investigate andanalyze MRP’s plan to determine if it is a reasonable solution to theunderwater mortgage problem. These cities should do what is in thebest interests of their citizens and should not be afraid to stand up toWall Street.

188. 24 C.F.R. § 100.500(c)(3).

J.R.R. TOLKIEN GOES TO LAW SCHOOL:EXPLORING PROPERTY LAW

JURISPRUDENCE THROUGH THE HOBBITAND THE LORD OF THE RINGS TRILOGY

By Colin P. Benton†

I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25II. LAW AND LITERATURE: A BRIEF OVERVIEW . . . . . . . . . . . 26

A. Introduction to Law and Literature . . . . . . . . . . . . . . . . . 26B. Theories of Law and Literature . . . . . . . . . . . . . . . . . . . . . 27C. Supporters and Detractors . . . . . . . . . . . . . . . . . . . . . . . . . . 29D. The Literary Canon, Tolkien, and the Public

Consciousness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31E. A Modest Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

III. PROPERTY JURISPRUDENCE IN TOLKIEN’S LITERATURE . 34A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34B. Tolkien and the Bundle of Sticks . . . . . . . . . . . . . . . . . . . . 34

1. Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352. Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363. Destruction of Property. . . . . . . . . . . . . . . . . . . . . . . . . 37

C. Acquisition by Creation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39D. Acquisition by Finding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

1. Lost, Mislaid, and Abandoned Property . . . . . . . . 43E. Property Obtained through Criminal Activity . . . . . . . 45F. Inter vivos Gifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

IV. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

I. INTRODUCTION

“Among the most misunderstood aspects of law and order are prop-erty rights.”1

-Thomas Sowell

“[O]ne can learn a great deal of jurisprudence from the works ofliterature . . . .”2

-Richard A. Posner

For the last several decades, legal scholars have used works of liter-ature to gain a fuller understanding of the nature and purpose of law.

† J.D. and Candidate, Texas A&M University School of Law Spring 2015, M.A.,Denver Seminary, 2013, M.A.T., Georgia College & State University, 2006, B.S.,Georgia College & State University, 2005.

The author would like to thank the following people for their support: Sarah Ben-ton, John & Diane Benton, Doug Groothuis, Rick Maes, and Ryan Kearns.

1. THOMAS SOWELL, BASIC ECONOMICS 422 (4th ed. 2011).2. RICHARD A. POSNER, LAW AND LITERATURE 21–22 (3d ed. 2009).

25


This field of study is known as Law and Literature.3 Proponents ofthis new discipline of legal scholarship endeavor to use literature as aunique lens through which legal issues can be studied, understood,and applied.4 However, some Law and Literature detractors eitherquestion the legitimacy of this new academic project outright, or atleast require more convincing.5 Indeed, even among Law and Litera-ture supporters, there is a wide spectrum of opinions regarding thenature and purpose of Law and Literature.6

This Article offers J.R.R. Tolkien’s classic stories, The Hobbit andThe Lord of the Rings Trilogy, as useful for Law and Literature schol-arship because they have a large audience of all ages, who have eitherread them in books or seen them as movies. Their widespread popu-larity makes these stories an effective way to introduce and inspiremany to the property law jurisprudence that permeates the texts.While Tolkien’s literature has not been traditionally utilized for Lawand Literature purposes, there are several issues of property law juris-prudence that can be elucidated through Tolkien’s writings.

This Article begins by briefly assessing the debate regarding the ef-ficacy of Law and Literature, proposes Tolkien’s literature as a legiti-mate means of stimulating an interest in property law jurisprudence,and concludes by exploring a variety of property law issues usingTolkien’s literature as the background material facts.

II. LAW AND LITERATURE: A BRIEF OVERVIEW

A. Introduction to Law and Literature

Law and Literature is an academic pursuit built on the premise that“literature can teach lawyers, judges, and legal scholars basic thingsabout how the law does operate, and how it should . . . .”7 While theroots of Law and Literature can be traced decades earlier, there wasan explosion of Law and Literature legal scholarship in the 1980s, andthat trend has continued.8 This is not to say all legal scholars havesigned on to Law and Literature without trepidation. Indeed, many inthe legal academy have wrestled with the legitimacy of this sub-disci-pline and the role it should play in legal scholarship, if any.9 Some

3. See JAMES BOYD WHITE, THE LEGAL IMAGINATION (1973); see also Bruce L.Rockwood, Preface to Critic of Institutions-9, Law and Literature Perspectives 1(Bruce L. Rockwood ed. 1996).

4. See, e.g., Rockwood ed., supra note 3.5. See, e.g., RICHARD A. POSNER, LAW AND LITERATURE: A MISUNDERSTOOD

RELATIONSHIP (1988).6. See infra note 15.7. BRIAN BIX, JURISPRUDENCE: THEORY AND CONTEXT 257 (6th ed. 2012).8. See WHITE, supra note 3; see also BIX, supra note 7 (“Benjamin Cardozo . . .

wrote an article [in 1925] on the literary styles of judicial opinions . . . .”).9. See generally Gary Minda, Law and Literature at Century’s End, 9 CARDOZO

STUD. L. & LITERATURE 245 (1997).

2014] J.R.R. TOLKIEN GOES TO LAW SCHOOL 27

scholars are ambivalent about the efficacy of Law and Literature.10

Still other scholars have embraced Law and Literature with enthusi-asm, recognizing that literature may help us understand depths of thelaw not yet understood.11

Perhaps the high-water mark for the Law and Literature debatecame in the United States Supreme Court’s opinion of Plaut v. Spend-thrift Farm, Inc. in which Justices Antonin Scalia and Stephen Breyerclashed over how to best appropriate the Robert Frost poem, “Mend-ing Wall.”12 Justice Scalia referenced “Mending Wall” to support theproposition that in a government with separated powers, “Goodfences make good neighbors.”13 Justice Breyer disagreed with Scalia’sapplication of the poem, and responded, “One might consider as well[Frost’s] caution, for he not only notes that ‘something there is thatdoesn’t love a wall,’ but also writes, ‘Before I built a wall I’d ask toknow / What I was walling in or walling out.’”14 While opinions re-garding who had correctly applied Frost varied, this Supreme Courtopinion provided a tacit legitimacy to Law and Literature in a way itdid not previously enjoy. Nevertheless, in the wider context of legalscholarship, Law and Literature is still a relatively new discipline witha diversity of opinions regarding the nature and purpose of Law andLiterature.15

B. Theories of Law and Literature

Law and Literature has typically been appropriated in two ways:law-as-literature, and law-in-literature.16 Law-as-literature frames thepractice of law essentially as “the mastery of texts, whether of cases,statutes, or the Constitution.”17 Pace legal positivism, the practice oflaw is necessarily an endeavor to interpret and contextualize language,as “the ordinary language of all developed legal systems includes con-stant recourse to texts that authorize specific conduct.”18 This viewthat law-as-literature is helpful in the interpretation of language is un-

10. See, e.g., POSNER, supra note 5, at 13 (“The publication since 1984 of fivebooks on law and literature attests to the rapid growth of the field. But is it a healthy,balanced, and fruitful growth? I have some doubts.”).

11. See generally Minda, supra note 9.12. Plaut v. Spendthrift Farms, Inc. 514 U.S. 211, 240, 245 (1995); see also Linda

Greenhouse, Justices Rule that Congress Overstepped Bounds: Scalia and BreyerTrade Quotes from ‘Mending Wall’ N.Y. TIMES (Apr. 19, 1995), available at http://www.writing.upenn.edu/~afilreis/88v/frost-scalia.html.

13. Plaut, 514 U.S. at 240.14. Id. at 245 (Breyer, J., concurring).15. See, e.g., RICHARD WEISBERG, POETHICS AND OTHER STRATEGIES OF LAW

AND LITERATURE 3 (Columbia Univ. Press, 1992) (“While Law and Literature nowcommands the attention of a growing number of academics and practitioners, no uni-fying manifesto or program has as yet been announced.”).

16. See generally Sanford Levinson, Law as Literature, 60 TEX. L. REV. 373 (1982);see also Minda, supra note 9.

17. Levinson, supra note 16, at 374.18. Id.


derscored by many Supreme Court decisions,19 as well as the canonsof construction that aid statutory interpretation.20 While there is asignificant disagreement with respect to how one ought to interpretstatutory language,21 there is little debate that this view of law-as-liter-ature is a legitimate one. As Gary Minda notes, “The law-as-litera-ture perspective has been quite popular in legal studies throughoutthe 1980s mainly because it has served to show how literary activity isan integral part of the central activity of law—i.e., the interpretationof legal texts (case opinions, statutes, and regulations).”22

While law-as-literature is generally considered useful, the law-in-literature perspective received more of a mixed response. Law-in-literature has typically “attempted to show how the stories in the clas-sics of Western literature might offer lawyers and judges importantlessons about the nature of law lessons which are missing in the offi-cial reported stories of the cases.”23 While this early incarnation oflaw-in-literature was well-received, its recent manifestations havebeen more controversial. Perhaps co-opted as part of the widerpostmodernist project that dominated English departments for the lat-ter half of the twentieth century, the classical literature of “Dickens,Kafka and Melville [was] being edged-out by authors like Derrida,Foucault, Heidegger and Wittgenstein as Law and Literature scholarsexplored the meaning of law’s language as a cultural and literary arti-fact.”24 Thus, law in literature began a shift “beyond the Great booksof Western literature to the critical texts of literary theory, structural-ism, post-structuralism, deconstuctionism and the like to aid them intheir literary translations of legal texts.”25 This shift blurred the linesbetween law-as-literature and law-in-literature, and stigmatized Lawand Literature as a meaningless academic exercise, as devoid of mean-ing as the very texts that the postmodern literary critics purported todeconstruct.26 Indeed, the postmodern literary agenda is so en-trenched in Law and Literature that there is currently a movementafoot to go even “beyond law and literature in the traditional sense toa new literary study of language as cultural discourse.”27 Before goingdown this path, law-in-literature proponents would be wise to remem-ber the late Christopher Hitchens observation that “[t]he

19. Id.20. See JOHN F. MANNING & MATTHEW C. STEPHENSON, LEGISLATION AND REG-

ULATION 202 (Robert C. Clark ed., 2d ed. 2010).21. See, e.g., Id.22. Minda, supra note 9, at 246.23. Id. at 245.24. Id.25. Id.26. See infra note 35.27. Minda, supra note 9, at 247; see also Peter J. Hutchings, Modern Forensics:

Photography and Other Subjects 9 CARDOZA STUD. L. & LITERATURE 229–243(1997).


Postmodernists’ tyranny wears people down by boredom and semi-literate prose.”28

C. Supporters and Detractors

The increased interest in Law and Literature has touched off a spir-ited scholarly debate regarding the efficacy of this new academic pro-ject.29 The debate has become more pointed with the development ofthe law-as-literature and law-in-literature perspectives. Several pre-eminent legal scholars have staked out positions on each side of thedebate, thus ensuring a conclusion settled by an adversarial system.Professor Richard A. Posner seems to occupy the role of leading criticof Law and Literature, while a variety of other scholars offer a robustdefense of this burgeoning discipline.30

The prolific judge and legal scholar Richard Posner has devoted anentire book to the topic of Law and Literature.31 Now in its thirdedition, Posner’s assessment of Law and Literature pulls no punches:“I shall argue that only rarely can we learn much about the day-to-dayoperations of a legal system from works of imaginative literature evenwhen they depict trials or other legal processes.”32 Statements such asthis cause many to consider Posner a staunch critic of Law and Litera-ture.33 However, Posner himself contends that “if the first edition ofthis book had rather a negative and even defensive character . . . thatwas more than 20 years ago and the negative tone was gone by thesecond edition.”34 Indeed, it seems that Posner’s antipathy towardLaw and Literature may be more properly understood as criticism ofparticular developments within Law and Literature, rather than oppo-sition to the movement in principle. For example, Posner cites asproblematic Law and Literature’s incorporation of postmodern liter-ary theory “that is making laughingstocks of English departments. . . .”35 While Posner’s concern with respect to the problems ofpostmodern literary theory is apt, it is worth noting that the CriticalLegal Studies (“CLS”) school has already adopted much of thepostmodern’s distain for metanarratives and belief that all truth is

28. Quoted in Jonah Goldberg, The Quote-Unquote Presidency, NATIONAL RE-

VIEW ONLINE (Mar. 15, 2014), http://www.nationalreview.com/article/373397/quote-unquote-presidency-jonah-goldberg/page/0/2.

29. See, e.g., POSNER, supra note 2, at 21 (“I shall argue that only rarely can welearn much about the day-to-day operations of a legal system from works of imagina-tive literature even when they depict trials or other legal processes.”); see also POS-

NER, supra note 5, at 16 (“These attempted syntheses of law and literature areingenious and provocative but do not convince me.”).

30. See POSNER, supra note 2; see also POSNER, supra note 5.31. See POSNER, supra note 2; see also POSNER, supra note 5.32. POSNER, supra note 2, at 21 (emphasis added).33. See generally ROBIN WEST, NARRATIVE, AUTHORITY, AND LAW (Martha Mi-

now, Michael Ryan, & Austin Sarat eds., 1993).34. POSNER, supra note 2, at 6.35. Id. at 10.


merely a social construct.36 That is to say, if postmodernism in legalscholarship is Posner’s problem, Law and Literature is hardly the onlycategory of legal scholarship under its influence. Nevertheless, Pos-ner’s stance appears to have shifted from outspoken critic to a moresympathetic position.

Many scholars disagree with Posner’s bleak (or formerly bleak) as-sessment of Law and Literature. Law and Literature professors at theUniversity of Tennessee College of Law, Jerry J. Phillips and Judy M.Cornett confidently state that “there are many reasons to teach Lawand Literature . . . .”37 Indeed, Phillips and Cornett are so convincedof the importance of Law and Literature that they co-authored a text-book to demonstrate and “support [the] many ways of teaching Lawand Literature.”38 Professor Bruce L. Rockwood waxes poetic in hisoptimistic perspective on Law and Literature: “Law and literature arelike flint and steel over the kindling of our doubts and uncertainties ina rapidly changing modern, or postmodern, world. By knocking theflint of literature against the steel of the law, we can make somesparks that will illuminate our way to the future . . . .”39 ProfessorHilde Hein believes that the interdisciplinary approach of Law andLiterature is not only useful, but perhaps necessary given the limita-tions of both law students and the study of law: “Approaching lawthrough art enlivens the law even as it permits exploration of law’sgaps and exclusions.”40 Therefore, Hein concludes, “I believe that in-sight into one area will also help us to understand the other.”41 Fi-nally, Gary Minda is optimistic that for Law and Literature, the best isyet to come: “This is where we are today; Law and Literature at cen-tury’s end is just coming to acknowledge the full meaning and signifi-cance of what it means to translate the meaning of a text.”42

Despite these disagreements over the nature, purpose, and efficacyof Law and Literature, there is broad agreement that Law and Litera-ture is useful for jurisprudence. While jurisprudence has undergoneits own historical transformation, modern jurisprudence is “the studyof the general and fundamental elements of a particular legal system,as opposed to its practical and concrete details.”43 Thus, even Posnerhimself concedes, “[O]ne can learn a great deal of jurisprudence from

36. For a critique of CLS see ANDREW ALTMAN, CRITICAL LEGAL STUDIES: ALIBERAL CRITIQUE (Marshall Cohen ed., 1993). For a critique of postmodernism gen-erally see DOUGLAS GROOTHUIS, TRUTH DECAY: DEFENDING CHRISTIANITY

AGAINST THE CHALLENGES OF POSTMODERNISM, 17–59 (2000).37. JERRY J. PHILLIPS & JUDY M. CORNETT, SOUND AND SENSE: A TEXT ON LAW

AND LITERATURE v (2003).38. Id.39. Rockwood ed., supra note 3, at 19.40. Hilde Hein, Law and Order in Art and Law, in 9 LAW AND LITERATURE PER-

SPECTIVES, 113 (Bruce L. Rockwood ed. 1996).41. Id. at 114.42. Minda supra note 9, at 256 (emphasis added).43. BLACK’S LAW DICTIONARY 984 (10th ed. 2014).


the works of literature . . . .”44 John Fisher also supports the legiti-macy of Law and Literature with respect to jurisprudence when hestates, “The Law and Literature movement is . . . fundamentally aform of jurisprudence.”45 Richard Weisberg further acknowledges,“Law and Literature actually began as a subcategory of jurispru-dence.”46 Therefore, as there is broad agreement regarding the effi-cacy of Law and Literature with respect to jurisprudence, this Articlewill use Tolkien’s works to specifically explore aspects of property lawjurisprudence.

D. The Literary Canon, Tolkien, and the Public Consciousness

As previously alluded to, there is significant debate within Law andLiterature regarding which literary texts should be used for Law andLiterature.47 Different legal scholars use a variety of criteria in deter-mining the utility of studying a particular work of literature. How-ever, several works are granted near universal legitimacy such asCharles Dickens’ Bleak House,48 Franz Kafka’s The Trial,49 and Fy-odor Dostoevsky’s Crime and Punishment.50 Indeed, this is not sur-prising as each of these works and their authors are traditionallywithin the Great Books literary canon and the pantheon of great au-thors. However, as discussed above, some proponents of Law andLiterature explicitly reject the “Great Books” within the Western tra-dition—Shakespeare, Dickens, Melville, etc.—specifically becausethey view Law and Literature as part of the larger deconstructivistproject, characterized by postmodernism and the Critical Studies ap-proach.51 Richard Weisberg views this approach as misguided: “I donot think the case has been made for Law and Literature’s aban-doning the canon . . . .”52 In support of the Great Books approach,perhaps in light of the logical deficiencies of postmodernism, Weisbergnotes, “There is a reason why, these days, lawyers are furthering thereturn to the Great Books.”53

While the question of Tolkien’s place in the Great Books discussionis an interesting one, the debate is superfluous to this Article. The

44. POSNER, supra note 2, at 21–22.45. John Fischer, Note, Reading Literature/Reaching Law: Is There a Literary Ju-

risprudence? 72 TEX. L. REV. 135, 137 (1993).46. WEISBERG, supra note 15, at 3.47. Id. at 122.48. CHARLES DICKENS, BLEAK HOUSE (1853); see also PHILLIPS & CORNETT,

supra note 37, at 384–390.49. FRANZ KAFKA, THE TRIAL (1925); see also PHILLIPS & CORNETT, supra note

37, at 344–350; see also POSNER, supra note 2 at, 21.50. FYODOR DOSTOYEVSKY, CRIME AND PUNISHMENT (1866); see also PHILLIPS &

CORNETT, supra note 37, at 379–384; see also POSNER, supra note 2, at 21.51. See Carolyn Heilbrun & Judith Resnick, Convergences: Law, Literature, and

Feminism 99 YALE L. J. 1913, 1937 (1990).52. WEISBERG, supra note 15, at 122.53. Id.


utility of a particular work of fiction in using Law and Literature tolearn jurisprudence is unrelated to whether or not Tolkien is in theliterary canon (although it seems clear that Tolkien’s literature hasmade the cut).54 Of far greater importance is the widespread societalpervasiveness and enjoyment of the literary work. That is, it mattersmore for the purposes of this Article that many people read and enjoyTolkien, rather than whether Tolkien’s work is canonical or useful fora postmodern agenda.

John Ronald Reuel Tolkien was a twentieth century English writerand philologist, who is best known for his fantasy epics, The Hobbitand The Lord of the Rings.55 Tolkien chaired the Department of En-glish Language and Literature at Oxford University, and his profes-sional activities included a position as Assistant Lexicographer for theNew Oxford English Dictionary.56 Despite his publisher’s low expec-tations for The Lord of the Rings,57 Tolkien’s literature has been gen-erally lauded since The Hobbit was first published in 1937. Indeed,several polls in 1999 rated The Lord of the Rings Trilogy as the great-est book of the twentieth century.58 Moreover, Tolkien has been de-scribed as “the most influential author of the [twentieth] century.”59

Time Magazine named The Lord of the Rings Trilogy third on its listof the best novels from 1923–2005.60 The box office success61 and crit-ical acclaim62 of the film adaptation of The Lord of the Rings Trilogyand the current film adaptation of The Hobbit into respective three-part films, have further cemented Tolkien’s stories into the publicconsciousness.63

54. See, e.g., Richard Lacayo, ALL-TIME 100 Novels, TIME MAGAZINE (Jan. 6,2010), http://www.time.com/time/2005/100books/the_complete_list.html.

55. JRR Tolkien Biography, TOLKIENSOCIETY.ORG, http://www.tolkiensociety.org/author/biography/ (last visited Aug. 8, 2014).

56. Id.57. See, e.g., COLIN DURIEZ, THE J.R.R. TOLKIEN HANDBOOK 11 (1992) (“[H]is

publishers were convinced that The Lord of the Rings might well make a financial lossfor them.”).

58. Andrew O’Hehir, The Book of the Century, SALON (June 4, 2001), http://www.salon.com/2001/06/04/tolkien_3/.

59. TOM SHIPPEY, J.R.R. TOLKIEN: AUTHOR OF THE CENTURY (2002).60. Lacayo, supra note 54.61. Brett Pulley, ‘Hobbit’ Heirs Seek $220 Million for ‘Rings’ Rights (Update 1),

BLOOMBERG (July 15, 2009), http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aiAEIATGLREU (“The three films based on Tolkien’s fantasy epic—2001’s‘The Lord of the Rings: The Fellowship of the Ring’; ‘The Lord of the Rings: The TwoTowers’ in 2002; and ‘The Lord of the Rings: The Return of the King,’ released in2003—have generated almost $3 billion in worldwide box-office receipts, and another$3 billion from DVDs, merchandise and other sources . . . .”).

62. See, e.g., Sharon Waxman, ‘Lord of the Rings’ Dominates the Oscars; FinalFilm of Trilogy Sweeps 11 Categories; Sean Penn and Charlize Theron Get Top ActingAwards, N.Y. TIMES (Mar. 1, 2004), http://www.nytimes.com/2004/03/01/arts/lord-rings-dominates-oscars-final-film-trilogy-sweeps-11-categories-sean-penn.html.

63. Indeed, the films and their licensed progeny have been so successful thatTolkien’s estate has filed two separate lawsuits to seek compensation; see, e.g., Clau-dia Eller & Rachel Abramowitz, Warner Bros. Settles Lawsuit Over ‘Lord of the


While it is difficult to quantify the overall societal pervasiveness andimpact of a literary work, there do seem to be objective indicators thatone could use: film royalties, book royalties, merchandise royalties,and critical acclaim all seem to indicate broad societal appeal.64 Addi-tionally, one could further study (and someone possibly has) the rateat which Tolkien’s books are checked out at libraries, the number ofcollege courses that significantly address Tolkien, and other creativeways an author’s influence on society can be quantified. Given thesustained critical acclaim and popularity of Tolkien’s literature, thisArticle will proceed on the assumption that The Hobbit and The Lordof the Rings Trilogy are legitimate for Law and Literature purposes.

E. A Modest Proposal

As explained above, Law and Literature is a growing body of schol-arship that has mixed reviews with respect to its utility. Indeed, evenLaw and Literature apologists find it difficult to agree on the exactdirection this discipline needs to take, and such ambiguity continues toserve as fodder for its critics.65 However, there is broad agreementthat Law and Literature is useful for purposes of jurisprudence. Thus,the purpose of this Article is as a means for anyone—legal scholarsand professors, law students, and lay people—to begin to learn andunderstand issues in property law jurisprudence through J.R.R.Tolkien’s well-known and beloved stories.

The final reason that this Article attempts to frame Tolkien’s litera-ture through the lens of property law is to provoke within an individ-ual an interest in property law jurisprudence where such interest didnot previously exist. The corollary to provoked interest is additionalexploration, study, and eventually competence or even expertise inproperty law. That is, the purpose of this Article is quite modest: in-troduce, provoke interest, and begin to learn all connote this Author’sposture regarding what this Article can actually accomplish. Finally,lest any veteran, curmudgeon, legal scholars, and practitioners forget,this Author hastens to remind them that many successful legal profes-sionals’ first interest in law was piqued by the likes of Atticus Finch,Perry Mason, and Jack McCoy. In the same way these fictional char-acters did, Tolkien’s literature, if properly framed, may have the abil-ity to inspire an interest in the law. If law is indeed a noble profession,I say the more the merrier. Here is hoping this Article leads to more.

Rings’ Licensing Payments, L.A. TIMES (Sept. 9, 2009), http://articles.latimes.com/2009/sep/09/business/fi-ct-hobbit9; see also Pulley, supra note 61.

64. Waxman, supra note 62; see Pulley, supra note 61.65. POSNER, supra note 2, at 7.


III. PROPERTY JURISPRUDENCE IN TOLKIEN’S LITERATURE

A. Introduction

While it is not within the realm of a traditional literary analysis, itwould not be inappropriate to suggest that property, including its na-ture and uses, is a dominant theme throughout Tolkien’s The Hobbitand The Lord of the Rings Trilogy.66 This analysis would certainly beacceptable in the context of Law and Literature scholarship. Thoughit is doubtless there are more, this Article addresses several theoreti-cal considerations related to property law jurisprudence—that is, the“bundle of sticks”—that Tolkien covers, as well as briefly surveys sev-eral legal property issues that play a significant role throughoutTolkien’s literature. The property issues are: (1) acquisition by crea-tion or occupancy; (2) acquisition by finding, including lost, mislaid,and abandoned property; (3) forfeiture of property obtained throughcriminal activity; and (4) inter vivos gifts.

This next section begins by examining how Tolkien addresses thetheoretical foundations of property ownership, or, the “bundle ofsticks.” Then, four property issues will be considered by identifying alegal issue as presented by Tolkien’s literature and the relevant com-mon law property rule, analyzing the content from Tolkien and thecommon law rule, and predicting the likely legal outcome of theTolkien scenario.

B. Tolkien and the Bundle of Sticks

In one edition of The Lord of the Rings, the publisher, BallantineBooks, summarized Tolkien’s story this way:

J.R.R. Tolkien’s The Lord of the Rings—of which this book is thefirst part—is a chronicle of the great War of the Ring . . . At thattime, the One Ring . . . had been held for many years by the hobbits,but was eagerly sought by the Enemy who made it . . . Out of thestruggle to possess and control the One Ring . . . there arose a war. . . The Fellowship of the Ring begins the story of . . . the flight ofFrodo—unwilling heir to the One Ring—from his own land [. . .][and] of the great Council at which it was decided that the Ringmust be destroyed . . . [Frodo and his companions must] return theRing to Mordor . . . and . . . destroy it . . . .67

This excerpt nicely identifies several key theoretical property law is-sues that permeate Tolkien’s epic stories.

66. See, e.g., DURIEZ, supra note 57, at 206–08; see also Christina Sterbenz, 6 Lawsfrom ‘Lord of the Rings’, BUSINESS INSIDER (June 17, 2013), http://www.businessin-sider.com/law-in-the-lord-of-the-rings-2013-6; Ilya Somin, Property Law in the Lordof the Rings, VOLOKH CONSPIRACY (Mar. 30, 2008, 2:45 AM), http://www.volokh.com/posts/1206859543.shtml.

67. J.R.R. TOLKIEN, THE FELLOWSHIP OF THE RING (Ballantine Books 1965)(1954) (emphasis added).


If asked to describe property law, many property law professors, aswell as most law students, will begin by talking about a bundle ofrights, or what is also known as “the bundle of sticks.”68 The bundleof sticks is a metaphor that property professors commonly use to in-troduce law students to the theoretical considerations that runthroughout the corpus of property law.69 The metaphor works bycomparing various property interests in real or personal property to abundle of sticks. In that sense, it is possible for multiple parties toeach have a legal interest in a piece of property just as it is possible formultiple parties to each have one stick out of the whole bundle.70 Thefact that several people can have multiple sticks in the same piece ofproperty is what gives rise to many legal actions regarding real andpersonal property. The bundle of sticks typically consists of the fol-lowing interests: ownership, possession, the right to transfer, usage orcontrol, division, exclusion, and destruction.71 While there is some de-bate regarding the legitimacy of the bundle of sticks metaphor, Profes-sor Richard Epstein suggests, “[T]he bundle of rights normallyassociated with the concept of property, far from being randomly andfortuitously put together, actually coheres and forms the basis of hugeportions of the terrain of the ordinary common law.”72 Assuming thatthe bundle of sticks is actually a helpful metaphor, this Article willdiscuss three of these rights in relation to Tolkien’s literature: (1) own-ership; (2) possession; and (3) destruction of property.

1. Ownership

The concept of property ownership is of such importance that it isoften expressed not simply as one of the sticks, but as the entire bun-dle.73 Frank Hall Childs defines property ownership as the “dominionover things, the right to deal with them in some particular manner tothe exclusion of others, to use, to enjoy, and to dispose of them.”74 Aspart of the bundle of property rights, an individual may both own realor personal property, and yet not possess or control said property:“Ownership is distinct from possession.”75 Indeed, when contractual

68. See JESSE DUKEMINIER ET AL., PROPERTY 83 (Vicki Bean et al. eds., 7th ed.2010); see also Denise R. Johnson, Reflections on the Bundle of Rights, 32 VT. L. REV.247, 247 (2007) (“Whatever its faults or inadequacies, the bundle of rights is the domi-nant legal paradigm for the courts and the theory of property that is taught to Ameri-can law students.”); but see generally Hanoch Dagan, The Craft of Property, 91 CAL.L. REV. 1517, 1518 (2003).

69. See United States v. Craft, 535 U.S. 274, 278–79 (2002).70. See Johnson, supra note 68, at 254.71. Id. at 253.72. Richard A. Epstein, Property and Necessity, 13 HARV. J.L. & PUB. POL’Y 2, 3

(1990).73. Johnson, supra note 68, at 247.74. FRANK HALL CHILDS, PRINCIPLES OF THE LAW OF PERSONAL PROPERTY 121

(1914).75. Id.


and policy considerations are involved, the owner of the property maynot even be able to transfer, exclude, or even destroy his own prop-erty.76 Simply put, “The right to acquire, use, and transfer property isnot unlimited.”77 Still, in property law jurisprudence, ownership mat-ters. For example, in legal actions involving found property, it is onlythe true owner of the personal property that has superior claimagainst the finder.78 Thus, the concept of property ownership is offirst importance with respect to the bundle of sticks.

Just as ownership is primary regarding the bundle of sticks, it is pri-mary in Tolkien’s literature. In The Fellowship of the Ring, the wizardGandalf recounted a detailed history of the One Ring (“Ring”) toFrodo Baggins, now in possession of the Ring.79 Frodo became re-pulsed upon learning about the wretched creature Gollum, and he la-mented that his uncle, Bilbo Baggins, did not simply kill Gollum whenhe had the chance.80 Gandalf responded that pity and mercy were thevirtues that prevented Bilbo from killing Gollum, and he concludedwith this comment: “Be sure that [Bilbo] took so little hurt from theevil, and escaped in the end, because he began his ownership of theRing so. With Pity.”81 According to Tolkien, the issue of ownershipof the Ring was connected with Bilbo’s possession of the Ring.82 Ad-ditionally, when Gandalf tells Bilbo, “I was professionally interestedin your ring,” he is acknowledging that Bilbo is the current owner ofthe Ring.83 Gandalf made a similar statement to Frodo after Bilbogave the Ring to Frodo: “Your ring is shown to be that One Ring bythe fire-writing alone . . . .”84 These references are frequent inTolkien, and they all relate to the property right of ownership withrespect to the Ring.

2. Possession

Possession is another important concept in the bundle of propertyrights. Particularly with respect to lessor-lessee agreements, someoneother than the true owner can possess property. Possession can bedefined as, “The right to exclusive physical control of the thingowned.”85 Epstein argues that the possession stick has a powerful, yet“negative impulse” because the right to possess if left alone wouldonly lead “up to a grand blockade [where] I could stop everybody else

76. See infra, Part III.B.3.77. CHILDS, supra note 74.78. See RAY A. BROWN, THE LAW OF PERSONAL PROPERTY 26 (3d ed. 1975),

quoted in DUKEMINIER ET AL., supra note 68, at 98.79. TOLKIEN, supra note 67, at 78–95.80. Id. at 92.81. Id. (emphasis added).82. Id.83. Id. at 59 (emphasis added).84. TOLKIEN, supra note 67, at 88 (emphasis added).85. Johnson, supra note 68, at 253.


from doing anything with the property that I owned, but there wouldbe nothing else that I could do with the property myself.”86 The con-cept of possession is also important when two or more individualsclaim title to the same thing.87 Therefore, while ownership is a theo-retical concept of first importance in property law, possession is aclose second, especially with respect to property value.

Throughout The Hobbit and The Lord of the Rings Trilogy, the is-sue of possession, with respect to the Ring, is ubiquitous. Tolkienscholar Colin Duriez supports this understanding when he states that“Tolkien explores power in relation to possession” and “[p]ower is aunifying theme . . . .”88 For example, Gandalf indicated that Bilbo’sownership of the Ring began when he first possessed the Ring.89 Inthe Prologue to The Fellowship of the Ring, Tolkien recounts the his-tory of the Ring, and he mentions that Gollum “possessed a secrettreasure that had come to him long ages ago, when he still lived in thelight: a ring of gold that made its wearer invisible.”90 In a heated ex-change between Gandalf and Bilbo, Gandalf admonishes Bilbo to letgo of the Ring for the last time: “Go away and leave [the Ring] be-hind. Stop possessing it.”91 Finally, there is even a more philosophicalexchange regarding possession of the Ring between Gandalf andFrodo, after Gandalf had explained the true nature and origin of theRing. Gandalf warned Frodo that “it would utterly overcome anyoneof mortal race who possessed it. It would possess him.”92 WhileGandalf’s philosophical warning lacks legal resonance, it does under-score the ubiquity and importance of possessing the Ring in Tolkien’sliterature.

3. Destruction of Property

A century ago Frank Hall Childs stated, “Personal property maycease to exist, or at least to have any value, by its destruction, whichmay result from accident, or from intention through human agency.”93

However, today there is some debate regarding the right of owners todestroy their own property.94 The venerable Black’s Law Dictionarybecame part of this debate when it changed its definition of ownerfrom the sixth to seventh edition.95 Specifically, the sixth edition con-tained the definition of owner as:

86. Epstein, supra note 72.87. CHILDS, supra note 74, at 164.88. DURIEZ, supra note 57, at 206 (emphasis added).89. TOLKIEN, supra note 67, at 92.90. Id. at 32 (emphasis added).91. Id. at 61 (emphasis added).92. Id. at 76 (emphasis added).93. CHILDS, supra note 74, at 430 (emphasis added).94. See, e.g., Lior Jacob Strahilevitz, The Right to Destroy, 114 YALE L.J. 781

(2005).95. Strahilevitz, supra note 94, at 783.


The person in whom is vested the ownership, dominion, or title ofproperty; proprietor. He who has dominion of a thing, real or per-sonal, corporeal or incorporeal, which he has a right to enjoy and dowith as he pleases, even to spoil or destroy it, as far as the law per-mits, unless he be prevented by some agreement or covenant whichrestrains his right.96

The seventh edition, instead, chose to define owner as, “One who hasthe right to possess, use, and convey something; a proprietor.”97 In-terestingly, the seventh edition omitted language indicating that theowner has the right to destroy his own property.98 The recently re-leased tenth edition of Black’s Law Dictionary also omits languageindicating a property owner’s right to destroy.99 Lior JacobStrahilevitz asserts that as a policy matter, courts are increasinglylikely to remove this stick from the property owner’s bundle: “Whenasked to resolve cases where one party seeks to destroy her property,courts have reacted with great hostility toward the owner’s destructiveplans.”100 This further illustrates how it is helpful to think of propertyinterests as a bundle of sticks or rights, and that even owners in pos-session of their property are not simply free to do whatever they wantwith their property.

The culmination of The Lord of the Rings Trilogy takes place in TheReturn of the King.101 Frodo and his traveling companion SamGamgee, the remnants of the original fellowship, have finally made itto Mordor, with the intention of destroying the Ring by casting it intothe “Cracks of Doom in the depths of Orodruin, the Fire mountain. . . .”102 As the story builds to its climax, Frodo is at the Cracks ofDoom, when Gollum surprises him.103 Gollum’s all-consuming desirefor the Ring would not be denied, and in a final effort to regain con-trol of the Ring, he bit off Frodo’s finger with the Ring still on itbefore falling into the Cracks of Mount Doom destroying the Ringonce and for all.104

Indeed, the destruction of the Ring is not simply the culmination ofthe story, but the very impetus. Speaking to Frodo in The Fellowshipof the Ring, Gandalf states that there is only one way to break thepower of the Ring and prevent it from falling into the hands ofSauron: “[F]ind the Cracks of Doom, in the depths of Orodruin, the

96. BLACK’S LAW DICTIONARY 1105 (6th ed. 1991), quoted in Strahilevitz, supranote 91 (emphasis added).

97. BLACK’S LAW DICTIONARY 1130 (7th ed. 1999), quoted in Strahilevitz, supranote 91.

98. Id. at 1130–31.99. BLACK’S LAW DICTIONARY 1280 (10th ed. 2014).

100. Strahilevitz, supra note 94, at 784.101. J.R.R. TOLKIEN, THE RETURN OF THE KING (HarperCollins 5th ed. 2011)

(1955).102. TOLKIEN, supra note 67, at 94.103. TOLKIEN, supra note 101, at 943.104. Id. at 946.


Fire-mountain, and cast the Ring in there, if you really wish to destroyit . . . .”105 Frodo’s reply left no doubt as to his intentions: “‘I really dowish to destroy it!’ cried Frodo. ‘Or, well, to have it destroyed.’”106

Indeed, it was Frodo’s desire to destroy the Ring that began the greatquest on which the entire Lord of the Rings Trilogy is premised.While the bundle of property rights may not always include the rightto destroy, the destruction of the Ring was central to Tolkien’s story,and destroying the Ring was a legitimate goal in its literary context.

C. Acquisition by Creation

Both The Hobbit and, more so, The Lord of the Rings Trilogy arecentered on the One Ring (“Ring”), but these stories focus exclusivelyon the claims to the Ring in its present state of existence.107 Tolkien,however, does provide an account of the origin of the Ring. In TheFellowship of the Ring, Frodo, upon learning about the power of theRing, expressed his trepidation to Gandalf: “‘This ring!’ He stam-mered. ‘How, how on earth did it come to me?’”108 This promptedGandalf to provide a brief history of the Ring, beginning with “Sauronthe Great, the Dark Lord.”109 In explaining Sauron’s plan to consoli-date power by obtaining the Ring, Gandalf stated, “He only needs theOne; for he made that ring himself, it is his, and let a great part of hisown power pass into it . . . .”110 Later in the conversation, Frodo wasincreasingly distressed by the Ring’s power and checkered history,and he expressed a desire to simply destroy the Ring.111 Thisprompted a degree of amusement from Gandalf followed by an expla-nation and demonstration of how it was nearly impossible to destroythe Ring.112 Gandalf concluded by stating, “[N]or was there ever anydragon, not even Ancalagon the Black, who could have harmed theOne Ring, the Ruling Ring, for that was made by Sauron himself.”113

Appendix B in The Return of the King also identifies c. 1600 of theSecond Age as the date when “Sauron forge[d] the One Ring inOrodruin.”114 Tolkien clearly identifies Sauron as the creator of theRing in these passages. Moreover, Gandalf’s admission that “it is his”indicates Sauron is indeed the Ring’s rightful owner.

A legal issue here is whether any subsequent possessors of the Ringcould prevail in an action against Sauron. The notion that one canacquire property through creation or occupancy is “the first general

105. TOLKIEN, supra note 67, at 94.106. Id.107. See infra, Part III.D–F.108. TOLKIEN, supra note 67, at 81.109. Id. at 81.110. Id. (emphasis added).111. See infra, Part III.B.3.112. TOLKIEN, supra note 67, at 93–94.113. Id. at 94 (emphasis added).114. TOLKIEN, supra note 101, at 1083.


mode of acquiring title to personal property.”115 As Horace E. Smithstates, acquisition by occupancy “is primal,” and “[o]ccupancy is gen-erally regarded as the first known method of acquiring exclusive titleto property.116 D.F. Libling argues that this principle is deeply em-bedded in the common law:

Any expenditure of mental or physical effort, as a result of whichthere is created an entity, whether tangible or intangible, vests inthe person who brought the entity into being, a proprietary right tothe commercial exploitation of that entity, which right is separateand independent from the ownership of that entity.117

From this understanding, some legal scholars extrapolated thatLibling’s theory of a creator’s right trades on John Locke’s under-standing that “you own the fruits of your labor in consequence of hav-ing ‘a property in your own person.’”118 While this Article focuses onthe common law rules that govern property, Locke’s Labor Theory ofProperty is often considered a principle of natural law.119 Pace somecontemporary legal scholars, it was classically understood that com-mon law is derived from natural law.120 Harkening back to a “State ofNature,” Locke reasoned that one ought to possess the fruits of one’sown labor because it is an individual’s work created the thing pos-sessed, thus connecting labor and ownership.121 Although Locke’sLabor Theory is often discussed today in the context of intellectualproperty, his understanding of property acquired through creation un-dergirds the entire corpus of personal property at common law. While“the fruits of your labor are not always yours alone to exploit, and youdo not always have full rights of property in your own person,” it is asettled rule of common law that one generally owns the fruits of one’slabor.122

Here, the facts from Tolkien clearly indicate that Sauron the Great,or the Dark Lord, is the creator of the Ring. Gandalf readily admits

115. HORACE E. SMITH, A TREATISE ON THE LAW OF PERSONAL PROPERTY 52(1893).

116. Id.117. D.F. Libling, The Concept of Property: Property in Intangibles, 94 L.Q. REV.

103, 104 (1978), quoted in DUKEMINIER ET AL., supra note 68, at 56.118. DUKEMINIER ET AL., supra note 68.119. JOHN LOCKE, SECOND TREATISE OF CIVIL GOVERNMENT AND A LETTER CON-

CERNING TOLERATION, Of Property, Chapter V (J.W. Gough, 1948).120. WILLIAM C. SPRAGUE, BLACKSTONE’S COMMENTARIES: ABRIDGED Sec. II, 3

(Callaghan & Co., 9th ed. 1915).121. Supra note 119, at 15 (“Though the Earth, and all inferior Creatures be com-

mon to all Men, yet every Man has a Property in his own Person. This no Body hasany Right to but him. The Labour of his Body and the Work of his Hands, we maysay, are properly his. Whatsoever, then, he removes from out of the State that Naturehath provided, and left it in, he hath mixed his Labour with, and joined to it some-thing that is his own, and thereby makes it his Property. It being by him removedfrom the common state Nature placed it in, it hath by this labour something annexedto it, that excludes the common right of other Men.”).

122. DUKEMINIER ET AL., supra note 68, at 56.


so multiple times.123 While neither The Hobbit nor The Lord of theRings Trilogy takes place during the period in which Sauron createdand possessed the Ring,124 there is no dispute that Sauron created theRing, and as such, is the Ring’s true owner. Applying common lawprinciples, Sauron would prevail in an action against any of the subse-quent possessors of the Ring, unless some intervening event had takenplace such as abandonment or assignment of the Ring.125 In any ac-tion between any of the subsequent possessors (Isildur, Deagol, Gol-lum, Bilbo, or Frodo), none could claim a right to possession under atheory of occupancy. Instead, the dispute would involve subsequentpossessors of property.126

D. Acquisition by Finding

After Bilbo Baggins gifted Frodo the Ring, Gandalf explained toFrodo the significance of the Ring.127 This explanation caused Frodoto become distressed regarding the great power behind the Ring, andthe evil of those who sought to possess the Ring. Frodo could finallytake no more as he exclaimed, “I wish [Bilbo] had not kept the Ring.I wish he had never found it . . . .”128 Here, Frodo is referring to TheHobbit when Bilbo first came upon the Ring after he fell into orcmines in the depths of the Misty Mountains.129 Gandalf also claimed,“Behind that, there was something else at work, behind any design ofthe Ring-Maker. I can put it no plainer than by saying that Bilbo wasmeant to find the Ring, and not by its maker.”130 Here, Gandalf ac-knowledged the existence of a “Ring-Maker,” Sauron, and yet heclaimed that Bilbo was meant to find and possess the Ring.131

To further solidify that the Ring was indeed found, in the Prologueto The Fellowship of the Ring, Tolkien actually titled the sectiondescribing how Bilbo came upon the Ring as, “Of the Finding of theRing.”132 Here, a legal issue to explore is whether Gollum would pre-vail in an action against Bilbo. To do so, it must be determined whereand how Frodo found the Ring, and whether the Ring was lost, mis-laid, or abandoned by Gollum when Bilbo found it.

123. TOLKIEN, supra note 67, at 81, 94.124. See TOLKIEN supra note 101, at 1083 (The One Ring was created in the Second

Age whereas The Hobbit and The Lord of the Rings Trilogy take place in the ThirdAge).

125. See infra Part III.D.126. Id.127. See supra Part III.C.128. TOLKIEN, supra note 67, at 93 (emphasis added).129. See J.R.R. TOLKIEN, THE HOBBIT, 76 (Ballantine Books revised ed. 1982)

(1937).130. TOLKIEN, supra note 67, at 88.131. For a look at Tolkien’s use of providence, see DURIEZ supra note 57, at 208–12.132. TOLKIEN, supra note 67, at 32 (emphasis added).


One of the classic cases regarding lost personal property is Armoryv. Delamirie.133 In Armory, a son of a chimney sweeper found a rarejewel while cleaning the home of a customer.134 After the boy tookthe jewel to a local goldsmith to be appraised, the goldsmith’s appren-tice attempted to keep the jewel after learning about how valuable itwas.135 In its holding, the Armory court articulated a common lawrule that the title of the finder is good as against the whole world butthe true owner.136 However, if the dispute is between the landownerand the finder, “the landowner will win if the finder was trespassing atthe time she found the object.”137 Thus, title of the finder is goodagainst the whole world but the true owner, provided the finder wasnot trespassing when she found the object.

Another significant case that addressed personal property found onthe real property of another is Hannah v. Peel.138 In Hannah, a sol-dier in World War II found a brooch while staying at another’s homeduring the war.139 The homeowner was not living there at the time.140

The Hannah court, which entered a judgment for the soldier, articu-lated the following rules: “A man possesses everything which is at-tached to or under his land. Secondly . . . a man does not necessarilypossess a thing which is lying unattached on the surface of his landeven though the thing is not possessed by someone else.”141

Here, Bilbo found his Ring during an accidental fall into the depthsof the Misty Mountains. As it happened, Bilbo ended up encounter-ing Gollum near his home. In a conversation with Gandalf, Bilbostates, “[The Ring] is my own. I found it. It came to me . . . It is mine,I tell you. My own.”142 Tolkien’s account provided that Bilbo foundthe Ring in an area outside of Gollum’s property.143 Since Bilbo didnot find the Ring while on Gollum’s property, the rule from Hannahdoes not apply. Therefore, the Armory rule controls, and Bilbo wouldhave a right to the Ring against everyone but the Ring’s true owner.The legal issue now becomes whether the Ring was lost, mislaid, or

133. Armory v. Delamirie, 1 Strange 505 (King’s Bench 1722), quoted inDUKEMINIER ET AL., supra note 68, at 98.

134. Id.135. Id.136. RAY A. BROWN & WALTER B. RAUSHENBUSH, THE LAW OF PERSONAL PROP-

ERTY 26 (Callaghan & Co., 3d ed. 1975), quoted in DUKEMINIER ET AL., supra note 68,at 98.

137. JOSEPH WILLIAM SINGER, PROPERTY LAW: RULES, POLICIES, & PRACTICES 96(5th ed. 2010).

138. Hannah v. Peel, 1 K.B. 509 (U.K.), quoted in DUKEMINIER ET AL., supra note68, at 101–02.

139. Id. at 102.140. Id.141. Id. at 106.142. TOLKIEN, supra note 67, at 59.143. TOLKIEN, supra note 129, at 76, 79 (“Actually Gollum lived on a slimy island

of rock in the middle of the lake.”).


abandoned by Gollum when Bilbo found it, and whether Gollum wasindeed the Ring’s true owner.

1. Lost, Mislaid, and Abandoned Property

Of all of the property law issues, lost, mislaid, and abandoned per-sonal property may be the most significant throughout the narrative.For example, in The Hobbit, the Ring was discovered by Bilbo in theMisty Mountains,144 and there would be a genuine factual dispute asto whether Gollum lost or mislaid the Ring.145 After Bilbo and thethirteen dwarves reached the Misty Mountains, Bilbo was separatedfrom the group, and he ended up tumbling into the black orc mines,deep in the Misty Mountains.146 As Bilbo lay there after his fall “hegroped in vain in the dark, he put his hand on the ring, lying on thefloor of a tunnel. He put it in his pocket.”147 Tolkien tells us that,“Trying to find his way out, Bilbo went on down to the roots of themountains, until he could go no further. At the bottom of the tunnellay a cold lake far from the light, and on an island of rock in the waterlived Gollum.”148 Tolkien, who interestingly never goes as far as togrant title to Gollum, instead states, “[Gollum] possessed a secret trea-sure that had come to him long ages ago . . . a ring of gold that madeits wearer invisible.”149 After Gollum’s encounter with Bilbo endedpoorly for Gollum, “He slipped away, and returned to his island . . .far off in the dark water. There, he thought, lay his ring.”150 Tolkienconcludes, “But the ring was not on the island; he had lost it . . . .”151

As the theme of Providence runs throughout Tolkien’s work, it is alsointeresting that Gandalf tells Frodo, “[The Ring] abandonedGollum.”152

At common law, courts divide personal property into lost, mislaid,and abandoned property:

Property is lost when the owner accidentally misplaced it; it is mis-laid when the owner intentionally left it somewhere—and then for-gets where she put it; it is abandoned when the owner forms anintent to relinquish all rights in the property. Property that hasbeen lost or mislaid may subsequently be abandoned if the ownerintends to give up any claim to the property.153

Horace E. Smith asserts that “[a]t common law, to goods lost by theowner and unreclaimed, or designedly abandoned by him, the finder

144. Id. at 76.145. See id. at 80–87.146. Id. at 65–68.147. TOLKIEN, supra note 67, at 32.148. Id. (emphasis added).149. Id. (emphasis added).150. Id. at 33.151. Id. (emphasis added).152. TOLKIEN, supra note 67, at 88.153. SINGER, supra note 137, at 95.


acquires title by occupancy.”154 However, the former owner musthave “completely relinquished the chattel before a perfect title willaccrue to the finder.”155 Michael v. First Chicago Corp. articulated thecommon law rule that “[a] finder of property acquires no rights inmislaid property, is entitled to possession of lost property against eve-ryone except the true owner, and is entitled to keep abandoned prop-erty.”156 While this general rule is correct as far as it goes, it does notgo far enough, so different jurisdictions consider additional factors,such as if the property was found in a public or private place.157

Courts distinguish between when an object is considered lost orabandoned and un-reclaimed, and when it is considered mislaid. Lostproperty:

[M]ay be defined as that which the owner has involuntarily partedwith through neglect, carelessness, or inadvertence. There is a pre-sumption of abandonment obtaining until the owner appears andclaims the property, that gives the right as legal possessor to thefinder, the presumption being disputable by the rightful owner.158

Property is considered mislaid when “the owner intentionally placeswhere he can again resort to it, and then forgets.”159 When mislaidproperty is found on the land of another, it “is presumed to be left inthe custody of the owner or occupier of the premises upon which it isfound, and it is generally held that the right of possession to mislaidproperty as against all except the true owner is in the owner or occu-pant of such premises.”160 In order for a property to be consideredabandoned, courts have determined two elements must be present:“[T]he law demands proof both of an owner’s intent to abandon theproperty and of some affirmative act or omission demonstrating thatintention.”161 The owner’s intent to abandon and the subsequent af-firmative act or omission require fact-dependent analyses.

Here, Tolkien is clear that Gollum “had lost [the Ring].”162 Tolkienstates that Gollum “kept [the Ring] hidden safe in a hole on his island,except when he was hunting or spying on the orcs of the mines.”163

Bilbo found the Ring in the orc mines, above Gollum’s island wherehe kept the Ring hidden.164 Additionally, it is part of the record that

154. SMITH, supra note 115, at 58.155. Id.156. Michael v. First Chicago Corp., 487 N.E.2d 403, 409 (Ill. App. Ct. 1985).157. DUKEMINIER ET AL., supra 68, at 109.158. J.E. Keefe, Jr., Annotation, Rights in Respect of Lost, Mislaid, and Abandoned

Property as Between the Finder and Person Upon Whose Property it is Found, 170A.L.R. 706 § 2 (1947).

159. Id. at 3.160. Id.161. Hoelzer v. City of Stamford, Conn., 933 F.2d 1131, 1138 (2d Cir. 1991).162. TOLKIEN, supra note 67, at 33.163. Id.164. Id. at 32.


Gollum would go out spying on the orcs, and this was the only time hewould take the Ring off his island home.165 Therefore, it is not likelythat the Ring was intentionally placed in the tunnel where Bilbo foundit, and there is no evidence that Gollum had simply forgotten wherehe last set down the Ring. Instead, it is likely that the Ring was simplydropped by Gollum during one of his orc-watching excursions. In-deed, Frodo specifically asked Gandalf, “[W]hy didn’t [Gollum] getrid of [the Ring], or go away and leave it?”166 Gandalf responded, “ARing of Power looks after itself. It may slip off treacherously, but itskeeper never abandons it.”167 Gollum certainly thought he lost theRing, or as he called it, “Precious”: “‘Where is it? Where iss it?’ Bilboheard [Gollum] crying. ‘Losst it is, my precious, lost, lost! Curse usand crush us, my precious is lost!’”168 Thus, while it could be arguedthat the Ring was mislaid, it is more likely that Gollum lost the Ring.

After falling into the Misty Mountains, Bilbo discovered the Ring ina tunnel, above the “island of rock in the water” where Gollumlived.169 That is to say, the Ring was not discovered on the propertyof Gollum. If Bilbo had discovered the Ring on the property of Gol-lum, then it would need to be determined if he was a trespasser, andHannah would apply. However, because the Ring would likely beconsidered lost personal property, found by Bilbo, and not on theproperty of Gollum, the rule from Armory controls; Bilbo would pre-vail against everyone except the true owner of the Ring. Therefore,Gollum’s own means of obtaining possession of the Ring need to bescrutinized to determine if he is in fact the Ring’s true owner. If Gol-lum is the true owner, he would prevail in an action against Bilbo toreclaim his lost Ring. However, if Gollum is not the Ring’s trueowner, Bilbo would prevail.

E. Property Obtained through Criminal Activity

Tolkien’s literature has been lauded in large part due to the depthof history and detail he created regarding Middle Earth. This in-cluded chronologies, genealogies, and even an Elvish language.170

Tolkien even included some details of the legal customs of hobbits:“[Bilbo’s will] was, unfortunately, very clear and correct (according tothe legal customs of hobbits, which demanded among other thingsseven signatures of witnesses in red ink).”171 While Tolkien did dis-cuss some hobbit political mores with respect to municipalities and

165. Id. at 33.166. Id. at 87.167. TOLKIEN, supra note 67, at 87 (emphasis added).168. TOLKIEN, supra note 129, at 82.169. TOLKIEN, supra note 67, at 32.170. See TOLKIEN, supra note 101, at Apps. A-F.171. TOLKIEN, supra note 67, at 66.


governmental structure,172 Tolkien never provided a fully developedlegal system. However, this Article assumes that Middle Earth was acommon law jurisdiction, and that includes criminal activity. There-fore, the next legal issue is to determine whether Gollum obtained theRing through criminal activity, and how that would affect any legalaction brought by Gollum seeking the courts to help him regain thelost Ring.

The story regarding how Gollum came upon the Ring was passeddown from Gandalf to Frodo in The Fellowship of the Ring.173 Oneday Gollum was out on a river at Gladden Fields with his friend,Deagol, when they parted company.174 Gollum went to look aroundthe riverbanks, while Deagol took the boat out to fish.175 Deagolhooked a fish so large that he was pulled into the water.176 As Deagolwas dragged to the bottom of the river, he spotted and grabbed ashiny object in the riverbed.177 The shiny object was the One Ring.Smeagol witnessed Deagol’s discovery, and he immediately suggestedto Deagol that the Ring would be a fine birthday present forSmeagol.178 When Deagol demurred, Smeagol “caught Deagol by thethroat and strangled him, because the gold looked so bright and beau-tiful.”179 Gandalf confirmed the criminal nature of Smeagol’s actionby stating, “No one ever found out what had become of Deagol; hewas murdered far from home, and his body was cunningly hidden.”180

He later reiterated, “The murder of Deagol haunted Gollum.”181 Ac-cording to Appendix B: “The Tale of Years” in The Return of theKing, the year of 2463 in the Third Age, is described as, “About [the]time Deagol the Stoor finds the One Ring, and is murdered bySmeagol.”182 Tolkien’s record is clear that Gollum obtained the Ringby committing the criminal act of murder.

Murder is the killing of another human being with malice afore-thought.183 Malice aforethought is “a fixed purpose or design to dosome physical harm to another that exists before the act is committed,and it may be shown by proof that the defendant, without justificationor excuse, intended to kill the victim, or to do the victim grievousbodily harm.”184 Malice is considered present “when an unlawfulhomicide has been committed with the intention unlawfully to take

172. Id. at 29–32.173. Id. at 78–95.174. Id. at 84.175. Id.176. TOLKIEN, supra note 67, at 84.177. Id.178. Id.179. Id. at 85.180. Id. (emphasis added).181. TOLKIEN, supra note 67, at 89.182. TOLKIEN, supra note 101, at 1087.183. 40 AM. JUR. 2D Homicide § 36 (2014).184. Id.


away the life of a fellow human being, or with awareness of the dangerand a conscious disregard for life.”185 The distinction between firstand second degree murder is that while second degree murder onlyrequires malice aforethought, first degree murder requires evidence ofpremeditation.186

As previously discussed, the common law is derived from principlesof natural law.187 According to Riggs v. Palmer, it is considered amaxim of natural law that, “No one shall be permitted to profit by hisown fraud, or to take advantage of his own wrong, or to found anyclaim upon his own iniquity, or to acquire property by his owncrime.”188 In Riggs, a grandson, Palmer, killed his grandfather afterhe discovered that his grandfather was going to disinherit him.189 Al-though the plain language of New York’s controlling Statute of Willswould still have allowed Palmer to take under his grandfather’s will,the Riggs court held that, “[One] shall not acquire property by hiscrime, and thus be rewarded for its commission.”190 While this casehas been criticized for its problematic method of statutory interpreta-tion, the common law maxim supporting the decision remains valid.

Another relevant legal doctrine is that “before a complainant canhave a standing in court he must first show that not only has he a goodand meritorious cause of action, but he must come into court withclean hands.”191 Also known as the Clean Hands Doctrine, this princi-ple dictates that “the equitable powers of . . . court can never be ex-erted in behalf of one who has acted fraudulently, or who by deceit orany unfair means has gained an advantage.”192 However, this doctrineis limited in that it does not “close [the] doors because of plaintiff’smisconduct, whatever its character, that has no relation to anythinginvolved in the suit.”193 Instead, one who seeks equity from courtsmust have clean hands in “immediate and necessary relation to theequity that he seeks in respect of the matter in litigation.”194 Thus, theClean Hands Doctrine is designed to prevent courts from becoming“abetter[s] of iniquity,” with respect to the specific issue before thecourt.195

The Clean Hands Doctrine would likely bar Gollum from bringingan action seeking a court to grant relief by returning the Ring to him.Gollum first obtained the Ring through the unlawful, indeed criminal,

185. Id.186. Id.187. SPRAGUE, supra note 120.188. Riggs v. Palmer, 115 N.Y. 506, 511 (N.Y. 1889).189. Id. at 508–09.190. Id. at 514.191. Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240, 244 (1933).192. Id. at 245.193. Id.194. Id.195. Id.


act of murder. Therefore, Gollum could not then use the courts toretrieve the Ring from Frodo. Even if Gollum did make it to court, hewould not be found to have title to the Ring because it would offendthe common law principle that one should not obtain property fromhis crime and thereby benefit from its commission. Here, Gollum ob-tained the Ring by strangling Deagol. Gandalf’s account alleged thatGollum “caught Deagol by the throat and strangled him, because thegold looked so bright and beautiful.”196 This was likely done withmalice aforethought as Gollum clearly wanted to do Deagol harm andtake his ring. However, there does not appear to be premeditation, soGollum’s offense would be second degree murder. Under the rule inRiggs, Gollum would have to forfeit the Ring. Just as Palmer was pre-vented from taking under his grandfather’s will in Riggs, Gollumshould be prevented from murdering Deagol, and then profiting bygaining title to the Ring. Indeed, if Gollum were allowed to keep theRing, he would be directly “acquiring property by his own crime.”197

Therefore, it is likely that Gollum is not the Ring’s true owner be-cause he obtained the Ring through a criminal act.

F. Inter Vivos Gifts

The opening of The Fellowship of the Ring begins at the Shire withbirthday party preparations by and for the eccentric hobbit, BilboBaggins.198 Following the party, Bilbo left the Shire for good, but notbefore he conveyed his house and much of his property to his nephewand heir, Frodo.199 Most importantly, Bilbo transferred the Ring toFrodo. Tolkien includes the fact that such a gift was executed withinthe legal custom of hobbits: “[Bilbo’s will] was, unfortunately, veryclear and correct (according to the legal customs of hobbits, whichdemand among other things seven signatures of witnesses in redink).”200 It is also noteworthy that while Frodo is indeed Bilbo’snephew, Bilbo had also adopted Frodo as his heir, again within thelegal custom of hobbits.201 The legal issues regarding Bilbo’s transferof the Ring to Frodo are to determine whether this was an inter vivosor causa mortis gift, and whether it is a valid transfer so that Frodohad legal ownership of the Ring following the transaction.

Childs defines a gift “in its broadest sense, [as] a transfer of prop-erty, services, or rights without consideration.”202 The common lawseparates lifetime gifts into causa mortis gifts and inter vivos gifts.203

196. TOLKIEN, supra note 67, at 85.197. Riggs, 115 N.Y. at 511.198. TOLKIEN, supra note 67, at 43–69.199. Id. at 61.200. Id. at 66.201. Id. at 21 (“But in the days of Bilbo, and of Frodo his heir . . .” (emphasis

added).).202. CHILDS, supra note 74, at 289.203. DUKEMINIER ET AL., supra note 68, at 173–74.


Specifically, “A gift inter vivos is a voluntary, actual, and immediatetransfer of a thing by one living person to, or for, another living per-son.”204 A causa mortis gift is one “made in contemplation of and inexpectation of immediate approaching death . . . .”205 Courts havetypically been more rigid in their application of causa mortis gifts thaninter vivos gifts due to policy reasons associated with wills formali-ties,206 and because a causa mortis gift is essentially a will substitute.However, the modern trend of relaxing wills act formalities has loos-ened the application of causa mortis standards.207

Here, the record indicates that Bilbo’s gift followed hobbit legalcustom.208 While Bilbo was advanced in age (he had just celebratedhis “eleventy-first” birthday209), his conveyance of the Ring to Frododoes not appear to be in contemplation of immediate approachingdeath. Indeed, Bilbo indicated to Gandalf that, upon leaving theShire, he planned to execute his plan of taking a holiday, which in-cluded traveling to see mountains and writing his book.210 This ishardly the plan of a one who believes his death is “immediate andapproaching.” Therefore, this is likely to be considered an inter vivosgift, and not a causa mortis gift.

Gruen v. Gruen was a classic case that articulated the common lawrules of inter vivos gifts.211 In Gruen, a son brought a claim against hisstepmother to recover a painting that she possessed. The son allegedhis late father gave him title to the painting, but the father retainedpossession until his death in 1980.212 The stepmother contended thatthe gift was testamentary and invalid because it failed to comply withwill formalities.213 In its decision, the Gruen court articulated the fol-lowing rules regarding inter vivos gifts: “First, to make a valid intervivos gift there must exist the intent on the part of the donor to makea present transfer; delivery of the gift, either actual or constructive tothe donee; and acceptance by the donee.”214 That is, for a valid intervivos gift, there must be: (1) Donative intent; (2) Delivery; and (3)Acceptance. The legal question then becomes whether or not evi-dence in the record supports that this gift met all three elements for avalid inter vivos gift.

It is likely that Bilbo possessed the requisite donative intent tomake this a valid inter vivos gift. With respect to donative intent,

204. SMITH, supra note 115, at 125.205. DUKEMINIER ET AL., supra note 68, at 173.206. See SMITH supra note 115, at 134.207. DUKEMINIER ET AL., supra note 68, at 173.208. TOLKIEN, supra note 67, at 66.209. Id. at 43.210. Id. at 49.211. Gruen v. Gruen, 496 N.E.2d 869, 871 (N.Y. 1986).212. Id.213. Id.214. Id. at 872.


courts have held that “the intention of the grantor . . . may be mani-fested by mere acts and words or both combined.”215 Here, Gandalfasked Bilbo, before leaving for a long holiday, whether he planned toleave the Ring to Frodo. Bilbo responded, “Well, er, yes, I suppose so. . . .”216 As Bilbo was about to leave, he discovered that the Ring wasactually still in his pocket. This prompted him to say himself, “Yesafter all, why not? Why shouldn’t it stay there?”217 Despite Gandalf’sbest efforts to persuade him, Bilbo seemed to conclude that the Ringwould stay with him permanently: “I shall keep it, I say.”218 Thistouched off a heated exchange between Bilbo and Gandalf withneither backing down. However, Bilbo finally relented, as Gandalfadmonished him to, “Stop possessing it. Give it to Frodo, and I willlook after him.”219 Bilbo responded, “Very well . . . [The Ring] goesto Frodo with all the rest.”220 Although Bilbo required some convinc-ing from Gandalf, in the end he manifested both the requisite wordsand actions to demonstrate donative intent.

It is also likely that Bilbo’s delivery of the Ring was sufficient tosatisfy the second element of the inter vivos gift analysis. For intervivos gifts, “The delivery must be as perfect as the nature of the prop-erty, and circumstances and surroundings of the parties will reasona-bly permit, and hence it may take one of the three forms recited.”221

Here, Bilbo asked Gandalf to deliver the Ring to Frodo: “You hadbetter take [the Ring] and deliver it for me. That would be the saf-est.”222 But Gandalf refused, and instead advised Bilbo to “[p]ut it onthe mantelpiece. It will be safe enough there, till Frodo comes.”223

When Frodo arrived at the house, Gandalf told him that Bilbo left apacket for him: “Frodo took the envelope from the mantelpiece, andglanced at it, but did not open it.”224 After Gandalf told Frodo aboutthe envelope’s contents, Frodo exclaimed, “The Ring! . . . Has he leftme that?”225 Bilbo’s delivery of the Ring—leaving it on the mantle,and having Gandalf tell Frodo about it—represents a constructive de-livery of the Ring. Therefore, it is likely that Bilbo’s gift met the de-livery element of a valid inter vivos gift.

Finally, it is likely that Frodo accepted Bilbo’s gift of the Ring. Ac-ceptance “may be actual or implied and may also be evidenced bywords and conduct, need not be contemporaneous with delivery, but

215. Estate of Davenport v. Comm’r., 184 F.3d 1175, 1187 (10th Cir. 1999).216. TOLKIEN, supra note 67, at 59.217. Id.218. Id. at 60.219. Id. at 61.220. Id.221. Speaker v. Keating, 36 F. Supp. 556, 563 (E.D.N.Y. 1941).222. TOLKIEN, supra note 67, at 61.223. Id.224. Id. at 63.225. Id.


may be manifested subsequently.”226 Here, Frodo stated, “The Ring!Has [Bilbo] left me that? I wonder why. Still, it may be useful.”227

As previously discussed, Gandalf would soon cause Frodo to questionwhether he wanted to keep the Ring.228 However, at this time, itseems Frodo had accepted the Ring (albeit more casually than heprobably should have). Therefore, Frodo’s action of acknowledgingand accepting the Ring from Bilbo would likely meet the third ele-ment for a valid inter vivos gift, granting Frodo title to the Ring.

IV. CONCLUSION

J.R.R. Tolkien’s The Hobbit and The Lord of the Rings Trilogy arenot simply popular and captivating fantasy epics, they can also be ahelpful tool for exploring issues in property law jurisprudence. To re-prise Tolkien, there is indeed an “applicability of fantasy.”229 Moreo-ver, legal scholars can remain agnostic as to the legitimacy of Law andLiterature, and still recognize Tolkien’s works may provoke within acolleague, practicing attorney, law student, or lay person an increasedinterest in law generally, and an issue within property law more specif-ically. Thus, the approach taken in this Article is best thought of as afirst step in property law rather than a final destination (the same goesfor Tolkien’s literature). If law is, as is often suggested by its practi-tioners, a noble profession, those within its ranks must have the confi-dence to both recognize and celebrate its manifestations throughoutsociety—even when they are found in unlikely places, or perhaps evenon an unlikely journey.

226. Speaker, 36 F. Supp. at 564.227. TOLKIEN, supra note 67, at 63.228. Id. at 76–81.229. DURIEZ, supra note 57, at 9.

THE FLOODPLAIN FIASCO

By Andrew J. Kubiak†

I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53II. HISTORY, PURPOSE, AND RECENT DEVELOPMENTS OF

THE NATIONAL FLOOD INSURANCE PROGRAM . . . . . . . . . . 54III. BASICS OF FLOODPLAIN ANALYSIS . . . . . . . . . . . . . . . . . . . . . . 57

A. Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57B. Hydrology Basics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58C. Hydraulic Basics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

IV. SOURCES OF SYSTEMIC ERRORS IN THE FLOOD

INSURANCE RATE MAPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59A. Existing Conditions Hydrology . . . . . . . . . . . . . . . . . . . . . . 59

1. Changes in Ground Cover . . . . . . . . . . . . . . . . . . . . . . 592. Reductions in the Time to Peak . . . . . . . . . . . . . . . . 61

B. Failures in the Software Analysis . . . . . . . . . . . . . . . . . . . . 64C. Limitations in the Methods of Survey . . . . . . . . . . . . . . . 65

1. Effect of Survey Errors on the Models . . . . . . . . . 662. Errors in the Limits of Inundation and Efforts

to Reestablish Those Limits . . . . . . . . . . . . . . . . . . . . 67V. CONCERNS AND ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

A. Restudy the Streams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69B. Make Insurance Optional . . . . . . . . . . . . . . . . . . . . . . . . . . . 69C. Independent Determinations . . . . . . . . . . . . . . . . . . . . . . . . . 70

VI. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

I. INTRODUCTION

Flooding has long been a source of hardship for the people whowork and live near bodies of water such as rivers, lakes, and streams.The United States has not been an exception. Only in recent decadeshas the United States taken proactive steps in an effort to mitigate thedamage associated with flooding. These proactive measures predictthe areas of the United States that flood, and require that people wholive within those areas to purchase flood insurance. These predictionsare in the form of a nationwide system of maps. Until recently, floodinsurance was offered to affected property owners at a reduced rate.1The nationwide system of maps indicate the potential limits of flood-ing however these maps are plagued by systematic errors, which re-

† Mr. Kubiak graduated from the University of Texas at Arlington in 2004 with aBachelor of Science in Civil Engineering, in 2007 with a Master of Business Adminis-tration, and is currently a student at Texas A&M University School of Law. Mr. Ku-biak is also a Registered Professional Engineer in the State of Texas.

1. See generally A Chronology of Major Events Affecting the National Flood In-surance Program, THE AMERICAN INSTITUTES FOR RESEARCH (Oct. 2002), http://www.dhs.gov/xlibrary/assets/privacy/privacy_pia_mip_apnd_h.pdf.

53


duce their accuracy to the point where the flooding limits indicated onthe maps are almost, if not completely, meaningless. These errors arecaused by the use of stormwater runoff rates that are based on ex-isting conditions,2 the use of computer technology that cannot accu-rately model the effects of structures impeding the flow ofstormwater,3 and the use of survey equipment that does not accuratelymodel the terrain that forms the basis of these limits of inundation.4For these reasons, the proposition of this Article is that the way floodinsurance is managed should be changed. This Article also proposesseveral possible solutions to the problem of flood inundationmapping.

II. HISTORY, PURPOSE, AND RECENT DEVELOPMENTS OF THE

NATIONAL FLOOD INSURANCE PROGRAM

Flooding control and mitigating the damage that flooding causeshas long been an issue in the United States. Ostensibly beginning in1824, there have been many laws and court cases associated with themanagement of the nation’s waterways.5 These first laws were prima-rily concerned with constructing levee systems near major waterways.These first laws only focused on preventing damage from occurringrather than proactively determining likely places where damage willoccur and mitigating that damage after it occurrs.6 According to the“Report on Floods and Flood Damage” produced by the AmericanInsurance Association, “specific flood insurance covering fixed loca-tion properties cannot feasibly be written because of the virtual cer-tainty of loss, its catastrophic nature and the reluctance or inability ofthe public to pay the premium charge.”7 Insurance companies couldnever offer flood insurance at a rate that would be accepted by thepurchasing market.8 Therefore, flood insurance was never a meaning-ful option for people to purchase.

2. Changes to General Provisions and Communities Eligible for the Sale of In-surance Required to Include Future-Conditions Flood Hazard Information on FloodMaps, 66 Fed. Reg. 59,166–67 (Nov. 27, 2001) (to be codified at 44 C.F.R. pts. 59 and64).

3. Compare U.S. Army Corps of Eng’rs, The Hydraulic Engineering Center,HEC-2 WATER SURFACE PROFILES USER’S MANUAL (Sept. 1982), with CEIWR-HEC, U.S. Army Corps of Eng’rs, The Hydraulic Engineering Center, HEC-2WATER SURFACE PROFILES USERS MANUAL (Sept. 1990).

4. See generally K.W. Holmes et al., Error in United States Geological Survey 30-meter digital elevation model and its impact on terrain modeling, 233 JOURNAL OF

HYDROLOGY 154-73 (2000).5. THE AMERICA INSTITUTES FOR RESEARCH, supra note 1, at 1.6. Id.7. Report on Floods and Flood Damage, AMERICAN INSURANCE ASSOCIATION

(Jan. 10, 1956), http://tera-3.ul.cs.cmu.edu/NASD/4dcb85c3-9fee-4c83-9e6d-fe6ce5522b59/China/disk4/77/77-3/31008019/PDF/00000013.pdf.

8. Id.

2014] THE FLOODPLAIN FIASCO 55

The first major law to change the way in which flood insurance wasaddressed was Title XIII of the Housing and Urban Development Actof 1968, also known as the National Flood Insurance Act of 1968.9The National Flood Insurance Act did many things, but the most rele-vant was that it mandated that the Department of Housing and UrbanDevelopment create an inventory of the areas in the United Statessubject to flooding10 within fifteen years of the date of the enactmentof the National Flood Insurance Act.11 The National Flood InsuranceAct also required that the flood insurance policies be offered at a sub-sidized rate.12 The National Flood Insurance Act also required theSecretary of Housing and Urban Development to coordinate withother member agencies of the federal government to achieve thesedirectives.13

This mapping effort led to the creation of the Flood Insurance RateMaps.14 These maps show the limits of the 100-year floodplain, that isthe “area which is subject to inundation from a flood having a 1-per-cent chance of being equaled or exceeded in any given year.”15 Thelimits of these floodplains were established as a result of engineering,that is hydrologic and hydraulic, studies on these waterways.16 Subse-quent regulations passed by the Department of the Treasury then re-quired that any structure whose purchase was secured by a loan andwas within one of these established floodplain boundaries would berequired to purchase flood insurance from an insurance provider.17

The result of these two legislative efforts is that there are approxi-mately 5.5 million flood insurance policies currently in place18 insuringalmost $1.3 billion in assets.19 As a result, until recently, Americanshave had access to flood insurance at a commercially viable cost toinsure properties that are shown to be at risk of flooding during a 100-year storm.

The latest major development in the regulatory environment re-lated to flood insurance is the passage of the Biggert-Waters FloodInsurance Reform Act of 2012.20 This law passed because of recent

9. Housing and Urban Development Act of 1968, Pub. L. No. 90-448, § 1301, 82Stat. 572 (1968).

10. Id. § 1360.11. Id. § 1360(2).12. Id. § 1308 (b)(2).13. Id. § 1360.14. THE AMERICA INSTITUTES FOR RESEARCH, supra note 1, at 13.15. 42 U.S.C.A. § 4004(a)(1) (West 2012).16. THE AMERICA INSTITUTES FOR RESEARCH, supra note 1, at 17.17. 12 C.F.R. § 22.3 (2014).18. Policies in Force by Month, FEMA, http://www.fema.gov/flood-insurance-sta-

tistics-current-month/policies-force-month (last visited Dec. 21, 2013).19. Total Coverage by Calendar Year, FEMA, http://www.fema.gov/policy-claim-

statistics-flood-insurance/policy-claim-statistics-flood-insurance/policy-claim-13-12(last visited Dec. 21, 2013).

20. Jay Landers, Congress Delays Certain Changes to National Flood InsuranceProgram, CIVIL ENGINEERING, February 2014, at 16.


major storms the United States has seen over the last decade. Majorstorms, such as Hurricane Katrina and Superstorm Sandy, havecaused large-scale damage to urban areas of the country.21 Thesestorms, as well as many more less-notable storms have caused billionsof dollars worth of damage to the United States, and the NationalFlood Insurance Porgram paid for this damage by borrowing money.22

The National Flood Insurance Act also authorized a National FloodInsurance Fund,23 whose purpose was to subsidize the flood insurancepolicies that would be required under this program.24 This fund beganwith a pre-authorized borrowing limit of $250 million set by Congressin 1968.25 Over the history of the National Flood Insurance Program,that limit has been raised many times, and the National Flood Insur-ance Program now has a pre-authorized borrowing limit of $500 mil-lion with over $30 billion allowed with presidential approval.26

Presidential authorization was given, and currently the National FloodInsurance Program is $24 billion in debt.27 The premiums levied as aresult of the Department of the Treasury regulations noted above, thatis those regulations requiring the purchase of flood insurance, havenot been able to recoup the losses experienced by the Flood InsuranceProgram since 2004.28

In order to alleviate this issue, the Biggert-Waters Flood InsuranceReform Act of 2012 withdrew the subsidy for new flood insurancepolicies and those policies that have lapsed.29 The subsidy withdrawalwill have a phased implementation30 that limits the amount of pre-mium increase to only 20% per year until the premium that the in-sured paid reflects the actual risk based on recognized actuarialprinciples.31 While there are no definitive amounts regarding whatthose premiums will be, preliminary estimates indicate that hundredsof thousands of properties will experience increased rates as a resultof this new legislation.32 Property owners that are compelled to buyflood insurance will be required to pay annual premiums of thousands

21. Id.22. 158 Cong. Rec. H4616-01 (daily ed. June 29, 2012) (statement of Rep. Bachus),

2012 WL 2491406.23. Housing and Urban Development Act of 1968, Pub. L. No. 90-448, § 1310(a),

82 Stat. 577 (1968).24. Id. § 1334(a).25. Id. § 1309(a).26. 42 U.S.C.A § 4016(a) (West 2012).27. Landers, supra note 20, at 16.28. Rawle O. King, Cong. Research Serv., R42850, The National Flood Insurance

Program: Status and Remaining Issues for Congress 18 (2013), available at https://www.fas.org/sgp/crs/misc/R42850.pdf.

29. Landers, supra note 20, at 16.30. Moving Ahead for Progress in the 21st Century Act, Pub. L. No. 112-141,

§ 100205, 126 Stat. 918 (2012) (codified in 42 U.S.C. § 4015).31. Id.32. Flood Insurance May End Up Being No Fix At All, CNBC, http://www.cnbc.

com/id/101539750#. (last visited Oct 7, 2014).


of dollars for the unsubsidized flood insurance policies as opposed tohundreds of dollars under the pre-Biggert-Waters subsidized insur-ance regime.33

Lawmakers have received negative feedback, especially fromcoastal states such as Louisiana and Florida, because of the increase inflood insurance premiums caused by the withdrawal of the flood in-surance subsidy required by the Biggert-Waters Flood Insurance Re-form Act.34 This legislation had far-reaching consequences that werenot considered by authors of Biggert-Waters. Congresswoman Max-ine Waters, one of the legislators after whom the bill was named,stated that “neither the Republicans nor the Democrats envisionedthat [Biggert-Waters] would inflict the pain and concern that manyAmericans are experiencing.”35 There were attempts to delay the im-plementation of the premium increases stated in Biggert-Waters.36

However, given the financial situation that the National Flood Insur-ance Program is currently in, there must be some fundamental changeto the way flood insurance is handled in this country. Otherwise, theNational Flood Insurance Program will continue to be insolvent.

III. BASICS OF FLOODPLAIN ANALYSIS

A. Generally

Generally, the establishment of a floodplain consists of two studies,a hydrologic study and a hydraulic study. Hydrology is specificallydefined as “the study of the occurrence, circulation and distribution[of water] over the world’s surface.37” The use of hydrology, as it re-lates to floodplains, is concerned with the estimation of a design event,that is the peak flow rate that the reach of a creek will experiencewithin a probability.38 Federally regulated floodplains shown on theFlood Insurance Rate Map, are based on the 100-year design event.39

That is the peak flow rate of stormwater that will occur with a statisti-cal probability of once every 100 years.40 Put another way, a 100-yearstorm has a 1% chance of occurring in any given year. For a typical30-year mortgage, this correlates to a 26% chance that a 100-yearstorm will happen during the life of the mortgage.41

33. Id.34. Landers, supra note 20, at 16.35. Id. at 17.36. Id.37. ANDREW CHADWICK ET AL., HYDRAULICS IN CIVIL AND ENVIRONMENTAL

ENGINEERING 308 (4th ed. 2004).38. Id. at 313.39. MANAGING FLOODPLAIN DEVELOPMENT THROUGH THE NATIONAL FLOOD

INSURANCE PROGRAM, 3–37 available at www.fema.gov/pdf/floodplain/is_9_complete.pdf [hereinafter MANAGING FLOODPLAIN DEVELOPMENT].

40. 42 U.S.C.A § 4004(a)(1).41. MANAGING FLOODPLAIN DEVELOPMENT, supra note 39, at 3-6.


Once that peak flow rate is established, the elevation or depth ofthe stormwater during that peak rate needs to be established. This isaccomplished by way of the hydraulic study. The hydraulic studystarts with the creation of a computer model of the subject creek thatis being studied and applies the peak flow rate determined by the hy-drologic analysis to that hydraulic model. The hydraulic model thendetermines the peak water surface elevation along the subject creek.42

By comparing the peak water surface elevations with the terrain of thecreek, the limits of inundation can be determined.

B. Hydrology Basics

The peak flow rate of stormwater that enters a reach of a creek at agiven point is dependent on several factors that have to be determinedas part of the engineering study. There are many methods that can beused to determine the peak 100-year flow rate used in the floodplainanalysis43; however, the variables used in those methods are largelythe same.44 The primary elements that affect the peak flow rate dur-ing a 100-year storm are: watershed size, rainfall intensity in the area,average slope of channels in the watershed, amount of water stored inthe basin, level of basin development, and impervious cover in thewatershed.45 While most of these variables are largely unchangeablein any meaningful way, human activities can change some of the vari-ables in a watershed such as basin development and imperviouscover.46 By changing any of these variables in a watershed, the peak100-year flow rate determined for a watershed can also change.

C. Hydraulic Basics

The hydraulic analysis of a creek establishes how high the water willget during the peak flow rate established during the hydrologic analy-sis. These peak elevations are usually determined through a computerprogram called “HEC-RAS,” or its predecessor “HEC-2.”47 In orderto determine the peak water surface elevations of a subject creek, theengineer has to develop a computer model of the creek. These pro-grams determine the peak elevation based on a number of parametersthe engineer performing the analysis inputs. These parameters in-clude: the length of the creek; the hydraulic roughness of the creek;the shapes of the cross sections of the creek; backwater effects from

42. U.S. Army Corps of Eng’rs (Sept. 1990), supra note 3, at 3.43. RICHARD MCCUEN, HYDROLOGIC ANALYSIS AND DESIGN 367–68 (Prentice

Hall 2d ed. 1998).44. Id.45. Id.at 368.46. See id.47. GARY W. BRUNNER, HEC-RAS RIVER ANALYSIS SYSTEM USER’S MANUAL x

(2010).


obstructions such as culverts, bridges, and other structures.48 The fi-nal product of the hydraulic analysis is a series of water surface eleva-tions, which, when compared with the existing terrain can be used togenerate the limits of inundation.

IV. SOURCES OF SYSTEMIC ERRORS IN THE FLOOD

INSURANCE RATE MAPS

The Flood Insurance Rate Maps noted above in Section II of thisArticle were created in conformance with the procedures noted inSection III of this Article. However, the methodologies used intro-duce several systemic errors into the mapping process, and these er-rors have created inaccurate maps. This Section will discuss some ofthose systemic errors and the result of those individual errors on theeffectiveness of the maps.

A. Existing Conditions Hydrology

When the initial inventory was performed and the flood hazardboundaries established, the engineers performed the studies using ex-isting conditions hydrology, that is the peak flow rate that would haveoccurred when the engineers performed the study in the 1970s.49 As aresult of the urbanization of many watersheds during the last fortyyears, the characteristics of many watersheds (that is size, slope,ground cover, etc.) are radically different. Therefore the peak 100-year stormwater runoff flow rate will be different as well. As notedabove, the peak 100-year flow rate for a watershed partly depends onthe ground cover and the level of development of the watershed.

1. Changes in Ground Cover

The United States has seen a massive boom in development duringthe last several decades.50 The net result of this development is build-ings, streets, and parking lots now replace areas of vegetated terrain.According to the 2010 National Resources Inventory, produced by theNatural Resources Conservation Service, between 1982 and 2010, theamount of ‘developed land’ has increased from almost 72 million acresto over 113 million acres.51 This is a 58% increase in the amount ofland dedicated to development in some form or fashion.52 Put an-

48. See U.S. Army Corps of Eng’rs (Sept. 1990), supra note 3, at 1.49. Changes to General Provisions and Communities Eligible for the Sale of In-

surance Required to Include Future-Conditions Flood Hazard Information on FloodMaps, 66 Fed. Reg. 59,166–67 (Nov. 27, 2001) (to be codified at 44 C.F.R. pts. 59 and64).

50. NATURAL RES. CONSERVATION SERV. & IOWA STATE UNIV. CTR. FOR SUR-

VEY STATISTICS & METHODOLOGY, U.S. DEP’T OF AGRIC., SUMMARY REPORT: 2010NATIONAL RESOURCES INVENTORY 8 (2013).

51. Id. at 56, 62.52. Id. at 8.


other way, 37% of the currently developed land in the United Stateshas been developed in the last twenty-eight years.53 Development ofpreviously undeveloped areas generally increases the peak stormwaterrunoff from those areas in two ways: the first is the increase of imper-vious area in a watershed, and the second is the reduction in a water-shed’s time to peak because of the channelization and concentrationof stormwater runoff from the watershed.

Clearing a previously undeveloped watershed and replacing thatarea with impervious cover, such as rooftops and concrete, functionsto increase the stormwater runoff in a watershed by eliminating theability of stormwater to infiltrate into the ground.54 During a rainevent, stormwater will primarily go in only two directions. The major-ity of the stormwater that accumulates during a rain event will eitherinfiltrate into the ground or it will runoff or enter a storm drainagesystem and eventually a larger natural body of water such as a river,creek, or lake.

Permeability is the typical measure of water’s ability to passthrough soil.55 The more permeable a soil type is, the more water thatwill pass through the soil and enter the groundwater supply, therefore,a soil type that is more permeable will allow less stormwater to enter asurface drainage system, e.g. creeks and storm drain systems. Permea-bility is generally a function of the grain size, grain size distribution ofthe soil, and the latent water content of a soil profile.56 For example, asoil that has much larger grains, such as sand, will be much more per-meable because there is a larger amount of void space between theindividual grains. Clayey soils have a much smaller grain diameterand can actually retain water in the void spaces between the soil parti-cles.57 This combination of small grain diameter and ability to retainwater make clayey soils much less likely to absorb stormwater andmake the amount of stormwater that will runoff higher than a simi-larly situated sandy soil. Additionally, grain size distribution is criticalto determining the permeability of a soil profile. A “well graded” soil,that is a soil with a large number of diameters in the particle distribu-tion will be less permeable than a soil with fewer diameters.58 This isdue to the simple fact that in a soil profile with a large number ofdiameters, the void spaces in between the larger particles can be occu-pied by smaller particles, thus creating a more densely packed soil

53. Id.54. Integrated Stormwater Management Technical Manual, NORTH CENTRAL

TEXAS COUNCIL OF GOVERNMENTS HO-35, http://iswm.nctcog.org/Documents/tech-nical_manual/Hydrology_4-2010b.pdf.

55. MCCUEN, supra note 43, at 117.56. See V. N. S. MURTHY, GEOTECHNICAL ENGINEERING PRINCIPLES AND PRAC-

TICES OF SOIL MECHANICS AND FOUNDATION ENGINEERING 104-05 (Michael D.Meyer ed., 2003).

57. Id. at 107.58. Id. at 44.


profile that is less likely to allow water to pass through it to lower soilstrata.59

Additionally, the location and makeup of underlying rock strata, orgenerally impervious strata, can channel recently infiltratedstormwater through subterranean paths.60 Generally, this phenome-non is known as ground water recharge, and while it is a significantlegal issue, its scope, effects, and consequences are beyond the pur-view of this Article. Simply because stormwater has entered theground does not necessarily mean that it will never enter any surfacedrainage systems. Groundwater can exfiltrate and enter surfacedrainage systems depending on the relative elevations of the rocklayer, water table, and other percolation factors associated with thesoil strata.61 The primary effect that losing ground water recharge hason surface floodplains is that by covering watersheds with impermea-ble areas, ground water storage cannot be recharged because thestormwater is simply passing into nearby creeks and streams. This hasthe effect of increasing the flow in those creeks (and subsequent inun-dated areas) and reducing the stormwater that can infiltrate into theground.

Replacing permeable ground cover, that is soil, grass, and othervegetative covers, with impermeable ground cover, e.g. concrete sur-faces, roofs, etc., provides stormwater with less of an opportunity toinfiltrate into groundwater sources and necessarily dictates that al-most all of that stormwater enters some form of surface drainage sys-tem, either a storm drainage system, creek, river, and usually all three.Forcing more water into the natural drainage systems causes an in-crease in the peak 100-year runoff flow rate. Because creeks, streams,and rivers now have to carry more stormwater in an urbanized condi-tion, the limits of inundation during this design event will be largerand therefore subject properties to flooding that may not have beenduring these undeveloped conditions.

2. Reductions in the Time to Peak

The reduction of time needed for a watershed to peak createshigher peak flow rates in a more indirect manner. When a 100-yeardesign storm, that is a storm that will produce a 100-year peak flowrate, occurs, the stormwater requires a finite and measurable amountof time, minutes, hours, or even days, to progress through the water-shed.62 A watershed’s time to peak (also known in some methodolo-gies as the time of concentration) reflects the amount of time that it

59. Id.60. See NEVEN KRESIC, GROUNDWATER RESOURCES SUSTAINABILITY, MANAGE-

MENT, AND RESTORATION 110 (Larry S. Hager ed., 2009).61. See id. at 278–79.62. See NORTH CENTRAL TEXAS COUNCIL OF GOVERNMENTS, supra note 54, at

HO-19.


takes for a watershed to reach its maximum rate of discharge during astorm event.63 For example, consider two watersheds that are identi-cal with the only difference between the two being the time to peak,one having a time to peak of ten minutes and the other having a timeto peak of twenty minutes. Then consider identical storms strikingtwo watersheds and generating ten thousand cubic feet of stormwaterrunoff. In the first watershed, that is with a time to peak of ten min-utes, the average rate of runoff will be one thousand cubic feet ofrunoff per minute. In contrast, the second watershed would have atime to peak of twenty minutes and the average rate of runoff wouldbe five hundred cubic feet per minute. While this example oversimpli-fies the effects of reducing the time to peak on a watershed, the over-all rule still holds that shorter times to peak necessarily mean higherstormwater runoff rates, and higher stormwater runoff rates correlateto larger limits of inundation during floods.

Time to peak in undeveloped watersheds are naturally longer thantheir developed counterparts because of increased channelization andthe reduction of permeable ground cover.64 Reduction of perviousand vegetated ground cover decreases the time to peak for a water-shed by making it hydraulically smoother for stormwater passing overit.65 For example, an unpaved surface, such as grass, will retard theflow of water over its surface more than a similar section of smoothconcrete at the same slope.66 Increased channelization of stormwatermanifests in terms of concrete lined channels and other storm drain-age structures. The usage of these types of structures allows munici-palities and real estate developers to reduce the impact of drainagestructures on real estate by concentrating stormwater and quicklymoving it off their property and downstream, thus maximizing devel-opable land. Therefore, reducing the time to peak also has the netresult of increasing the stormwater burden on downstream propertyowners by increasing the peak flow rate.

There are many methods recognized by the engineering communityfor determining the peak stormwater discharge of a watershed, e.g.the SCS Method, the Green-Ampt Method, or the Initial and Con-stant Loss Method, just to name a few.67 The SCS Method is one ofthe more popular methods due to its versatility and simplicity.68 Ac-cording to the SCS Method, which is a method for determining thestormwater runoff from a watershed of virtually any size, the unit

63. Id.64. Id. at HO-24.65. Id.66. Id.67. See William A. Scharffenberg & Matthew J. Fleming, Hydrologic Modeling

System HEC-HMS Users Manual, U.S. ARMY CORPS OF ENG’RS 130-39 (Aug. 2009),http://www.hec.usace.army.mil/software/hec-hms/documentation/HEC-HMS_Users_Manual_3.4.pdf.

68. Urban Hydrology for Small Watersheds 2-1 (U.S.D.A. 1986).


peak discharge is inversely related to the time of concentration andtime to peak of a watershed. Put another way, as the time to peakdecreases, the unit peak discharge increases.69 The unit peak dis-charge is defined as the peak rate of runoff that will be generated by awatershed per square mile per inch of excess precipitation, that is cfs/sq. mi.-in.70 The peak rate of stormwater discharge from a watershedis determined in part by the peak unit discharge equation.71 The peakunit discharge equation is a function of the watershed peaking factor,the watershed area, and the time to peak of the watershed.72 Of thesethree parameters, the only parameter that urbanization of a watershedcan affect is the time to peak; the remaining factors are related to thegeometry of the watershed. The area of a watershed typically remainsthe same while the peaking factor is a function of the average slope ofa watershed.73 Therefore, absent any large-scale earthmoving projectsor diversion streams that convey stormwater from one watershed intoanother, the area of a watershed and the average slope will remain thesame.

Most areas of the United States have observed this phenomenon ofincreased peak stormwater runoff rates resulting from development.William B. Reed specifically studied this phenomenon in his essay en-titled “An Evaluation of the Effects of Changing Land Use on theUrban Flood Frequency and Hydrograph Characteristics of ValleyCreek.”74 His analysis discusses the changes in peak flow rates thatoccurred between the arrival of the European settlers in 1685 and1995.75 The results show that, because of development, that is reduc-tion in the time to peak and increasing impervious ground cover in awatershed,76 the peak 100-year stormwater flow rate has almostdoubled between 1685 conditions and 1995 conditions.77 Also, the re-sults show a 14% increase between 1977 conditions and 1995conditions.78

The use of existing conditions hydrology in the current hydrologicmodels that form the basis for the Flood Insurance Rate Maps under-estimate the peak flow rate that will be experienced in a stream or

69. Integrated Stormwater Management Manual HO-28, North Central TexasCouncil of Governments, http://iswm.nctcog.org/Documents/technical_manual/Hy-drology_4-2010b.pdf.

70. Id. at Fig. 1.10.71. Id. at Eq. 1.15.72. Id.73. NORTH CENTRAL TEXAS COUNCIL OF GOVERNMENTS, supra note 54, at HO-

28.74. William B. Reed, An Evaluation of the Effects of Changing Land Use on the

Urban Flood Frequency and Hydrograph Characteristics of Valley Creek, SYMPOSIUM

PROCEEDINGS ON URBAN HYDROLOGY 23 (1990).75. Id. at 24–25.76. Id. at 28.77. Id. at 29.78. Id.


river. The use of existing conditions hydrology results in an actualpeak 100-year flow rate that is greater than the peak flow rate used togenerate the Flood Insurance Rate Maps, therefore the actual 100-year floodplain elevation should be higher and the limits of inunda-tion should be wider than the floodplain limits indicated on the FloodInsurance Rate Maps. This is a systemic error that effects all FloodInsurance Rate Maps by underestimating the risk associated withproperties that are near, but not technically inside the federally-regu-lated floodplain.

B. Failures in the Software Analysis

An essential part in any floodplain analysis is the evaluation ofstructures that will impede the flow of stormwater in a creek orstream; these structures include bridges, levees, and culverts. Due totheir small size and low cost, culverts make up a significant percentageof structures crossing regulated floodplain hazard areas.79 During theinitial modeling of the creeks studied for the Flood Insurance RateMaps, the primary program used was HEC-2.80 HEC-2 was first de-veloped in 1964 as a means of determining flood profiles in “irregu-larly shaped cross sections.”81 The major limitation of this softwarepackage was the fact that it could not model culverts until the 1991version.82 This means that any culvert’s effects on surroundingproperties would be an approximation at best because there was noway to accurately model them. Culvert and bridge hydraulics are gov-erned by similar sets of equations.83 Those equations are Manning’sequation, the weir flow equation, and the pressure flow equation.84

All three of these equations rely on the use of empirically-determinedconstants.85 The Federal Highway Administration (along with otherparties) performed an empirical analysis on culverts to determine theeffects that its shapes have on the upstream and downstream hydrau-lics.86 These coefficients accommodated the different types of culvert

79. Kornel Kerenyi, et al., U.S. Dep’t of Transp., FHWA-HRT-05-007, A BetterDesign of Box Culverts (2005), available at http://www.fhwa.dot.gov/publications/pub-licroads/05sep/07.cfm.

80. MANAGING FLOODPLAIN DEVELOPMENT, 3-14.81. Id. at 1.82. Compare U.S. Army Corps of Eng’rs, The Hydraulic Engineering Center,

HEC-2 WATER SURFACE PROFILES USER’S MANUAL, VII-2 (Sept. 1982), withCEIWR-HEC, U.S. Army Corps of Eng’rs, The Hydraulic Engineering Center, HEC-2 WATER SURFACE PROFILES USERS MANUAL, Appendix II-ii (Sept. 1990) [Thepages cited indicate the available options for users to consider when creating models.The only structure referenced on the cited pages of the 1982 Manual are bridges. The1990 Manual references both bridges and culverts.].

83. Compare GARY BRUNNER, HEC-RAS RIVER ANALYSIS SYSTEM HYDRAULIC

REFERENCE MANUAL 5-18 & 5-19 (2010), with GARY BRUNNER, HEC-RAS RIVER

ANALYSIS SYSTEM HYDRAULIC REFERENCE MANUAL 6-35 (2010).84. Id.85. Id. at 3-14, 5-19, and 5-23.86. Id. at Table A-1.


(circular, square, elliptical, etc.), differing material types (concrete,corrugated metal, etc.), and differing headwall types (parallel, perpen-dicular, etc.).87 The 1991 release of HEC-2 incorporated these Fed-eral Highway Administration equations and coefficients into theHEC-2 program.88 This incorporation allowed designers to accuratelymodel the effects of culvert crossings on floodplains adjacent to thosecrossings.

The problem with the incorporation of this routine into the HECsoftware package is that it occurred in 1991, six years after the crea-tion of the Flood Insurance Rate Maps. Therefore, none of the origi-nal models could have provided an accurate modeling of any culvertcrossing a floodplain. Considering that the majority of structures thatcross floodplains are in fact culverts, this is a massive potential sourceof error in floodplain mapping.

C. Limitations in the Methods of Survey

The hydraulic models that were created as the basis for the flood-plain limits shown on the Flood Insurance Rate Maps were based onsurveys that were performed contemporaneously with the hydraulicmodel development. In order to perform the floodplain determina-tions necessary for the Flood Insurance Rate Maps, a massive surveyof the creeks and streams had to be completed in order to generatethe computer models that would eventually become the basis of theFlood Insurance Rate Maps.89 These surveys were performed usingsurvey equipment that would have been typically available in the1970s. During this same period, and possibly as a result of the flood-plain mapping effort, the United States Geological Survey produced anationwide survey. The fundamental problem with the survey meth-ods and its use in the floodplain mapping effort was that the equip-ment was wrought with errors due to the fact that these areas wereprimarily mapped using aerial and photogrammetric technology,which had not yet achieved the level of accuracy necessary for engi-neering level studies.90

In 1999, a group from the University of California-Santa Barbaraand Stanford selected an approximately 6,500 acre area of California,which represented a variation of terrain types, to determine the aver-age error found between the maps produced by United States Geolog-ical Survey and maps produced as a result of modern survey methodsusing Global Positioning System equipment.91 They tested the area bycomparing the data shown on the United States Geological Surveymap for the area with data acquired using a Global Positioning Sys-

87. Id.88. Id. at 21.89. MANAGING FLOODPLAIN DEVELOPMENT, supra note 39, at 3–7.90. See K.W. Holmes et al., supra note 4, at 155.91. Id. at 156–57.


tem.92 The potential error reported on this particular United StatesGeological Survey map implied that the measurements shown on themap could be off by as much as 9 meters in the horizontal and verticaldirections and 5 meters in the vertical direction.93 The results of thestudy indicated that, on the average, the United States GeologicalSurvey map, in this case, was much more accurate than the potentialerror reported, the average error being only about 10 centimeters94,however, the error range discovered was found to be between +18meters and -13 meters.95 So while the average error for this area waslow, the potential margin of error was much larger than that indicatedon the published United States Geological Survey map. This indicatesa large source of seemingly random errors that cannot be predicted oraccommodated for in the mapping process that render the maps pro-duced in this time period dubious at best. Consequentially, anythingthat is produced because of those maps, specifically drainage area de-terminations and hydraulic models, must be considered equallydubious.

Errors in the underlying survey data used to produce the hydraulicmodels can affect the delineated 100-year floodplain in two ways.First, the water surface elevations calculated during the hydraulicanalysis are based on cross sections that are reflective of the surveydata collected in the field. Second, the limits of inundation shown onthe Flood Insurance Rate Maps are reflective of the correlation be-tween the calculated water surface elevations of the floodplain andhow it relates to the elevations of the cross sections taken from thesurvey data.

1. Effect of Survey Errors on the Models

The water surface elevations that represent the peak water surfaceelevations during the 100-year design storm shown on the Flood In-surance Rate Map are determined by using a computer analysissoftware package initially called HEC-2, and then later replaced byHEC-RAS.96 This software package uses two equations to iterate to asolution, specifically the Energy Equation and Manning’s Equation, inorder to determine the water surface elevation that will appear at across section when a specified flow rate is applied to it.97 The energybalancing equation uses several variables in order to determine thecalculated water surface elevation at a given section, specifically, thewater surface elevation and energy gradient elevation at the adjoining

92. Id. at 157.93. Id.94. Id. at 172.95. See K.W. Holmes et al., supra note 4, at 162.96. GARY BRUNNER, HEC-RAS RIVER ANALYSIS SYSTEM USER MANUAL xi

(Jan. 2010).97. GARY BRUNNER, HEC-RAS RIVER ANALYSIS SYSTEM HYDRAULIC REFER-

ENCE MANUAL 2-2 through 2-4 (2010).


cross section, the cross sectional area of the section, the wetted perim-eter of the cross section, the hydraulic roughness of the cross section,the distance between the cross sections, and the slope of the streambeing studied.98 A change to any one of these variables will result in achange in the calculated water surface elevation at that section.Changes to any individual section will cause changes that can propa-gate through the entire stream being studied.99 Therefore, the accu-racy of the survey data used in a stream analysis is critical to theaccuracy of the end product. Although the effects and extents ofthose errors cannot be determined, the effects of those errors are nec-essarily reflected in the water surface elevation determinations of themodels in some manner.

2. Errors in the Limits of Inundation and Efforts toReestablish Those Limits

The models noted above established the 100-year water surface ele-vations for the creeks and streams that were studied during the devel-opment of the Flood Insurance Rate Maps. Those models were basedon survey data that was prone to errors, so the floodplain limits estab-lished by those models will have errors of a magnitude similar to thoseof the underlying survey data. This is one area of floodplain manage-ment where the federal government has tried to make someimprovements.

The Biggert-Waters Flood Insurance Reform Act has authorized $2billion for remapping the nation’s floodplains.100 This remapping ef-fort consists of using new and more accurate aerial survey techniquesto create new topographic surveys of the nation’s waterways in orderto establish new limits of inundation based on the new topography.This effort has one critical flaw. Regardless of how accurate the newsurvey data that forms the basis of the floodplain limits is, the watersurface elevations that are used are based on the old erroneous surveydata. Any changes to the cross sectional area or wetted perimeter of astream will necessarily change the peak water surface elevation of thestream at that point.101 Any changes to the water surface elevation atany point in a stream will cause changes that will propagate to up-stream or downstream sections of the stream as well.102 So the situa-tion exists wherein old water surface elevations are being used toestablish the floodplain limits with topographic data which has a highlevel of accuracy. The fact that the peak water surface elevations are

98. Id.99. Id. at 2-2.

100. Moving Ahead for Progress in the 21st Century Act, Pub. L. No. 112-141,§ 100216, 126 Stat. 927-8 (2012) (codified in 42 U.S.C.A. § 4101b).

101. BRUNNER, supra note 97, at 2-4.102. Id.


not actually indicative of any real-world conditions is not an aspectbeing addressed in the Flood Insurance Reform Act.

V. CONCERNS AND ANALYSIS

The overall concern here is that federal law requires any personwho owns property in a regulatory floodplain and wants to get a loansecured by that property, i.e. a mortgage, will be required to purchaseflood insurance if they are shown within the limits of a floodplain.103

The location of the property relative to flood hazard boundariesshown on the Flood Insurance Rate Map determines whether or not astructure is in a floodplain. Based on Section IV above, we can seethat the maps are fundamentally flawed and the boundaries indicatedon the maps do not relate to the actual limits of the 100-year flood-plain. Therefore, a situation exists wherein property owners may beshown within the limits of the regulatory floodplain when in fact theymay not actually be at risk for flooding, in this case, these homeown-ers would be wasting money on flood insurance that they do not actu-ally need. The converse may also be true, where a property is notshown within the limits of the regulatory floodplain when in fact theyare at risk, but not required to purchase the statutorily required floodinsurance; this situation puts those homeowners at unnecessary risk offlood damage. Recent studies indicate that only about 18% of home-owners who actually are within floodplain areas actually have floodinsurance.104

In the past, this would have represented a relatively harmless error.The federal government has subsidized flood insurance policies suchthat the average cost has been about $500 per year for propertieswithin a recognized flood hazard zone.105 With the passage of the Big-gert-Waters Flood Insurance Reform Act of 2012, property ownerswith structures in floodplains will be required to pay the “real” cost offlood insurance on their properties. While the final cost of this unsub-sidized insurance policy is unknown, preliminary estimates indicatethat this can be several times the cost of the previously subsidizedpremium for flood insurance.106

Considering the level of error associated with the Flood InsuranceRate Maps, some change to the existing statutory scheme is necessary.I propose three potential solutions to the existing scheme, each ofwhich individually would be able to mitigate the problems associatedwith errors in the floodplain maps. Either reevaluate the existing wa-

103. 12 C.F.R. § 22.3 (2014).104. King, supra note 28, at 3.105. What Flood Zone Am I In?, FLOODFACTS (Sept. 15, 2014, 10:12 AM), http://

www.floodfacts.com/facts_flood_zone.html.106. Flood Insurance Costs Soaring for Thousands of Homeowners, CNN

Money, http://money.cnn.com/2013/10/21/real_estate/flood-insurance/(last visited Oct.7, 2014).


terways of the United States and reestablish the base flood elevationsand limits of flooding by using modern technology and practices;change the statutes such that a property within a flood hazard area isnot required to purchase flood insurance; or make a new requirementfor closing a home loan that a floodplain determination is performedby a professional engineer prior to closing on the home. As will bediscussed below, only one of the potential solutions put forth will beultimately amenable to all parties involved.

A. Restudy the Streams

A re-study of the nation’s waterways would be an enormous under-taking in terms of both time and in terms of cost. According to theUnited States Environmental Protection Agency, the United Stateshas approximately 3.5 million miles of streams and rivers.107 Further-more, average costs for performing detailed studies of streams andrivers are approximately $10,000 per linear mile of stream.108 Thisleads to a cost of $35 billion to restudy all of the nation’s creeks andstreams. That cost does not even include the cost to restudy anycoastal floodplains that are the result of storm surge events. Thiscourse of action is more appropriate for a long term solution thatwould definitively solve the problem of floodplain mapping and deter-mination of the relative risks of structures in and near floodplains,however, the cost of restudying all of the creeks makes this solutioninfeasible in the current regulatory and fiscal climate.

B. Make Insurance Optional

The second proposed way of mitigating the errors associated withFlood Insurance Rate Maps would be to make flood insurance op-tional for home owners, contingent upon the disclosure of the exis-tence of any floodplains regardless of whether or not the home isactually in the floodplain or just nearby. Making flood insurance op-tional for homeowners shifts the burden back onto the individualhomeowner to make decisions regarding the purchase of insurance.The mandatory disclosure of the location of any nearby floodplainswould ensure that homeowners are making intelligent decisions re-garding the relative risk of flooding versus the cost of insurance overthe life of their loan. Homeowners would be on notice of the possiblepresence of a floodplain near their property, and therefore any deci-sion not to purchase flood insurance would constitute constructive as-sumption of risk of flooding. The elimination of premium discountsthat are coming with the phased implementation of the Biggert-Wa-ters Flood Insurance Reform Act mean that homeowners will now be

107. Water: Rivers and Streams, EPA http://water.epa.gov/type/rsl (last updatedMar. 13, 2013).

108. MANAGING FLOODPLAIN DEVELOPMENT, supra note 39, at 3–28.


paying the real cost of flood insurance, as opposed to the subsidizedcost.109 In this case, we have a truly free market scenario in whichpeople are free to purchase insurance, or opt to not do so, at their owndiscretion.

This solution puts the final decision to purchase flood insuranceback in the hands of the individual homeowner, however, it puts sub-stantial risk on the banks holding the loans for those properties. Inthe event that a 100-year (or possibly even less) storm occurs and ahome without flood insurance is damaged by flood waters, the cost torepair that home can be tens of thousands of dollars depending on thedepth of the water and duration of inundation.110 In this case, there isa substantial probability that the homeowner will declare bankruptcyor abandon the home in lieu of repairing it. This likelihood of aban-donment in turn creates an unnecessary risk for the lending institu-tions, and makes this a possible but ultimately unreasonable solution.

C. Independent Determinations

A third solution is to make floodplain determinations performed bya professional engineer mandatory for all homes near a creek as partof the process of securing a loan. Flood insurance required for thatproperty could be based on the relative risk assessment of that struc-ture. Flood insurance can still be mandatory but it would be based onan actual determination by a professional engineer based on the con-ditions as they exist at the time of the purchase and those conditionswhich are predicted to exist in the future as opposed to using theFlood Insurance Rate Maps which are based on the conditions as theyexisted in the 1970s. By having professional engineers perform indi-vidualized floodplain limit determinations, they can pinpoint the exactprobability of a structure being inundated, to what depth, and forwhat duration. With these parameters determined, each property canhave a more precise determination of the appropriate risk and theinsurance premium can take that risk level into account. Contrast thiswith the current Flood Insurance Rate Maps, which merely indicatethe existence or absence of a 100-year floodplain with no regard todepth or duration of inundation.

While there is an appreciable cost associated with retaining a pro-fessional each time a home loan is processed, this cost can be borne bythe individual homeowners themselves. The cost of retaining a pro-fessional engineer to perform a floodplain determination cost can beincorporated into the amount of money borrowed from the bank in

109. Carolyn Kousky & Howard Kunreuther, Addressing Affordability in the Na-tional Flood Insurance Program, RESOURCES OF THE FUTURE 8 (Aug. 2013), http://www.rff.org/RFF/Documents/RFF-IB-13-02.pdf.

110. Cost of Flooding, NatiONAL FLOOD INSURANCE PROGRAM (Sept. 11, 2012,9:13 AM), http://www.floodsmart.gov/floodsmart/pages/flooding_flood_risks/the_cost_of_flooding.jsp.


addition to escrow and closing costs. A change to this setup makessound fiscal sense as well. The cost of an independent floodplain de-termination can be thousands of dollars. Spending this money on anindependent determination makes sense when compared to the tensof thousands of dollars that will be spent on unnecessary flood insur-ance over the life of a mortgage.

VI. CONCLUSION

Flooding is, and will continue to be, a problem for both the UnitedStates and the world. The National Flood Insurance Act of 1968started a program to alleviate those problems by taking a proactiveapproach to the risk of flooding. It was the first time that the UnitedStates had ever tried to minimize the effects of flooding because ofpredictions related to flooding. To that end, it has been effective.However, due to the changes in technology and paradigms of develop-ment, the tools that the federal government developed to predict theeffects of flooding are no longer appropriate. Because of that, thisArticle advocates for some change in the way flood insurance is ad-ministered by the federal government. Either through the eliminationof the use of the Flood Insurance Rate Maps in the determination ofthe requirements of flood insurance, the restudying of all of the na-tion’s creeks and streams, or through a fundamental change in the waythat floodplain determinations are made for properties that may be atrisk. One thing is certain though, regardless of the solution that is putinto place, the current system cannot be allowed to continue due to itsarbitrary and capricious nature of enforcement using maps that bearonly a tenuous relationship to the risks that they purport to predict.Furthermore, considering that the subsidy, which so many peoplehave relied on, is ending, it is more crucial now than it has ever beenthat reforms occur in the administration of flood insurance.

FIELD OF DREAMS: IS THE MOVIE SITE’SCOMMERCIALIZATION A DREAM PLAN

WITH SIGNIFICANT BENEFITS OR ANIGHTMARE SCRIPT WITH

CRIPPLING EFFECTS?

By Michael J. McGraw†

I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73II. HISTORY AND BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

A. Background of “Field of Dreams” . . . . . . . . . . . . . . . . . . 74B. Background of the Movie Site Property . . . . . . . . . . . . . 75C. Go The Distance Baseball’s Quest for Funding and

Approval for All-Star Ballpark Heaven . . . . . . . . . . . . . 77D. Growing Opposition to All-Star Ballpark Heaven . . . 82E. Background of Property and Zoning Law . . . . . . . . . . 86

III. ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89A. Examination of Petitioners’ Contentions and

Application to Iowa Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 90B. Distinguishing “Field of Dreams” Property

Development Plan From “Little v. Winborn” . . . . . . . 91C. Analogizing “Field of Dreams” Property

Development Plan With “Fox v. Polk County Boardof Supervisors” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

D. The Development Plan of All-Star Ballpark Heavenis an Innovative Plan of Interaction Between PrivateInvestors and Political Officials but Could HaveGone Further in its Requirements from the PrivateSector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

IV. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

I. INTRODUCTION

While some claim that baseball is no longer America’s “NationalPastime,” it is difficult to assert that any other sport breeds more nos-talgia than baseball.1 Perhaps the best exemplification of this is the1989 movie Field of Dreams, in which an Iowa farmer builds a base-

† The author is an attorney licensed to practice law in the Commonwealth ofPennsylvania, a 2014 graduate of the Duquesne University School of Law, and a grad-uate of Duquesne University (B.A.) in English Media Communication, andSociology.

He would like to thank his wife, Molly, and daughter, Sunday, and all of his familyfor their constant love and support, and Professor Kenneth Gray for his dedicatedguidance and instruction throughout law school.

1. See Allen R. Sanderson, In Defense of New Sports Stadiums, Ballparks, andArenas, 10 MARQ. SPORTS L. REV. 173, 183 (2000).

73


ball field on his farmland only to later discover that the spirits of earlytwentieth century baseball players emerge from the cornfields to playbaseball.2 Unlike virtually any piece of property in American film his-tory, the field constructed for the movie has remained intact, continu-ally attracting thousands of visitors each year,3 and has hostedcongressional delegations, presidential candidates, celebrity games,and fantasy camps.4

What began as a benign conversion of farmland into a movie prophas become a contentious situation for various parties claiming a mul-titude of interests in the land. This quarrel’s manifestation has in-cluded split ownership of the field itself between two families andtheir conflicting viewpoints on the site’s commercialization,5 the saleof the property to commercial developers with hopes of constructing asports complex on the land,6 the use of public funds to help subsidizethe project,7 the site’s commercial rezoning, and the developmentagreement forged between the private investors and local governmentto build the complex.8

This Comment will detail the field’s powerful attraction, discuss andanalyze the applicable zoning laws and governing case law associatedwith comparable property disputes in relation to the present facts,praise the use of tax rebates to help subsidize the project, and assertthat the public sector could have established even further require-ments for the private business to meet before receiving such substan-tial public funds.

II. HISTORY AND BACKGROUND

A. Background of “Field of Dreams”

Field of Dreams, based on a book written by W.P. Kinsella,9 fea-tured an impressive cast consisting of Kevin Costner, James EarlJones, Burt Lancaster, and Ray Liotta.10 Costner’s character, Ray

2. See FIELD OF DREAMS (Universal Pictures 1989).3. See Zillow, The Home Featured in ‘Field of Dreams,’ FORBES (Aug. 23, 2012),

http://www.forbes.com/sites/zillow/2012/08/23/the-home-featured-in-field-of-dreams/.4. Id.5. See Richard Jerome, Neighbors Throw One Another Curves in Dispute Over

the Real Field of Dreams, PEOPLE (Aug. 30, 1999), http://www.people.com/people/archive/article/0,,20129067,00.html.

6. See Zillow, supra note 3.7. See Lynn Campbell, Panel OKs Tax Plan to Help “Field of Dreams” Site,

OMAHA WORLD HERALD (Mar. 22, 2012), http://www.omaha.com/article/20120322/NEWS01/703229913.

8. See Brenden West, Area Residents Take Action Versus Dyersville City Council,DYERSVILLE COMMERCIAL (Sept. 6, 2012), http://www.dyersvillecommercial.com/news/area-residents-take-legal-action-versus-dyersville-city-council/article_2eabe90a-f83d-11e1-8279-0019bb30f31a.html.

9. Game Program, FIELD OF DREAMS MOVIE SITE, http://www.fodmoviesite.com/game-program (last visited Sept. 26, 2012).

10. FIELD OF DREAMS, supra note 2.

2014] FIELD OF DREAMS 75

Kinsella, was a farmer who, after hearing voices instructing him to doso, constructed a baseball field on his farmland out of blind faith thatit was to serve an elevated purpose.11 Although not everyone couldsee them, members of the banned 1919 Chicago White Sox,12 includ-ing “Shoeless” Joe Jackson, appeared out of the cornfields to playbaseball on the meticulous, picturesque field outside of Kinsella’sfamily farmhouse.13 What transpired was a journey that took Kinsellacross-country traveling to bring a defamed author and young, aspiringbaseball player back to Kinsella’s baseball field in Iowa.14 Similar tothe 1919 Chicago White Sox, both the author and young ballplayerreceived cherished opportunities for redemption solely because ofKinsella’s baseball field.15

In what proved to be a prophetic statement regarding the actualmovie site, Terence Mann, James Earl Jones’s character, provided atimeless discourse to Ray Kinsella, regarding the attraction of Kin-sella’s field: “[P]eople will come . . . they’ll come to Iowa for reasonsthey can’t even fathom . . . people will most definitely come.”16

Although Jones’s scripted speech referred to the field Costner’scharacter built in the movie, it became symbolic of what transpired atthe actual movie site, with the first visitor arriving at the field on May5, 1989,17 the same day as the film’s widespread domestic releasedate.18 Indicative of its resonance among the American public, thefilm grossed $64 million at the box office, becoming the highest gross-ing baseball movie up to that point,19 was nominated for three Acad-emy Awards, including “Best Picture,”20 and the field itself instantlybecame an inimitable piece of land in American cinematic history.

B. Background of the Movie Site Property

The movie site property is located in Dyersville, Iowa, which has apopulation of about 4,000 people.21 The Lansing family originally

11. Id.12. Jerome, supra note 5 (discussing how the 1919 Chicago White Sox were

banned from baseball for allegedly conspiring to throw the World Series for money).13. FIELD OF DREAMS, supra note 2.14. Id.15. Id.16. Id.17. The Film, FIELD OF DREAMS MOVIE SITE, http://www.fodmoviesite.com/the-

film (last visited Sept. 26, 2012).18. Field of Dreams, IMDB, http://www.imdb.com/title/tt0097351/ (last visited

Sept. 26, 2012).19. Tom Verducci, Field of Dreams, SPORTS ILLUSTRATED (July 13, 2009), availa-

ble at http://lib-ezproxy.tamu.edu:2048/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=43007624&site=ehost-live.

20. Awards, Field of Dreams, IMDB, http://www.imdb.com/title/tt0097351/awards(last visited Sept. 26, 2012).

21. Associated Press, ‘Field of Dreams’ Neighbors Worried About DevelopmentProposal, THE GAZETTE (Mar. 14, 2012), http://thegazette.com/2012/03/14/field-of-dreams-neighbors-worried-about-development-proposal/.


bought the 300-acre property in 1906 but later sold 133 acres of thetract to Al and Rita Ameskamp in 1967.22 In preparation for filming,Universal Studios modified the interior of the Lansing farmhouse tofit the necessary filming equipment, extended the porch to wraparound the house, and built the baseball field in only three days.23

In the process of building the field, a peculiarity resulted that mightnot have seemed significant at the time but later proved to be conse-quential: the baseball field was split between the Lansing’s land andthe Ameskamp’s land.24 Don Lansing owned the farmhouse, all of thebaseball diamond except third base, and all of right field; the Ames-kamps owned third base, most of center field, and the cornfield be-yond the outfield.25 Initially, this division did not present any seriousconcerns, with Al Ameskamp plowing his side of the field immedi-ately after the film’s shooting ended; however, Don Lansing kept hisportion of the field intact following the movie’s production.26 But asfilm-watchers and baseball fans started visiting the field, to the num-ber of 60,000 people per year,27 contention arose between thelandowners.28

Don Lansing married Becky Lansing in 1995,29 and an assortmentof competing ideas regarding the attraction’s preservation and com-mercialization ensued between the Lansings and Ameskamps, withboth sides taking inconsistent positions at times.30 The families’ con-flict continued for about a decade until the Lansings bought out theAmeskamps’ portion of the movie site in 2008.31

With the Lansings in solitary control of the movie site’s land and itssubsequent rezoning back to agricultural,32 the couple decided to putthe property up for sale in 2010 for $5.4 million.33 In late 2011, Deniseand Mike Stillman, Chicago-area residents, agreed to a sales contractfor the purchase of the property, totaling 193 acres.34 The Stillmansagreed to purchase the property with plans of having their company,

22. Jerome, supra note 5.23. The Film, supra note 17.24. See Jerome, supra note 5.25. Id.26. See id.27. Zillow, supra note 3.28. See Jerome, supra note 5.29. Id. (Becky and Don Lansing met when Becky traveled to the field as a visitor,

with Don later proposing to her on the infield).30. See Brenden West, Monetizing the Field: Then and Now, DYERSVILLE COM-

MERCIAL (Feb. 29, 2012), http://www.dyersvillecommercial.com/news/top_news/mone-tizing-the-field-then-and-now/article_d5a51004-62e4-11e1-9c00-001a4bcf6878.html.

31. See id.32. See id.33. Zillow, supra note 3.34. Josh Jorgenson, Field of Dreams Sold, DYERSVILLE COMMERCIAL (Nov. 2,

2011), http://www.dyersvillecommercial.com/news/top_news/field-of-dreams-sold/arti-cle_dced67ec-0553-11e1-b9d5-001a4bcf6878.html; Kyle Munson, ‘Field of Dreams’Site Sells for $3.4 million, USA TODAY (Jan. 4, 2013, 1:53 PM), http://www.usato-


Go the Distance Baseball, LLC (“Go the Distance Baseball”), de-velop the property as “All-Star Ballpark Heaven,” a premiere youthsports complex, while keeping the actual field and farmhouse from themovie virtually untouched.35

C. Go the Distance Baseball’s Quest for Funding and Approval forAll-Star Ballpark Heaven

Almost immediately after agreeing in principal on a sale price topurchase the field and surrounding property, the Stillmans beganwork on garnering goodwill with the local community and politiciansin an effort to have their support.36 With an estimated price tag of $38million and a projected start date of late 2012,37 All-Star BallparkHeaven faced an aggressive timeline with significant cost barriers. Toappeal to investors, the Stillmans decided to aggressively pursue ac-quisition of public funds to facilitate subsidization of their plan.38 TheStillmans were hopeful they would receive public assistance to back aportion of the significant initial expense, thus increasing their appealto any potential investors.39 The sales agreement for the property wasfinalized in the fall of 2011,40 and by December 2011 the Stillmans hadalready traveled to the state’s capital in Des Moines during a pre-leg-islative period to meet with local and state political leaders, includingIowa Governor Terry Branstad, to lobby for political support.41

As the Stillmans attempted to acquire public funding, two feasibilitystudies were commissioned regarding the plan: the Strategic Econom-ics Group of Des Moines, Iowa conducted one of the studies42 and the

day.com/story/gameon/2013/01/04/field-of-dreams-sells-34-million-wade-boggs-iowa/1809609/ (the sale was officially closed in early 2013 for $3.4M).

35. See id.; Zillow, supra note 3.36. See Jorgenson, supra note 34 (explaining the Stillmans immediate plans to visit

Dyersville and garner support); Elected Officials Rally for State Support of Field ofDreams Preservation and Ballpark Heaven Project, DYERSVILLE COMMERCIAL (Dec.29, 2011), http://www.dyersvillecommercial.com/news/top_news/elected-officials-rally-for-state-support-of-field-of-dreams/article_1e5989be-3276-11e1-899a-0019bb30f31a.html [hereinafter Field of Dreams Preservation] (detailing the Stillmans interactionswith local politicians in hopes of seeking support in legislative sessions).

37. Field of Dreams Preservation, supra note 36.38. See id.39. See Brenden West, Governor Signs Ballpark Heaven Rebate Bill, DYERSVILLE

COMMERCIAL (Apr. 19, 2012), http://www.dyersvillecommercial.com/news/top_news/governor-signs-ballpark-heaven-rebate-bill/article_a1586e00-8a5c-11e1-9ce8-0019bb30f31a.html.

40. Jorgenson, supra note 34.41. Field of Dreams Preservation, supra note 36.42. Karla Thompson & Jacque Rahe, One Thing is Certain . . . Changes are Inevi-

table, DYERSVILLE COMMERCIAL (Feb. 22, 2012), http://www.dyersvillecommercial.com/opinion/guest_opinion/one-thing-is-certain-changes-are-inevitable/article_47cd0754-5d6d-11e1-a337-001a4bcf6878.html (discussing how the Strategic EconomicsGroup of Des Moines study was commissioned by the following: Dyersville AreaChamber of Commerce, Dubuque Convention & Visitor’s Bureau, Greater DubuqueDevelopment Corporation, and a grant from Alliant Energy).


Sports Facilities Advisory conducted the other.43 The Strategic Eco-nomics Group provided a comprehensive impact study of the project,analyzing job creation, tax revenue, and monies accruing to serviceindustries.44 The study considered the impact on the property’s sixsurrounding counties45 and concluded that the site would attract ap-proximately 1,500 families to the area each week,46 create 1,200 full-time equivalent jobs by its fourth year,47 generate $25 million in laborby its eighth year,48 and raise $4.2 million and $2.2 million in annualincreases in state and local taxes, respectively.49 Negatively, the studydetailed travel logistics with the area’s location, noting that the site isseventy-two miles from the closest airport in Cedar Rapids and has norailroad to service the area.50

The Sports Facilities Advisory study endorsed the legitimacy of theproject, while also recognizing the plan’s pros and cons.51 The studyspecifically praised the project’s inclusion of softball fields, a uniquefeature from similar sports complexes on the East Coast, but it ex-pressed parallel reservations to the Strategic Economic Group’s studyover the remote location of Dyersville and recommended suspendingplans for the indoor facilities pending the success of the outdoorfields.52

As local city council and the Stillmans conducted and released thesefeasibility studies, state and local politicians debated the validity andappropriateness of public funding for the project.53 Dyersville’s dis-trict state politicians, Senator Tom Hancock and Representative SteveLukan, sponsored a bill to the state legislature that would give Go theDistance Baseball a sales tax rebate, collected solely from sales taxrevenue generated at the All-Star Ballpark Heaven facility, to offsetthe cost of construction while providing no upfront public funding.54

On March 21, 2012, the Iowa House Ways and Means Committeeapproved a sales tax rebate of $16.5 million over a ten-year period (by

43. Id. (discussing how the Stillmans commissioned the Sports Facility Advisory,which is a company that specializes in sports complex construction and tourism).

44. See generally Mike Lipsman & Harvey Seigelman, All-Star Ballpark Heaven:Economic and Fiscal Impact Study—A Two-Phased Development Plan, STRATEGIC

ECONOMICS GROUP (Feb. 2012), http://www.economicsgroup.com/reports/ASBH.pdf.45. Id. at 3 (explaining that the six surrounding counties include: Buchanan, Clay-

ton, Delaware, Dubuque, Jackson, and Jones Counties).46. Id.47. Id.48. Id.49. Lipsman & Seigelman, supra note 44, at 3.50. Id. at 5.51. See Brenden West, Stillmans Release Feasibility Study Findings, DYERSVILLE

COMMERCIAL (Apr. 10, 2012), http://www.dyersvillecommercial.com/news/top_news/stillmans-release-feasibility-study-findings/article_0913d6c8-8356-11e1-bd9e-0019bb30f31a.html.

52. Id.53. See Thompson & Rahe, supra note 42.54. Id.


a 19-6 vote), but it prescribed specific stipulations before doing so: (1)the construction must take place within 2012; (2) the cost of the pro-ject must be at least $38 million; and (3) the majority of investors mustreside in Iowa.55 The Iowa House of Representatives (by a 53-41vote) and the Iowa Senate (by a 34-14 vote) subsequently passed thebill,56 and on April 19, 2012, Governor Terry Branstad officially signedthe bill as final approval for the rebate.57

In addition to the back-end state rebate, the Stillmans attempted toacquire upfront financial backing from Dubuque County, which wouldallow the Stillmans to take low-rate, tax-exempt federal MidwesternDisaster Relief bonds to market; however, the Dubuque CountyBoard of Supervisors rejected this request.58 With the assistance ofNorthwestern University Professor Mike Thiesen, a municipal financespecialist, the Stillmans formally presented a plan to repay the countywith interest over a thirty-year span in exchange for financial backingof the bonds, which would further strengthen the investment group’sstanding.59 Despite indicating its support for the project, the countyrefused to provide any upfront funding, citing its concerns over takinga financial risk on a private business even though Go the DistanceBaseball committed to repay the county with interest.60

55. Brenden West, Ballpark Heaven One Step Closer to Tax Break, DYERSVILLE

COMMERCIAL (Mar. 22, 2012), http://www.dyersvillecommercial.com/news/top_news/ballpark-heaven-one-step-closer-to-tax-break/article_17f05d64-742a-11e1-bf08-001a4bcf6878.html; see, e.g., Campbell, supra note 7.

56. James Lynch, Field of Dreams Tax Rebate Headed to Governor’s Desk, GA-

ZETTE (Apr. 4, 2012), http://thegazette.com/2012/04/04/field-of-dreams-tax-rebate-headed-to-governor/.

57. Brenden West, Bill Meets Governor Approval, DYERSVILLE COMMERCIAL

(Apr. 25, 2012), http://www.dyersvillecommercial.com/news/top_news/bill-meets-gov-ernor-approval-exclusive-video/article_a92359cc-8ed7-11e1-bf14-0019bb30f31a.html.

58. See Brenden West, Supervisors Reject Stillmans’ Funding Request, DYER-

SVILLE COMMERCIAL (Oct. 24, 2012), http://www.dyersvillecommercial.com/news/su-pervisors-reject-stillmans-funding-request/article_ce0c318e-1de6-11e2-a4a1-0019bb30f31a.html (discussing how the Midwestern Area Disaster bonds carried an expirationdate of December 31, 2012, and the Stillmans cited the uncertainty of whether theUnited States Congress would extend the bonds beyond this date); Id. (explainingthat the bonds were issued by the Iowa Finance Authority earlier in 2012); MattMuilenburg, RAAC Asks Court to Dismiss Lawsuit, DYERSVILLE COMMERCIAL (Nov.15, 2012), http://www.dyersvillecommercial.com/news/raac-asks-court-to-dismiss-law-suit/article_609d0260-2f6e-11e2-832a-001a4bcf6878.html.

59. West, supra note 58 (explaining that the Stillmans and Thiesen presented aproposal to the Dubuque County Board of Supervisors that predicted a positive cashflow of $8.9M by 2019); Id. (explaining that Mike Stillman stated it was Go the Dis-tance Baseball’s “due diligence” to pursue such public funding, saying, “We would bedoing a disservice to the area and the investors if we didn’t at least pursue this.”); Id.

60. Id. (explaining that if All-Star Ballpark Heaven became a complete failure andGo the Distance Baseball would be unable to repay Dubuque County, the countyestimated its risk at $750,000 per year); Id. (explaining that Dubuque County BoardSupervisor Wayne Demmer stated, “We’ve never given money—that I know of—toany private entities anywhere.”).


In addition to seeking state and county funding, Go the DistanceBaseball’s main interaction involved coordinating with Dyersville CityCouncil (“Council”), because any council or board in Iowa has au-thority to determine regulations, restrictions, and usage of any prop-erty under council control as long as it promotes the health, safety,morals, or general welfare of its constituents.61 The first step of theprocess required annexation of specific Dubuque County propertyinto City of Dyersville property for the purposes of rezoning theland.62 To facilitate such a result, five property owners voluntarily an-nexed their land from Dubuque County property to City of Dyersvilleproperty,63 an action Council approved on July 2, 2012 (by a 4-1vote).64 As the property now came under the City of Dyersville’s juris-diction, this annexation formally allowed Council to consider the re-zoning issue.65

Per Iowa statute, a council has the authority to appoint a zoningcommission, which then subsequently makes recommendations to thecouncil for its determinative vote.66 Zoning commissions in Iowa es-sentially serve as the recommending entity while the council itself haslegislative control.67 Following this annexation, the Dyersville Plan-ning and Zoning Commission (“Commission”) approved a proposal(by an 8-0 vote) to rezone the site and surrounding property from A-1“Rural Restricted District” to C-2 “Commercial District.”68 As partof the vote, the Commission agreed to a 200-foot buffer on three sidesof the property to provide surrounding farmers with protectiverights.69

61. See IOWA CODE ANN. § 414.1 (West, Westlaw through 2012 Reg. Sess.).62. See West, supra note 30.63. Brenden West, Council Approves Voluntary Annexation, DYERSVILLE COM-

MERCIAL (July 3, 2012), http://www.dyersvillecommercial.com/news/top_news/council-approves-voluntary-annexation/article_58c31c24-c4ab-11e1-8632-001a4bcf6878.html(clarifying that the property owners were Don and Becky Lansing, Gerald and AliceDeutmeyer, John and Nicole Rahe, Keith and Jacque Rahe, and Dorothy Meyer).

64. Id. (explaining that Councilmember Molly Evers was the lone dissenter).65. See Lauren DeWitt, Dyersville City Council Approves Annexation of Field of

Dreams, Gazette (July 2, 2012), http://thegazette.com/2012/07/02/dyersville-city-coun-cil-approves-annexation-of-field-of-dreams/.

66. IOWA CODE ANN. § 414.6 (West, Westlaw through 2012 Reg. Sess.); see IOWA

CODE ANN. § 335.8 (West, Westlaw through 2012 Reg. Sess.) (providing same powerto county boards).

67. Little v. Winborn, 518 N.W.2d 384, 386 (Iowa 1994).68. Matt Muilenburg, P & Z Commission Casts Unanimous Thumbs Up, DYER-

SVILLE COMMERCIAL (July 11, 2012), http://www.dyersvillecommercial.com/news/top_news/p-z-commission-casts-unanimous-thumbs-up/article_d56b707a-cb5c-11e1-9d98-0019bb30f31a.html; see DYERSVILLE, IOWA, ZONING REGULATIONS, ORDINANCE

165.21, 615–16 (City of Dyersville through 2011) http://www.cityofdyersville.com/City-AdServ/Ordinances/2011/Chapter165_Zoning_Regulations.pdf.

69. Muilenburg, supra note 68.


The next step required Council approval of the rezoning.70 Follow-ing its assessment of the Commission’s recommendation, on August 6,2012, Council approved the rezoning of the site from A-1 to C-2 (by a4-1 vote).71

With the sales tax rebate from the state solidified along with Coun-cil’s rezoning approval, the Stillmans and Go the Distance Baseballstill faced two significant hurdles: Council’s approval of a develop-ment plan and securing investors for the project. Regarding approvalof a development plan, Iowa law requires that land regulations mustbe made in agreement with a comprehensive plan that is “designed topreserve the availability of agricultural lands . . . .”72

Facing this level of scrutiny, an agreement with Council was metwith resistance and skepticism.73 Despite this opposition, on Septem-ber 4, 2012, Go the Distance Baseball and Council came to an agree-ment on a development plan for the All-Star Ballpark Heavenproject.74 The agreement stipulated that Go the Distance Baseballmust fund $3 million for water and sewer infrastructure for the landand complete the entire project by 2018.75 In return, the City of Dyer-sville would make incremental tax financing rebates to Go the Dis-tance Baseball, totaling a potential maximum of $5.13 million overfifteen years, which, similar to the state’s sales tax rebate, would besolely dependent upon revenue generated from the business itself andwould not include any upfront public funding.76 NotwithstandingCouncilmember Molly Evers’s lone dissenting vote on the develop-ment agreement,77 the overwhelming Council approval seemed tomark the end of an almost year-long political lobbying process andallow the Stillmans to focus on gathering investors, finalizing thepurchase of the property, and beginning construction.78

70. See IOWA CODE ANN. § 414.6 (explaining that council cannot hold a zoninghearing until it receives the zoning commission’s final report).

71. Council Approves Rezoning, DYERSVILLE COMMERCIAL (Aug. 6, 2012), http://www.dyersvillecommercial.com/news/top_news/council-approves-rezoning/article_e561f7ce-e029-11e1-a1b6-001a4bcf6878.html (explaining that Molly Evers was again thelone council dissenter).

72. IOWA CODE ANN. § 414.3 (West, Westlaw through 2012 Reg. Sess.).73. See Matt Muilenburg, Council Signs Development Agreement, DYERSVILLE

COMMERCIAL (Sept. 5, 2012), http://www.dyersvillecommercial.com/news/council-signs-development-agreement/article_37a83478-f76b-11e1-9d0f-0019bb30f31a.html(referencing councilmember Molly Evers’ concerns over the agreement).

74. Id.75. Id.76. Id.77. Id.78. But see West, supra note 8 (detailing area residents filing of a writ of certiorari

against the Dyersville City Council and Dyersville Mayor Jim Heavens) (emphasisadded); see generally Muilenburg, supra note 73 (demonstrating the strong supportfrom Council for the development project); Field of Dreams Preservation, supra note36 (describing the Stillmans’ efforts to acquire public funding and attract investors forthe project).


While these political elements were occurring, the Stillmans workedto attract investors for All-Star Ballpark Heaven.79 In what wouldbecome a trend of recruiting well-known baseball names, the first big-name investor to join the group was Des Moines, Iowa, native andTampa Bay Rays pitcher, Jeremy Hellickson.80 The Stillmans subse-quently announced associations, including instructional clinics at thenew complex, with the following current or former Chicago White Soxplayers, coaches, and employees: Chris Sale, Don Cooper, Ron Kittle,and well-known groundskeeper, Roger Bossard.81 Also, two big-name investors who later joined were Hall-of-Famer Wade Boggs andactor Matthew Perry.82 Pertaining to corporate investors and spon-sors, Dubuque-based Conlon Construction agreed to join the invest-ment team and serve as the development project’s contractor,83 andFranklin (the official batting glove supplier to Major League Baseball)agreed to officially sponsor All-Star Ballpark Heaven’s first season.84

D. Growing Opposition to All-Star Ballpark Heaven

Despite the success of the Stillmans’ plans to move forward withAll-Star Ballpark Heaven, there was a steady and growing oppositionto their project, which manifested into legal action.85 Vocal opposi-tion began to surface at Council’s meeting on February 20, 2012,where local residents expressed their concerns about the develop-

79. See, e.g., Brenden West, Ballpark Gets Major League Investor, DYERSVILLE

COMMERCIAL (Mar. 2, 2012), http://www.dyersvillecommercial.com/news/top_news/ballpark-heaven-gets-major-league-investor/article_eb0a0f9a-649b-11e1-a09e-001a4bcf6878.html.

80. Id.81. See Brenden West, Progress Continues for Local Projects, DYERSVILLE COM-

MERCIAL (Aug. 15, 2012), http://www.dyersvillecommercial.com/news/top_news/progress-continues-for-local-projects/article_cd0aa9e0-e6e7-11e1-9644-0019bb30f31a.html;Matt Muilenburg, Hall of Famer Wade Boggs Joins Ballpark Heaven as Investor, DY-

ERSVILLE COMMERCIAL (Sept. 26, 2012), http://www.dyersvillecommercial.com/news/top_news/hall-of-famer-wade-boggs-joins-ballpark-heaven-as-investor/article_f35b1746-083f-11e2-bc91-001a4bcf6878.html.

82. Muilenburg, supra note 81; Philliana Ng, Matthew Perry Joins as Investor in‘Field of Dreams’ Ballpark, THE HOLLYWOOD REPORTER (Feb. 6, 2013, 10:45 AM),http://www.hollywoodreporter.com/news/matthew-perry-field-dreams-ballpark-418767.

83. Conlon on Board for Ballpark Heaven, DYERSVILLE COMMERCIAL (Aug. 29,2012), http://www.dyersvillecommercial.com/news/top_news/conlon-on-board-for-ballpark-heaven/article_7891c258-f1dd-11e1-a500-001a4bcf6878.html (emphasis added).

84. Matt Muilenburg, Go the Distance Baseball Announces First Corporate Spon-sor, DYERSVILLE COMMERCIAL (Sept. 27, 2012), http://www.dyersvillecommercial.com/news/go-the-distance-baseball-announces-first-corporate-sponsor/article_a178918c-08b3-11e2-9e8e-001a4bcf6878.html.

85. See, e.g., Brenden West, Ballpark Protestors Seek Judicial Review, DYER-

SVILLE COMMERCIAL (Sept. 12, 2012), http://www.dyersvillecommercial.com/news/ballpark-protesters-seek-judicial-review/article_396735a2-fce3-11e1-91df-001a4bcf6878.html.


ment.86 Among the numerous issues raised were traffic congestion,water run-off, construction of hotels, gas stations, and restaurants,land erosion, and a general incredulity regarding the supposed posi-tive economic impact to the area.87

This resistance was not limited to residents who feared a direct im-pact on their land and privacy.88 As the bill worked its way throughthe House Ways and Means Committee, it met opposition fromlawmakers opposed to allocating any variation of public monies to theproject.89 Representative Dave Jacoby expressed apprehension overthe sales tax rebate influencing future projects petitioning for similartreatment, and Chairman Tom Sands believed the Iowa legislatureneeded parameters to curtail this sort of incentive program.90

Locally in Dyersville, Molly Evers continued to be Council’s lonedissenter throughout the voting process.91 At the hearing—in whichCouncil and Go the Distance Baseball ultimately consummated thedevelopment agreement—Evers questioned Denise Stillman by ask-ing her to evaluate the fairness in having a “multi, multi-million dollarprivate enterprise . . . on the shoulders of the average Dyersvilletaxpayer.”92

Following Council’s agreement to the development plan with Gothe Distance Baseball on September 4, 2012, local residents took legalaction in attempt to stop the agreement and rezoning.93 Twenty-fourplaintiffs (“Petitioners”),94 including a private agricultural company,filed for a writ of certiorari against Council members95 and DyersvilleMayor Jim Heavens.96 The Petitioners also asked the Iowa DistrictCourt in Dubuque County for a request of stay and injunction against

86. Brenden West, Field of Dreams: The Other Side of the Story, DYERSVILLE

COMMERCIAL (Feb. 22, 2012), http://www.dyersvillecommercial.com/news/top_news/field-of-dreams-the-other-side-of-the-story/article_b5dfd2e8-5d69-11e1-923d-001a4bcf6878.html.

87. Id.88. Aaron Hepker, House Panel Approves Field of Dreams Tax Rebate Plan,

KCRG (Mar. 21, 2012, 6:47 PM), http://www.kcrg.com/news/local/House-Panel-Approves-Field-of-Dreams-Sales-Tax-Rebate-Plan-143736756.html (referencing polit-ical concern over the development plan).

89. Id.90. Id.91. Council Approves Rezoning, supra note 71 (explaining that Evers cast the lone

dissenting vote against the rezoning of the property); Muilenburg, supra note 73 (ex-plaining that Evers cast the lone dissenting vote against development agreement withGo the Distance).

92. Muilenburg, supra note 73.93. See West, supra note 8.94. Residential & Agric. Advisory Comm., LLC v. Dyersville City Council, No.

13–0015, 2013 WL 5951191, at *1 (Iowa Ct. App. Nov. 6, 2013).95. The council members were Mike English, Mark Bretibach, Robert Platz,

Molly Evers, and Dan Willenborg. Id.96. Id.


the Council and Mayor.97 Chief among the Petitioners’ seventeencomplaints98 were the following: (1) Council violated ordinances bynot making “written findings and conclusions” on a factual and legalbasis; (2) Council conducted itself “illegally and arbitrarily” by rezon-ing the property from agricultural to commercial; (3) Council “failedto consider the impact of the development”; (4) Council violated openmeeting laws of Iowa; (5) Council neglected concerns of traffic andagricultural effects; and (6) Council acted without regard to the“moral and general welfare” of the citizens.99

Go the Distance Baseball, although not named as a defendant inthe suit, also became involved in the legal battle.100 Go the DistanceBaseball filed a petition for intervention on September 19, 2012against the Petitioners.101 In filing the petition, Go the Distance Base-ball sought to ensure protection of its interests in the legal dispute.102

Go the Distance Baseball denied eight of the Petitioners’ seventeenallegations, specifically opposing the assertion that Council violatedIowa law and local ordinances in rezoning the property from commer-cial to agricultural and the allegation that the project would result in“irreparable harm.”103 Go the Distance Baseball petitioned the IowaDistrict Court in Dubuque County to dismiss the Petitioners’ writ ofcertiorari and any other petitions against the project.104

On September 25, 2012, District Judge Tom Bitter conducted ahearing concerning the legal dispute.105 After receiving additional in-formation from Council and the mayor, along with hearing commentsfrom the Lansings’ attorney regarding the $4 million proposed salesprice that the Lansings stood to lose, Judge Bitter initially held off onissuing a ruling, temporarily leaving everyone with various levels ofuncertainty.106 Following a review of this additional information, onOctober 9, 2012, Bitter affirmed Council’s rezoning of the property,

97. Id; see IOWA CODE ANN. § 414.15 (West 2012) (provides any person or tax-payer the opportunity to file a writ of certiorari if he or she believes he or she hasbeen aggrieved by a zoning adjustment board’s decision).

98. Matt Muilenburg, Go the Distance Baseball Files Petition Against Opposition,DYERSVILLE COMMERCIAL (Sept. 24, 2012), http://www.dyersvillecommercial.com/news/go-the-distance-baseball-files-petition-against-opposition/article_eca79c2a-066f-11e2-aab9-001a4bcf6878.html.

99. West, supra note 8.100. See Muilenburg, supra note 98.101. Id; see IOWA R. CIV. P. 1.407 (“Unless parties’ vested interests are already

represented in a court matter, persons or entities have an intervention by right whenthey have a claim in the matter and the disposition can ‘impair or impede’ theirinterest.”).

102. Muilenburg, supra note 98.103. Id.104. Id.105. Matt Muilenburg, Ballpark Heaven Court Case Ongoing, DYERSVILLE COM-

MERCIAL (Sept. 26, 2012), http://www.dyersvillecommercial.com/news/ballpark-heaven-court-case-ongoing/article_ef445288-07e2-11e2-aa6f-0019bb30f31a.html.

106. Id.


thus denying the Petitioners’ writ of certiorari.107 The Residential andAgricultural Advisory Committee (“RAAC”) subsequently won anappeal of the district court’s denial of the Petitioners’ writ of certio-rari—with the Iowa Court of Appeals determining that the districtcourt made a ruling on the merits without the opportunity fordiscovery.108

To further protect its interests in the project, on October 12, 2012,Go the Distance Baseball filed suit against the RAAC, seeking litiga-tion cost reimbursement, punitive damages, and any other relief thecourt would deem “just and appropriate under the circumstances.”109

The Stillmans claimed intentional interference with contracts associ-ated with All-Star Ballpark Heaven, including the purchase agree-ment to buy the Lansings’ property, the state legislature sales taxrebate, and the federal Midwest bond allocation.110 The Stillmansalso alleged Wayne and Sharon Ameskamp distributed pamphletsunder churchgoers’ windshields, urging area residents to fight the de-velopment project.111 Go the Distance Baseball specifically claimedthese communications were “false and defamatory,” “made with ac-tual malice,” consisted of “willful and wanton conduct,” and were “aproximate cause of damages to [Go the Distance Baseball],”112 butGo the Distance Baseball and RAAC ultimately agreed to dismisstheir claims against each other.113

107. Matt Muilenburg, Judge Denies Writ: Ballpark to Proceed, DYERSVILLE COM-

MERCIAL (Oct. 10, 2012), http://www.dyersvillecommercial.com/news/judge-denies-writ-ballpark-to-proceed/article_2e743140-12e6-11e2-8767-0019bb30f31a.html.

108. Residential & Agric. Advisory Comm., LLC v. Dyersville City Council, No.13–0015, 2013 WL 5951191, at *1, *6 (Iowa Ct. App. Nov. 6, 2013). A trial date in thedistrict court has been set for February 16, 2015. RAAC v. Dyersville Trial Set forFebruary, DYERSVILLE COMMERCIAL (Aug. 20, 2014), http://www.dyersvillecommercial.com/news/raac-vs-dyersville-trial-set-for-february/article_1d0f9886-27f7-11e4-a346-001a4bcf6878.html?success=2.

109. Matt Muilenburg, Stillmans File Suit Against Opposition, DYERSVILLE COM-

MERCIAL (Oct. 15, 2012), http://www.dyersvillecommercial.com/news/stillmans-file-lawsuit-against-opposition/article_20200906-1710-11e2-914a-0019bb30f31a.html (dis-cussing the Residential and Agricultural Advisory Committee, LLC, which consists ofmore than twenty Dyersville area citizens who were involved in the district court suitagainst Dyersville City Council in hopes of reversing the rezoning of the Field ofDreams property); Id. (regarding Go the Distance’s filing suit, Denise Stillmanstated, “We want to make sure [All-Star Ballpark Heaven] goes forward for Dyer-sville and for greater Eastern Iowa. This is one of the best ways we can do to protect itto make sure it does happen.”); Id.

110. Id.111. Id.112. Id.113. Legal Claims Between FOD Owners, Neighbors Dismissed, DYERSVILLE COM-

MERCIAL (Dec. 22, 2013), http://www.dyersvillecommercial.com/news/legal-claims-be-tween-fod-owners-neighbors-dismissed/article_6bd8d7f8-690b-11e3-ae3f-001a4bcf6878.html.


E. Background of Property and Zoning Law

The sanctity of property in American history has its foundation en-trenched in the Fifth Amendment of the United States Constitution,which protects citizens from deprivation of life, liberty, or property,without due process of law.114 In 1926, the United States SupremeCourt ruled on the constitutionality of zoning ordinances and regula-tions in the landmark case Village of Euclid v. Amber Realty Com-pany.115 In this case, the Court established the standard for theprotection and deference to local municipalities in determining zoningissues by declaring, “We have nothing to do with the question of thewisdom or good policy of municipal ordinances.”116 In discussing mu-nicipal power to create zoning regulations, the Court stated that mu-nicipal rulings must find their justification in the general police powergiven by the states for the good of public welfare.117 For any regula-tion to be unconstitutional, it must be “clearly arbitrary and unreason-able, having no substantial relation to the public health, safety,morals, or general welfare.”118

Following the Court’s established deference to state and local gov-ernmental bodies’ zoning decisions, the United States Court of Ap-peals for the Eighth Circuit declared that federal courts will notinterfere with properly executed state power established for the goodof the general welfare.119 Conforming to these federal decisions, theIowa Supreme Court has repeatedly ruled in alignment with a strongdeference to local council or board rulings in zoning matters.120 Bar-ring an unreasonable decision, the Iowa Supreme Court will not sub-stitute its judgment for those of local boards or councils.121 The IowaSupreme Court recognizes the positive impact of zoning ordinancesand treats these issues under the general theory that “the division ofcities into zoned district [sic] has contributed to the welfare of thecommunities;”122 and it has upheld zoning rulings and regulations asvalid discretionary measures taken by municipalities under the policepower afforded to them by the state to effectuate “health, safety,morals, or the general welfare” of the citizens and community.123

In accordance with Iowa statute, local zoning commissions mustmake recommendations to county boards or city councils that they areunder no legal obligation to adopt.124 Once the council or board re-

114. See U.S. CONST. amend. V.115. Vill. of Euclid v. Ambler Realty Co., 272 U.S. 365 (1926).116. Id. at 394.117. Id. at 387.118. Id. at 394.119. See McMachon v. Dubuque, 255 F.2d 154, 160 (8th Cir. 1958).120. See, e.g., Keller v. Council Bluffs, 66 N.W.2d 113, 116–17 (Iowa 1954).121. Perkins v. Bd. of Supervisors, 636 N.W.2d 58, 67 (Iowa 2001).122. Keller, 66 N.W.2d at 119.123. Id. at 116.124. Little v. Winborn, 518 N.W.2d 384, 386–87 (Iowa 1994).


ceives the zoning commission’s recommendation, there must be a pub-lic hearing at which citizens have an opportunity to be heard.125 Iowadefines an open session as a “meeting to which all members have pub-lic access,”126 and the purpose of this requirement is to promote trans-parency regarding governmental bodies’ decision-making rationale.127

This hearing does not have to be held in a formal evidentiary setting;rather, it can be a “comment-argument” hearing to aid the appropri-ate deciding board in gathering information.128

Once county boards or city councils establish a zoning regulation,this decision carries a strong presumption of validity that is difficult toovercome.129 As the Iowa Supreme Court detailed in Neuzil v. IowaCity,130 as long as the zoning ordinance is “facially valid” and its rea-sonableness is “fairly debatable,” the decision of the local board muststand.131 A zoning regulation or ordinance is “facially valid” if it hasany substantive relationship to the “public health, comfort, safety, andwelfare, including the maintenance of property values.”132 For the“fairly debatable” standard, a court will not overrule a board orcounty’s determination if there is any basis for reasonable minds todiffer on the zoning regulation at hand;133 i.e., the regulation is valid ifthere is an opportunity for two different opinions.134 Once a boardestablishes a zoning regulation, the board has flexibility to amend theregulation as it deems necessary.135

In further support of this strong presumption of validity of a councilor board’s zoning determination, the Iowa Supreme Court held thereis no balancing test that must be utilized in which the public good is

125. IOWA CODE ANN. § 414.4 (West, Westlaw through 2012 Reg. Sess.).126. IOWA CODE ANN. § 21.2 (West, Westlaw through 2012 Reg. Sess.).127. See id. § 21.1.128. Montgomery v. Bremer Cnty. Bd. of Supervisors, 299 N.W.2d 687, 693 (Iowa

1980).129. See Perkins v. Bd. of Supervisors, 636 N.W.2d 58, 67 (Iowa 2001).130. Neuzil v. City of Iowa, 451 N.W.2d 159, 163 (Iowa 1990).131. Id. at 163.132. Id. at 164.133. Molo Oil Co. v. Dubuque, 692 N.W.2d 686, 691 (Iowa 2005); see also Ander-

son v. Jester, 221 N.W. 354, 356, 358 (Iowa 1928) (describing the use of the “fairlydebatable” standard as the measuring test having its roots all the way back to the firstcase the Iowa Supreme Court heard concerning municipal zoning law ordinances).

134. Shriver v. City of Okoboji, 567 N.W.2d 397, 401 (Iowa 1997).135. Neuzil v. City of Iowa, 451 N.W.2d 159, 165 (Iowa 1990) (contrasting Iowa

zoning amendment law with the “Maryland Rule,” in which a zoning ordinance canonly be changed to correct an error or due to a certain change in conditions); seeKeller v. City of Council Bluffs, 66 N.W.2d 113, 116 (Iowa 1954) (“We are of theopinion the governing body of a municipality may amend its zoning ordinances anytime it deems circumstances and conditions warrant such action . . . .”); contra Nw.Merch. Terminal, Inc. v. O’Rourke, 60 A.2d 743, 752 (Md. Ct. App. 1948) (declaring itis “arbitrary and an unreasonable exercise of power” to amend zoning ordinancesunless there is “appreciable danger to the public health, comfort, safety, or welfare tobe feared from [the original zoning ordinance’s] exercise.”).


balanced against potential harm.136 Although recognizing that zoningdecisions naturally lead to hardships for certain individuals,137 thecourt significantly noted that it is not concerned about individualhardships in any particular case, but its sole focus is on the generalpurpose of the ordinance.138 Further decreasing the chance of a rever-sal of a board’s zoning decision, the burden to prove the invalidity andunreasonableness of the zoning decision rests with the person or en-tity claiming its invalidity.139 As a legal means to dispute a zoning de-cision, an opposing party can file a writ of certiorari if it feels a boardor council has acted illegally or exceeded its jurisdiction in enactingthe regulation in question.140

Perhaps there is no more applicable case to the Field of Dreamsproperty issue than Fox v. Polk County Board of Supervisors,141 whichreached the Iowa Supreme Court as the result of residents challengingthe county board’s decision to rezone property for the development ofa softball field complex.142 The Polk County Board of Supervisorsvoted to rezone an area of predominantly agricultural land to enableconstruction of a softball field complex on land donated to the countyby a local family.143 Certain residents of the area strongly opposedthe rezoning due to concerns such as increased traffic and noise, de-clines in property value, and other general safety concerns.144 Theseresidents filed a writ of certiorari to overrule the board’s zoning deci-sion and construction of the softball complex.145 The district courtdenied the writ, upholding the board’s decision, and the Iowa Su-preme Court affirmed the rezoning.146 In reaching its decision, theIowa Supreme Court applied the “fairly debatable” standard andfound no error in the district court’s ruling that the rezoning wouldprovide park facilities to the area, preserve large areas of open space,and create a buffer area between residential and commercial areas.147

While there are many holdings in which Iowa courts upheld the“fairly debatable” standard, the cases are sparse in which courts havereversed local zoning regulations. The only major decisions that over-

136. See F.H. Uelner Precision Tools & Dies, Inc. v. City of Dubuque, 190 N.W.2d465, 468 (Iowa 1971), overruled by Molo, 692 N.W.2d 686, 691.

137. See Keller, 66 N.W.2d at 119 (quoting Eaton v. Sweeney, 177 N.E. 412, 414(N.Y. Ct. App. 1931)).

138. See Boardman v. Davis, 3 N.W.2d 608, 610 (Iowa 1942).139. See Anderson v. Cedar Rapids, 168 N.W.2d 739, 742 (Iowa 1969).140. IOWA R. CIV. P. 1.1401; see also Montgomery, 299 N.W.2d at 692; Fox v. Polk

Cnty. Bd. of Supervisors, 569 N.W.2d 503, 508 (Iowa 1997).141. Fox, 569 N.W.2d at 503.142. Id. at 505.143. Id. at 505–07.144. Id. at 506.145. Id.146. Fox, 569 N.W.2d at 507, 509.147. Id. at 508.


rule zoning regulations dealt with the concept of “spot zoning.”148 InLittle,149 the Davenport Shooting Association requested the ScottCounty Zoning and Planning Association to rezone 223 acres of prop-erty so the association could construct buildings for a shooting rangeclub.150 Surrounding property owners objected to the rezoning, ex-pressing concerns over the effect on livestock, the noise of the shoot-ing range, and the risk of fire hazards from buildings.151 The ScottCounty Board of Supervisors approved the rezoning of the property,leading to surrounding property owners petitioning the district courtfor a writ of certiorari, which resulted in the district court ruling therezoning invalid.152

While affirming the district court’s ultimate rejection of the rezon-ing, the Iowa Supreme Court ruled that spot zoning existed becausethe subject property would have different use restrictions than sur-rounding land.153 In its next step, the court ruled that the spot zoningwas illegal because the rezoning had no relation to the public safety,health, morals, or welfare of the community, as the property ownerswere the only community members who would receive any benefitfrom the rezoning.154 In addition, the court determined there was noreasonable basis for rezoning this specific property, as it had nounique characteristics that distinguished it from any of the surround-ing properties.155 Finally, the court held that rezoning of the propertywould contravene the Scott County Comprehensive Zoning Plan,which identified protecting agricultural land from scattered develop-ment as a main objective.156

III. ANALYSIS

This section will first examine the Petitioners’ main points of con-tentions surrounding Go the Distance Baseball and Council’s decisionto rezone the Field of Dreams movie site property in anticipation ofconstructing a youth sports complex. Then, this section will distin-

148. See, e.g., Little v. Winborn, 518 N.W.2d 384, 389 (Iowa 1994); Keppy v. Ehlers,253 N.W.2d 1021, 1024 (Iowa 1962); but see Jaffe v. Davenport, 179 N.W.2d 554, 559(Iowa 1970).

149. Little, 518 N.W.2d at 388.150. Id. at 385.151. Id.152. Id. at 386 (establishing that the district court, however, did not discuss the

issue of spot zoning, ruling instead that the rezoning was invalid due to failure tocomply with two procedural requirements: (1) the zoning commission did not recom-mend the Davenport Shooting Association’s rezoning petition to the Scott CountyBoard of Supervisors prior to its vote, and (2) the Scott County Board of Supervisorsessentially granted consent of a shooting range without following the appropriate stat-utory procedures required for approval of such a facility); Id.

153. Id. at 388.154. Little, 518 N.W.2d at 388.155. Id.156. Id.


guish those facts from the situation presented in Little v. Winborn157

and compare the similarities to Fox v. Polk County Board of Supervi-sors.158 Next, this section will discuss why the interaction between Gothe Distance Baseball and the local and state governmental bodies ofIowa created an innovative plan that, although an impressive accom-plishment in public and private collaboration, could have expanded itsrequirements of the private business. This section will then propose amodel plan for any future attempts of private business and govern-ment funding a plan that benefits both private business and the gen-eral welfare of the community.

A. Examination of Petitioners’ Contentions andApplication to Iowa Law

The Petitioners presented seventeen complaints to the DubuqueCounty District Court against Council and Mayor Jim Heavens.159

While District Court Judge Ritter denied the Petitioners’ equitable re-quest and upheld the rezoning during the first hearing,160 in analyzingthe paramount claim regarding the arbitrary nature of the Council’sactions with the rezoning of the property, it would appear on the sur-face that the Petitioners faced a difficult path to reverse the zoningdecision.

In evaluating a claim of arbitrary board action with zoning, the dis-cussion will focus on the “fairly debatable” standard established andutilized by the Iowa Supreme Court since 1928, when it first encoun-tered a municipal zoning issue in Anderson v. Jester.161 As long as azoning ordinance is “facially valid” and its reasonableness is “fairlydebatable,” it will not be reversed.162 As stated, a zoning regulation is“facially valid” if it has any substantive relationship to the “publichealth, comfort, safety, and welfare, including the maintenance ofproperty values,”163 and courts will not reverse a local zoning determi-nation as long as reasonable minds can differ on the zoning deci-sion;164 in other words, the regulation is valid if there is an opportunityfor two logical, dissimilar opinions.165

There is little dispute that the zoning regulation changing the site tocommercial property for the construction of the youth sports complexis facially valid, as it bears a strong relationship to the public welfare.As a facility supported by predictions of increased tax revenue and job

157. Id. at 384.158. Fox v. Polk Cnty. Bd. of Supervisors, 569 N.W.2d 503, 503 (Iowa 1997).159. Muilenburg, supra note 98.160. Muilenburg, supra note 107.161. Anderson v. Jester, 221 N.W. 354, 356, 358 (Iowa 1928).162. Neuzil v. City of Iowa, 451 N.W.2d 159, 163 (Iowa 1990).163. Id. at 164.164. Molo Oil Co. v. City of Dubuque, 692 N.W.2d 686, 691 (Iowa 2005).165. See id.


growth,166 with potential numbers of 1,200 full-time equivalent jobs,$25 million in labor income, and $4.2 million and $2.2 million in an-nual state and local tax increases, respectively, by 2017, the publicshould experience a substantial positive impact.167

The Iowa Supreme Court has upheld the “fairly debatable” stan-dard as a lenient standard to measure the reasonableness of a zoningboard’s determination.168 The court has made clear that a decisionwill not be reversed as long as there is room for two reasonable opin-ions.169 While opposition to the development has raised legitimateconcerns such as agricultural demise, traffic, and pollution,170 thecounter argument is that the project will have a positive impact on thecommunity and transcend a small farming town to an economically-productive attraction.171 With the zoning regulation having the neces-sary qualification of a “facially valid” ordinance and satisfying the“fairly debatable” test with the existence of two differing yet reasona-ble opinions, it would appear that the Dubuque District Court will stillultimately uphold the rezoning based on these established merits.

B. Distinguishing “Field of Dreams” Property DevelopmentPlan from “Little v. Winborn”

The overwhelming majority of cases in which Iowa courts have re-viewed board or council decisions regarding zoning have consistentlyrevealed their strong deference to local governing bodies’ decisions.172

While many cases represent affirmations of local decisions, an exami-nation of one of the few cases, Little v. Winborn,173 in which the Iowajudicial system reversed a local board’s decision, will demonstrate itsdisparate circumstances from the Field of Dreams situation.

As detailed, Little concerned a shooting association successfully pe-titioning a county zoning board to rezone property for construction ofbuildings for a recreational club,174 causing surrounding propertyowners to file a writ of certiorari contending, among other concerns,that the rezoning was illegal spot zoning.175 In ruling the spot zoningillegal, the court stated the property owners would be the sole benefi-ciaries of the rezoned property, the property had no unique character-istics to support a reasonable basis for the rezoning, and the rezoningcontravened the local government’s established plan, which identified

166. See Lipsman & Seigelman, supra note 44, at 3; West, supra note 51.167. Lipsman & Seigelman, supra note 44, at 3.168. See Molo Oil Co., 692 N.W.2d at 691.169. Id.170. See, e.g., Zillow, supra note 3.171. See Thompson & Rahe, supra note 42.172. See, e.g., Perkins v. Bd. of Supervisors, 636 N.W.2d 58, 67 (Iowa 2001).173. Little v. Winborn, 518 N.W.2d 384 (Iowa 1994).174. Id. at 385–86.175. Id. at 386.


protecting agricultural land from development as a primaryobjective.176

In juxtaposing Little with the Dyersville rezoning and developmentissue, it is apparent that vast contrasts exist. Although Little reversedthe county board’s rezoning decision,177 the Dyersville petitionersnever raised spot zoning as an issue.178 Additionally, the rezoning ofthe property at the movie site will benefit youths from around thecounty by providing a place for teams, coaches, and families to traveland experience the emanating positives of playing softball and base-ball. Conceding that the Stillmans and their investors initiated thisbusiness enterprise to earn profits, as does virtually every business ini-tiator, studies support this project as providing ample rewards and apositive impact on the local economy.179

Moreover, the movie site is a unique piece of land. Very few, if any,areas of land have been developed solely for a movie but consistentlyattract thousands of visitors more than two decades after its construc-tion.180 The unique quality of the land makes it an attractive place torezone to commercial and allow for the construction of the youthcomplex, as building the complex on any other ordinary piece of landwould not have the same attraction as this landmark property. Fi-nally, the Dyersville City Zoning Regulations themselves indicate,among other things, the purpose of the zoning ordinances is to en-dorse the general welfare and “encourage the most appropriate use ofland.”181

C. Analogizing “Field of Dreams” Property Development Plan with“Fox v. Polk County Board of Supervisors”

While the facts of the Field of Dreams property contrast to Little,they closely align with the Iowa Supreme Court case of Fox v. PolkCounty Board of Supervisors.182 As referenced earlier, the Fox peti-tioners challenged a county board’s decision to rezone property forthe construction of a softball field complex.183 Among the main con-cerns of the opposing residents were increased traffic and noise, de-clining property value, and general safety apprehensions.184 Theresidents subsequently filed a writ of certiorari to overrule the zoningdecision and the construction of the softball complex, but the court

176. Id. at 388.177. Id. at 389.178. But see West, supra note 8.179. See Lipsman & Seigelman, supra note 44, at 3.180. See, e.g., Zillow, supra note 3.181. DYERSVILLE, IOWA, ZONING REGULATIONS, ORDINANCE 165.02, 601 (City of

Dyersville through 2011) http://www.cityofdyersville.com/CityAdServ/Ordinances/2011/Chapter165_Zoning_Regulations.pdf.

182. Fox, 569 N.W.2d 503 (Iowa 1997).183. Id. at 505.184. Id. at 506.


applied the “fairly debatable” standard to uphold the rezoning, andaffirmed the county board’s decision.185

There are transparent similarities between the two cases basedsolely on the comparable land development projects (i.e., the rezoningof agricultural land for development of youth sports complexes).186

Also, similar to the Dyersville petitioners’ opposition of the rezoningand development of the complex due to agricultural and traffic con-cerns,187 the petitioners in Fox cited mirroring concerns among theircomplaints.188 Similarly, the Dyersville petitioners claimed that Coun-cil acted “illegally and arbitrarily” in rezoning the property,189 muchlike the petitioners in Fox alleged that the board’s rezoning of theproperty for the softball complex was “arbitrary, capricious, illegal,erroneous, an abuse of discretion, and contrary to law.”190

D. The Development Plan of All-Star Ballpark Heaven is anInnovative Plan of Interaction Between Private Investors and

Political Officials but Could Have Gone Further in itsRequirements from the Private Sector

Although there has been opposition to All-Star Ballpark Heaven,191

a diametric viewpoint on the development plan should prevail: Theinteraction between the private investors and political bodies, specifi-cally the manner in which public funds were allocated while creating arevenue-generating, positive attraction for the community, should belauded as an innovative model. While there are several impressiveelements to the plan, this section will propose that the plan had roomfor even further expansion regarding its requirements from the privateinvestors due to the extensive amount of public funding at issue.

Encumbering any new business venture is the arduous task of secur-ing the requisite financing to initiate the business, especially when theinitial cost of the venture is $38 million.192 With attracting investors asan essential element to their business plan,193 the Stillmans aggres-sively pursued acquisition of public funds to increase the project’s ap-peal to potential investors.194 The ideal scenario for Go the DistanceBaseball would have been to receive unconditional upfront publicfunding, thus reducing the amount required from private funding.This strategy raises the frequently polarizing policy question of thevalidity of using public funds for a private development project in

185. Id. at 508.186. See id. at 505; Council Approves Rezoning, supra note 71.187. West, supra note 86.188. Fox, 569 N.W.2d at 506.189. West, supra note 8.190. Fox, 569 N.W.2d at 508.191. West, supra note 86.192. See Field of Dreams Preservation, supra note 36.193. See West, supra note 57.194. See Field of Dreams Preservation, supra note 36.


which the private investors themselves are the primary financial bene-ficiaries. Deliberations such as these are pervasive throughout manyindustries; however, public funding for professional sports facilities isone particular industry in which this public financing approach hasbeen prevalent.195

Instead of giving upfront public funding from the state, the Iowalegislature created an alternative plan to provide state subsidies to Gothe Distance Baseball.196 The legislature structured a bill in which Gothe Distance Baseball would receive back-end public funding, mean-ing the private development group would receive a sales tax creditpredicated upon the success of the business itself (i.e., the sales taxrevenue generated from the facility).197 As summarized by New Vi-enna Representative Steve Lukan, “[Go the Distance Baseball] [has]to generate the revenue. They have to generate foot traffic, or theydon’t create sales tax . . . . This actually forces them to make the in-vestments and to be profitable before there’s any sales tax rebate.”198

Although the argument can be made that the lack of upfront publicfunding, consequently resulting in the need for more private invest-ment, could be a detriment to investors, Go the Distance Baseballviewed the sales tax rebate as an invaluable instrument in attractinginvestors.199 With the growing list of investors announced, includingprominent names,200 this legislative approach has not shown signs ofbeing a significant impediment to Go the Distance Baseball securinginvestors.

In another component of the requirements to receive the sales taxrebate, the Iowa legislature added an aspect aimed at keeping poten-tial investment money within the state by requiring at least 51% ofAll-Star Ballpark Heaven investors to reside in Iowa.201 The result ofthis directive has been visible with the Stillmans’ announcement ofDes Moines native Jeremy Hellickson as an investor,202 and the an-nouncement of Dubuque-based Conlon Construction as an investorand contractor of the project.203 Without this legislative requirement,the Stillmans might have looked outside the local area for acontractor.

195. See generally Irwin A. Kishner & David R. Hoffman, The Benefits of Publicand Private Cooperation in Financing Professional Sports Stadiums, 28 ENT. AND

SPORTS LAW 20 (2010).196. See Campbell, supra note 7.197. Id. (detailed earlier in the comment, the agreement will provide $16.5 million

in sales tax credits over a ten-year period to Go the Distance Baseball, with thecredited money coming directly from the sales tax generated at the sports complex);Zillow, supra note 3.

198. Campbell, supra note 7.199. See West, supra note 57.200. See, e.g., Muilenburg, supra note 81.201. See West, supra note 55.202. See West, supra note 79.203. See Conlon on Board for Ballpark Heaven, supra note 83.


Following the lead established by the state legislature, Councilworked with Go the Distance Baseball to create an equivalent agree-ment.204 Recognizing the need for substantial infrastructure costs forthe facility, Go the Distance Baseball agreed to pay the water andsewer costs instead of the City of Dyersville.205 In return, Dyersvilleagreed to provide tax rebates based 100% on the revenue generatedfrom the business.206 This agreement thus avoided upfront publicfunding, instead requiring the private investors of All-Star BallparkHeaven to pay for the water and sewer infrastructure needed for theCity of Dyersville to extend these utilities out to the site, while givingback-end public rebates dependent solely on the business’ generatedtax revenue.

While this plan exudes many positive, innovative qualities, thisComment asserts that the public sector should have required addi-tional concessions from Go the Distance Baseball. With the signifi-cant amount of public financing potentially being provided to theprivate developer, there needed to be even more assurances that thereis extremely minimal risk to public funds. While the format of thepublic subsidies being contingent on sales tax generated at the facilityitself is the ideal method to provide back-end public funding, the pri-vate investor should have been mandated to pay for the entire infra-structure costs that might be associated with this plan, not just thewater and sewer costs. The government should have stipulated thatthe private developer would be responsible for all infrastructure costsrequired to construct the facility, including unforeseen expendituresduring the development stages.

In addition, not only should the developer pay for the entire upfrontinfrastructure and development cost, the back-end sales tax rebateshould be dependent on more than a simple majority of the privateinvestors residing in Iowa. While the plan devised by the Iowa stategovernment was a commendable progression to help ensure signifi-cant dollars do not leave the state, they should have taken the addi-tional step and required more than just a simple majority of theprivate investors to reside in Iowa. By the legislature stating that atleast 51% of investors needed to be local, the risk is that the businesswill simply meet that minimum requirement of just 51%, a simple ma-jority, which this Comment contends is not enough.

Instead, the legislature should have detailed a specific number, per-haps three-quarters, of indigenous investors as a prerequisite for thefunding. This model would allow for a recycling of financial resources

204. See Muilenburg, supra note 73.205. Id. (explaining that Go the Distance Baseball, LLC agreed to pay the $3 mil-

lion water and sewer infrastructure cost for the facility).206. Id. (explaining that the City of Dyersville agreed to provide a total of $5.13

million over fifteen years to Go the Distance Baseball, LLC as part of this tax rebateagreement).


within the state — a fair exchange in return for the state providing asignificant financial contribution to private development. Not onlywould this help to retain money in the state, it could possibly help healsome of the contentiousness existing between the community and thedevelopers by showing that Go the Distance Baseball is committed tonot just the project, but also to local long-term growth and financialstability.

It could be argued that these increased requirements could detractprivate business from developing in a particular state; however, thetrade-off would be that with these increased requirements wouldcome increased tax rebate dollars that could potentially negate all ofthe private upfront development costs. The rationale behind these in-creased requirements is not to detract business, but rather to minimizeany risk of irresponsible upfront spending of public funds. The Iowalegislature could have declared that it would rebate the entire cost ofthe venture over an extended period of time from sales tax generatedby the private development, as this money would be dependent uponthe success of the business itself and create minimal risk to publicfunding.

IV. CONCLUSION

There is no disputing the attachment so many feel toward the Fieldof Dreams property, which has led to divisive viewpoints on how bestto preserve the property while maximizing its economic potential.This polarizing topic has resulted in legal battles over issues such aszoning, contract interference, and defamation, among others.207

This Comment uses the framework provided by the Field of Dreamsdevelopment plan to propose a model plan that encompasses the fol-lowing components: (1) private business funding the entire upfrontcost of development; (2) private business funding the entire upfrontinfrastructure cost of the development; (3) substantial state and localsubsidies, up to the entire cost of the project, provided on a back-end,sales tax rebate basis, wholly dependent on revenue generated fromthe business itself; and (4) state and local subsidies dependent upon asignificant specific percentage — not just a simple majority — of thebusiness investors residing in the state.

In essence, public subsidies can and should be available to privateinvestors, but only on a back-end contingency basis where there isminimal risk associated with the public funds. The risk inherent withthe development has to be heavily tilted toward the private sector, asdiscretionary public funds cannot be susceptible to such endanger-ment. However, as long as the project proves to be successful — ben-efiting the private sector and the general welfare — the governmentshould rebate the private developers with tax money generated by thefacility itself.

207. See id; Muilenburg, supra note 109.

SPANISH AND MEXICAN LAND GRANTSAND HEIRS’ RIGHTS TO UNCLAIMED

MINERAL ESTATES IN TEXAS

By Rose Richerson†

I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98II. THE HISTORY OF SPANISH AND MEXICAN LAND

GRANTS IN TEXAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101A. The History of Texas Lands . . . . . . . . . . . . . . . . . . . . . . . . 101

1. Spanish and Mexican Sovereignty . . . . . . . . . . . . . . 1012. The Republic of Texas . . . . . . . . . . . . . . . . . . . . . . . . . . 1023. The State of Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1034. The Treaty of Guadalupe-Hidalgo . . . . . . . . . . . . . . 1035. Historical Land Grant Commissions . . . . . . . . . . . . 104

B. Mineral Estates in the State of Texas . . . . . . . . . . . . . . . . 106C. Historical Social, Political, and Cultural Issues . . . . . . 107

III. TEXAS LAND GRANT DISPUTE CASE HISTORY . . . . . . . . . 108A. General Land Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108B. Mineral Estate Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

IV. CURRENT OBSTACLES AND RIGHTS FOR HEIRS . . . . . . . . . 114A. Current Texas Property Law . . . . . . . . . . . . . . . . . . . . . . . . 114

1. Mineral Estate Rights in Texas . . . . . . . . . . . . . . . . . 115B. Heirs and Land Grant Claims Today . . . . . . . . . . . . . . . 118

V. THE FUTURE FOR HEIRS AND LAND GRANT CLAIMS . . . 118A. Heirs’ Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118B. Recent Legislation: House Bill 724 and its Potential

Effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119C. Modern Social, Political, and Cultural Issues . . . . . . . . 119

VI. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

“Truly the heritage of Texas is as varied and colorful as the landitself. Yet a common denominator has shown at every turn—a pre-vailing purpose and determination among the settlers, in seeking a

new and fuller life, to make the most of the State’s unparalleled op-portunities. That common denominator has carried happily into thepresent—and is essential to the fullest achievement in the future!”1

“Indio que labras con fatigatierras que de otros duenos son:

† J.D. Candidate, Texas A&M University School of Law, Spring 2015; B.A. inEnglish 2011, Texas State University.

The Author would like to thank her mother, Debra Cantu for inspiring the topic ofthis article, Professor Stephen R. Alton for his advisement, Professor Lisa A. Rich forher guidance and revisions, and Mr. John Martin Davis for sharing his expertise.

1. JERRY SADLER, History of Texas Land, Comm’r of the Gen. Land Office, at ii(1962).

97


¿ignoras tu que deben tuyasser, por tu sangre y tu sudor?¿ignoras tu que audaz codicia,

siglos atras, te las quito?¿ignoras tu que eres el Amo?

—¡Quien sabe, senor!”2

I. INTRODUCTION

Five-year old Debbie would sit on a swing in the backyard of hersmall childhood home, watching her mother, Minerva, hang wet cloth-ing on a line. Minerva would wistfully state a phrase uttered by thefamily for generations: “Imagine all the things we will be able to do if‘El Niquele’3 ever comes through.” When extended family wouldvisit, Debbie would overhear her aunts and uncles discuss a map and adeed to “El Niquele”— a large tract of land in Texas that was stolenfrom the family many generations ago. Just like their mothers andfathers before them, the family knew the land still belonged to themand they debated how to go about how to reclaim it. But this was inthe 1950s and 1960s, when Mexican-American’s rights to old landgrants in Texas were simply not an issue of interest so the family be-lieved there was no solution. After a few failed attempts to receivelegal representation on the matter, the family disregarded their effortsto raise a claim and awaited a change in the political and socialatmosphere.

Subsequently, the family rarely spoke of “El Niquele,” but still be-lieved their rights should be recognized and a payout of large sums ofmoney should ensue. A few years ago, a distant relative began re-searching and found an attorney in south Texas who specializes inSpanish and Mexican land grants. This attorney asserts that heirs tothese grants should be able to reclaim the mineral estates on the landsonce owned by their ancestors. The attorney began a search of thefamily and over two hundred heirs, including Debbie’s family mem-bers, of the Jose Domingo Gonzales (“Las Pintas”) and Pedro VelaSpanish lands (“El Niquele”), contributed to and joined this newclaim to the mineral rights upon the lands once owned by theirancestor.

It has now been over five years since the two hundred plus heirsfirst began paying their attorney to represent them. The only result of

2. Jose Santos Chocano, ¡ Quien sabe!, in SPANISH-AMERICAN POETRY: A DUAL

LANGUAGE ANTHOLOGY 46, (Seymour Resnick ed. trans., Dover Publ’ns, Inc. 1964)(Spanish for “Oh Indian, who labors hard/in fields that someone else owns,/don’t youunderstand, by right/of blood and sweat they should be yours?/don’t you understandthat brazen greed/ stole them from you, long ago?/don’t you know you are theMaster?/ Ah, Milord: who knows?”).

3. See SPANISHDICT, http://www.spanishdict.com/translate/nickel (last visitedAug. 7, 2014) (Spanish for “The Nickle.”).

2014] SPANISH AND MEXICAN LAND GRANTS 99

this representation is the recent passage of a bill creating a Commis-sion to research the rights and remedies of the heirs to Spanish andMexican land grants.4 The family grows impatient and has lost fiveyear’s worth of money in attorney’s fees awaiting answers regardingwhether or not they will ever see a payout from “El Niquele.” Just asher mother before her, Debbie today will turn to me, her daughter,and say, “Imagine all the things we would be able to do if ‘El Niquele’ever comes through.”

Land grants issued by Spain and Mexico, in the region which laterbecame the State of Texas, have resulted in a long history of compli-cated legislation and case law.5 The boundary dispute between Mex-ico and Texas ended with the Treaty of Guadalupe-Hidalgo (“Treaty”)in 1848 and resulted in Texas’ recognition of the rights of previouslandowners.6 However, the Treaty did not provide a clear process forhandling the competing rights of former landowners and the Anglo-American settlers who began settling in Texas.7 Texas’ Constitutionalrevisions following the Treaty resulted in Texas relinquishing its rightsto the mineral estates attached to land, and vesting rights in thoselandowners given titles by the sovereign of Spain or Mexico.8 Sincethis relinquishment, land grant holders have brought land grant dis-putes to Texas Courts. The results have been mixed, and resulted invarious outcomes as well as some legislative action both on the stateand on the federal level.9 Thus, over 165 years of complicated title

4. Tex. H.B. 724, 83d Leg., R.S. (2013).5. See generally HEIRS: Heirs Enforcing Inheritance Rights (2013), http://span-

ishlandgrants.com/heirs/HEIRS-BROCHURE.pdf; Galen D. Greaser & Jesus F. de laTeja, Quieting Title to Spanish and Mexican Land Grants in the Trans-Nueces: TheBourland and Miller Commission, 185 –1852, 95 SW. HIST. Q. 445 (Apr. 1992); Fede-rico M. Cheever, A New Approach to Spanish and Mexican Land Grants and ThePublic Trust Doctrine: Defining the Property Interest Protected by the Treaty ofGuadalupe-Hidalgo, 33 UCLA L. REV. 1364 (June 1986); Article, Validity of CertainSpanish Land Grants in Texas, 2 TEX. L. REV. 435 (1924); THE LAND GRANT JUSTICE

ASSOCIATION, http://www.landgrantjustice.org/mission.html (last visited 2013); SPAN-

ISH AND MEXICAN LAND GRANTS, spanishlandgrants.com (Last updated 2013); Statev. Ballı, 190 S.W.2d 71 (Tex. 1944); State v. Gallardo, 166 S.W. 369 (Tex. 1914);Fremont v. United States, 58 U.S. 542 (1854).

6. HEIRS, supra note 5, at 2; see also Treaty of Peace, Friendship, Limits andSettlement With the Republic of Mexico, U.S.-Mex., Feb. 2, 1848, 9 stat. 922, 1848 WL6374 [hereinafter Treaty]; J.J. Bowden, Spanish and Mexican Land Grants in theChihuahuan Acquisition, TEXAS WESTERN PRESS, 3 (1971); Florence Johnson Scott,ROYAL LAND GRANTS NORTH OF THE RIO GRANDE 1777–1821, x (1969).

7. Greaser & de la Teja, supra note 5, at 446.8. HEIRS, supra note 5, at 3, Greaser & de la Teja, supra note 5, at 463.9. See generally Gallardo, 166 S.W. at 369; Balli, 190 S.W.2d at 71; Fremont, 58

U.S. 542; Act of June 13, 2013, 83rd Legs., R.S., ch. 878, 2013 Tex. Gen. Laws 2223;Jon Michael Haynes, What Is It About Saying We’re Sorry? New Federal Legislationand the Forgotten Promises of the Treaty of Guadalupe Hidalgo, 3 SCHOLAR 231(2001).


claims have yet to result in legislative directives or court actions creat-ing an efficient process for adjudicating land grant disputes.10

Spanish and Mexican land grant heirs continue to bring claims toestablish their rights to the mineral estates with hopes of collectingroyalties from the oil and gas extracted from the lands previouslyowned by their ancestors.11 My family’s land grant is one among hun-dreds of Spanish and Mexican land grants that were never recognizedby the State of Texas.12 Establishing these rights has become moreimportant because of the increased drilling production in the last fewyears, especially since shale drilling technology has made it possible toextract oil and gas from previously unprofitable areas.13 In addition,there are large sums of money in the form of royalties that go un-claimed every year because of unknown mineral estate owners.14 Therecent passage of House Bill 724 (“HB 724”) in the Texas legislature,which created a Commission to find land grant heirs and determinepossible royalty payouts for mineral rights, may result in further deter-minative legislative action.15 Currently, determining heirship andrights is still a complicated, uneven process.16

This Comment discusses the history of Spanish and Mexican landgrants in Texas and the complicated issues of: (1) recognizing therights of original land grant owners; and (2) distinguishing what reme-dies, if any, shall be given to their heirs. Part II provides backgroundof Spanish and Mexican land grants in Texas, including the provisionsincluded in the Treaty of Guadalupe-Hidalgo, and the underlying cul-tural, political, and social issues. Part III discusses the history of gen-eral land grant case law and mineral estate case law in Texas. Part IVdiscusses the current obstacles that heirs face in bringing ancient landgrant claims, which are subject to the current property laws in Texas.Finally, Part V explores the possible future for land grant disputesincluding the recent passage of HB 724, the current goals of heirs

10. See Andrew Walker, Mexican Law and the Texas Courts, 55 BAYLOR L. REV.225, 233–34, 24 –42 (2003); see also John MacCormack, Land-Grant Heirs See Gold inOld Mineral Royalties, SAN ANTONIO EXPRESS-NEWS (Sept. 15, 2013), http://www.expressnews.com/news/local/article/Land-grant-heirs-see-gold-in-old-mineral-royal-ties-4815134.php; SPANISH AND MEXICAN LAND GRANTS, supra note 5; Land GrantJustice Association, supra note 5.

11. SPANISH AND MEXICAN LAND GRANTS, supra note 5; Land Grant Justice As-sociation, supra note 5; Haynes, supra note 9, at 232 (“Recently in Texas, Mexican-American families have begun to fight for the return of their ancestral lands. . . .”).

12. SPANISH AND MEXICAN LAND GRANTS, List of Land Grants with Good Re-covery Potential, http://www.eileenmckenziefowler.com/Grants-Indicating-Net-Min-eral-Estate.cfm (last visited 2013).

13. Jennifer Hiller, Eagle Ford and Energy: Unclaimed Mineral Royalties Increas-ing, SAN ANTONIO EXPRESS-NEWS (Aug. 5, 2013, 1:15 PM), http://www.expressnews.com/news/energy/article/Unclaimed-mineral-royalties-increasing-4704339.php.

14. Id.15. Tex. H.B. 724.16. MacCormack, supra note 10, at 2.


seeking recognition of their rights, and competing arguments on thefulfillment of those goals.

II. THE HISTORY OF SPANISH AND MEXICAN LAND

GRANTS IN TEXAS

A. The History of Texas Lands

Texas has a history unique from other states that provides for inter-esting and complicated property disputes, which still affect real prop-erty ownership today.17 The majority of the land that is consideredpart of the State of Texas today was originally owned by Spain.18

Spanish rule extended into Mexico as well, but Mexican citizens even-tually revolted, and Mexico became the sovereign over all the previ-ously Spanish owned lands.19 Although the Mexican governmentallowed Anglo-Americans to settle on their land under contracts, dis-putes over land ownership resulted in a revolution and the formationof the Republic of Texas, which governed the land north of the RioGrande River.20 By the end of 1845, the United States annexed theRepublic of Texas and that land is now the State of Texas.21

1. Spanish and Mexican Sovereignty

Texas land ownership rights began with land grants that were issuedby the Spanish crown between 1750–1810, and Mexican land grantsthat were given between 1810–1836.22 Land grants issued by Spainwere called Porciones, which were rectangular strips of land locatedalong the Rio Grande River.23 When Spain ruled Texas, territorysouth of the Nueces River was the most populated.24 Other tracts ofland were conveyed to “influential” persons just north of the Por-

17. See Sadler, supra note 1, at ii, 19–22.18. Id. at 2–3.19. Id. at 4–5.20. Id. at 8.21. Id. at 12.22. HEIRS, supra note 5, at 2; see also Terry I. Cross, Why Texas Titles are Differ-

ent, 4 ROCKY MTN. MIN. L. INST. Paper No. 16, 3–4 (2007) (Texas has existed as apolitical unit under four different sovereigns); Scott, supra note 6, at ix (“Royal grantsof land from the King of Spain were made in the Lower Rio Grande beginning in1767.”).

23. HEIRS, supra note 5, at 2; see also Scott, supra note 6, at ix (“The porciongrants had been given a number but these larger grants were named, sometimes for asaint, other were taken from some physical or natural characteristic such as a prairieor pasture, or from a mott of trees, or from a dry lake or arroyo, or from some eventor happening. Such names have survived both through verbal usage and on currentmaps, and the names of the original grantees are preserved in abstracts and otherlegal records.”); Land Grants, TEXAS GENERAL LAND OFFICE, http://www.glo.texas.gov/what-we-do/history-and-archives/the-collection/land-grants/ (last visited Mar. 22,2014) (“. . . land titles issued by Spain and Mexico from 1720 to 1836;” “The SpanishCollection is the primary source of documentation for land distribution in Texas priorto 1836.”).

24. Walker, supra note 10, at 232.


ciones and along the coast.25 These original land grants were normallyconveyed without any mention of the minerals associated with theland so mineral rights were retained by the crown of Spain orMexico.26

French and Spanish explorers fought for settlement and claim toTexas land beginning in 1685.27 Spain established missions with a pri-mary settlement in San Antonio by 1718 and the first colonies wereestablished by 1731.28 Anglo-American settlers began moving intothe region by 1779, but their numbers were less than 3,000 by 1820when Moses Austin received a colonization contract with Spain.29

Austin, and later his son, Stephen F., were given authority by theSpanish crown to settle three hundred Anglo-American families in theTexas area.30 By 1822, revolution in Mexico resulted in a new Mexi-can government.31 Stephen F. Austin’s efforts to renew the contractof his colony proved successful and even resulted in a new coloniza-tion Act allowing more settlers into Texas.32

Stephen F. Austin increased his efforts to bring more Anglo-Ameri-can colonists into Texas and offered incentives to potential land pur-chasers, such as no taxes for six years, in order to increase interest.33

In 1823, Austin appointed a land commissioner to begin issuing actualland titles to the new settlers.34 Austin and other “empresarios”35

were given contracts by the Mexican government to settle more landwith Anglo-Americans and by 1835, the time Spain was no longer thesovereign, about one-seventh of the Texas area was owned by theseprivate settlers.36 Within a few years, the Anglo-American populationincreased from 3,000 to almost 30,000 by 1835.37

2. The Republic of Texas

Over the years, tensions rose and controversy between these newsettlers and Mexican land laws resulted in revolution and the ten-year

25. HEIRS, supra note 5, at 2.26. Id. at 3.27. Sadler, supra note 1, at 3.28. Id.29. Id. at 4.30. Id.31. Id. at 4–5.32. Id.33. Sadler, supra note 1, at 5.34. Id.35. Id. at 5 (“Empresarios” were Anglo-Americans who signed contracts with the

Mexican government to colonize certain, specified areas of Mexican land with AngloAmerican settlers.).

36. Id. at 6–7; see also, Bowden, supra note 6, at 151 (The change in sovereigntyfrom Spanish to Mexican rule resulted in the recognition of all valid Spanish issuedland grants, and private landowners were not affected by the change in governmentrule.).

37. Sadler, supra note 1, at 5.


reign of the Republic of Texas.38 The 1836 Lone Star Republic Con-stitution created the General Land Office and the new Commissionerbegan securing land records for all the Anglo-American settlers.39

These records were used to appropriate 30 million acres of public do-main lands, which were then issued in the form of “Headrights.”40

Headrights were conveyances of land issued to the heads of familiesand single men.41 Under the Republic of Texas, more empresariosreceived contracts to settle land all over Texas.42

3. The State of Texas

The United States began negotiations concerning the annexation ofthe Republic of Texas in 1844.43 By December 29, 1845, Texas offi-cially became a state under the jurisdiction of the United States.44 Be-cause the United States Congress did not want to incur debt by payingfor Texas’ land, the State of Texas retained its public lands and contin-ued to recognize valid titles that were issued by Spain, Mexico, andthe Republic of Texas.45 The State of Texas began issuing varioustypes of grants to: individuals; veterans; railroad, highway, and watercanal construction companies; capitol building construction projects;and public schools.46 Through these grants, the State of Texas endedup selling over 90% of its land but did not hold on to the mineralrights.47 Finally, in 1895, The Mineral Act authorized mineral permitsto be issued to private surface owners.48

4. The Treaty of Guadalupe-Hidalgo

Under Texas law, property rights issued by a prior sovereign werenot divested when Texas became a state, and the establishment of thenew State’s government gave Texas the right to eminent domain andto change the laws relating to acquiring property within its territory.49

However, the Treaty of Guadalupe Hidalgo officially ended the bor-der dispute between Mexico and the State of Texas in 1848 and re-sulted in the State’s recognition of the land grants conveyed by Spainand Mexico.50 In 1860, the Texas Legislature gave authority to thedistrict courts to validate all land grant estates issued by the prior sov-

38. Id. at 8–9.39. Id.40. Id. at 9.41. Id.42. Sadler, supra note 1, at 11.43. Id.44. Id. at 12.45. Id.46. Id. at 14–19.47. Sadler, supra note 1, at 19 (the state’s later adoption of the common law as-

sured that the state would retain gold and silver only).48. Id. at 19–20.49. 47 Tex. Jur. 3d International Law § 3 (2013).50. HEIRS, supra note 5, at 2; see also Treaty, supra note 6.


ereigns.51 Article VIII of the Treaty provided that Mexicans whowere already “established in territories previously belonging to Mex-ico . . . shall be free to continue where they now reside.”52 ArticleVIII also established that “the present owners, the heirs of these, andall Mexicans who may hereafter acquire said property by contract,shall enjoy with respect to it guaranties equally ample as if the samebelonged to citizens of the United States.”53 The Treaty also gaveMexicans residing within the new boundaries of Texas the choice todecide whether they would remain Mexican citizens or take on UnitedStates citizenship.54 Despite the Treaty’s stipulations, boundary dis-putes continued up until 1963.55

Essentially, the Treaty provided that if a land grant was valid underthe Mexican government before the time the boundaries of Texaswere decided, December 19, 1836, and that land was within Texas ter-ritory, it was protected under the Treaty of Guadalupe Hidalgo.56

This also meant that if a Spanish or Mexican land grant was conveyedafter 1836, the State of Texas will not recognize it.57

Because Texas retained its public land when it became a state, it isleft to the State to determine the legality of all previous claims to landwithin its borders.58 Often, the State had difficulty validating claimsbecause grants were incomplete, defective, or fraudulent.59 Interest-ingly, many of the claims related to land in the southern part of Texasare now settled.60

5. Historical Land Grant Commissions

In the years following the Treaty of Guadalupe Hidalgo, it becameclear that the Treaty did not provide a neat process for protectingproperty rights of original landowners.61 Also, the loss of documenta-

51. HEIRS, supra note 5, at 2.52. Treaty, supra note 6, at 4.53. Id. at 5; see also Bowden, supra note 6, at xii (“[T]he property rights of Mexi-

cans who remained in the affected area, whether or not they elected to retain theirMexican citizenship, were to be protected to the same extent as those of citizens ofthe United States.”).

54. Treaty, supra note 6, at 5.55. Walker, supra note 10, at 237.56. 60 Tex. Jur. 3d Public Lands § 20 (2013).57. Id.; see also, Bowden, supra note 6, at 110–12, 113–14 (the Rafael Ruelas

Grant was granted to Ruelas by a Mexican judge in 1848 and when Ruelas’ son-in-law, after purchasing the land, brought his land grant claim to court, it was found thatbecause it was issued by Mexico after Texas had become a state, the grant was invalid;The Luis Cuaron Grant was issued by a Mexican Judge in 1847 and was thereforedeclared invalid by a Texas court.).

58. Greaser & de la Teja, supra note 5, at 463 (see also discussion on Land GrantCommissions, in section v. below).

59. 3 Aloysius A. Leopold, Texas Practice Series: Land Titles and Title Examina-tion § 1.7 (3d ed. 2013).

60. Id.61. Greaser & de la Teja, supra note 5, at 446.


tion of land ownership from theft, poor record keeping, and the confu-sion caused by contradictory grants made processing claims even moredifficult.62 Once the State of Texas began exerting its control over theregion, new claims were raised by owners of Republic of Texas Head-right certificates, which had been filed with the Texas General LandOffice.63 Under international law principles, the Treaty protected theinterests of Mexicans in the areas now within Texas boundaries.64

Current landowners, Anglo and Mexican alike, were opposed to acommission created by Governor Bell in 1849 to investigate land titlesbecause they were concerned about the diminution of their titles.65

However, those landowners who supported the Commission, made aneffort to pledge their loyalty to the State of Texas, motivated by thehopes of quieting false titles.66

Governor Bell appointed William H. Bourland and James B. Milleras commissioners of the Bourland and Miller Commission (“BourlandCommission”).67 The Bourland Commission was created to deter-mine whether grants claimed by heirs were perfected under the lawsof the previous sovereign and if they were not, whether they wouldhave been if Texas had not taken over.68 The commissioners followeda set procedure in making determinations: petitions were considered ifthe documentation presented by claimants included the location of theland, a survey of the land, proof that the land had been occupied con-tinuously—save for periods of time involving Indian occupation—andevidence that the land had been used or cultivated in some way.69 TheCommission submitted reports to the legislature after gathering infor-mation on all claims submitted and found that 234 of the claims wereperfect or perfectible.70 This Commission was successful in validatingclaims to land that were actually made, but it was not able to helpothers make a valid claim to land because of loss of land due to cor-ruption, Indian violence, lack of legal resources, and the like.71 TheCommission did establish ownership for most of the Spanish-speakingowners who would have been able to establish a claim under Spanish

62. Id. at 446–47.63. Id. at 447; see also, Cross, supra note 21, at 5 (“Grants during the Republic

were made under four different systems: (a) the impresario system; (b) headrights; (c)pre-emption; and (d) homestead.”).

64. Greaser & de la Teja, supra note 5, at 447.65. Id. at 449–52.66. Id.67. Id. at 454.68. Id. at 457 (the Bourland Commission is also referred to as the Bell Commis-

sion. Bourland was the primary commissioner responsible for locating and validatingland grants); Bowden, supra note 6, at 95–96 (showing that the Bell Commission isalso referred to as the Bourland Commission; Bourland was the primary commis-sioner responsible for locating and validating land grants).

69. Greaser & de la Teja, supra note 5, at 458.70. Id. at 459.71. Walker, supra note 10, at 241–42.


or Mexican law.72 After this Commission, subsequent commissions in-vestigated claims in other areas of the State.73

While representing an Anglo-American Texas settler in the 1850s,attorney Josiah F. Crosby became State Representative and instigatedthe passage of an Act, which created the Rio Grande Commission.74

Like the Bourland Commission, the Rio Grande Commission was de-signed to investigate Spanish and Mexican land grants, but specificallyin certain counties not covered by the Bourland Commission.75

B. Mineral Estates in the State of Texas

When Texas became a Republic—and later when it became aState—it held the mineral rights when land was conveyed, reservingthe mineral estate to the State’s control.76 In 1840, the common lawwas adopted by Texas but did not apply expressly to determinationsabout mineral rights.77 However, the new State Constitution of 1866returned the right to mineral estates to surface owners and later Con-stitutions and cases continued to implement mineral estates in favor ofsurface estate owners.78 After 1866, cases construed the relinquish-ment of mineral rights to landowners narrowly so that it favored theState; specifically, all State conveyances of public lands beginning in1912 reserve the mineral estates for the State.79

To remedy the unanticipated loss of wealth from oil and gas reve-nue, the State later enacted laws allowing royalty and bonus paymentsthrough mineral leases for oil, coal, and natural gas.80 Many portionsof land all across the State were designated to public schools and man-aged by the State.81 Texas was able to lease over half a million acresin mineral estates on these public school lands and began collectingroyalties from across the State.82 Controversy surrounded mineral de-

72. Id. at 249–50.73. Greaser & de la Teja, supra note 5, at 460–61; Bowden, supra note 6, at 96.74. Bowden, supra note 6, at 95–96.75. Id. at 96.76. HEIRS, supra note 5, at 3; see also Peter L. Reich, Western Courts and the

Privatization of Hispanic Mineral Rights Since 1850: An Alchemy of Title, 23 COLUM.J. ENVTL. L. 57, 84 (1998); Cowan v. Hardeman, 26 Tex. 217, 224 (1862) (finding thatthe Act of 1840 retained mineral rights in sulphur and “minerals of every description”to the state in repeal of prior Mexican law and for the protection of the interest of thestate).

77. HEIRS, supra note 5, at 3.78. Reich, supra note 73, at 84–85; State v. Parker, 61 Tex. 265, 268 (1884) (“. . .all

mines and mineral substances, including salt lakes, etc., now of right belong to theowner of the soil. . .”).

79. Reich, supra note 76, at 85; Cox v. Robinson, 150 S.W. 1149, 1155–56 (Tex.1912); Schwarz v. State, 703 S.W.2d 187, 189–91 (Tex. 1986) (finding that coal andlignite specifically were not included in the Act of 1840; therefore, the state ownedthose minerals).

80. Sadler, supra note 1, at 20.81. Id.82. Id.


velopment of the Gulf area along the coast until 1960 when the Statefinally retained ownership of those mineral estates as well.83

C. Historical Social, Political, and Cultural Issues

Texas and Mexico continued to be dependent upon each other evenafter Texas became a state, but the conflicts of culture and legal sys-tems created a control issue when it came to establishing proper own-ership of land.84 The people populating Texas land during Mexicanrule did not experience political miscommunication until English-speaking people settled in Texas.85 When Mexico was still the sover-eign in Texas, the Mexican government allowed Anglo-Americans tosettle in Texas as Mexican citizens which resulted in conflicts betweencultures and ideologies of English-speaking citizens and Spanish-speaking citizens.86 These conflicts eventually led to the TexasRevolution and the establishment of the Republic of Texas.87

Texas has a unique legal atmosphere thanks to the geographic andpolitical connection Texas has maintained with Mexico.88 ApplyingMexican law allowed white immigrants title to lands which were oncesubject to the laws of Spain and Mexico.89 Hispanic and non-Hispanicimmigrants both benefited from Mexican law favoring their titles.90

As new leaders moved into Texas, Mexican law was associated with anoverthrown government and differing cultural groups began to clash.91

New residents of Texas felt no need to adapt to Mexican law onceTexas became a state.92

Varying outcomes of land grant disputes over the years offer littleguidance for how Spanish and Mexican land grant holders’ disputeswould fare today. The Commissioner of the General Land Office ofTexas in 1962, Jerry Sadler, concluded in his brief history of Texasland, that although some mineral revenues are received by the Statethrough the Public School Fund, mineral estate ownership in Texas forthe most part was, and still is, unclear.93 Commissioner Sadler aptlyconcludes: “Simple dedication ‘to the public good’ is insufficient, andthe Legislature is now struggling with the challenge. The four-millionodd acres constitute another frontier. They will extend the story ofTexas lands into still another era, leaving more to be written.”94

83. Id. at 21.84. See Walker, supra note 10, at 231.85. Id. at 232–33.86. Id. at 233–34.87. Id. at 234.88. Id. at 239.89. Walker, supra note 10, at 240.90. Id. at 240–41.91. Id. at 246.92. Id.93. Sadler, supra note 1, at 21.94. Id. at 21–22.


III. TEXAS LAND GRANT DISPUTES CASE HISTORY

A. General Land Claims

Land disputes over the years have included both claims to title ofland generally and claims for mineral rights. Historical case law inTexas regarding Spanish and Mexican land grants primarily covers dis-putes over the actual land and not disputes over rights to mineralestates.95

For example, Texas acquired a portion of the Mexican State of Chi-huahua through the Compromise of 1850.96 Texas acquired 13,445,000acres of land with this Compromise and later acquired another3,219,000 acres from the Gadsden Treaty in 1853.97 Twenty-six privateland claims for land in this area were brought to Texas courts after theacquisition of Mexican land.98 Owners who were “educated, influen-tial, wealthy,” or who owned a substantial amount of land brought themajority of these land grant claims.99 The other land grant claimswere brought by colonies consisting of multiple Mexican families thatresided on and cultivated the land.100 Colony land grants often re-sulted in the Texas government paying the Mexican families to moveinto new boundary lines of the Chihuahuan state of Mexico partiallybecause such families declared their loyalty to Mexico and not toTexas.101

In the early 1800s, the Canutillo Grant provided a portion of land tothirty different landowners who later petitioned for recognition oftheir Mexican grants by their town official.102 Recognition was givenso long as the owners entered upon and cultivated the land in ques-tion.103 These landowners brought claims, and a special commissionwas appointed to survey and set the boundary lines for the exact por-tion of land to be given to the petitioners.104 Once this was complete,the petitioners agreed to the allotted portion and entered the land in1823.105 In 1833, Apache Indians drove landowners off their land andthe land was subsequently settled by James W. Magoffin in 1850.106

95. See generally State v. Ballı, 190 S.W.2d 71 (Tex. 1944); State v. Gallardo, 166S.W. 369 (Tex. 1914); Cortina v. P.I. Corp., 385 S.W.3d 613 (Tex. App.—CorpusChristi 2012, no pet. h.).

96. Bowden, supra note 6, at 1.97. Id. at 1–3.98. Id. at 3.99. See Bowden, supra note 6 (results for these disputes had varying results, and

depended mostly on whether or not the original grant was recognized by the priorsovereign and if it was granted by Mexico before Texas became a state).

100. Id.101. Id. at 48.102. Id. at 94.103. Id.104. Bowden, supra note 6, at 94.105. Id.106. Id.


The owners of the Canutillo Grant acted quickly, and in 1852, theyhired attorneys who agreed with Magoffin to convey a one-third inter-est in the grant once it was confirmed by the State of Texas.107 How-ever, the Bourland Commission was not examining Spanish andMexican land titles in the area where the Canutillo Grant land waslocated.108 Magoffin hired District Attorney Josiah F. Crosby to re-present his one-third interest and offered Crosby a one-half interest aspayment for his services.109 Fueled by this incentive, Crosby wonState Representative the following election and was the instigator ofthe passage of an Act creating the Rio Grande Commission which wasto investigate Spanish and Mexican land grants in several counties in-cluding El Paso County, where the Canutillo Grant was located.110

The Rio Grande Commission recommended recognition of onlysome of the land grant claims it had investigated and submitted itsreport to the governor.111 The governor then passed the report on tothe Texas Legislature, which passed a bill allowing relinquishment ofnearly 900,000 acres of land, but the governor vetoed the bill becauseit included land which was not a part of the Rio Grande Commission’srecommendations.112 The Canutillo Grant was one of the tracts ofland recommended by the Commission to be relinquished, and theowners of the Grant, “sought special relief legislation” and received itwith the passage of a bill in 1858 relinquishing their land and otherland grant tracts.113 The law did not describe the exact metes andbounds of the land that was relinquished.114 Instead, it only gave thenames of the land grants, and the second half of the law required theland to be surveyed, and directed the General Land Office to issuepatents upon receipt of the survey field notes.115 Subsequent disputesover the proper surveying of the land, as well as Railroad Commissionland use allowances, altered the boundary lines of the Canutillo Grantup until 1866.116

The Canutillo Grant is one example of the more than two dozenland grant claims brought by original landowners after the acquisitionof Mexican lands in the early 1850s.117 Despite the efforts of theCommissioners involved in the Bourland and Rio Grande Commis-sions, not all Spanish and Mexican land grant holders brought their

107. Id.108. Id.109. Bowden, supra note 6, at 94.110. Id. at 96.111. Id.112. Id. at 96–97.113. Id. at 97, 106.114. Bowden, supra note 6, at 106.115. Id.116. Id. at 97–101.117. Id. at 74, 94–96.


claims, resulting in later-realized rights by heirs and transferees oforiginal land grant owners to this day.

In State v. Gallardo, landowners brought a claim for land that wasgranted to the town of Reynosa by the Spanish crown in 1767 and waslocated just north of the Rio Grande River.118 By 1836, the land waslocated in the Mexican state of Tamaulipas and transferred to Gal-lardo in 1841.119 The State of Texas claimed that because the landbelonged to Mexico when title was passed, the State of Texas actuallyowned it as public domain.120 Gallardo argued that the purchasersfrom whom he bought the land had acquired title before Texas be-came a state and therefore, the court should give effect to Mexicanlaw which, would give Gallardo full title.121 The Court found that thetitle in question was recognized by the Mexican government at thetime the land became a part of Texas and was therefore subject toprotection under the Treaty of Guadalupe Hidalgo.122 The Court heldthat the continuous occupation of the land by the private owner, andrecognition of the private owner’s grant by the Mexican sovereign,perfected title under the State of Tamaulipas.123 Texas’s failure toclaim the land and control it created mitigating circumstances, whichgave Gallardo the stronger claim.124

In 1921, in Kenedy Pasture Co. v. State, several parties asserted titleto divided land encompassing a total of 30,000 acres.125 Mexican heirsclaimed title under a land grant called Santa Rosa de Abajo issued totheir ancestor from the Mexican government.126 The Supreme Courtof Texas affirmed the trial court’s ruling that the land grant was voidbecause the Governor of the Mexican State of Tamaulipas issued it in1848, after Texas became the new sovereign over that territory.127 TheCourt reasoned that a prior sovereign could no longer grant title toland it no longer owned.128 On December 19, 1836, the Republic ofTexas claimed that its territory extended to the Rio Grande River andtherefore, any title granted by Mexico after that date could not beconsidered valid in Texas Courts.129 The Court also found that theTreaty of Guadalupe Hidalgo only protected those titles granted byMexico before December 19, 1836, and those titles which were goodin equity prior to that date.130 Although the land grant was found

118. State v. Gallardo, 166 S.W. 369, 370 (Tex. 1914).119. Id. at 370.120. Id. at 371.121. Id.122. Id. at 373.123. Walker, supra note 10, at 250.124. Id.125. Kenedy Pasture Co. v. State, 231 S.W. 683, 684 (Tex. 1921).126. Id. at 684–87.127. Id. at 688, 693.128. Id. at 688, 691.129. Id. at 691.130. Kenedy Pasture Co. v. State, 231 S.W. 683, 691 (Tex. 1921).


void, the Court concluded that the heirs still had equitable title be-cause the evidence showed that the Governor of Texas recognized thetitle and the original owner remained in lawful possession of the landuntil 1850 or 1860.131 However, the Court held that equitable title toland that had remained vacant and unclaimed by the original ownerand his heirs for over seventy years, would not trump title conveyedby the State of Texas to innocent landowners currently in rightfulpossession.132

In State v. Ballı, claimants were conveyed land, which is now knownas Padre Island, from Padre Nicholas Ballı.133 The case included sev-eral related parties, including oil and real estate companies that wereinterested in the land.134 The State argued that the claimants had re-linquished title when they failed to survey the land by the appropriatedate in compliance with the Relinquishment Act and the Texas Con-stitution.135 The Court concluded in Ballı that using a State Constitu-tional provision to nullify Mexican and Spanish grants that had notbeen surveyed accordingly under Texas law, would raise unnecessaryequal protection and due process questions.136 If the Court had de-cided differently, Spanish and Mexican titles would have been consid-ered void if they were not recorded or archived, but this requirementwas not present in the previous Constitution and no adequate timewas allowed for compliance so the Court found the State Constitutionprovision unconstitutional.137 The Court’s decision in Ballı was thefirst case to apply Mexican law to land disputes more liberally.138 Thedecision in Ballı resulted in subsequent Courts applying a more accu-rate analysis to Mexican land grant disputes.139

In 1947, in Amaya v. Stanolind Oil & Gas Company, Mexican citi-zens with a valid land grant issued to their ancestor from the kingdomof Spain, claimed an interest in lands owned by Stanolind Oil andGas.140 The appellants asserted that the Treaty of Guadalupe-Hidalgoprotected their original title even against later enacted Texas laws ap-plying to adverse possession, statute of limitations, and forfeiture.141

The Court examined the language within the Treaty of Guadalupe Hi-dalgo and concluded that the Treaty did not excuse Mexican citizenswith valid land grants from the subjection of Texas laws.142 The Court

131. Id. at 693.132. Id. at 694.133. State v. Ballı, 190 S.W.2d 71, 73 (Tex. 1944).134. Walker, supra note 10, at 260.135. Ballı, 190 S.W.2d at 83.136. Harold Hoffman, Texas Land Titles and Vested Rights, 25 TEX. L. REV. 508,

526 (1947).137. Id. at 526–27.138. Walker, supra note 10, at 259.139. Id. at 260–61.140. Amaya v. Stanolind Oil & Gas Co., 158 F.2d 554, 555 (5th Cir. 1946).141. Id.142. Id. at 557.


also found that the Treaty guaranteed that Mexican land grants wouldbe respected but it did not guarantee protection against the loss ofland due to adverse possession, foreclosures, and similar acts.143 TheCourt reasoned that the Treaty of Guadalupe Hidalgo, in recognizingprior grants, was intended to extend the same respect to land claimsraised by Mexican citizens as it did to land claims raised by citizens ofthe United States.144 The Court held that the appellants were subjectto the current property laws of Texas and that their claim to the landin question was time barred by the State’s statutes of limitation.145

The Ballı decision resulted in many more claims to the land on Pa-dre Island, including a 2012 dispute over an interest in land betweenP.I. Corporation and other Ballı descendants.146 The Cortinas (Ballıdescendants), argued that the land conveyed through a guardian’sdeed from their ancestor to third party Grisante, was void because thesale took place after Texas became a state in 1846 and therefore, Mex-ican law no longer had authority over Texas lands.147 However, theCourt recognized that “Texas courts apply a presumption in favor ofancient judgments, particularly those involving land titles.”148 TheCourt reasoned that the land transaction in dispute was between indi-vidual Mexican citizens and not between the state of Mexico and anindividual.149 Therefore, when a state has personal jurisdiction overindividuals, it has authority over those individuals even if their disputeinvolves land in another state.150 In this case, the Court affirmed sum-mary judgment in favor of P.I. Corporation because it found thatMexico had personal jurisdiction over Cortinas’s ancestor andGrisante because they were individual Mexican citizens.151

The provisions of the Treaty of Guadalupe Hidalgo shaped the out-come of the first one hundred years of land grant cases. Texas legisla-tors realized that recognition of valid Mexican grants required by theTreaty was not simple and created two commissions designed to vali-date or invalidate claims raised by Mexican citizens.152 The Texas Su-preme Court considered land grants valid if they were granted andrecognized by Mexico prior to the date that Texas became a Repub-lic.153 Although a land grant’s validity was partly based on the laws ofthe prior sovereign, land grant owner’s rights were determined not tosubvert the rights of landowners in rightful possession of the land

143. Id. at 558.144. Id. at 557–58.145. See Amaya v. Stanolind Oil & Gas Co., 158 F.2d at 558–59.146. Cortina v. P.I. Corp., 385 S.W.3d 613, 617 (Tex. App.—Corpus Christi 2012, no

pet. h.).147. Id. at 615.148. Id. at 617.149. Id.150. Id.151. Cortina, 385 S.W.3d at 617.152. See Bowden, supra note 6, at 95–96.153. Kenedy Pasture Co. v. State, 231 S.W. 683, 684 (Tex. 1921).


under Texas property law.154 More recently, the Court determinedthat Mexican law would apply when citizens of Mexico were the origi-nal parties in a land grant transfer.155

B. Mineral Estate Claims

Texas case law history concerning land grant claims to mineral es-tates is less extensive and offers little guidance for land grant heirswho want to raise mineral estate claims today.

In 1986, in Schwarz v. State, private landowners attempted to claimownership to coal and lignite extracted by a construction company towhom Schwarz had given a mining lease.156 However, the Schwarzs’spredecessors had purchased the land from the State of Texas’ GeneralLand Office so the Court found that the dispute was between theState and a private landowner.157 The Court reasoned, based on priorcase law and legislation, that the intent of the legislature in grantingland to a private landowner was to retain the mineral estate.158 TheCourt held that all the lignite under the Schwarzs’s tract of land be-longed to the State of Texas.159

In 2008, in Kerlin v. Sauceda, more Ballı heirs brought a claimagainst an attorney for fraud alleging he concealed their royalty rightsin Padre Island land and conveyed those rights to himself.160 Heirs toone portion of the original Ballı grant sought legal assistance (in dis-covering their legal rights to the land in question) from the attor-ney.161 The attorney informed the heirs that they did have rights tothe land and mineral interests.162 He then fraudulently, and withoutpermission from the heirs, took the eleven signed deeds from the heirsand conveyed 20,000 acres of land and related mineral interests tohimself during settlement.163 The attorney sold these interests andtwenty-four years later, another heir, Sauceda, contacted the attorneyabout the deeds he had created at the settlement for the heirs and theattorney informed her that the deeds were invalid.164 Eight yearslater, 275 heirs sued the attorney for fraud and won unpaid royaltyinterests in the mineral estate.165 However, the Supreme Court ofTexas reversed the judgment because the heirs were time barred by

154. See Amaya v. Stanolind Oil & Gas Co., 158 F.2d 554, 558–59 (5th Cir. 1946).155. Cortina, 385 S.W.3d at 617.156. Schwarz v. State, 703 S.W.2d 187, 187–89 (Tex. 1986).157. Id. at 189.158. Id. at 189–91.159. Id. at 191.160. Kerlin v. Sauceda, 263 S.W.3d 920, 921–22 (Tex. 2008).161. Id. at 922.162. Id. at 923.163. Id.164. Id. at 924.165. Id.


the statute of limitations from bringing the fraud claim against theattorney.166

Mineral estate case law provides that the State will retain the min-eral rights when it is found that the State has conveyed land to privateowners.167 It is yet to be seen whether Texas Courts will recognizeheirs’ rights to mineral estates on land once owned by their ancestorsand whether or not an award is available.

IV. CURRENT OBSTACLES AND RIGHTS FOR HEIRS

The underlying issues at the time Texas established its territory andentered into a friendly agreement with Mexico are still issues today.The Bourland Commission and the Rio Grande Commission estab-lished land grants for Mexican title holders who were able to comeforward either because they were well-connected or wealthy; theCommission did not help those who did not have the means to make aclaim to their rightfully owned land.168 The clashing of Mexican andAmerican cultures has continued,169 is still present today, and may ac-count for why heirs to unclaimed land grants have just recently begunto come forward with documentation their families have possessed fordecades. This recent and building interest of Mexican-American citi-zens laying claim to their ancestor’s property may not play out theway heirs anticipate and part of this has to do with the clash of priorsovereignty laws and Texas real property laws today.

A. Current Texas Property Law

Texas real property law is different from the property law in otherstates primarily because of the switching of sovereignties and theState’s territorial Treaty with Mexico; under international law, privateproperty should remain undisturbed by sovereignty changes.170 Theprevious laws that individuals abided by still govern unless they con-flict with the new sovereign and until the new government changesthem.171 However, the new government is not bound by an interna-tional treaty to continuously follow the property laws of the formersovereign because doing so would go against the standard that realproperty should be governed by the laws where the land is located.172

This being the case, the Treaty of Guadalupe Hidalgo is only in placeto protect Spanish and Mexican titles against “discriminatory legisla-

166. Kerlin, 263 S.W.3d at 924–28.167. Schwarz v. State, 703 S.W.2d 187, 189–91 (Tex. 1986).168. See Walker, supra note 10, at 241–42; Bowden, supra note 6.169. Walker, supra note 10, at 246.170. Validity, supra note 5, at 439.171. Hoffman, supra note 132, at 511.172. Id.; see Amaya v. Stanolind Oil & Gas Co., 158 F.2d 554, 558–59 (5th Cir.

1946).


tion.”173 This means later enacted Texas state provisions would beinvalid if they required the owners of Spanish and Mexican landgrants to fulfill obligations not originally required of them under theprevious sovereign.174 However, it also means the rights of Mexicanand Spanish land grant holders will not trump the rights of landownersin Texas.175

Although a person may have a superior right to real propertyagainst third parties this does not mean they have a vested right; thelegislature has the ability to change the law under which vestment wasoriginally authorized.176 However, an owner of a land grant will beprotected if the Court agrees that the land was a part of the territorywhen the grant was created.177 However, the rights and the laws re-garding such ownership are not always clear.

1. Mineral Estate Rights in Texas

To fully understand the competing interests at stake, it is importantto at least have some knowledge of what mineral estates in Texas are,who has an interest in the rights, and what those rights entail.

Although the Texas Constitution of 1866 released rights to mineralestates to surface owners, including owners of land grants, when theState of Texas conveys land today to a private owner, the State ofTexas will retain the mineral estate.178 In 1945, the Supreme Court ofTexas heard a dispute regarding a land grant conveyed to Jose Ballı.179

Because of the holding, the Texas legislature changed the Texas Con-stitution, restoring mineral rights to landowners and not the State.180

Although the Ballı case was a dispute over sulphur, the resultingchanges provide Texas landowners the right to convey or transferland, mineral rights, or both.181 Under Texas law today, if a convey-ance of land does not mention the minerals, it is assumed that theminerals are passed on to the purchaser of land.182 However, if anoriginal land grant does not mention the minerals, the rights to theminerals remain with the seller and will pass on to the seller’s heirs.183

Mineral estate ownership includes a right to “develop the mineralsand the obligation to pay the costs of development.”184 Mineral rights

173. Hoffman, supra note 136, at 511.174. Id. at 511, 526–27.175. Id. at 511–12.176. Id. at 517.177. Id. at 524.178. Schwarz, 703 S.W.2d at 190.179. HEIRS, supra note 5, at 3; State v. Balli, 190 S.W.2d 71 (Tex. 1944).180. Id.181. HEIRS, supra note 5, at 3.182. Id. at 4.183. Id.184. Joseph Shade, Primer on the Texas Law of Oil and Gas 12 (Matthew Bender,

4th ed., 1996).


to land purchased can be severed from the surface rights to the landand if they are not expressly granted, a seller will retain the mineralrights.185 The mineral estate may be conveyed as a fee simple orlesser estate.186 In addition, if there is a severed mineral estategranted in another, that estate is dominant so that the owner mayenter upon the surface to an extent “reasonably necessary” to reachthe minerals.187 Exceptions to this can be made in the mineral leaseitself; for example, a mineral estate owner can waive any rights to ac-cess the surface.188 The owner of this dominant mineral estate doesnot have absolute ownership while the oil or gas remains undergroundand will not have such ownership until he is in actual possession of theminerals.189 While it is still in the earth, oil and gas are consideredreal property, but once a mineral estate owner has actual possessionof that oil or gas, it becomes personal property.190

A surface owner is also “entitled to an accommodation of estates ifthe mineral lessee has a reasonable alternative that would serve thepublic policy of mineral development while also permitting use of thesurface for productive agriculture.”191 Once a mineral estate has beenconveyed, adverse possession of the surface estate will not adverselyaffect the mineral estate.192

When a mineral estate owner conveys or leases his estate to an-other, he has the option of retaining a royalty interest in the oil andgas.193 A royalty interest is “a certain proportion of the oil, or itsvalue, or a certain sum per producing well in the case of gas, which ispayable only in case oil or gas is produced” and which is non-posses-

185. Judon Fambrough, Minerals, Surface Rights, and Royalty Payments, Real Es-tate Center Texas A&M University, Technical Report 840, Nov. 2009, at 1; Acker v.Guinn, 464 S.W.2d 348, 352 (1971) (“A grant or reservation of minerals by the feeowner effects a horizontal severance and the creation of two separate and distinctestates: an estate in the surface and an estate in the minerals.”).

186. Humphreys-Mexia Co. v. Gammon, 254 S.W. 296, 299 (1923).187. Acker, 464 S.W.2d at 352 (“This [mineral] estate is dominant, of course, and its

owner is entitled to make reasonable use of the surface for the production of hisminerals.”); See also Fambrough, supra note 185; Shade, supra note 184, at 12.

188. Fambrough, supra note 185, at 1.189. Tex. Co. v. Daugherty, 176 S.W. 717, 719 (Tex. 1915); see also Shade, supra

note 184, at 12.190. See Susan Combs, Texas Comptroller of Public Accounts, WINDOW ON STATE

GOV’TS, http://www.window.state.tx.us/taxinfo/audit/unclaimed/04_Mineral_Interest_to_Unidentified_Deposits.htm (“A mineral interest is fundamentally an interest inreal property, while proceeds from the sale of oil and gas production are consideredintangible personal property subject to unclaimed property statutes.”); ChristopherJensen et al., Unclaimed Property in the Oil and Gas Industry: What Companies Needto Know about Mineral Proceeds Suspense Accounts, RYAN (Feb. 15, 2013), http://www.ryan.com/Assets/Downloads/Articles/AUP-What-Companies-Need-To-Know-About-Mineral-Proceeds-Suspense-Accounts.pdf.

191. Fambrough, supra note 185 at 2.192. Elliott v. Nelson, 251 S.W. 501, 504 (Tex. 1923); HEIRS, supra note 5, at 3.193. Shade, supra note 184, at 14.


sory and free from the cost of production.194 A royalty interest is anuncertain right because the value of such a right is speculative as itdepends on possible future production.195 It is this royalty interestthat Spanish and Mexican land grant heirs are seeking to recover fromthe lands once owned by their ancestors.

Today, oil and gas companies are the primary lessees of mineral es-tates in Texas.196 These entities must find owners of every portion ofthe mineral estates they are interested in and obtain valid leases fromeach of those owners.197 In the event an oil and gas company is una-ble to find an owner of a portion of a mineral estate, it will request areceivership from a court in which an attorney represents the un-known owner in negotiating the terms of the lease.198 When an oiland gas company has a receivership lease to a mineral estate, the com-pany holds the oil and gas royalty for three years and then the royal-ties, as agreed in the lease, are reported to the Texas Comptroller ofPublic Accounts.199 If the Comptroller’s office is unable to locate themineral estate owners, the royalties are transferred to the state’s gen-eral revenue fund earning interest that the state keeps.200 Heirs withvalid land grants hope to receive a payout of royalties from this gen-eral revenue fund.201 In 2012, gas operators ended up giving $47.5million to the State and only $19.5 million was given to owners whocame forward to claim their royalties.202

Additionally, the normal four-year statute of limitations in sales taxtransactions does not apply to unclaimed property.203 In addition, va-rious property and civil practice codes from the 1980s set a retrospec-tive cut-off date upon which the State could demand delivery ofunclaimed property.204

194. Id.195. Id.196. See Hiller, supra note 13, at 3.197. Id.198. Id.199. Id.; see also, Texas Comptroller, supra note 190; Jensen, supra note 190, at 1;

HEIRS, supra note 5, at 6.200. Hiller, supra note 13; see also Jensen, supra note 190, at 3 (“many division

orders have gone through three generations, and the related decimal interests aregetting smaller, further complicating the associated division of interest.”); HEIRS,supra note 5, at 6 (the State is required to hold funds (dating back to 1985) in escrowfor mineral estate).

201. HEIRS, supra note 5, at 6 (these funds are available and may be claimed byheirs who take the initiative to declare them).

202. Hiller, supra note 13.203. Texas Comptroller, supra note 190; see also TEX. PROP. CODE ANN. § 74.308

(West 2013) (which eliminated the application of the four-year statute of limitationstime bar on unclaimed property beginning September 1, 1987).

204. Texas Comptroller, supra note 190; see also TEX. CIV. PRAC. & REM. CODE

ANN. §16.004 (West 2013) (which established that September 1, 1987 is the earliest thestate could require unclaimed property); TEX. CIV. PRAC. & REM. CODE ANN.§ 16.070 (West 2013) (which establishes that by contract, the earliest the state couldrecover unclaimed property would be September 1, 1985); Jensen, supra note 190, at 5


B. Heirs and Land Grant Claims Today

In considering the rights of individual parties in title disputes, onewriter noted, “we should not lose sight of what has been said to beamong the most important elements to be considered in passing uponthe validity of retroactive laws: reasonable expectations built on longfaith in a bona fide purchase and on a long period of undisturbedpossession.”205

Even though it has been over 250 years since the first Spanish landgrant was issued, many families who remained on the land retain aportion of those original grants.206 Texas case law has favored Stateand private ownership of mineral estates by following the State’sproperty laws, but on rare occasions, the State will utilize originalSpanish and Mexican law if the outcome would support publicinterest.207

Although an heir to a Spanish or Mexican land grant may claimtitle, if the ancestor abandoned the property, an heir will have a moredifficult claim to prove, unless further evidence can support continueduse of the land.208 Under original Spanish and Mexican law, a land-owner lost title to land when “he ceased to occupy it with the inten-tion of relinquishing his claim upon it.”209

The current process for beginning a land grant claim in Texas in-cludes gathering one hundred or more heirs of a particular land grantand providing documents demonstrating original ownership of theland.210 The group of descendants must then file a motion for declara-tory judgment in order for a Court to establish the validity of theirclaim.211 Heirs may try to locate record titles to the mineral estates todetermine the net worth of the land grant.212

V. THE FUTURE FOR HEIRS AND LAND GRANT CLAIMS

A. Heirs’ Goals

Support and research groups, such as Heirs Enforcing InheritanceRights (HEIRS), promote legislative changes in favor of heirs receiv-ing royalty payouts for mineral rights from unclaimed estates.213

HEIRS insists that it does not aim to encourage legislation that will

(“There are generally no statutes of limitation in the unclaimed property arena, and anumber of states reserve the right to “look-back” for extended periods on audit.”).

205. Hoffman, supra note 136, at 528–29.206. Scott, supra note 6, at ix-x.207. Reich, supra note 76, at 85.208. See 3 Aloysius A. Leopold, Texas Practice: Land Titles and Title Examination

§1.31 (3d ed.).209. Id.210. HEIRS, supra note 5, at 5.211. Id.212. Id.213. Id. at 1.


infringe on the rights of current landowners.214 Organizations such asthe Land Grant Justice Association are dedicated to passing legisla-tion that will benefit heirs of Spanish and Mexican land grants:

A major part of achieving this goal is the understanding that theenactment of this historic law would not cause the expenditure ofany tax monies, either in administration or claims payment, becausethe entire expense would be paid by monies currently held by theComptroller and remitted by the Oil Companies as unclaimedroyalties.215

B. Recent Legislation: House Bill 724 and its Potential Effects

HB 724 created a seventeen-member Commission to identify heirsof unclaimed mineral estates and to determine the value of thoserights.216 The Commission is also charged with determining efficientprocedures for the State to “notify the owners of proceeds . . . [and]. . . distribute proceeds to the owners.”217 Commission members wereappointed on December 31, 2013, and were required to schedule theirfirst meeting no later than thirty days after all appointments weremade.218 The commission’s report is due by January 2015 and mustinclude “proposed legislation necessary to implement the recommen-dations made in the final report.”219

Proponents of payouts to heirs of Spanish and Mexican land grantshope that HB 724 will bring heirs closer to realizing the recognition oforiginal land ownership and substantial payouts from mineral estateson their lands.220

C. Modern Social, Political, and Cultural Issues

As Mexico modernizes, some commentators believe that communi-cation and activity between Texas and Mexico will result in more Mex-ican law applied in Texas Courts.221

Texas attorney Eileen Fowler has a similar mission to encouragelegislative change in favor of heirs’ rights to mineral estates.222 How-ever, others are pessimistic about the realization of payouts sought byheirs: “[T]here are formidable practical and political hurdles ahead.The descendents will have to prove their claims to the royalties, apoint in dispute among experts. Beyond that, new legislation might be

214. Id.215. Land Grant Justice Association, supra note 5.216. HEIRS, supra note 5, at 7.217. H.B. 724 § 2(b)(2).218. H.B. 724 § 2(e)–(f).219. HEIRS, supra note 5, at 7; see also H.B. 724 § 3(3).220. See MacCormack, supra note 10; Spanish and Mexican Land Grants, supra

note 5; Land Grant Justice Association, supra note 5, at 1.221. Walker, supra note 10, at 230.222. Spanish and Mexican Land Grants, supra note 5.


necessary to resolve the issue.”223 Although attorneys representinghundreds or even thousands of heirs are optimistic about large royaltypayouts, “further obstacles loom. For starters, there’s no pot of moneywaiting in Austin for anyone who can prove a claim. While hundredsof millions of dollars in unclaimed royalties have been paid to theState by energy companies, the funds have vanished into the State’sgeneral fund.”224 In addition, “if the state suddenly had to pay outhuge claims, the Legislature would have to appropriate the money, apolitically daunting assignment.”225 Attorneys and researchers whohave worked closely with land grant disputes have concluded that thelegislature will have to act in order for money to be paid to theseprobably well-deserving heirs.226

Allowing Mexican-American citizens to reclaim land rights oncelost to their ancestors is difficult enough but more problems arisewhen Mexican immigrants raise the same claims to land rights. Thesenative Mexicans refer to Mexico’s and Texas’ history, claiming UnitedStates citizens stole their ancestors’ lands to support their argumentthat they should be able to enter the country legally.227 Many Mexi-can-Americans foster these claims under a movement called the“reconquista of the Southwest.”228 A more aggressive group, theMexica Movement, attempts to “reconstruct” a portion of UnitedStates land (parts of California, Arizona, New Mexico, and Texas)back to its indigenous state and call it “Anahuac,” or “Republica delNorte.”229

Some scholars assert that discrimination against heirs was presentwhen original land claims were disputed and affected the outcomes ofsuits negatively against those of Mexican heritage, and still do to-day.230 This opinion stems from the idea that there should be “ac-countability and compensation for the theft of land” from theancestors of these heirs now claiming these rights.231 These scholarsargue that Mexican-Americans experience a “fragile existence” whenit comes to the application of the law because they are citizens ofcolor.232 These scholars assert that once Texas became a state, Mexi-

223. MacCormack, supra note 10, at 2, 3.224. Id. at 3.225. Id.226. Id.227. Mexican Aliens Seek to Retake “Stolen” Land, THE WASHINGTON TIMES (Apr.

16, 2006), http://www.washingtontimes.com/news/2006/apr/16/20060416-122222-1672r/?page=all.

228. Id.229. Id.230. Guadalupe T. Luna, On the Complexities of Race: The Treaty of Guadalupe

Hidalgo Anddred Scott v. Sanford, 53 U. MIAMI L. REV. 691, 714 (July 1999).231. Haynes, supra note 9, at 232.232. Luna, supra note 230, at 698.


can-Americans experienced exclusion from achieving full citizenshipdue to stereotypes that leaked into the State’s legal culture.233

Similar to Native-Americans, Mexican-Americans are “the only mi-nority group in the United States . . . to be annexed by conquest andto have their rights allegedly safeguarded by treaty;” rights that shouldbe recognized and upheld by the federal government.234 Failure of thefederal government to take action that ensures adherence to theTreaty of Guadalupe Hidalgo “reveals a microcosm of race relationsthroughout the United States.”235 These scholars assert that theUnited States’ “desire to acquire and control land” through “dispos-session of Mexican American landholders and the simultaneous en-richment of White America” results in this perceived inequity.236

The Treaty of Guadalupe Hidalgo provides that Mexicans living onTexas lands “shall be free to continue where they now reside;” butTexas Courts did not just distinguish occupied and vacant land, theyrequired proof of validity of title from Spain or Mexico before recog-nizing Mexican land ownership.237 However, even these scholars ac-knowledge that the complicated and distant history of Spanish andMexican land grants makes it very unlikely that heirs will ever becompensated for the losses their ancestors endured.238 The initial stepmay be public recognition of the injustices experienced by generationsof land grant owners and heirs before compensation measures caneven be considered.239 Applying standardized equal treatment guide-lines for all parties involved in land grant disputes may help eliminateunfair and inconsistent Court rulings.240

In Fremont v. United States, an American citizen’s claim to title wasrecognized despite the fact that similar claims (many of which weremade by Mexican-Americans), where more convincing evidence wasprovided to prove ownership, were denied.241 The Treaty ofGuadalupe Hidalgo gave Mexican citizens United States citizenshipstatus which was constantly challenged and resulted in unequal treat-ment such as “[l]ynchings, segregation, denying Chicano soldiers re-turning from World War II the right to burial in their home-towncemeteries, poll taxes, and other measures.”242

233. Id. at 701.234. Haynes, supra note 9, at 235.235. Id. at 235–36.236. Id. at 236.237. Treaty, supra note 6, at Art. VIII; Haynes, supra note 9, at 251.238. Haynes, supra note 9, at 265.239. Id.240. See Frederico M. Cheever, A New Approach to Spanish and Mexican Land

Grants and The Public Trust Doctrine: Defining the Property Interest Protected by theTreaty of Guadalupe-Hidalgo, 33 UCLA L. REV. 1364, 1395-1409 (June 1986).

241. See Luna, supra note 230, at 704–06.242. Id. at 712.


Scholars who assert that Mexican-American landowners were pur-posefully excluded because of their race also believe that the samediscriminations have carried into the present legal culture and that iswhy Mexican-Americans are still fighting for claims to their ancestors’lands.243 These exclusions resulted in an absence of Mexican-Ameri-can presence in legal scholarship, academia, and the possibility of im-proving less-than fortunate communities, all of which mirrors theoriginal conquest of the more advanced European colonization uponthe culture of Mexicans.244

VI. CONCLUSION

Spanish and Mexican land grants that were unrecognized by Texasare now being claimed by heirs who are hopeful that their rights willbe validated. Decades of subsequent ownership on Texas land meansthat heirs are subject to Texas property law and may not be entitled toroyalty interests in the mineral estates once owned by their ancestors.The recent passage of HB 724 will determine the rights of heirs, butthis is a complicated task as commissioners must apply prior sover-eignty laws as well as Texas property law. In addition, political issuessuch as the perceived history of race discrimination may influence therecommendations made by the commissioners.

Deciding what heirs are entitled to, after so many generations ofunclaimed rights, will likely include a balancing of heirs’ rights withthe rights of current land and mineral estate owners, and the interestsof the State of Texas. If the Commission or subsequent authoritiesdetermine that heirs do not have a legal claim, heirs may be entitled toan equitable remedy. This may not provide heirs with the payout theyexpect, but may nevertheless recognize and validate lost rights. How-ever, recognition of heirs’ rights will certainly not be realized at all ifheirs and those who support them cease to assert their claims.

243. Id. at 714.244. Id. at 715.

PROPERTY RIGHTS IN SPACE:ASTEROID MINING

By David Sarnacki†

I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123II. WHY MINE? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

III. THE TREATIES, THE CASES, AND THE SEA . . . . . . . . . . . . . 125A. The Outer Space Treaty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126B. The Moon Treaty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128C. Claiming Rights in Other Ways . . . . . . . . . . . . . . . . . . . . . 131

1. Nemitz v. US . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1312. Deep-Sea Minerals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

a. Law of the Sea Treaty . . . . . . . . . . . . . . . . . . . . . . 134b. Non-governmental Entities . . . . . . . . . . . . . . . . . . 137

IV. RIGHTS THAT CAN BE CREATED . . . . . . . . . . . . . . . . . . . . . . . 138A. Ownership of Space Property . . . . . . . . . . . . . . . . . . . . . . . 139B. Space Mining Methods and the OST . . . . . . . . . . . . . . . . 141C. Private Ventures and Speculation . . . . . . . . . . . . . . . . . . . . 144

V. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

I. INTRODUCTION

Imagine a person walking into a lawyer’s office, asking whether heor she can own an asteroid. Space Mining Corporation (“SMC”) is aUnited States based corporation selling the rights to this asteroid inorder to fund research and future missions to mine asteroids. Oncethe technology matures, the missions will be launched, and the inves-tor who owns the asteroid will receive a percentage of all resourcescollected. Scientists have scouted this asteroid, and believe it to befull of platinum, gold, and many other valuable resources. The clientis concerned that if he or she purchases this asteroid without clearproperty rights supported by law, the investment will be lost. Onepracticed in space law may immediately be reminded of lunar deeds,pieces of the moon sold without anything to support those claims, butthe question the client has asked is still there, “Can I own anasteroid?”

Most of what is commonly thought of as space law began under theOuter Space Treaty and its progeny, which came into force in the late1960s. This law has not changed since the 1980s, when the last treatywas passed. One of the complications to this Treaty is that it wasbased on a time when only national governments had the resourcesand ability to launch a mission to space. The technology and motiva-

† Author Bio: J.D. Candidate, Texas A&M University School of Law, Spring2015; B.B.A., Texas A&M University 2007; Editor-in-Chief, Texas A&M Journal ofReal Property Law, 2014–2015.

123


tion for private citizens to be involved in space is becoming a reality.Scholars are calling for the formation of an international governingentity to regulate and enforce these treaties.1 The technology to ex-tract resources from celestial bodies, and more specifically asteroids, isin its infancy. Applying unnecessary constraints influenced by short-term political currents may stifle innovation and create even more fi-nancial disincentives to expand the reaches and resources available.

This Note will discuss why maintaining the status quo, while waitingfor the technology to mature, will encourage development andstrengthen the industry before being smothered by laws and regula-tions promulgated by parties who may have conflicts of interest. ThisNote will first explain why scientists are attempting to mine asteroids.It will then examine the rules that apply, including the two main spacetreaties (the Outer Space Treaty and the Moon Treaty), the modernview of the court, and the history of deep-sea mining. Finally, thisNote will apply the treaties to modern plans being developed to har-vest an asteroid.

II. WHY MINE?

The finite resources on Earth and the belief that asteroids have anabundance of such resources, have lead scientists to hypothesize thatmany useful minerals such as platinum can be found in abundance inasteroids.2 The collection of those resources from an asteroid adds tothe total amount of resources available for use. Some asteroids arebelieved to be so rich that one asteroid could have more platinumthan the total amount harvested on Earth.3

An asteroid is a rock body that is orbiting the sun.4 Asteroids con-tain different materials and metals such as nickel and iron.5 It is hy-pothesized that some asteroids have high volumes of valuable andrare metals such as platinum and gold.6 Meteors are asteroids that

1. Leslie I. Tennen, Towards A New Regime for Exploitation of Outer Space Min-eral Resources, 88 NEB. L. REV. 794 (2010); see also Sarah Coffey, Establishing ALegal Framework for Property Rights to Natural Resources in Outer Space, 41 CASE

W. RES. J. INT’L L. 119 (2009).2. David Cohen, Earth’s Natural Wealth: An Audit, NEW SCIENTIST, May 23,

2007, at 34–41, available at http://www.sciencearchive.org.au/nova/newscientist/027ns_005.htm.

3. William BC Crandall, To: The Augustine Committee, Enabling Profitable As-teroid Mining, ABUNDANT PLANET (Aug. 3, 2009), at 9, http://www.nasa.gov/pdf/383154main_53%20-%2020090803.7.toAugustineCommittee-2009-08-03.pdf; see alsoDonna Blankinship & Seth Borenstien, There’s Gold In Them Thar Asteroids, The-Times-Tribune.com (Apr. 25, 2012), http://thetimes-tribune.com/news/health-science/there-s-gold-in-them-thar-asteroids-1.1304953.

4. NASA Jet Propulsion Laboratory, Frequently Asked Questions, http://neo.jpl.nasa.gov/faq (last visited July 31, 2014).

5. Id.6. Kevin Bonsor, How Asteroid Mining Will Work, HOWSTUFFWORKS.COM, Nov.

10, 2000, available at http://science.howstuffworks.com/asteroid-mining.htm; see alsoDonna Blankinship and Seth Borenstien, There’s Gold In Them Thar Asteroids, The-

2014] PROPERTY RIGHTS IN SPACE 125

have come into the Earth’s atmosphere, unlike comets which are bod-ies that are mainly composed of ice instead of rock.7 Most asteroidsorbit the sun in the asteroid belt, which is between Mars and Jupiter,but some orbit closer to Earth.8

The primary goal of the exploratory missions to asteroids will be tolocate water, with the additional possibility to extract and return valu-able metals, like platinum.9 Developing an efficient extraction tech-nique will clear one of the major hurdles to long-term spacefaring andcolonization, and a new industry can be created.10 The mining ofthese mineral-rich asteroids would yield metals for construction of col-onies or resource collection facilities, water for rocket fuel and sus-taining life, and a payoff of precious metals to investors.11

III. THE TREATIES, THE CASES, AND THE SEA

The laws that apply to space exploration have been created throughtreaties under the United Nations (“UN”). In 1958, the UN createdthe Office for Outer Space Affairs (“UNOOSA”) as the body to im-plement the decisions of both the General Assembly and the smallercommittee, the Outer Space Affairs Division.12 There are five maintreaties that govern interactions in space.13 As of the writing of thisNote, three countries have completed manned space missions: theUnited States, Russia, and China.14 Nine other countries (and spaceagencies) have launched satellites: France, Japan, Great Britain, theEuropean Space Agency, India, Israel, Iran, North Korea, and SouthKorea.15 The two main treaties examined within this Note are theOuter Space Treaty and the Moon Treaty.

Times-Tribune.com (Apr. 25, 2012), http://thetimes-tribune.com/news/health-science/there-s-gold-in-them-thar-asteroids-1.1304953.

7. NASA Jet Propulsion Laboratory, Frequently Asked Questions, http://neo.jpl.nasa.ogv/faq (last visited July 31, 2014).

8. Id.9. Susan Thomas, Gold rush in space? Asteroid miners prepare, but eye water

first, REUTERS.COM, Nov. 21 2013, available at http://uk.reuters.com/article/2013/11/21/us-space-mining-asteroids-idUKBRE9AK0JF20131121.

10. Id.11. Id.12. UNITED NATIONS OFFICE FOR OUTER SPACE AFFAIRS, http://www.unoosa.

org/oosa/en/OOSA/index.html (last visited July 31, 2014).13. UNITED NATIONS OFFICE FOR OUTER SPACE AFFAIRS, United Nations Trea-

ties and Principles on Space Law, http://www.unoosa.org/oosa/en/OOSA/index.html(last visited July 31, 2014).

14. Manned Flight, ENCYCLOPEDIA ASTRONAUTICA, http://www.astronautix.com/flights/index.htm (last visited Oct. 2, 2014); see also, Spacefaring, WIKIPEDIA, http://en.wikipedia.org/wiki/Spacefaring (last visited Oct. 2, 2014).

15. Q ‘n A: Answers To Your Questions, Spacetoday.org (last visited Feb. 17,2014), http://www.spacetoday.org/Questions/FirstSats.html; see also Spacefaring,WIKIPEDIA, http://en.wikipedia.org/wiki/Spacefaring (last visited Oct. 2, 2014).


A. The Outer Space Treaty

The official name of the Outer Space Treaty (“OST”) is the Treatyon Principles Governing the Activities of States in the Explorationand Use of Outer Space, including the Moon and Other CelestialBodies.16 The Treaty was designed to have similar principles as theAntarctic Treaty, which was a successful nonarmament treaty.17 In1960, President Dwight Eisenhower addressed the UN General As-sembly and pushed for a nonarmament treaty in space modeled on theAntarctic Treaty’s principles.18 In 1963, the General Assembly of theUN unanimously adopted a resolution calling for all states to refrainfrom launching weapons of mass destruction into orbit based on state-ments from the Soviet Union and the United States.19 This resolutionto refrain from launching weapons of mass destruction into space ledto the first draft of the OST, submitted in 1966.20 The final treaty wassigned into effect in 1967 and ratified by the United States that sameyear.21 More than 100 nations are parties to this Treaty, includingevery major spacefaring nation.22 The OST was drafted with an inter-est in the nonarmament of space and an interest in peaceful explora-tion of space.23 The OST does not contain provisions about resourcecollection, as it was not the focus, but it does prohibit national appro-priation of heavenly bodies.24

Article II of the OST states “Outer Space, including the Moon andother celestial bodies, is not subject to national appropriation by claimof sovereignty, by means of use or occupation, or by any othermeans.”25 A government is not permitted to claim ownership of acelestial body such as an asteroid. This is why, for example, theUnited States cannot claim ownership of the moon even though it wasthe first sovereign nation to plant a flag there. The Treaty uses the

16. Treaty on Principles Governing the Activities of States in the Exploration andUse of Outer Space, Including the Moon and Other Celestial Bodies, Jan. 27, 1967, 18U.S.T. 2410, 610 U.N.T.S. 205 [hereinafter Outer Space Treaty] available at http://www.unoosa.org/pdf/publications/STSPACE11E.pdf, v-vi.

17. U.S. DEPARTMENT OF STATE, Treaty on Principles Governing the Activities ofStates in the Exploration and Use of Outer Space, Including the Moon and Other Celes-tial Bodies, http://www.state.gov/t/isn/5181.htm (last visited July 31, 2014).

18. Id.19. Id.20. Id.21. Id.22. U.S. DEPARTMENT OF STATE, Treaty on Principles Governing the Activities of

States in the Exploration and Use of Outer Space, Including the Moon and Other Celes-tial Bodies, http://www.state.gov/t/isn/5181.htm (last visited July 31, 2014); see alsoUNITED NATIONS OFFICE FOR DISARMAMENT AFFAIRS, Treaty on Principles Gov-erning the Activities of States in the Exploration and Use of Outer Space, including theMoon and Other Celestial Bodies, http://disarmament.un.org/treaties/t/outer_space(last visited July 31, 2014).

23. Outer Space Treaty, supra note 16, at 3.24. Id. at 31.25. Id. at 4 (emphasis added).


term celestial bodies throughout, which suggests that those bodies ref-erenced are not just large celestial bodies, such as the moon, but alsosmaller ones, such as asteroids.26

Article II has left what some analysts call a loophole, prohibitingnational governments from staking claim but arguably allowing non-government entities to claim ownership in celestial bodies.27 If a pri-vate entity such as SMC were to lay claim to an asteroid or othercelestial body, that corporation might not be subject to the same regu-lations as its home government of the United States. Article VI of theOST tries to resolve this.28 It states that any “activities of non-govern-mental entities in outer space, including the moon and other celestialbodies, shall require authorization and continuing supervision by theappropriate State Party to the Treaty.”29 This is clarified in ArticleVII, which states the jurisdiction that launches the spacecraft is re-sponsible for the actions of that craft.30

This Treaty is written with an eye to the future by referring disputesthat arise to be resolved through international law.31 The Treatyneither expressly disallows the extraction of minerals nor does it disal-low the use of asteroids and other celestial bodies.32 The closest pro-hibition to the use of the materials in an asteroid is in Article IX,which requires that any potentially harmful interference between par-ties is to be resolved by international consultation before proceed-ing.33 This means that if two nations were heading to the samelocation to acquire the same resources, they are to resolve the disputethrough international consultation prior to launch. The Treaty prohib-its the armament of space and the governmental acquisition of celes-tial bodies, but it encourages the cooperation amongst the memberstates.34 Further, OST can be amended by a majority of the parties tothe agreement, allowing for a more specific resolution to disputes thatarise.35 At first glance, the answer to the hypothetical question is no.

The OST laid the ground for four other space treaties, commonlyviewed as the OST’s progeny. The treaties that followed were: theAgreement on the Rescue of Astronauts, the Return of Astronauts,and the Return of Objects Launched into Outer Space (commonlycalled “The Rescue Agreement”); the Convention on International

26. Outer Space Treaty, supra note 16.27. Andres Jauregui, Legal Loophole May Pave Way For Private Ownership Of

Outer Space, THEHUFFINGTONPOST.COM (Apr. 6, 2012, 5:28 PM), http://www.huf-fingtonpost.com/2012/04/06/legal-loophole-may-pave-way-for-private-ownership-of-outer-space_n_1409035.html.ownership-of-outer-space_n_1409035.html.

28. Outer Space Treaty, supra note 16, at 5.29. Id.30. Id.31. Id. at 28.32. Outer Space Treaty, supra note 16.33. Outer Space Treaty, supra note 16, at 6.34. Id.35. Id. at 8.


Liability for Damage Caused by Space Objects (commonly called“The Liability Convention”); the Convention on Registration of Ob-jects Launched into Outer Space (commonly called “The RegistrationConvention”); and the Agreement governing the Activities of theStates on the Moon and other Celestial Bodies (commonly called“The Moon Treaty”).36 These treaties have varying amounts of ac-ceptance, but none come close to the limited acceptance of The MoonTreaty.37

B. The Moon Treaty

The Moon Treaty has not been as successful gaining ratification asthe OST, or even the rest of the treaties considered to be the progenyof the OST.38 The Moon Treaty was first signed in December of 1979,but it only has ten parties and five signatories (countries that signedthe Treaty who later decided not to ratify it).39 None of the partieswere a major spacefaring country.40 France and India are the two sig-natories that are at least spacefaring.41 The goal of the Moon Treatywas to solidify cracks in the OST, prohibiting military installations onthe moon, and prohibiting any weapons testing.42 It expressly prohib-its any claim above or below the surface of the Moon by a sovereign

36. Id. at v–viii; see also UNITED NATIONS OFFICE FOR OUTER SPACE AFFAIRS,Status of International Agreements relating to Activities in Outer Space, http://www.unoosa.org/oosa/en/SpaceLaw/treatystatus/index.html (last visited July 23, 2014).

37. COMMITTEE ON THE PEACEFUL USES OF OUTER SPACE, Status of InternationalAgreements relating to activities in outer space as at 1 January 2014, Apr. 4, 2014, http://www.unoosa.org/pdf/limited/c2/AC105_C2_2014_CRP07E.pdf (last visited Oct. 2,2014); see also, UNITED NATIONS OFFICE FOR OUTER SPACE AFFAIRS, Status of Inter-national Agreements relating to Activities in Outer Space, http://www.unoosa.org/oosa/en/SpaceLaw/treatystatus/index.html (last visited July 23. 2014). The total nationswho have ratified each treaty are as follows: OST 103; Rescue 94; Liability 91; Regis-tration 60; Moon 15.

38. Id.39. The Parties are: Australia, Austria, Chile, Kazakhstan, Mexico, Morocco,

Netherlands, Pakistan, Philippines, and Uruguay. The Signatories are: France, Guate-mala, India, Peru, and Romania. NUCLEAR THREAT INITIATIVE, Agreement Gov-erning the Activities of States on the Moon and Other Celestial Bodies (MoonAgreement), http://www.nti.org/treaties-and-regimes/agreement-governing-activities-states-moon-and-other-celestial-bodies-moon-agreement/ (last visited July 31, 2014).

40. NUCLEAR THREAT INITIATIVE, Agreement Governing the Activities of Stateson the Moon and Other Celestial Bodies (Moon Agreement), http://www.nti.org/trea-ties-and-regimes/agreement-governing-activities-states-moon-and-other-celestial-bod-ies-moon-agreement/ (last visited July 31, 2014); see also, Manned Flight,ENCYCLOPEDIA ASTRONAUTICA, http://www.astronautix.com/flights/index.htm (lastvisited Oct. 2, 2014); see also, Spacefaring, WIKIPEDIA, http://en.wikipedia.org/wiki/Spacefaring (last visited Oct. 2, 2014).

41. NUCLEAR THREAT INITIATIVE, Agreement Governing the Activities of Stateson the Moon and Other Celestial Bodies (Moon Agreement), http://www.nti.org/trea-ties-and-regimes/agreement-governing-activities-states-moon-and-other-celestial-bod-ies-moon-agreement/ (last visited July 31, 2014).

42. Agreement Governing the Activities of States on the Moon and Other CelestialBodies, Dec. 18, 1979, 1363 U.N.T.S. 3 [hereinafter Moon Treaty], http://www.unoosa.org/pdf/publications/STSPACE11E.pdf.


nation.43 The Moon Treaty requires all parties to inform the UN ofactivities conducted in space, and further include the results of thoseactivities, generally within a month of completion of the activity orexperiment.44 Article 1 of the Treaty expands the definition of theMoon to include any celestial body.45 It also expressly closes any pos-sibility of a loophole in the OST regarding non-government entities inArticle 11, Section 3, stating “natural resources in place, shall [not]become property of any. . . international intergovernmental or non-governmental organization, . . . or non-governmental entity or of anynatural person.”46

The widespread rejection of the Moon Treaty can be linked to thefact that the Treaty calls for the creation of an enforcement body tocontrol and enforce space law.47 Article 11 calls for the creation ofthis international regime.48 It requires this regime to share all re-sources, including the granting of mining rights and the resources col-lected, equitably by weighing both the needs of developing countriesand the efforts of the countries that have contributed to the explora-tion of the Moon.49 Article 9 requires the UN to have an up-to-datelist of all constructed bases, the purpose of the base, and the status ofthe base.50 Article 14 requires the parent jurisdiction of a non-govern-mental entity to ensure compliance with the Treaty.51 Article 16 per-mits an international intergovernmental organization, such as theEuropean Space Agency, to ratify the agreement and become aparty.52 The Treaty’s provisions prohibit any government or intergov-ernmental organization, including corporations, to act outside of theenforcement powers of this regime that would be created. One prob-lem with this prohibition is that all activities, experiments, technology,resources, and bases would be monitored and distributed as this inter-national regime deemed fit.

The Moon Treaty also addresses resource extraction on the moon.53

Because of Article 1, the definition of the moon is expanded to anycelestial body, so the Treaty encompasses all celestial bodies.54 TheMoon Treaty’s regime is given the power under Article 6 to permit the

43. Id.44. Id.45. Articles in the Moon Treaty are numbered in Arabic numerals, not Roman

numerals. Moon Treaty, supra note 42, at 27.46. Moon Treaty, supra note 42, at 31.47. Michael Listner, The Moon Treaty: failed international law or waiting in the

shadows?, THE SPACE REVIEW (Oct. 24, 2011), http://www.thespacereview.com/arti-cle/1954/1.

48. Moon Treaty, supra note 42, at 32.49. Id.50. Id. at 30–31.51. Id. at 33.52. Id. at 34.53. Id. at 27–35.54. Id. at 27.


extraction of resources, but a portion must be given to other parties.55

This includes materials extracted for the support of the mission (suchas water to be used for fuel).56 However, Article 11 expressly prohib-its any governmental or non-governmental entity from creating a rightof ownership in any materials on or extracted from the moon (andfrom Article 1, any celestial body).57 This prohibits the ownership ofany interest in an asteroid, including the resources extracted. TheMoon Treaty essentially hinders any for-profit venture from even be-ginning to stake a claim in the resources to be extracted under Article11.58 Under the Moon Treaty, the answer to the hypothetical is a clearand unambiguous no. A person cannot own any right to an asteroidclaimed by SMC. This becomes more complicated because the MoonTreaty has such a low number of nations that have ratified it.59

It is important to note that the Moon Treaty is still internationallaw, even though there are ten parties (fifteen signatories and ten par-ties). Many countries have not ratified the Treaty, but ratificationcould be persuasive to a judge resolving a dispute. The Moon Treatycould also be used to exert political pressure on non-members. Thisoccurred in the Law of the Sea Treaty when one powerful membersigned on. As discussed later in this Note, the United States is not aparty to the Law of the Sea Treaty, but political pressure has beenapplied to American companies mining the oceans. The Moon Treatyhas little weight in the international community right now because ofits low participation, but if a major spacefaring nation did decide toratify it, the Treaty would become much stronger and would begin tohave weight.

In contrast to the Moon Treaty, the OST was successful in obtainingwidespread acceptance. This is because the OST resolves conflictsunder current international law and does not set up an internationalcourt, international arbitration, or international committee to regu-late. The OST was written so that many future technologies or ideaswould still fall under its regulations without requiring new treaties orenforcement bodies. The OST does not provide for the extraction ofresources, but it does not prohibit it either. The Moon Treaty wasdrafted more than ten years after the OST and attempts to createmore regulations and an enforcement body to resolve these issues, butthe enforcement body has been a large reason why the Moon Treatyhas almost universally been rejected. This body could effectively pro-hibit the exploitation of resources in space. If the governing body is

55. Id. at 29.56. Id.57. Id. at 31.58. Moon Treaty, supra note 42, at 31.59. UNITED NATIONS OFFICE FOR OUTER SPACE AFFAIRS, Status of International

Agreements relating to Activities in Outer Space, http://www.unoosa.org/oosa/en/SpaceLaw/treatystatus/index.html (last visited July 23, 2014).


ever formed, it could give authority to parties that do not have theability to launch a satellite into stable orbit, allowing those countriesto restrict or impede the exploration of space and the development ofnew technologies.

The spacefaring countries have wisely decided not to sign on to theMoon Treaty. Keeping the OST and its provision of using current in-ternational law to resolve conflicts will allow the technology to matureand wisdom to be used when regulations are required. The OST waswritten well after the Soviet Union had launched Sputnik and test-fired an Inter-Continental Ballistic Missile.60 The result of waitingwas universal acceptance of the peaceful exploration of space, basedon the wisdom gained during the Cold War and the technologies de-veloped. While not being aggressively proactive may seem like a WildWest approach, the law can resolve most conflicts that would arise. Itwould be premature to deliver sectors of space to a governing bodythat could stifle space exploration through heavy-handed regulations,and redistribution of technologies and harvested minerals.

C. Claiming Rights in Other Ways

Property rights can be claimed in many ways under national andinternational law. The OST calls for disputes to be resolved undercurrent international law. In order to understand how this may beapplied, this Section will first look at how the courts of the UnitedStates have decided issues related to ownership of space material.This Section will also examine the Law of the Sea Treaty includingwhy some scholars believe this Treaty is what stifled innovation indeep-sea mining. Finally, this Section will examine the liability of cor-porate, non-government entities being held to treaties.

1. Nemitz v. US

The court examined the ownership of an asteroid in Nemitz v. US.61

This short case involves a claim over “Eros,” which is a large asteroidin orbit near Earth.62 NASA landed on Eros in 2001, and GregoryNemitz, a private citizen, attempted to assert property rights in Erosby suing NASA for trespass.63 Nemitz’s claim stated the propertyrights were granted because Nemitz had registered a claim on Eros

60. U.S. DEPARTMENT OF STATE, Treaty on Principles Governing the Activities ofStates in the Exploration and Use of Outer Space, Including the Moon and Other Celes-tial Bodies, http://www.state.gov/t/isn/5181.htm (last visited Mar. 23, 2014).

61. Nemitz v. United States, CV-N030599-HDM (RAM), 2004 WL 3167042 (D.Nev. Apr. 26, 2004) aff’d sub nom. Nemitz v. N.A.S.A., 126 F. App’x 343 (9th Cir.2005).

62. Nemitz v. United States, 2004 WL 3167042, at *1.63. Keay Davidson, Final Frontier for Lawyers—property rights in space/Land

claims, commercial schemes and dreams have legal eagles hovering, SFGATE.COM

(Oct. 16, 2005, 4:00 AM), http://www.sfgate.com/news/article/Final-frontier-for-law-yers-property-rights-in-2564610.php.


with the Archimedes Institute.64 The Archimedes Institute was a non-governmental organization run by a group of private citizens that rana website which allowed anyone to claim a celestial body for free.65

Nemitz claimed property rights based on his registration with the Ar-chimedes Institute website, but had not asserted any control over Erosbeyond his free application with a now-defunct, non-government web-site.66 One of Nemitz’s claims was that he used the Archimedes Insti-tute because of the loophole created in Article II of the Outer SpaceTreaty.67 The court dismissed this case for failure to state a claim,finding that Nemitz failed to assert a property right.68 The court alsodetermined that the ratification of the Outer Space Treaty and therejection of the Moon Treaty were not enough for Nemitz to claim aprivate property right.69 This dismissal was affirmed by the ninth cir-cuit court.70

The creation of property rights under common law is generally ce-mented in one of three avenues: discovery, creation, and capture.71

Here, Eros had been discovered by German Astronomer GustavWitt.72 Nemitz could not claim discovery, so he tried to claim the cre-ation by registration with the Archimedes Institute, however Nemitzdid not create Eros.73 The law typically used for mineral and resourcerights is based on capture.74 A law-school staple, Pierson v. Post, illus-trates how capture works.75 Pierson and Post were both hunters chas-ing the same fox.76 While Post and his dogs were pursuing the fox,Pierson shot the fox and took it.77 The court held that property rightsare created once the resource has been occupied, or in this instance,captured by being mortally wounded.78 The case would be analogousto the capture of an asteroid. Here, Nemitz did nothing to bring Eros

64. Nemitz v. United States, 2004 WL 3167042, at *1.65. The Archimedes institute was space-related website that offered to register

private property rights for free, and was hosted on permanent.com during the lawsuit.http://www.permanent.com/archimedes-institute.html.

66. Nemitz v. United States, 2004 WL 3167042, at *1.67. Id.68. Id.69. Nemitz v. United States, 2004 WL 3167042, at *2.70. Nemitz v. NASA 126 Fed. Appx. 343 at *1 (9th Cir. 2005) (Mem. op.).71. Peter T. Wendel, Casebook Review: The Perfect Blend of Methodology, Doc-

trine & Theory: Property, 22 SEATTLE UNIV. L. R. 1031, 1036 (1999) (reviewing JESSE

DUKEMINIER & JAMES E. KRIER, PROPERTY 4TH EDITION (1998)).72. Edward F. Tedesco, Eros, ENCYCLOPEDIA BRITANNICA, http://www.britannica.

com/EBchecked/topic/191801/Eros (last updated Jan. 13, 2014).73. Nemitz v United States, CV-N030599-HDM (RAM), 2004 WL 3167042, at *1

(D. Nev. Apr. 26, 2004) aff’d sub nom. Nemitz v. N.A.S.A., 126 F. Appx. 343 (9th Cir.2005).

74. 38 Am. Jur. 2d Gas and Oil § 8 (2012).75. Pierson v. Post, 3 Cai. R. 175, 1805 WL 781, 1805 N.Y. Lexis 311 (N.Y. Sup. Ct.

1805).76. Pierson, 1805 WL 781, at 177.77. Id.78. Id. at 177–78.


under his control. Nemitz would have a much stronger argument if hehad landed a spacecraft on the asteroid and modified the asteroid’sorbit.

Nemitz was acting like a patent troll. A patent troll will register andpurchase patents without any interest in using the patent beyond ex-cluding others. Here, just like a patent troll, Nemitz registered prop-erty rights in space without any ability or intent to act on those rightsexcept to exclude others. Nemitz failed here because he did not estab-lish any real property rights. Nemitz established no control over whathe claimed was his and had no way to act on any of the property rightshe claimed.

The reason Nemitz’s case is important is that the federal court hasnot closed the door to the creation of property rights in celestial bod-ies. The United States’ view on granting property rights to extrater-restrial objects can be expanded by examining the eleventh circuitcourt case of United States v. Roberts, where the court recognizedproperty rights in objects returned from space.79 The Apollo missionsbrought back lunar samples that were held by NASA.80 A NASA in-tern, Thad Roberts, was convicted for the theft of those rocks, as wellas several other samples gathered from space.81 By capturing the lu-nar rocks, the court recognized that NASA created a property right inthe rocks when the court convicted Roberts. This means that thecourts have recognized, contrary to the treaties in place, that NASAoccupied the rocks, creating a right by capture, and that the UnitedStates government will support those property rights created.82

The American courts, through cases like Nemitz and Roberts, havenot expressly found that property rights can be created in space, butthey have hinted that there are property rights to be acquired inmaterials harvested from space. One can only speculate how thoserights would be created, but it is likely that the property would needto be captured in order to create those rights. Loose asteroids orbit-ing in the asteroid belt cannot just be claimed.

2. Deep-Sea Minerals

The OST resolves conflicts with international law, and there are twomajor examples of how this conflict has been resolved. One drasticexample of international law is the treaties governing Antarctica.Many governments were attempting to mine the continent while ex-pressing superior rights to do so.83 The nations were unable to resolve

79. United States v. Roberts, 155 Fed. Appx. 501, 502 (11th Cir. 2005).80. Id.81. Id.82. Listner, supra note 47, comments.83. Mining in Antarctica, BRITISH ANTARCTIC SURVEY, http://www.antarctica.

ac.uk/about_antarctica/geopolitical/environmental_issues/mining.php (last visited July31, 2014).


this conflict without establishing an entity to control the claiming ofmining sites.84 The eventual result of this was a moratorium set onany commercial mining in Antarctica until 2040, but scientificprocesses are still conducted without interference.85 The Law of theSea Treaty takes the opposite approach. The Law of the Sea Treatygoverns the extraction of deep-sea minerals from international waters,which sets up a regulatory body similar to what may happen if theMoon Treaty is signed.

a. Law of the Sea Treaty

The United Nations Convention on the Law of the Sea is commonlyreferred to as the Law of the Sea Treaty (“LOST”). It is hypothesizedthat if the enforcement body from the Moon Treaty were to beformed, it would mirror LOST Part XI, which formed “The Enter-prise.”86 “The Enterprise” is the commercial arm of the InternationalSeabed Authority (“ISA”).87 “The Enterprise” was established to col-lect technologies used to mine deep-sea resources, and in turn givethose technologies to non-developed countries.88 This act is one ofthe reasons listed by President Ronald Reagan for not signingLOST.89 The ISA has the authority to set prices for the sale of miner-als, as well as setting the tax rate on the resources collected.90 Thismoney is then used to fund the ISA, “The Enterprise,” and can beredistributed to non-developed countries.91 In contrast, the UnitedStates follows its own statutory language, the Deep Seabed Hard Min-eral Resources Act, which is similar to LOST with the exception ofPart XI.92

LOST was not recognized by the United States until President BillClinton signed it in 1994.93 However, the Treaty is not binding on theUnited States because the Senate has still not ratified LOST, with themost recent failure to ratify occurring in 2012.94 Analysts and schol-ars, due to the United States not being a party to LOST, debate the

84. Id.85. Id.86. Id.87. Frequently Asked Questions, International Seabed Authority, http://www.isa.

org.jm/en/about/faqs (last visited July 31, 2014).88. Listner, supra note 47.89. Ian Bezpalko, Note, The Deep Seabed: Customary Law Codified, 44 Nat. Re-

sources J. 867, 872–74 (2004).90. Rejecting the Law of the Sea Treaty (LOST), National Space Society, 2 (Mar.

13, 2009), http://www.nss.org/legislative/NSS-LoST-WhitePaper.pdf.91. Id.92. Deep Seabed Hard Mineral Resources Act, 30 U.S.C. §§ 1401–1473 (2002).93. Bezpalko, supra note 89, at 873–74.94. Id. at 874; see also Tom Murse, Law of the Sea Treaty Timeline Important

Dates in the Debate, http://uspolitics.about.com/od/Obama-Administration/a/Law-Of-The-Sea-Treaty-Timeline.htm (last visited July 31, 2014).


effect of the Treaty.95 The ISA is only now seeing a surge of interestfrom mining companies.96

The international governing body created in LOST Part XI is com-monly seen as the major point of contention between those for theratification and those against its ratification.97 The Moon Treaty, inArticle 11, prohibits a nation, non-governmental entity, or naturalperson, from staking a claim or establishing property rights. Part XIof LOST has similar language, stating in Article 137, “No State ornatural or juridical person shall claim, acquire or exercise rights withrespect to the minerals recovered from the Area except in accordancewith this Part.”98 This Article also states that the resources belong to“mankind as a whole” and denies the recognition of property rights inany minerals claimed or harvested in conflict with the Treaty.99 TheISA is granted complete immunity from legal process and any form ofsearch or seizure.100 This immunity grants the ISA the same rights asa national sovereignty.101 The ISA’s home territory would be interna-tional waters within the UN’s jurisdiction.102

Subsection E of Part XI establishes the Enterprise as an arm of theISA.103 Article 144 requires all parties to cooperate in the transfer oftechnology and scientific knowledge, including “facilitating access ofthe Enterprise and of developing states to the relevant technology,under fair and reasonable terms and conditions.”104 The transfer ofownership and control of technologies used is mandated, so the Enter-prise has a major interest in obtaining the technology which could beused as leverage when bargaining for a mineral lease.105 In Article268, member states are required to acquire and disseminate marinetechnology.106 If one party has developed a usable process, the hostcountry of that party is required to give the technology to the Enter-

95. Andrew Langer, The Case for Ratification of the Law of the Sea Treaty, REAL-

CLEARPOLITICS.COM (Nov. 28, 2012), http://www.realclearpolitics.com/articles/2012/11/28/the_case_for_ratification_of_the_law_of_the_sea_treaty_116272.html; see alsoBrooke Jarvis, Deep-Sea Mining—Bonanza or Boondoggle? NOVA NEXT (June 25,2013), http://www.pbs.org/wgbh/nova/next/earth/deep-sea-mining/; Rejecting the Lawof the Sea Treaty (LOST), National Space Society, 2 (2009), http://www.nss.org/legis-lative/NSS-LoST-WhitePaper.pdf.

96. Brooke Jarvis, Deep-Sea Mining—Bonanza or Boondoggle? NOVANEXT (Jun.25, 2013) available at http://www.pbs.org/wgbh/nova/next/earth/deep-sea-mining/.

97. Rejecting the Law of the Sea Treaty (LOST), National Space Society, 2 (Mar.13, 2009), http://www.nss.org/legislative/NSS-LoST-WhitePaper.pdf.

98. United Nations Convention on the Law of the Sea, art. 137, Dec. 10, 1982,1833 U.N.T.S. 397.

99. Id.100. Id. at 473.101. Id.102. Id.103. United Nations Convention on the Law of the Sea, art. 137, Dec. 10, 1982,

1833 U.N.T.S. 458, 471.104. Id. at 449.105. Id.106. Id. at 504.


prise.107 The Enterprise will then make that technology available toevery nation who is party to the Treaty.108 The transfer of technologycan be conducted through licenses, but the requirement to transfer thetechnology leaves little room for negotiation.109 The ISA is also ableto set the price of minerals that go to market.110

LOST has the goal of fair remuneration and cooperation in the ex-traction of resources that belong to mankind.111 While this goal is no-ble, the science and the markets were not mature enough to supportthe end goals. One of the problems that LOST creates is that itremoves incentive for companies to develop the processes and proce-dures to profitably extract minerals from deep-sea beds. The UnitedStates’ reaction to the Treaty is likely based on these fears. In 1974,the United States disagreed with the arrangement set forth under theinitial LOST, and with seven other member states, created a differenttreaty.112 Under this different treaty, the United States began to minean area outside of Hawaii considered international waters under UNcontrol.113 This project was ended due to the political pressures ap-plied by the UN.114 Eventually, these conflicts were resolved whenthe United States companies stopped mining.115 The United Stateshas a few areas under its exclusive jurisdiction (such as just off thecoast of Florida) but, the costs to mine the sea and develop the tech-nology to do so efficiently has not been able to compete with inlandmines.116 As long as the ISA has the authority to keep and distributetechnologies and set the prices for commodities mined at levels on parwith surface mines, it is not likely that many advancements will occurin the near future. This is just one danger that following a treaty suchas LOST could create—stifled innovation.

LOST has many parallels with the Moon Treaty. LOST follows suitwith the Antarctic Treaty of 1959 and the OST by stating that theminerals belong to mankind.117 The provision that grants this author-ity in LOST was kept because the ISA believes the resources belongto mankind, and large quantities or minerals were not being recov-ered.118 Keeping with the treatment of LOST, the minerals found inspace are considered to belong to mankind. It is also of note that the

107. Id.108. United Nations Convention on the Law of the Sea, art. 137, Dec. 10, 1982,

1833 U.N.T.S. 504.109. Id. at 530.110. Id. at 451.111. Id. at 398.112. Bezpalko, supra note 89, at 871.113. Id. at 880.114. Id.115. Id.116. Id.117. Id. at 882.118. United Nations Convention on the Law of the Sea, art. 137, Dec. 10, 1982,

1833 U.N.T.S. 504.


Moon Treaty was established in 1979 and LOST was established in1982, resulting in similar language and provisions.119 FollowingLOST, rights are granted in the minerals harvested, but only after alicense is granted to mine a site. The actions taken under LOST showthat all minerals extracted create property rights within the party har-vesting those minerals, even to non-signatory states. Property rightswould be created in the minerals actually harvested, but not in the siteitself.

The development and acquisition of the technology to send a maninto space is so difficult that only three countries have conductedmanned space flights: The United States, Russia, and China.120 Byacceding to a Treaty similar to the Moon Treaty, and allowing a cen-tral world governing body to control the technologies and mineralsderived from harvesting minerals in space, the only countries with aheavy investment in this industry could lose their investments andtechnology. This brings up a glaring problem with the Moon Treaty: itis valid international law. While the United States, Russia, and Chinahave not ratified it, because several countries have ratified the Treaty,it is still international law that can be brought up in international dis-putes. This is pressing because even though the United States is not asignatory on LOST, the United States is classified as an observer stateand must pay dues to the ISA.121 One concern with the Moon Treatyis that Russia and/or China can still sign on, giving significant weightto the Treaty.122

b. Non-governmental Entities

Another major issue at play is the loophole left in the OST. Thisloophole could hypothetically allow a corporation or other non-gov-ernmental entity to claim a property right in a celestial body. This isbecause the OST plainly states in Article II, “Outer Space, includingthe Moon and other celestial bodies, is not subject to national appro-priation by claim of sovereignty, by means of use or occupation, or byany other means.”123 So it appears that a non-governmental entitycould claim property rights in a celestial body, as long as the Treaty isnot interpreted to apply to that entity.

119. Rejecting the Law of the Sea Treaty (LOST), National Space Society (Mar. 13,2009), http://www.nss.org/legislative/NSS-LoST-WhitePaper.pdf at 1, 3.

120. Listner, supra note 47.121. Marjorie Ann Browne, United Nations System Funding: Congressional Issues,

CONGRESSIONAL RESEARCH SERVICE, Jan. 14, 2013, https://www.fas.org/sgp/crs/row/RL33611.pdf at 5; see also Observer States To The Authority, INTERNATIONAL SEA-

BED Authority, http://www.isa.org.jm/en/about/members/states/observers (last visitedJuly 31, 2014).

122. Listner, supra note 47.123. Outer Space Treaty, supra note 16, at 4 (emphasis added).


There is a split in the courts and scholarly debate on this issue.124

The main argument for non-government entities is that they have notsigned the Treaty and are not held to it.125 The counter argument isthat these corporations are still subject to sovereign power, with thatsovereign required to take responsibility for the actions of that corpo-ration.126 Traditionally, international law is binding only on the sover-eign nations, because those laws govern only how the nations interactwith each other.127 The second circuit has held that corporations arenot subject to the same level of scrutiny as a sovereign nation undercustomary international law.128 Rulings like this make enforcing in-ternational laws such as the OST difficult against a non-governmentalentity.

The American courts have held that the government will recognizeprivate property rights for extraterrestrial property. As explained ear-lier in this Note, the theft of NASA’s lunar rocks shows that the gov-ernment will grant property rights to materials harvested off Earth. InNemitz, the courts declined the opportunity to examine the interac-tion between the OST and the Moon Treaty.129 The Law Of the SeaTreaty is similar to the Moon Treaty, and neither has been ratified bythe United States. The United States has mostly ignored LOST andthe Moon Treaty. The loophole in the OST is also still open becausenon-governmental entities are traditionally only subject to the sover-eign they are under.

IV. RIGHTS THAT CAN BE CREATED

The Outer Space Treaty is the main law governing interactions inspace. The main reason to establish property rights in an asteroidwould be to exclude others from that same asteroid. The right to ex-clude others from property is the main right one would seek whenpurchasing mining rights from an international body. However, a cor-poration may attempt to use the loophole to claim an asteroid, as it isnot making a national claim on it.

124. Joel Slawotsky, The Global Corporation as International Law Actor, VA. J. OF

INT’L L. DIGEST 79, 79–80 (2012).125. Id. at 82.126. Id. at 86.127. Joel Slawotsky, Corporate liability for violating international law under The

Alien Tort Statute: The corporation through the lens of globalization and privatization,INT’L REV. OF L. 1 (2013), http://www.qscience.com/doi/pdf/10.5339/irl.2013.6.

128. Mara Theophila, “Moral Monsters” Under the Bed: Holding Corporations Ac-countable for Violations of the Alien Tort Statute After Kiobel v. Royal Dutch Petro-leum Co., 79 FORDHAM L. REV. 2859, 2861 (2011); Kiobel v. Royal Dutch PetroleumCo., 621 F.3d 111, 145 (2d Cir. 2010).

129. Nemitz v. United States, CV-N030599-HDM (RAM), 2004 WL 3167042 (D.Nev. Apr. 26, 2004) aff’d sub nom. Nemitz v. N.A.S.A., 126 F. App’x 343 (9th Cir.2005).


A. Ownership of Space Property

The OST contains a few ambiguities to explore. One ambiguity iswhat exactly a celestial body is. Another ambiguity is whether na-tional appropriation has anything to do with the creation of propertyrights.

The OST and its progeny, including the Moon Treaty, all use theterm “celestial bodies.”130 Webster’s dictionary defines celestial bodyas “an aggregation of matter in the universe that constitutes a unit (asa planet, nebula) for astronomical study.”131 Dictionary.com defines acelestial body as “Pertaining to the sky or visible heaven, or to theuniverse beyond the earth’s atmosphere, as in celestial body.”132 TheOxford Dictionary defines celestial as: “positioned in or relating to thesky, or outer space as observed in astronomy ‘a celestial body.’”133

The Macmillan Dictionary simply states a celestial body is, “some-thing in space, such as a star or planet.”134 While the term celestialbody leaves some ambiguity, common interpretation would includeany non-manmade objects ranging from a large nebula to a small as-teroid. This common usage, based on ambiguity, would not leave verystrong ground to support an argument that the OST does not apply toan asteroid.

At first glance, the loophole in the OST would seem to work.135 Acorporation is not a government entity. Corporations can be multina-tional, and are commonly established to extract resources. Multi-na-tional corporations have traditionally not been subject to internationallaw.136 The Moon Treaty expressly closes this loophole in Article 11by prohibiting a non-governmental organization from establishingproperty rights.137 By expressly closing the loophole, the authors ofthe Moon Treaty have attempted to correct the ambiguity left in theOST. Using the loophole, an argument could be made that a corpora-tion could begin to harvest minerals from a sector of space filled withasteroids. The corporation would own those minerals, possibly the as-teroids, but may have difficulty establishing ownership of the sector of

130. Outer Space Treaty, supra note 16.131. Celestial Body Definition, MERRIAM-WEBSTER ONLINE DICTIONARY, availa-

ble at http://www.merriam-webster.com/dictionary/celestial%20body (last visited Mar.23, 2014).

132. Celestial Body Definition, DICTIONARY.COM, http://dictionary.reference.com/browse/celestialbody (last visited Mar. 23, 2014).

133. Celestial Definition, OXFORD DICTIONARY, available at http://www.oxforddic-tionaries.com/us/definition/american_english/celestial (last visited Mar. 23, 2014).

134. Celestial Object Definition, MACMILLAN DICTIONARY, http://www.macmillandictionary.com/us/dictionary/american/celestial-object (last visited Mar. 23, 2014).

135. See supra Section IIIC2b, Earlier in this Note, the OST loophole was about thepossibility of corporations getting around international treaty because corporationsare not subject to international treaties.

136. Slawotsky, supra note 124, at 1.137. Moon Treaty, supra note 42, at 31.


space itself. That corporation would be free to sell the resources ex-tracted to any entity, not just their home country.

The counter to this argument is that the OST itself provides for theclosing of the loophole. The OST closes the loophole in Article VIand Article VII.138 Article VI provides that the jurisdiction thatlaunches the vehicle is responsible to enforce the Treaty.139 ArticleVII provides that that vehicle launched is subject to the jurisdiction itwas launched under.140 This means that if a company such as SMClaunches a spacecraft in Arizona, the United States is responsible forensuring SMC abides by the Treaty, and that vehicle is considered anAmerican flagged vessel. This argument is buttressed by the fact thatthe UN’s Office for Outer Space Affairs website expressly denies thata non-governmental entity can claim a celestial body because theTreaty requires continuing supervision by the appropriate StateParty.141 The United States agreed to this when it created the Regis-tration of Objects Launched into Outer Space Treaty, which was rati-fied by the Senate, signed by the President, and entered into force in1976.142 The Treaty, in Article I, section (a)(ii), defines that a launch-ing state means “a state from whose territory or facility a space objectis launched.”143 This means that anything launched from Americansoil is deemed to be flagged as an American vessel, subject to Ameri-can jurisdiction, and any international treaties that the courts willenforce.

Hypothetically, what happens if Space Mining Corp. (“SMC”) thenforms a subsidiary in Belize (a non-signatory, non-participating coun-try)144 and launches a vessel to harvest an asteroid claiming that aster-oid? It would be up to international law and agreements to pressureBelize and hold the nation responsible even though Belize did not signthe charter. The pressure could include trade embargos, or refusal topurchase the mined materials. Because SMC is an American corpora-tion, international law would hold the United States responsible aswell. As a result, international pressure could cause the governmentof the United States to restrict SMC. This is because the governmentrefused to enforce the Treaty. The government of the United States

138. Outer Space Treaty, supra note 16, at 5.139. Id.140. Id.141. Frequently Asked Questions, UNITED NATIONS OFFICE FOR OUTER SPACE AF-

FAIRS, http://www.oosa.unvienna.org/oosa/FAQ/splawfaq.html (last visited July 31,2014).

142. Convention on Registration of Objects Launched into Outer Space, Jan. 14,1975, 28 U.S.T. 695, 1023 U.N.T.S. 15 [hereinafter Registration Convention].

143. Id. at 5.144. UNITED NATIONS OFFICE FOR DISARMAMENT AFFAIRS, Treaty on Principles

Governing the Activities of States in the Exploration and Use of Outer Space, includingthe Moon and Other Celestial Bodies, http://disarmament.un.org/treaties/t/outer_space(last visited July 31, 2014).


might then be expected to take actions that go against SMC’s propertyrights in the asteroid.

The OST does account for the loophole further into its text. A cor-poration exists due to government recognition by grants of rights andprivileges.145 While national appropriation yields images of a personplanting a flag, that nation is responsible for the actions of the corpo-ration. Even multinational corporations are recognized as belongingto a parent state, as well as the nations they operate in. It is becauseof this that if SMC plants its flag on an asteroid, the home country stillhas jurisdiction, and the property rights still have not been created.

B. Space Mining Methods and the OST

Article II of the OST prohibits the appropriation of a celestial body,it does not speak of exploiting the resources of that body. The threemain methods of mining asteroids are: bring the asteroid to earth, pro-cess the asteroid on site, and bring the asteroid into stable orbit andprocess it there. If an asteroid is mined, this process is likely to createproperty rights in those minerals due to the capture of thoseresources.

The most dangerous way to harvest an asteroid would be to attachsome sort of engine to the asteroid or capture it in some large deviceand redirect it back into the Earth’s orbit.146 While this conjures upimages of disaster movies, it has been hypothesized by scientists thatslowing the speed of the asteroid, having it land in the ocean, wouldeliminate the catastrophic nature of the collision from an asteroid (be-coming a meteorite) falling to Earth.147 Article IX of the OST prohib-its this type of dangerous activity by prohibiting “adverse changes inthe environment of the Earth resulting from the introduction of extra-terrestrial matter. . . .”148 This means that bringing asteroids back toearth would likely be a violation of the Treaty. In a later agreementcalled the Convention on International Liability for Damages Caused

145. Corporation Definition, BLACK’S LAW DICTIONARY (9th ed. 2009), available atWestlawNext. A corporation is defined in Black’s law dictionary as an entity havingauthority under law to act as a single person. This right is gained by filing incorpora-tion documents, and being recognized by the government as an entity from that pointon.

146. Asteroid Retrieval Feasibility Study, KECK INSTITUTE FOR SPACE STUDIES

(Apr. 2, 2012), http://www.kiss.caltech.edu/study/asteroid/asteroid_final_report.pdf;see also Steven J. Ostro and Carl Sagan, Cosmic Collisions and the Longevity of Non-Spacefaring Galactic Civilizations, JET PROPULSION LABORATORY, http://trs-new.jpl.nasa.gov/dspace/bitstream/2014/19498/1/98-0908.pdf (last visited July 31, 2014).

147. See generally, William BC Crandall, To: The Augustine Committee, EnablingProfitable Asteroid Mining, ABUNDANT PLANET 7(Aug. 3, 2009), http://www.nasa.gov/pdf/383154main_53%20-%2020090803.7.toAugustineCommittee-2009-08-03.pdf at 7;see also Stephen Harris, Your Questions Answered: Asteroid Mining, THEENGINEER.CO.UK (Apr. 8, 2013) http://www.theengineer.co.uk/aerospace/in-depth/your-ques-tions-answered-asteroid-mining/1015966.article.

148. Outer Space Treaty, supra note 16, at 6.


by Space Objects, or the Liability Treaty, damages caused to any partyas a result of an object crashing to Earth are the responsibility of thenation that flagged the ship.149 Thus, it is not likely any country wouldapprove this method for harvesting an asteroid.

The next way to capture an asteroid would be to land a vehicle on itthat could adjust the trajectory of the asteroid into a stable orbit neara processing facility.150 This method still has the risk of collision withother objects, but is much safer than crashing the asteroid into theEarth. Using this method could create property rights because of thecapture or occupation of the asteroid.

If NASA brings the asteroid into stable orbit, according to ArticleII of the OST, no property rights could be enforced.151 This is becausethe party claiming the asteroid would be NASA, not a corporation.NASA’s claim would be a national claim of sovereignty, or the sameexclusive use of the asteroid expressly prohibited in Article II. Ex-tracting and claiming the resources is plausible, but not while the as-teroid is a celestial body. If SMC brought the asteroid into stableorbit, the OST still applies. SMC would not have property rights inthe asteroid until processing. The OST mission for the peaceful explo-ration of space and the generation of property rights through capturewill likely get heavy weight, as taking a captured asteroid from an-other party does not lead to peace. The method of stable orbit leavespotential problems that are solvable by treating only captured aster-oids as claimed. If technology makes this method feasible, the OSTmay need amending to reduce potential conflict if two parties are at-tempting to capture the same asteroid.

The last method commonly discussed is the on-site harvesting of theminerals in the asteroid.152 The idea is to land some form of solar-powered unit to harvest the resources, and then return these resourcesback to a station or Earth.153 This method would be clear as to whoshould own the property rights, as the minerals would have been fullycaptured. As far as the OST is concerned, this is merely harvestingresources, and not staking a claim on a celestial body. Where thisbecomes troublesome is if two competing factions are attempting toget the same resources from the same asteroid. Currently, the re-sources would likely go to whoever extracts them.

The OST and its progeny consistently talk about the spirit of coop-eration. Grounds against cooperation start to arise if multiple parties

149. Convention on International Liability for Damage Caused by Space Objects,Mar. 29, 1972, 24 U.S.T. 2389, 961 U.N.T.S. 187 [hereinafter Liability Convention].

150. Harris, supra note 147(b); See also Asteroid Retrieval Feasibility Study, KECK

INSTITUTE FOR SPACE STUDIES (Apr. 2, 2012), http://www.kiss.caltech.edu/study/as-teroid/asteroid_final_report.pdf.

151. Outer Space Treaty, supra note 16, at 5.152. US Company Aims to ‘Harvest’ Asteroids, PHYS.ORG (Jan. 22, 2013), http://

phys.org/news/2013-01-company-aims-harvest-asteroids.html.153. Id.


are attempting to collect the same asteroid, commonly known as thefree rider problem.154 While the costs would be astronomical, it islikely that agreements and contracts will be created to reduce the risk.As asteroid mining becomes cheaper and more efficient, registering alaunch to a specific asteroid with the UN (because a nation cannothave sovereignty) may be a simple enough solution to claim thoserights. Then again, this may not be necessary. In Pierson v. Post, Postwas still pursuing the fox when Pierson ended the chase.155 Piersongained his rights by mortally wounding the fox–Post did not first regis-ter that he would be hunting the fox. This method of establishingproperty rights by mortally wounding the wild animal still serveshunters.

United States law gives the basis for the process of harvesting theminerals, and will establish property rights in those minerals. TheApollo missions set the precedent when the United States collectedand brought back lunar samples to Earth. Where this gets compli-cated is that the OST was in effect as the missions in the Apollo pro-gram were ending.156 There is an argument to be made that there is aproperty right created in the harvested material because the OST al-lows for the collection and use of materials in Article VIII.157 ArticleVIII provides that “Ownership of objects launched into outer space,including objects landed or constructed on a celestial body, and oftheir component parts, is not affected by their presence in outer spaceor on a celestial body or by their return to earth.”158 This article ap-pears to govern the creation of facilities when using launched compo-nents combined with harvested components. It could be argued toinclude harvesting and using of metals to build facilities or the acquisi-tion and use of hydrogen to refuel rockets, allowing the nation to flagthe use of the minerals as the nation’s own property; comingling thenew materials with those launched from Earth. This would raise thequestion of what percentage of terrestrial matter is required for own-ership. A low percentage would probably be valid; this is because thematerials would have to be processed and incorporated, modifying theminerals into pieces of the facility, still being flagged by the govern-ment building the structure.

154. Bezpalko, supra note 89, at 883.155. Pierson v. Post, 3 Cai. R. 175, 1805 WL 781, 1805 N.Y. Lexis 311 (N.Y. Sup. Ct.

1805).156. The last Apollo mission to reach the moon was launched Dec. 7, 1972, and the

OST came into effect in 1967. Apollo 17, NASA.gov (April 7, 2011), http://www.nasa.gov/mission_pages/apollo/missions/apollo17.html#.UwFpNfldVzU; U.S. DE-

PARTMENT OF STATE, Treaty on Principles Governing the Activities of States in theExploration and Use of Outer Space, Including the Moon and Other Celestial Bodies,http://www.state.gov/t/isn/5181.htm (last visited July 31, 2014).

157. Outer Space Treaty, supra note 16, at 5.158. Id.


The OST was written with the intent to keep a nation from plantinga flag on the moon and claiming it. Maintaining the provisions in theOST is still possible, even when parties begin to harvest resourcesfrom those celestial bodies. The only adjustment that may be neededis over who would “own” the asteroid if multiple parties were compet-ing for ownership. The process of capture is a likely source to grantproperty rights in the resources collected, just not to a private com-pany claiming a sector of the asteroid belt.

C. Private Ventures and Speculation

The only country pushing for privatization of the space industry isthe United States. The OST applied in its current form would holdthe United States responsible for the actions undertaken by the priva-tized space companies because of Article VI and VII of the OST.Many Americans have purchased a “Lunar Deed” from a person whoclaimed the moon, (and several other planets and their moons), citingArticle II as the authority to take ownership.

If a person were to claim an asteroid merely by registering it with anagency (such as the Archimedes institute), the courts would likelyagree with the ruling in Nemitz and hold that no rights were cre-ated.159 Another example would be Dennis Hope who sells “LunarDeeds.”160 Mr. Hope stated that he claimed ownership of the moonby sending a letter to the UN stating his claim and demanding a re-sponse to state if that claim was invalid.161 He stated that he did thisbecause he saw the loophole in the OST and decided that if a govern-ment could not own the moon, then he should be able to.162 He hasbeen selling plots of land on the moon since 1995, and believes thatmost of his customers believe these are actual rights because 42% ofhis sales are to trusts.163 While no one has legally challenged thesedeeds, because of the time and notoriety involved, it could be arguedthat the UN acquiesced to Mr. Hope. On the other hand, Mr. Hopeknows that his claim has severe legitimacy issues because he recentlyestablished the “Galactic Government” (ratified by over 100,000 ofthe moon’s “landowners”) and is seeking for it to be recognized as anation.164 Ironically, by creating a government, the “Galactic Govern-ment” now conflicts with the OST, prohibiting a national govern-ment’s claim to appropriation.

159. Nemitz v. United States, CV-N030599-HDM (RAM), 2004 WL 3167042 (D.Nev. Apr. 26, 2004) aff’d sub nom. Nemitz v. N.A.S.A., 126 Fed. App’x 343 (9th Cir.2005).

160. Rachel Hardwick, Denis M. Hope has Owned the Moon Since 1980 Because HeSays So, Vice.com (Apr. 11, 2013), http://www.vice.com/read/ive-owned-the-moon-since-1980.

161. Id.162. Id.163. Id.164. Id.


Investors, who would fund the private venture into space mining,would likely want some form of return in the minerals harvested.These initial space mining ventures do not need to claim the asteroidsthey are attempting to harvest because of the very large barriers toentry. As the technology becomes more readily available, these pio-neering companies may have established regions where they exclu-sively mine asteroids. This is where the major challenge to the OSTand property rights would come into play. The Liability ConventionArticle III provides that the party that damages another is responsi-ble.165 So if SMC claimed a sector of asteroids, the OST would notprotect it. If SMC attempted to police this area itself, it would beliable for any damage done. The home nation would also be responsi-ble because of articles VI and VII of the OST, which requires thegovernment to flag the vessels and requires enforcement of theOST.166

The privatization of space as an industry, for now, seems to be hap-pening only in the United States.167 Russia revitalized its bankruptspace program by pioneering space tourism. Dennis Tito was Russia’sfirst commercial space tourist, purchasing a flight to the internationalspace station for $20 million on April 28, 2001.168 Russia is also ferry-ing American astronauts to and from the International Space Stationsince the end of NASA’s shuttle program in 2011.169 Russia wouldhave started a market for private space ventures if the loophole wasconsidered a realistic possibility. After the fall of the Soviet Union,the Russian Space Agency went bankrupt. One could speculate that ifthe Russian government believed this loophole was a possibility, itwould have sold their usable Soyuz capsules to a nongovernment en-tity. China has recently landed an unmanned drone on the moon.170

China is likely using that drone to scout for good resource collectionsites that are also near the lunar poles, where water has been discov-ered.171 If China were to grant its space technologies and resources toa fledgling company (such as SpaceX, which was given a multimillion-

165. Liability Convention, supra note 149, at 5.166. Outer Space Treaty, supra note 16, at 5.167. Dominic Basulto, Funding Manned Space Exploration is Not Rocket Science,

BIGTHINK.COM (Apr. 25, 2011, 9:27 PM), http://bigthink.com/endless-innovation/funding-manned-space-exploration-is-not-rocket-science.

168. Mike Wall, First Space Tourist: How a U.S. Millionaire Bought a Ticket to Or-bit, SPACE.COM (Apr. 27, 2011, 6:00 AM), http://www.space.com/11492-space-tourism-pioneer-dennis-tito.html.

169. Irene Klotz, NASA Wants “Space Taxis” To Bring Astronauts To The Interna-tional Space Station, BUSINESSINSIDER.COM (Nov. 19, 2013, 9:52 PM), http://www.businessinsider.com/nasa-iss-space-taxis-2013-11.

170. Glenn Harlan Reynolds, Will China Restart the Space Race?, USATODAY.COM

(Dec. 16, 2013, 4:20 PM), http://www.usatoday.com/story/opinion/2013/12/16/china-moon-astronaut-nasa-column/4031105/.

171. Jennifer Ouellette, This Moon was Made for Farming (Helium-3), DISCOVER-

YNEWS.COM (Feb. 21, 2011, 10:47 PM), http://news.discovery.com/space/this-moon-was-made-for-mining.htm.


dollar startup grant by the United States government),172 it could be-gin to test the loophole by claiming that site. At this point, it would beunnecessary for China to create such a nongovernmental entity. TheOST allows for countries to build structures. Conflict will only beginonce one party attempts to exclude another by claiming propertyrights. Should this conflict happen, parties to the Treaty would haveto pressure the country not following the Treaty into compliance.

As the OST is applied to hypothetical and real situations, it stillholds up and allows for the construction of colonies and the extractionof resources. The loophole itself is, at a minimum governed underSections VI and VII of the OST, holding the launching nation respon-sible. Another extreme possibility to avoid the OST could be re-nouncing citizenship of the Earth. Renouncing citizenship would thenmake any treaty inapplicable to that person, resulting in no governingauthority over that person. This is a flawed position because the en-forcement of the OST could be based on trade embargos against thatnon-Earth entity.

V. CONCLUSION

The answer to the question of, “Can I own an asteroid?” is no. Cre-ation of an international regime to govern the property rights of ob-jects in space would make ownership possible, but most nations arenot ready to give the UN control. It is possible to gain property rightsin the resources harvested from that asteroid. The OST has reachedwide acceptance, and most nations are a part of it. This Treaty canstill govern any interaction in space. Any change in the status quowould stifle the development of the industry. This would lead to asituation like in LOST, where the result was slowing the creation of aninfant industry. The ISA stalled the development of sea floor miningonce it came into effect. Most countries in the world have not signedthe Moon Treaty. A party owns resources collected from space andreturned to Earth, with property rights in those resources. As spaceexploration matures, so will new technologies and new ways to gener-ate revenue. Space mining is still in its infancy, and property rightswill emerge once theoretical problems become real problems.

172. Loren Thompson, What NASA Risks By Betting On Elon Musk’s SpaceX,FORBES.COM (May 23, 2011, 11:40 AM), http://www.forbes.com/sites/beltway/2011/05/23/what-nasa-risks-by-betting-on-elon-musks-spacex/.

ROBBING PETER AND BLAMING PAUL: ACOMMENT EXPLAINING HOW PROFESSOR

ROBERT HOCKETT INCORRECTLY ASSESSESTHE CAUSE OF THE UNDERWATER

MORTGAGE CRISIS AND AN AQUINIANEXPLANATION OF HOW HIS EMINENT

DOMAIN SOLUTION IS NEITHER ETHICALLYCORRECT NOR APPROPRIATE

By Cooper Morgan Walker†

I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148II. ROBERT HOCKETT’S EMINENT DOMAIN SOLUTION . . . . . 150

III. ROBERT HOCKETT’S EXPLANATION OF WHAT CAUSED

THE CRISES AND THE REASONING FOR HIS SOLUTION . . 151IV. THE AUTHOR’S EXPLANATION OF WHAT CAUSED THE

CURRENT UNDERWATER MORTGAGE CRISIS . . . . . . . . . . . 152A. A Brief History of What Led to the Crisis . . . . . . . . . . 153B. The Creation of the Crisis . . . . . . . . . . . . . . . . . . . . . . . . . . . 154C. The Consequences of the Crisis, Including Those

Going Without Consequence . . . . . . . . . . . . . . . . . . . . . . . . 156D. Why Robert Hockett’s Explanation of the Crisis is

Inadequate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157E. How Robert Hockett’s Explanation of the Crisis is

Inadequate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158F. The Financial Crisis Inquiry Commission’s

Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158V. HOW ROBERT HOCKETT’S SOLUTION IS NOT AN

ETHICALLY CORRECT SOLUTION ACCORDING TO THE

LEGAL PHILOSOPHY OF ST. THOMAS AQUINAS . . . . . . . . . 160A. An Explanation of St. Thomas Aquinas’s Definition

of Justice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161B. Robert Hockett’s Solution Does Not Treat the Cause

of the Underwater Mortgage Crisis at its Source . . . . . 161C. Robert Hockett’s Solution Does Not Hold Those

Who Created the Underwater Mortgage CrisisAccountable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1631. Criminal Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1642. Civil Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164

† Author Bio: J.D. Candidate, Texas A&M University School of Law, Spring2015; B.A. in Philosophy, University of Dallas, Spring 2012; Executive Editor, TexasA&M Journal of Real Property Law, 2014–2015.

147


D. Robert Hockett’s Solution Requires Valid Contractsto be Broken . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165

E. Robert Hockett’s Solution has no Likelihood ofBeing Any More Efficient than Leaving the HousingMarket Alone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167

VI. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168

I. INTRODUCTION

After many years of a booming, highly profitable housing market,in late 2008 the United States experienced the largest price drop inhomes in the nation’s history.1 U.S. home values plummeted by al-most 30% in October of 2008.2 This drop was almost double the num-ber registered in the United States during the Great Depression.3Many experts believe that the bursting of the housing bubble was thecatalyst for the recession that originated at the same time.4 Since thehousing crisis, many proposals have been set forth attempting to pro-vide a solution for the crisis the United States faces. However, noproposal has created such a buzz, or has been so well received, as thatof Robert Hockett.5 Hockett is a Professor of Law at Cornell LawSchool whose principal teaching, research, and writing interests lie inthe fields of organizational, financial, and monetary law andeconomics.6

Hockett’s solution to the underwater mortgage crisis contains manycomplexities. One of the purposes of this Comment is to adequatelyexplain those complexities. However, this will be done with a biggerpurpose in mind—to prove that Hockett’s solution is not an ethicallycorrect or appropriate solution for the current crisis. A more detailedexplanation of Hockett’s proposal is contained in part II of this Com-ment, but the fundamental idea that Hockett puts forth is as follows.

First, Hockett suggests that local municipalities use their eminentdomain power to take underwater mortgages from banks at a price

1. Alan Libel, Home Price Index Posts Largest Drop in 17-Year History, USATODAY, http://usatoday30.usatoday.com/money/economy/housing/2008-05-22-home-prices-drop_N.htm (last updated May 22, 2008).

2. Carmen M. Reinhart & Kenneth S. Rogoff, The Aftermath of Financial Crises4 (Nat’l Bureau of Econ. Research, Working Paper No. 14656, 2009), http://www.nber.org/papers/w14656.pdf?new_window=1.

3. Id.4. Jeff Holt, A Summary of the Primary Causes of the Housing Bubble and the

Resulting Credit Crisis: A Non-Technical Paper, 8 THE JOURNAL OF BUSINESS IN-

QUIRY 120 (2009), http://www.uvu.edu/woodbury/docs/summaryoftheprimarycauseofthehousingbubble.pdf.

5. The Century Foundation, Robert C. Hockett-Fellow, http://tcf.org/experts/de-tail/robert-c.-hockett (last visited Aug. 21, 2014) (explaining Professor Hockett’s biog-raphy to those unfamiliar with his work).

6. Id.

2014] ROBBING PETER AND BLAMING PAUL 149

that would “justly compensate” the banks.7 “Just compensation”would equal the fair market value of the home in the current housingmarket.8 These mortgages would then be bought by private investorswho would in turn begin receiving the homeowner’s mortgage pay-ment.9 These private investors are incentivized by a profit that is “cre-ated” as a result of the deal.10 Then, in the end, those withunderwater mortgages are provided with a new mortgage that is equalto the value of their home in the present market.11

Hockett’s proposal has produced much debate. There are schoolsof people eager to either defend or devour his solution.12 Whetherthe proposal will be productive in an economic sense and whether theproposal is constitutional has been of much debate in recent months.13

While both of these issues should be determining factors in decidingwhether to implement the solution, the two issues are both beyond thescope of this Comment. The purpose of this Comment is to addressHockett’s proposal from an ethical prospective. Although the eco-nomic and constitutional consequences of Hockett’s proposal are stillhighly in debate, there seems to be a lack of ethical reflection on theissue. As a prospective attorney, the Author understands that legalissues are based on the law rather than on what is “ethical” or what is“right.” However, when determining what the law should be or whatthe current law is meant to express, it is important to look at the mat-ter from an ethical prospective.

The Author’s purpose is to show the American community—andspecifically the legal community—how and why Hockett’s proposal isnot an ethically correct or appropriate solution for the underwatermortgage crisis. To achieve this end, the Author will give a detailedexplanation of Professor Hockett’s proposal in Part II. Next, the Au-thor will set forth Hockett’s explanation of what caused the underwa-ter mortgage crisis in Part III. In Part IV the Author will provide his

7. Robert Hockett, It Takes a Village: Municipal Condemnation Proceedings andPublic/Private Partnerships for Mortgage Loan Modification, Value Preservation, andLocal Economic Recovery, 18 STAN. J.L. BUS. & FIN. 121, 150–51 (2013).

8. Id.9. Id.

10. See generally Robert Hockett, Paying Paul and Robbing No One: An EminentDomain Solution for Underwater Mortgage Debt, Fed. Reserve Bank of N.Y., 19 Cur-rent Issues in Econ. and Fin. No. 5, 2013, http://www.newyorkfed.org/research/current_issues/cil9-5.pdf.

11. Hockett, supra note 7, at 151.12. See generally Rachel D. Godsil & David V. Simunovich, Protecting Status: The

Mortgage Crisis, Eminent Domain, and the Ethic of the Homeownership, 77 FORDHAM

L. REV. 949 (2008); David A. Dana, The Foreclosure Crisis and the Anti-Fragmenta-tion Principle in State Property Law (Nw. Univ. Sch. of Law Scholarly Commons,Working Paper No. 186, 2009); Andrew Peace, Coming Up for Air: The Constitution-ality of Using Eminent Domain to Condemn Underwater Mortgages, 54 B. C. L. REV.2167 (2013).

13. A quick Google search will provide numerous articles on whether Hockett’splan is economically sound or constitutional.


own belief on what the cause of the underwater mortgage crisis is.Then, after showing how Hockett does not assess the cause of the un-derwater mortgage crisis correctly, the Author will then show thereader how Hockett’s solution is not ethically appropriate in Part V.This Comment will evaluate the ethical resolve of Hockett’s solutionusing the legal philosophy of St. Thomas Aquinas. However, the Au-thor is confident that if the reader is willing to inspect Hockett’s solu-tion against the facts of what created the underwater mortgage crisis,the reader will then develop an intuitive sense for why Hockett’s solu-tion is neither ethically correct nor appropriate.

II. ROBERT HOCKETT’S EMINENT DOMAIN SOLUTION

Robert Hockett’s eminent domain solution contains many detailedcomplexities that are beyond the scope of this Comment. However, tounderstand the overall message of this Comment, the fundamentalidea of Hockett’s solution must be understood. This Section will ex-plain Hockett’s proposal only to the extent needed to lay a foundationfor the ultimate purpose of this Comment—to show both how andwhy Hockett’s proposal is not an ethically correct or appropriate solu-tion to the underwater mortgage crisis. Also, it must be rememberedthat Hockett’s solution requires action at the municipal level. There-fore, this general overview cannot and does not attempt to explainnuances between what one municipality may choose to do in compari-son to another municipality. Rather, this Section is intended to ex-plain the general similarities that will be carried out by anymunicipality that chooses to implement Professor Hockett’s proposal.

As explained, the first step in Hockett’s proposal asks local munici-palities to use their eminent domain power to take the underwatermortgages from banks that own the underwater mortgages.14 Thebanks must then be “justly compensated.” In other words, the banksmust be given the fair market value of the homes under the currenthousing market.15 On a related note, Hockett views this issue as beinglocally based in that certain areas of the United States have been andare being affected by this crisis much more than other areas.16 There-fore, Hockett believes that local municipalities are much better quali-fied to address the problem than the federal government is, and hebelieves that these municipalities should implement Hockett’s solu-

14. Hockett, supra note 7, at 150–51.15. See Robert Hockett, It Takes a Village: Municipal Condemnation Proceedings

and Public/Private Partnerships for Mortgage Loan Modification, Value Preservation,and Local Economic Recovery, 18 STAN. J.L. BUS. & FIN. 121, 151–52 (2013).

16. Id. at 152.


tion.17 One benefit of a local solution is that it would allow for munic-ipalities to tailor their plans to their local circumstances.18

In order to purchase these mortgages, municipalities deposit inves-tor-supplied funds in state-administered escrow accounts maintainedonly for this purpose.19 The amount deposited, as mandated by law,equals the probable just compensation ultimately to be paid for thecondemned mortgages.20 Probable just compensation is determinedvia municipality-procured appraisals.21 Once the underwater mort-gages are acquired, each municipality, in cooperation with the privateinvestors, comes to an agreement on the amount the homeowners paythe private investors for the mortgage.22 This agreement is made pur-suant to criteria commonly employed by ordinary market lenders likethe Federal Housing Administration.23

In the end, this process results in providing those with underwatermortgages with a new mortgage rate that is much closer to the valueof their mortgage in today’s market as opposed to what their mort-gage was worth at the time when the individual purchased the home.24

In theory, this is a great idea. However, the Author proposes thatwhile Hockett’s solution may be theoretically sound, it lacks the abil-ity to be practically sound or ethically appropriate.

III. ROBERT HOCKETT’S EXPLANATION OF WHAT CAUSED THE

CRISES AND THE REASONING FOR HIS SOLUTION

In order for a person to make an educated decision that Hockett’sproposal is not the ethically correct or appropriate solution for theunderwater mortgage crisis, two issues must be understood. First, thefundamentals of Hockett’s solution must be understood. This hasbeen discussed in Part II of this Comment. The second issue that mustbe understood is Professor Hockett’s perception of the problem andthe reasoning he employs to account for his solution. Once this hasbeen explained, the framework will have been laid to show how Hock-ett’s proposal is neither an ethically correct nor appropriate solutionto the underwater mortgage crisis.

Professor Hockett believes that the current underwater mortgagecrisis was created by individuals who were acting rationally.25 Hockettclaims that because these individuals were acting in a rational manner,

17. Id.18. Robert Hockett & John Vlahoplus, A Federalist Blessing in Disguise: From

National Inaction to Local Action on Underwater Mortgages, 7 HARV. L. & POL’YREV. 253, 268 (2013).

19. Hockett, supra note 7, at 154.20. Id.21. Id.22. Id.23. Id.24. Id. at 151.25. Hockett, supra note 7, at 138.


the housing crisis was unavoidable absent major Federal interven-tion.26 While Federal intervention certainly could have helped thecurrent underwater mortgage crisis, the crisis should not have beenpreventable only through Federal intervention. Hockett also assertsthat when looking at all the concerned parties of the underwater mort-gage crisis, each party made blameless decisions with the possible ex-ception of the central bank.27 Hockett further explains that the act ofparties acting in a financially defensible manner is what enabled thebubble to form.28 As expressed by him, Professor Hockett holds thatto attempt to identify and hold accountable the responsible parties is afrivolous pursuit.29

Finally, Hockett states that rather than wasting time pointing thefinger at anybody—home buyer, lender, or market investor—what thecountry should really focus on is the need to clean up the presentwreckage.30 Professor Hockett believes that the individuals who cre-ated the problem are no better positioned collectively to fix the prob-lem than they were to create it.31 To best show how ProfessorHockett views the current crisis and how he proposes solving it, theAuthor provides the following quote from Hockett.

It should be kept in mind in considering the foregoing [solution]that the purpose of the [solution] is not to bail out the borrower; thepolicy analysis does not depend on the morality of the borrower’s orthe lender’s prior actions in taking or making a toxic mortgage loan.The purpose is to save the neighbor, the community, and the cityitself . . . .32

While what Hockett is attempting to accomplish is admirable, theAuthor believes that Hockett’s perception of the underwater mort-gage crisis does not fully explain the causation of the crisis. The fol-lowing Section will be devoted to explaining that there is actually aspecific reason for the collapse of the housing market. This shouldbring light to how and why Hockett’s solution is not an ethically cor-rect or appropriate solution to the underwater mortgage crisis.

IV. THE AUTHOR’S EXPLANATION OF WHAT CAUSED THE

CURRENT UNDERWATER MORTGAGE CRISIS

During the significant period of time devoted to reading ProfessorHockett’s writings concerning his solution to the underwater mort-gage crisis, the Author became troubled by what he could not find.Specifically, the Author was never able to find a full and adequate

26. Id.27. Id. at 132.28. Id.29. Id. at 130.30. Hockett, supra note 7, at 130.31. Id.32. Hockett, supra note 18, at 267.


description of the underwater mortgage crisis—one that fully explainsboth the causes and reveals the culprits of the crisis. As clarifiedabove, Hockett has expressed that the mortgage crisis was inevitableand based on people making financially rational decisions.33 The Au-thor must disagree. In fact, the Author strongly disagrees. Therefore,the Author will now attempt to show the true catalyst of the underwa-ter mortgage crisis.

Unfortunately, there is still much debate over what exactly causedthe mortgage crisis of 2008. However, this outside debate does notshake the Author’s belief that he can show, at the very least, the chiefcomponent that created the crisis. Furthermore, the Author also be-lieves that Hockett’s solution becomes clearly inappropriate from anethical standpoint once the chief cause of the underwater mortgagecrisis becomes apparent. Thus, the Author will now show that the cri-sis is largely attributable to the deregulation of the financial marketthat began in the early 1970s and the many horrific consequences thatfollowed as a direct result of this deregulation.34

A. A Brief History of What Led to the Crisis

In the aftermath of the Great Depression, it was nearly universallybelieved that unregulated financial markets were inherently unstable,subject to fraud and manipulation by insiders, and capable of causinggreat economic crisis and political and social unrest.35 Therefore, inorder to protect the country from these dangers, in the mid-1930s theUnited States government created a strict financial regulatory systemthat was largely kept in place through the 1960s.36 This new modelwas based on the economic philosophies of Maynard Keynes and Hy-man Minsky.37 Their ideas generated a change in the American policyperspective of financial markets that was supportive of tight financialmarket regulation.38

Then, the financial turbulence felt in the 1970s and early 1980s ledto another policy regime shift concerning financial market regula-tion.39 Efficient financial market theory and new classical macro the-ory began to replace the conservative Keynesian and Minskianviews.40 The existing system of tight financial market regulation was

33. See Robert Hockett, It Takes a Village: Municipal Condemnation Proceedingsand Public/Private Partnerships for Mortgage Loan Modification, Value Preservation,and Local Economic Recovery, 18 STAN. J.L. BUS. & FIN. 121, 138 (2013).

34. James Crotty, Structural Causes of the Global Financial Crisis: A Critical As-sessment of the ‘New Financial Architecture,’ 33 CAMBRIDGE JOURNAL OF ECONOMICS

563 (2009), http://cje.oxfordjournals.org/content/33/4/563.full.pdfthtml.35. Id.36. Id.37. Id.38. Id. at 563–64.39. Crotty, supra note 34, at 564.40. Id.


thus deconstructed through radical deregulation that was pushed byfinancial institutions that were justifying this new and efficient markettheory.41 These developments then led to the current globally-inte-grated, deregulated financial market.42

B. The Creation of the Crisis

By the time George W. Bush took office in 2001, the United Statesfinancial sector was more powerful than ever before due to the crea-tion of derivatives43 and the inability to regulate these derivatives be-cause of the shift in American financial market theory.44 During thistime there were five investment banks (Goldman Sachs, Morgan Stan-ley, Lehman Brothers, Merrill Lynch, and Bear Stearns), two financialconglomerates (Citigroup and JP Morgan) and three credit ratingagencies (Moody’s, Standards & Poor’s, and Fitch) were dominatingthe financial industry. 45

The driving force behind these companies was a newly created de-rivative named a Collateralized Debt Obligation, or “CDO.”46 TheseCDOs are a collection of mortgage-backed securities and other loansincluding car loans, corporate debt, credit-card debt, etc.47 Once theCDOs are created, they are then sold to investors so that banks canquickly recover the money they just distributed for the loans.48

In the old system of Keynes and Minsky, when a homeowner madehis or her mortgage payment every month, this payment went back towhomever the homeowner borrowed the money from—usually thebank.49 These lenders were in turn very careful about whom theyloaned money to.50 This caution was only exacerbated by the fact thatmortgages take decades to pay back.51

41. Id.42. Id.43. Tomas Krizek, Legal Nature and Definition of Financial Derivatives (Oct. 24,

2011) (unpublished manuscript), available at http://ssrn.com/abstract=1948686.44. Vania Stavrakeva, Derivative Regulation—Why Does It Matter?, FORBES

(Sept. 24, 2013), available at http://www.forbes.com/sites/lbsbusinessstrategyreview/2013/09/24/derivative-regulation-why-does-it-matter/.

45. INSIDE JOB (Sony Pictures Classics 2010) (a paginated copy of the transcript tothis Academy Award winning documentary can be found at http://www.sonyclassics.com/awards - information / insidejob_screenplay.pdf) (the following citation can befound on page 22 of the transcript).

46. Id. at 23.47. Kay Giesecke & Baeho Kim, Risk Analysis of Collateralized Debt Obligations,

59 OPERATIONS RESEARCH 32 (2011), http://biz.korea.ac.kr/~baehokim/research/riskanalysis.pdf.

48. Ernest N. Biktimirov & Don Cyr, Using Inside Job to Teach Business Ethics,117 J. BUS. ETHICS 209, 210 (2013).

49. INSIDE JOB, supra note 45, at 23.50. Id.51. Id.


However, in the new system, lenders sell mortgages to investmentbanks such as those listed above.52 Then, these investment banks paythe rating agencies to evaluate the CDOs and determine whether buy-ing a particular CDO would be a good investment.53 After receiving agrade, these CDOs are then sold by the investment banks to privateinvestors.54 Thus, in today’s system, when homeowners pay theirmortgages the money travels to investors across the globe.55 This, inturn, means that money cannot be followed and monitored like it wasin days past.

It is easy to see why this new deregulated financial market systemquickly became a ticking time bomb. The new system created a struc-ture that allows the lenders, grading agencies, and investment banksto work exclusively and symbiotically toward their own financial ad-vantage without any regulation of, or consequences for, poor lending,poor grading, or poor investing.56 Lenders no longer have to worryabout whether borrowers can or will repay them because the lendersknow that the mortgage will be bought by an investment bank.57 Thelenders know that the mortgage will be purchased by an investmentbank because the more CDOs the investment banks sell to privateinvestors the higher the investment bank’s profits will be.58 The in-vestment bank knows that they will be able to sell their CDOs to in-vestors because the investment bank pays the rating agency, and if theinvestment bank is not getting AAA ratings (the highest rating possi-ble) for their CDOs then the investment banks can simply choose an-other grading agency to work with. This practice is possible becausegrading agencies have no liability if their ratings of a CDO prove in-correct.59 Therefore, again, the United States financial market haseventually become so unregulated that it now allows lenders, gradingagencies, and investment banks to act in their own self-interest, with-out consequence, and at the expense of our society. This deregulationcreated what the media calls “the bubble,” or, what should really be

52. Id.53. William Alden, Rating Agencies Repeatedly Caved to Banks’ Demands and

Helped Cause Crisis, Report Finds, HUFFINGTON POST, http://www.huffingtonpost.com/2011/04/14/rating-agencies-financial-crisis_n_849410.html (last updated June 14,2011).

54. Biktimirov, supra note 48, at 210.55. INSIDE JOB, supra note 45, at 23.56. Alissa Brunetti, Wall Street and the Financial Crisis: Anatomy of a Financial

Collapse 2, http://www.trustinorganizations.com/Resources/Documents/Wall_Street_and_the_Financial_Crisis_Anatomy_of_a_Financial_Collapse_-_Alissa_Brunetti_upload.pdf.

57. INSIDE JOB, supra note 45, at 23.58. Id.59. Id.


known as: the complete and total fabrication of the price of a group ofassets (CDOs) that is not justified by the actual price of those assets.60

Martin Wolf, Chief Economics Commentator of The FinancialTimes, described the current financial market system as not creatingreal profits or real income.61 Wolf further stated that money is simplybeing created by the system, and that in retrospect the system is aglobal Ponzi scheme.62

C. The Consequences of the Crisis, Including Those GoingWithout Consequence

Once the country realized there was not as much money in the sys-tem as alleged by those who created the underwater mortgage crisis,on October 4th, 2008, President Bush signed a $700 billion dollarbailout bill that would in essence put real currency into the financialmarket made of fraudulent monetary reports.63 In other words, hun-dreds of billions of dollars were given to the various companies listedat the beginning of this Section—the same companies that not onlycrippled the American housing market but also the global economy.64

And, in what seems to be an adding insult to injury fashion, the topfive executives at Lehman Brothers made over a billion dollars be-tween 2000 and 2007.65 Then, once the firm went bankrupt, the exec-utives were somehow allowed to keep all of this money.66 In likefashion, Stan O’Neil, the CEO of Merrill Lynch, received $90 millionin 2006 and 2007 alone.67 Then, after driving the firm into the ground,Merrill Lynch’s board of directors allowed O’Neil to resign and collect$161 million in severance.68

In the five years following the financial collapse, not one executivefrom any of these financial institutions have been criminallycharged.69 Not one. There is no denying that those who created thefinancial crisis that began in late 2008 have had little to no conse-quences for driving the economy into the ground.70 It should be notedthat over the last decade the financial services industry has maderoughly $5 billion dollars’ worth of political contributions to the

60. NASDAQ, http://www.nasdaq.com/investing/glossary/e/economic-bubble (lastvisited Feb. 28, 2014).

61. INSIDE JOB, supra note 45, at 25.62. Id. at 26.63. Dina Temple-Raston, Bush Signs $700 Billion Financial Bailout Bill, NPR,

http://www.npr.org/templates/story/story.php?storyId=95336601 (last updated Oct. 8,2008).

64. INSIDE JOB, supra note 45, at 53.65. Id. at 56.66. Id.67. Id.68. Id.69. Biktimirov, supra note 48, at 212.70. Id.


United States.71 The Author has no proof that these contributionsplay a factor in why these executives have had no criminal chargesbrought against them, but one may speculate that a $5 billion contri-bution could be the cause.

D. Why Robert Hockett’s Explanation of the Crisis is Inadequate

After this explanation of what the deregulation of the Americanfinancial market has done to cause the underwater mortgage crisis,there should now be a clear distinction between how Professor Hock-ett describes the collapse of the housing market as opposed to theAuthor’s explanation of the collapse. Professor Hockett barely ac-knowledges the deregulation of the American financial market andhow deregulation was a major, if not the complete, catalyst for thecurrent underwater mortgage crisis.72 Furthermore, while only devot-ing two paragraphs to the deregulation of the American financial mar-ket, Hockett spends approximately ten pages attempting to explainthat the underwater mortgage crisis is the result of “rationalthinking.”73

That Hockett did not adequately address the cause of the currentunderwater mortgage crisis is the primary reason why the Authorchose to address this topic. The Author can find no reason why Hock-ett would purposely withhold this information from the public—apublic who looks to experts such as Professor Hockett to providethem with the information necessary to make an informed decisionabout the current underwater mortgage crisis.

Unfortunately, the average person is not equipped with the infor-mation required to decipher whether Professor Hockett has fully ad-dressed the causes that crippled the housing market. This is why theAuthor finds it so important to pass the correct information along tothe general public. The Author would like to assume that ProfessorHockett did not think it necessary to address this issue in more detail.Alternatively, maybe Hockett did not think that an explanation suchas that just given would be important when deciding the best route totake in rescuing the country from the underwater mortgage crisis.However, this does not seem to be the case. Whether due to oversightor ulterior motives, Professor Hockett egregiously omits informationthat is paramount to understanding the crisis and in determining anethical and proper solution. When the full cause of the crisis is dis-closed, Professor Hockett’s solution cannot and will not be born by aninformed public. If the government chooses to deal with the currentunderwater mortgage crisis by placing the blame where it belongs,

71. INSIDE JOB, supra note 45, at 60.72. See Robert Hockett, It Takes a Village: Municipal Condemnation Proceedings

and Public/Private Partnerships for Mortgage Loan Modification, Value Preservation,and Local Economic Recovery, 18 STAN. J.L. BUS. & FIN. 121, 126 (2013).

73. Id. at 126–136.


forcing those individuals to be liable for their actions, then ProfessorHockett’s solution will no longer be viable.

E. How Robert Hockett’s Explanation of the Crisis is Inadequate

As explained earlier, Professor Hockett asserts that the underwatermortgage crisis was created by unavoidable, financially rational deci-sion-making.74 It should now be clear that this is untrue.75 In fact,Hockett’s statement is in direct opposition to the real cause of thecurrent underwater mortgage crisis. The executives at these financialinstitutions clearly knew what they were doing76, and the situation cer-tainly could have been avoided if there was any practical regulation ofthe American financial markets.77 More than that, the underwatermortgage crisis could have been avoided if these executives at thelending institutions, grading agencies, and investment banks did notknowingly decide to act in their own financial self-interest with noconcern for the economic well-being of the rest of the nation.78

Another issue that becomes clear after learning how and why thefinancial market collapsed is the fact that one logical solution to theproblem—to hold the lending institutions, grading agencies, invest-ment banks, and their executives responsible for the problem thatthey created—has not been implemented.79 Within Bank of America,Wells Fargo, Bear Stearns, Citigroup, Goldman Sachs, and J.P. Mor-gan, just to name a few, not one senior officer has been sued to date.80

One of the many reasons why Professor Hockett’s solution is not anethically correct or appropriate solution to the underwater mortgagecrisis is because it does not hold accountable the people who createdthe underwater mortgage crisis. However, this is certainly not theonly reason.

F. The Financial Crisis Inquiry Commission’s Opinion

The Financial Crisis Inquiry Commission was created under theFraud Enforcement and Recovery Act that was passed by the UnitedStates Congress and signed by President Obama in May of 2009.81

This ten-member panel was composed of private citizens with experi-ence in the areas of housing, economics, finance, market regulation,

74. Id. at 126–138.75. Reference the sub-section “Creation of the Crisis.”76. THE FINANCIAL CRISIS INQUIRY COMMISSION, THE FINANCIAL CRISIS IN-

QUIRY REPORT xxii (2011) http://www.gpo.gov/fdsys/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf [hereinafter Crisis Report].

77. Id. at xviii.78. Id. at xxii.79. See generally Ernest N. Biktimirov & Don Cyr, Using Inside Job to Teach Bus-

iness Ethics, 117 J. BUS. ETHICS 209, 212 (2013).80. Id.81. History of the Commission, FINANCIAL CRISIS INQUIRY COMMISSION, http://

fcic.law.stanford.edu/about/history (last visited Feb. 7, 2014).


banking, and consumer protection.82 Six of the Commission’s mem-bers were appointed by the Democratic leadership of Congress andfour by the Republican leadership.83 The Commission’s statutory in-structions contained twenty-two specific issues that should be investi-gated, and it asked the commission to examine the collapse of themajor financial institutions that failed or would have failed if not forthe $700 billion bail-out bill.84

In their final report published in January of 2011, the Financial Cri-sis Inquiry Commission used variations of the “fraud” at least 157times when describing what caused the crisis.85 The Commission con-cluded that there was a “systemic breakdown,” not just in accountabil-ity, but also in ethical behavior.86 Furthermore, the Commissionfound the signs of fraud everywhere, and the number of reports ofsuspected mortgage fraud rose twenty-fold between 1998 and 2005and then doubled again the next four years.87 The Commissionreached nine main conclusions that it published in The Financial CrisisInquiry Report: Final Report of the National Commission on theCauses of the Financial and Economic Crisis in the United States,88

some of which will now be quoted:We conclude this financial crisis was avoidable . . . We conclude acombination of excessive borrowing, risky investments, and lack oftransparency put the financial system on a collision course with cri-sis . . . We conclude there was a systematic breakdown in accounta-bility and ethics . . . We conclude collapsing mortgage-lendingstandards and the mortgage securitization pipeline lit and spreadthe flame of contagion and crisis . . . We conclude the failures ofcredit rating agencies were essential cogs in the wheel of financialdestruction.89

Another reason why Hockett’s solution is troublesome is that whilethe Financial Crisis Inquiry Commission—a commission elected bythe United States Congress for the purpose of determining the causeof the financial collapse—is quoted as saying that the underwatermortgage crisis was avoidable90, Professor Hockett claims the com-plete opposite.91 Hockett specifically states that it was “rational and

82. Id.83. Id.84. Id.85. Jed S. Rakoff, The Financial Crisis: Why Have No High Level Executives Been

Prosecuted?, N.Y. REV. OF BOOKS (Jan. 9, 2014), http://www.nybooks.com/articles/archives/2014/jan/09/financial-crisis-why-no-executive-prosecutions/.

86. Id.87. Id.88. CRISIS REPORT, supra note 76, at xvii-xxv.89. Id.90. Id. at xvii.91. See Robert Hockett, It Takes a Village: Municipal Condemnation Proceedings

and Public/Private Partnerships for Mortgage Loan Modification, Value Preservation,and Local Economic Recovery, 18 STAN. J.L. BUS. & FIN. 121, 138 (2013).


indeed unavoidable . . . for individual market actors to enter intotransactions that ultimately aggregated into the bubble.”92 Yet, theCommission explains that mortgages were being falsely attributedcreditworthiness that then became the sole collateral for highly lever-aged securities.93 These securities were then marked to have the high-est credit rating possible given by the credit rating agencies.94

Therefore, after the Committee explained that mortgages were givencompletely fabricated creditworthiness, Professor Hockett attempts toconvince the general public that the crisis was unavoidable and wascreated by rational decision-making.

V. HOW ROBERT HOCKETT’S SOLUTION IS NOT AN ETHICALLY

CORRECT SOLUTION ACCORDING TO THE LEGAL

PHILOSOPHY OF ST. THOMAS AQUINAS

A significant portion of this Comment has been devoted to explain-ing the lack of ethical decision-making that created the current under-water mortgage crisis and to explaining the solution Professor Hockettposes to fix the problem. Moreover, as explained early in this Com-ment, this was done in order to set up the main purpose of this Com-ment—to show how and why Professor Hockett’s solution is not anethically correct or appropriate solution to the underwater mortgagecrisis. While it is important that a problem of this magnitude besolved quickly and efficiently, it is most important that the correct so-lution be applied to the problem. The Author argues that for a solu-tion to be correct, it must also be ethical. This is not the onlycharacteristic of a correct solution; however, it is an important charac-teristic in determining a solution. Thus, this ethical characteristic isthe focus of this Comment. The purpose of this Section is to ade-quately explain why Professor Hockett’s solution is not an ethicallycorrect solution to the underwater mortgage crisis. To achieve thisend, the Author will utilize the legal philosophy of St. ThomasAquinas.

The legal philosophy of St. Thomas Aquinas, while complex, isgrounded in basic principles that can be universally understood andapplied to any situation. This, in large part, is what motivated theAuthor to use Aquinas’s legal philosophy to demonstrate how andwhy Hockett’s solution is not ethically sound. Specifically, the Authorwill be utilizing Aquinas’s definition of justice. The simplicity ofAquinas’s definition of justice is helpful in that it can be applied toany situation. The Author’s purpose in this Section is to explain Aqui-nas’s definition of justice, to practically apply this definition of justiceto the underwater mortgage crisis, and, through the application of

92. Id.93. Rakoff, supra note 85, at 4.94. Id.


Aquinas’s definition of justice, to prove that Professor Hockett’s solu-tion is not ethically sound.

A. An Explanation of St. Thomas Aquinas’s Definition of Justice

For Aquinas, justice is one of the four Cardinal Virtues, or moralvirtues, of which the other three are prudence, temperance, and cour-age.95 Aquinas claims that the virtue of justice governs a person’s re-lationship with others.96 Specifically, justice entails a constantwillingness to extend to each person what he or she deserves.97 WhileAquinas’s description of justice contains much complexity that is be-yond what is necessary for this Comment, it should be acknowledgedthat Aquinas alludes to a bifurcated explanation of justice—justice inrelation to the individual and justice in relation to the community.98

Justice in relation to the community is what Aquinas defines as legaljustice.99 In short, Aquinas states that the purpose of legal justice is togovern a person’s actions according to the common good of the com-munity.100 Interpreted this way, legal justice is a virtue that concernsnot individual benefits but the welfare of the community.101 Further-more, each member of the community relates to that community as apart relates to a whole—the part being the individual and the wholebeing the community.102 Thus, it logically follows that anything thataffects an individual in a community also affects the community as awhole. Likewise, the actions of the individual in the community canand will effect the community as a whole. Thus, again, that which isfocused on the common good of the community is defined as beinglegally just according to Aquinas.103 The Author will now show thatHockett’s solution is not ethically correct nor appropriate because it isnot in the best interest of the American community.

B. Robert Hockett’s Solution Does Not Treat the Cause of theUnderwater Mortgage Crisis at its Source

Every solution is created in order to repair a problem. In order forthe problem to be repaired, the problem must be properly assessed. Ifa problem is not properly assessed, then the solution created from this

95. 2 St. Thomas Aquinas, Summa Theologica, Q. 61 Art. 2, at 846–47 (Fathers ofthe English Dominican Province trans., rev. ed. 1920, reprt. Christian Classics 1981)(c. 1274).

96. 3 St. Thomas Aquinas, Summa Theologica, Q. 57 Art. 1, at 1425 (Fathers ofthe English Dominican Province trans., rev. ed. 1920, reprt. Christian Classics 1981)(c. 1274).

97. Id., Q. 58 Art. 1, at 1429.98. Id., Q. 58 Art. 5, at 1431–32.99. Id.

100. Id., Q. 58 Art. 6, at 1432–33.101. Id.102. Aquinas, supra note 96, Q. 58 Art. 5 at 1431–32.103. Id., Q. 58 Art. 5 at 1432–33.


assessment will not be very useful, nor will it solve the problem. Ad-ditionally, every problem seeks a permanent solution. If a problem isto be permanently solved, the solution must attack the problem at theproblem’s source. Therefore, if a solution does not attack a problemat its source, then the problem always has the chance of resurfacingand is not a true, permanent solution. A solution that is incapable ofeliminating a crisis due to a lack of understanding the root cause ofthe crisis is unlikely to prevent the recurrence of that same crisis. Thissort of “solution” is clearly not in the best interest of the Americancommunity.

Therefore, since it has been shown that Professor Hockett’s assess-ment of how the mortgage crisis was created is incorrect,104 and if itcan now be shown that his solution does not seek a permanent solu-tion, then it will quickly become clear that Hockett’s solution is inca-pable of ensuring that the crisis disappears; and a solution that isincapable of ensuring that the crisis disappears cannot be what is inthe best interest of the community.

If a permanent solution to a problem is desired, then the most logi-cal approach to solving the problem is to fix the problem where itoriginated. While it might take less time and/or resources to simplyclean up the mess that the problem created, this will not create a per-manent solution. The common good of the community might tempo-rarily benefit from a “quick fix,” but the common good of thecommunity will benefit much more from a permanent solution. Theremay be certain situations where a community may decide that it wouldbe more economically advantageous for the community to opt for thequick fix rather than the permanent solution; however, the Authordoes not find it to be a stretch to say that a permanent solution is whatis needed for the underwater mortgage crisis.

Imagine a community of homeowners. Since moving in, eachhomeowner has noticed that his or her pipe underneath their masterbathroom sink leaks in the middle of the night for an unknown reason.One solution is for each community member to hire Sam’s WaterClean Up to come to his or her house every afternoon to clean up thewater from the leaking pipes. While inefficient, this is a solution inso-far as each homeowner will come home from work each evening tofind a bathroom floor that is free of water. However, the better, per-manent solution is to treat the problem at its source by fixing or re-pairing the pipe so that the leaking no longer occurs. While theformer option is a temporary solution that must be applied over andover again, the latter is capable of resolving the problem permanently.Furthermore, by completely removing the problem the communitywill no longer have to continuously deal with the problem, will nothave to spend unnecessary money on Sam’s Water Clean Up, and will

104. Refer to pages 8–20 of this note.


not risk any further damage that could be created from the bathroomsink and floor being consistently wet.

Professor Hockett’s solution to the underwater mortgage crisis issimilar to hiring Sam’s Water Clean Up rather than assessing and fix-ing the root cause of the problem and eliminating the recurrence ofthe leak. Hockett’s solution does not provide a permanent solution tothe underwater mortgage crisis; in fact, it clearly leaves the Americanpeople at risk for another crisis to occur. For example, ProfessorHockett’s solution does not call for any of the criminal or civil mea-sures against these financial institutions.105 Why would these individ-uals change their behavior if they know they will face noconsequences for their actions? The good of a community is notserved when people are able to freely commit crimes withoutconsequence.

Furthermore, Hockett suggests that it is unimportant to try and findthe cause of the current underwater mortgage crisis.106 This theory isproblematic because the good of a community is not served when thatcommunity does not attempt to uncover the origin of its mistakes. Itis difficult to prevent a leak from repeatedly occurring without firstaccurately determining the root cause of the leak and then makingrepairs to ensure the initial cause of the leak does not return. To ben-efit the entire United States community, actions must be taken toeliminate the root cause of the underwater mortgage crisis in order todrastically decrease the likelihood of a recurrence. The fact that Pro-fessor Hockett’s solution does not address the issue in a way thatwould prevent the crisis from happening again is one of the many rea-sons why it is unethical and not in the best interest of the Americancommunity. What is in the best interest of the United States commu-nity is to implement a solution to the underwater mortgage crisis thataddresses the crisis at its origin and ensures that it can never occuragain.

C. Robert Hockett’s Solution Does Not Hold Those Who Createdthe Underwater Mortgage Crisis Accountable

The fact that no executives have been held criminally or civilly lia-ble for their actions, coupled with the fact that Hockett does not findthis to be an issue, is further reason why Professor Hockett’s solutionis not in the best interest of the American community. As suggested,this issue will be dealt with in two prongs. First, the issue of why thereis currently no incentive for the executives of these financial institu-tions to change their behavior will be addressed. Second, the issue ofwhy there is a lack of civil suits being filed against the executives of

105. See generally Robert Hockett, It Takes a Village: Municipal CondemnationProceedings and Public/Private Partnerships for Mortgage Loan Modification, ValuePreservation, and Local Economic Recovery, 18 STAN. J.L. BUS. & FIN. 121 (2013).

106. Hockett, supra note 7, at 130.


these companies will be addressed. And, again, the fact that both ofthese issues are not issues for Hockett provides more reason why hissolution is not in America’s best interest.

1. Criminal Liability

If a permanent solution to the underwater mortgage crisis is reallydesired, then it logically follows that one of the goals of the solutionmust be to prevent the crisis from occurring again. However, there iscurrently no reason for the executives who caused the underwatermortgage crisis to exhibit behavior different than the behavior thatcaused the current crisis. As explained, not one executive to date isfacing criminal charges for his or her actions.107 This poses a signifi-cant problem. If there is no reason for these individuals to act differ-ently, then there is nothing preventing history from repeating itself.Frankly, there is little reason to attempt to solve the crisis if it is prac-tically inevitable that the crisis will occur again.

Hockett’s solution is not in the best interest of the community be-cause it specifically avoids punishing the culprits.108 In fact, Hockettsays that assessing blame is a waste of time.109 This could not be fur-ther from the truth about what is needed to solve the crisis. It is obvi-ously in the best interest of the American community to implement asolution that will permanently solve the problem, and to do this theculprits must be identified and sufficiently punished. It is a futile exer-cise to clean up a mess that will almost certainly be created again, andif these executives are not held accountable then they have no reasonnot to continue exhibiting the same behavior. Furthermore, this canlead others to view this as acceptable behavior because they see itgoing unpunished. The ethically correct course of action to take is toensure that something like this never happens again. Professor Hock-ett’s solution does not provide this assurance.

2. Civil Liability

Another logical method of dealing with this crisis is to hold theseexecutives civilly liable. Our civil justice system is based on the princi-ple that when person or entity X harms person or entity Y, X shouldbe responsible for compensating for the damages incurred by Y. Yet,somehow this method of justice has not been applied to the culprits ofthe current underwater mortgage crisis. Furthermore, Hockett doesnot mention this type of solution anywhere in his writings. As ex-plained, Hockett says that the focus should not be placed on pointingfingers but rather focusing on cleaning up the current wreckage.110

107. Biktimirov, supra note 48, at 212.108. Hockett, supra note 7, at 130.109. Id.110. Id.


As if the lack of criminal charges facing corporate executives wasnot enough, the top five executives at Lehman Brothers made over abillion dollars between 2000 and 2007, and these individuals were ableto keep all of this money.111 Stan O’Neil, the former CEO of MerrillLynch, was able to walk away from a company that was driven intothe ground with a severance package valued at $161 million.112 Again,one of the most baffling aspects of the underwater mortgage crisis isthe fact that these executives were able to walk away from the damagethey caused without any criminal consequence and without being re-quired to put the money that they earned unethically back into thehousing market.

The Author will not attempt to determine a hypothetical dollaramount for which these executives might have been charged in a civilsuit; and even if a civil suit had taken place and the judgment hadbeen in the billions of dollars, there is no way to know if this wouldhave been able to save the country from the underwater mortgagecrisis and the economic collapse that followed. What is highly proba-ble is that if such a suit had taken place and the culprits were chargedaccording to the damage caused, the likelihood of a recurrence wouldbe greatly diminished. Instead, there has been no case, no judgment,and no repercussion of any magnitude for the culpable parties. Therehas clearly been a lack of adherence to the principle of when personor entity X has harmed person or entity Y, X should be responsiblefor compensating for the damages incurred by Y in relation to thiscrisis.

Just as Professor Hockett’s solution mentions nothing about holdingthese executives criminally liable, his solution also mentions nothingabout holding these executives civilly liable. This is not in the bestinterest of the American community. One of the primary duties ofour judicial system is to punish and prevent crime. To not utilize thepurpose of our judicial system concerning the current underwatermortgage crisis is not in the best interest of the community. There-fore, a solution, like Hockett’s, that lacks any use of the Americanjudicial system cannot be in the best interest of the community.

D. Robert Hockett’s Solution Requires ValidContracts to be Broken

Another reason why Professor Hockett’s solution to the underwatermortgage crisis is not tailored to the common good of the communityis that it requires valid, legal contracts to be broken.113 The breakingof these contracts would require banks to take a forced loss.114 Thiswould be the equivalent of A lending money to B so B could make a

111. INSIDE JOB, supra note 45, at 25.112. Id. at 57.113. Hockett, supra note 10, at 3.114. Id.


large purchase and then the government stepping in and telling A thatit no longer has a right to get its money back. What is even more of aproblem is the fact that Professor Hockett has defined this loss as a“raise in value.”115 In a recent paper, Professor Hockett falsely statesthat write-downs have the important advantage of raising value.116

Hockett’s explanation for how write-downs raise or create value inmortgages is as follows: “Bank officers know that underwater loansforeclose at high rates, with the result that expected values fall need-lessly short of face values; hence, they find it financially rational towrite down these loans.”117 In other words, it would be better forthese banks to receive a “guaranteed” smaller amount than an “un-guaranteed” larger amount.

In an e-mail the Author received from Professor Hockett, Hockettexplained that there is surplus generated by write-downs becausewrite-downs lower default risk.118 In other words, if there is a homemortgage note worth $400,000 that is underwater and is thereforeworth only $300,000 at market value, the lending banks would ratherwrite down the mortgage to market value and have a greater chanceof collecting $300,000 and avoiding foreclosure than a lesser chance ofcollecting $400,000. This higher chance of receiving less money iswhat Hockett has coined a “raise in value.”

However, the problem with Hockett’s explanation is that even ifthese lending institutions do find it in their best interest to write-downmortgages, this still does not create value. What write-downs do ismake it statistically more likely that the lending institutions will re-ceive a dollar amount that is smaller than the larger amount the bankis owed and is statistically less likely to receive. This is not a creationin value. On the contrary, this is an undeniable loss. If any bankagrees to only receive $300,000 on a $400,000 mortgage, the Authorguarantees that the bank accounts for a $100,000 loss.

Furthermore, it does not benefit the American community for localgovernments to use their eminent domain powers to force the sever-ance of contracts that both parties agreed to and signed. At the timeboth parties signed the contract, the parties should have recognizedthat there are always certain risks that come with contractual agree-ments. If a party does not want to bear the threat of that risk, thenthe party should not enter into the contract. It is not in the best inter-est of the community to not force those who freely entered into acontract to not be accountable for that contract.

115. Id. at 2.116. Id.117. Id. at 3.118. E-mail from Robert C. Hockett. Professor of Law, Cornell University Law

School, to Cooper M. Walker, J.D. Candidate, 2015, Texas A&M University School ofLaw (Dec. 13, 2013, 08:51 PM CST) (on file with the author).


E. Robert Hockett’s Solution has no Likelihood of Being AnyMore Efficient than Leaving the Housing Market Alone

Another reason why Professor Hockett’s solution to the underwatermortgage crisis is not tailored to what is in the best interest of theAmerican community is that the solution does not have a strong likeli-hood of getting mortgages out of an underwater status any morequickly or efficiently than letting the housing market balance itselfout.119 In the last quarter of 2011 there were 12.1 million residentialproperties with underwater mortgages.120 In September of 2013 therewere only 6.4 million residential properties with underwater mort-gages.121 Thus, in the past two years, with no plan or solution beingimplemented, the number of residential properties with underwatermortgages has nearly been cut in half.122

Professor Hockett explains that only certain homes will be eligiblefor his eminent domain solution. The reason for this is to providesecurity for the parties involved.123 Thus, only mortgages that have ahigh likelihood of being brought out of underwater status will qualifyfor the plan.124 Under these rules, Professor Hockett says that in Cali-fornia just fewer than 1.5 million homes will qualify for the plan.125

However, Professor Hockett is not able to back this number up withany empirical evidence—after stating the number of homes that willbe eligible in California no citation is provided that shows where thisinformation is coming from.126 Even if it is assumed that ProfessorHockett’s numbers are accurate, this means that roughly 75% ofhomes in California with underwater mortgages will qualify. There-fore, with no solution or plan in place there has been a 50% drop inunderwater mortgages,127 and if Professor Hockett’s plan has a 100%success rate, then 75% of mortgages in California will no longer beunderwater. However, there is no way to know how many mortgageswill be taken out of underwater status. Furthermore, the threat ofsevere unintended consequences negatively affecting the housing mar-

119. See generally Les Christie, 2.5 Million Mortgage Borrowers No Longer Under-water, CNNMONEY, (Sept. 10, 2013, 11:27 AM), http://money.cnn.com/2013/09/10/real_estate/underwater-borrowers/.

120. Bill Campbell, CoreLogic Reports Negative Equity Decreases in First Quarterof 2012, CORELOGIC (July 12, 2012), http://www.corelogic.com/about-us/news/core-logic-reports-negative-equity-decreases-in-first-quarter-of-2012.aspx.

121. Ricardo Lopez, Nearly 6.4-Million Homeowners Still Underwater on TheirMortgages, LOS ANGELES TIMES, (Dec. 17, 2013, 9:53 AM), http://www.latimes.com/business/money/la-fi-mo-corelogic-underwater-mortgage-report-20131217,0,6001540.story#axzz2nrwpSJmK.

122. Id.123. Hockett, supra note 7, at 154.124. Id.125. Id. at 155.126. Id.127. Campbell, supra note 120; Lopez, supra note 121.


ket and the economy is significant with a plan that has never beenimplemented.

The Author finds no reason to, more than five years since the begin-ning of the underwater mortgage crisis, try and implement ProfessorHockett’s plan if the underwater mortgage crisis is already beingsolved. It is not in the best interest in the American community toimplement a plan that would significantly affect the financial mar-ket—with potential catastrophic unintended consequences—in orderto solve a problem that is already solving itself.

VI. CONCLUSION

The Author has now shown the American community—specificallythe legal community who is in charge of deciding how to handle thecurrent underwater mortgage crisis—that Professor Hockett’s solutionis not in the best interest of the community. The Author is confidentthat an unbiased, open-minded reader will naturally develop an intui-tive sense for why Hockett’s solution is not in the best interest of thecommunity from reading the first four Sections of this Comment.However, in order to solidify the fact that Hockett’s solution is notappropriate, the Author has implemented the legal philosophy of St.Thomas Aquinas. Specifically, the Author utilized Aquinas’s idea ofwhat is legally just to provide numerous factual and logical reasonswhy Hockett’s solution is neither ethically correct nor appropriate.

First, it was shown that Professor Hockett’s solution does not treatthe cause of the underwater mortgage crisis at its source. Then, it wasshown that Hockett’s solution does not hold those who created theunderwater mortgage crisis accountable either criminally or civilly. Itwas then shown that Hockett’s solution requires valid contracts to bebroken. Lastly, it was shown that Hockett’s solution has no likelihoodof being any more efficient than leaving the housing market alone.

The Author hopes that those who will soon be deciding whether toimplement Professor Hockett’s solution will take the time to read thisComment.

HOW TO REMEDY THE COURT’SUNREASONABLE EXPANSION OF THE

PUBLIC USE DOCTRINE

By Brian Walsh†

I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169II. EVOLUTION OF THE PUBLIC USE DOCTRINE . . . . . . . . . . . . 170

A. Early Eminent Domain Doctrine . . . . . . . . . . . . . . . . . . . . 172B. “Protecting the Public Welfare” as a Public Use . . . . 174C. Public Use Examined Under Rational Basis

Scrutiny . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176D. “Public Purpose” as a Public Use . . . . . . . . . . . . . . . . . . . 177

III. THE REACTION TO THE PUBLIC USE EXPANSION . . . . . . . 178IV. A PROPOSAL FOR THE FUTURE OF THE PUBLIC USE

REQUIREMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181A. The Definition of Public Use Must Fall Within the

Original Intent of the Founders . . . . . . . . . . . . . . . . . . . . . 182B. The Right to Property Is a Fundamental Right and

Must Be Subject to Strict Judicial Scrutiny . . . . . . . . . . 183V. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185

I. INTRODUCTION

The Takings Clause of the Fifth Amendment protects the individ-ual’s right to own private property without interference from the gov-ernment.1 However, possibly as a result of relatively scant historicaldocumentation of the founder’s original intent in framing the FifthAmendment as a limitation on the government’s power of eminentdomain, the interpretation of the Takings Clause has evolved signifi-cantly over time.2 Generally, governmental takings must satisfy tworequirements: (1) the property must be taken for a public use; and (2)the owner must be justly compensated for his land.3 While early caselaw exclusively describes land taken for public use as including “forts,armories, and arsenals, . . . navy-yards and light houses, for customhouses, post offices, and court houses,”4 the broad modern view of

† Third year law student at Touro Law Center, member of the Touro Law Re-view, Municipal Law Fellow, and Honors Scholar.

I would like to thank Professor Sarah Adams-Schoen for her guidance andencouragement.

1. U.S. CONST. amend. V.2. See, e.g., Kohl v. United States., 91 U.S. 367, 368 (1875); Berman v. Parker, 348

U.S. 26 (1954); See Kelo v. City of New London, 545 U.S. 469 (2005); see generallySara B. Falls, Waking A Sleeping Giant: Revisiting the Public Use Debate Twenty-FiveYears After Hawaii Housing Authority v. Midkiff, 44 WASHBURN L.J. 355 (2005).

3. Kelo, 545 U.S. at 476.4. Kohl, 91 U.S. at 371.

169


public use includes expansive concepts such as economic revitaliza-tion.5 This expansion of the definition of what constitutes a public useis beyond the scope of the founders’ intent. The individual’s right toproperty is an enumerated fundamental right of the Fifth Amend-ment,6 and any purported violation of this right must be met with thesame strict scrutiny by the courts as any other violation of a funda-mental right.

This Comment will deal with the evolution of the public use re-quirement in Part II. Part III deals with the unnecessary expansion ofthe definition of a public use. In Part IV I will argue why the courtsshould return to a public use definition in line with the intent of theFifth Amendment as written by the founders.

II. EVOLUTION OF THE PUBLIC USE DOCTRINE

The Fifth Amendment provides that: “No person shall be . . . de-prived of life, liberty, or property, without due process of law; norshall private property be taken for public use, without just compensa-tion.”7 Much of the debate over the meaning of the Takings Clause isfueled by the interpretation of historical documentation regarding itsdrafting and inclusion in the Bill of Rights.8 Additionally, this area oflaw has grown increasingly controversial, as clear definitions of prop-erty, taking, and public use have not been agreed upon. For example,property has been vaguely described as “an elaborate bundle of cus-toms, rights, expectations, and obligations regarding the relationshipsamong individuals, society, and the state.”9 In some instances, such asin Nollan v. California Coastal Commission, the Justice writing themajority opinion outlines a number of different definitions ofproperty.10

An explanation of the right to property has proven to be equallyelusive. While it is generally accepted by modern legal scholars11 thatLord William Blackstone has come closest to defining the right toproperty as “the free use, enjoyment, and disposal of all . . . acquisi-

5. Kelo, 545 U.S. at 483.6. See U.S. CONST. amend. V.7. Id.8. See, e.g., Matthew P. Harrington, “Public Use” and the Original Understanding

of the So-Called “Takings” Clause, 53 HASTINGS L.J. 1245, 1246 (2002); JonathanLahn, The Uses of History in the Supreme Court’s Takings Clause Jurisprudence, 81CHI.-KENT L. REV. 1233, 1260 (2006).

9. Daniel A. Ippolito, An Originalist’s Evaluation of Modern Takings Jurispru-dence, 26 SETON HALL L. REV. 317, 322 (1995) (citing JESSE DUKEMINIER & JAMES

KRIEIR, PROPERTY 86 (3d ed. 1993)).10. See, e.g., Nollan v. Cal. Coastal Comm’n, 483 U.S. 825, 841 (1987); Andrea L.

Peterson, The Taking Clause: In Search of Underlying Principles Part I-A Critique ofCurrent Takings Clause Doctrine, 77 CAL. L. REV. 1299, 1316 n.7 (1989).

11. See, e.g., Ippolito, supra note 9, at 322 n.36; Douglas W. Kmiec, The OriginalUnderstanding of the Taking Clause Is Neither Weak Nor Obtuse, 88 COLUM. L. REV.1630, 1635 (1988).

2014] EXPANSION OF THE PUBLIC USE DOCTRINE 171

tions, without any control or diminution, save only by the laws of theland,”12 even this definition fails to provide a clear demarcation ofwhat interest in property the Constitution purportedly protects. Forexample, it is not clear whether under Lord Blackstone’s definition alocal land ordinance requiring a permit for tree removal would qualifyas a “law of the land” that would hinder a landowner’s “free use” ofhis property.

The definition of a taking is more concrete, but nevertheless is notwithout its own share of controversy. In the area of Fifth Amendmentjurisprudence, a taking of property can occur in two ways. The first isa direct, physical taking, the definition of which is relatively uncon-troversial.13 The other, far more contentious taking is known as a reg-ulatory taking.14 A regulatory taking occurs when the governmentenacts a regulation that takes away an intangible property right, ordiminishes property value by limiting its use.15 While a number ofmodern commentators have interpreted the Takings Clause to regu-late only direct, physical takings of property,16 the Supreme Court hasrecognized regulatory takings as well.17 However, the Court, by itsown admission, has never provided a justification for the rule of regu-latory takings.18 Nevertheless, the Court has frequently held thatwhen regulation denies any economically beneficial use of the land, aregulatory taking has occurred.19

Just as a firm definition of property and a taking has proven elusive,so has a definition of a public use. The definition of public use hasevolved along with society, environmental science, and the progres-sion of the function of government in the forum of property develop-

12. See 1 WILLIAM BLACKSTONE, COMMENTARIES AT 138.13. Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1014 (1992) (showing a “direct

appropriation” of property is covered under the Takings Clause).14. See Andrew S. Gold, Regulatory Takings and Original Intent: The Direct,

Physical Takings Thesis “Goes Too Far”, 49 AM. U. L. REV. 181, 242 (1999) (“It isquite possible, but far from clear, that the original understanding of the TakingsClause included regulatory takings. Original intent may raise questions regarding thecurrent incarnation of regulatory takings law, but it hardly resolves the question ofwhether regulatory takings deserve compensation generally.”).

15. Id. at 232 n.314; see also Woodruff v. Neal, 28 Conn. 165, 170 (1859) (requiringcompensation for regulation that took usage rights from landowners by requiringthem to allow others to graze cattle on their land).

16. See William Michael Treanor, The Origins and Original Significance of the JustCompensation Clause of the Fifth Amendment, 94 YALE L.J. 694, 711 (1985).

17. See Lucas, 505 U.S. at 1015–1016 (“As we have said on numerous occasions,the Fifth Amendment is violated when land-use regulation ‘does not substantially ad-vance legitimate state interests or denies an owner economically viable use of hisland.’”) (emphasis in original).

18. Id. at 1017 (“We have never set forth the justification for [the regulatory tak-ings] rule. Perhaps it is simply, as Justice Brennan suggested, that total deprivation ofbeneficial use is, from the landowner’s point of view, the equivalent of a physicalappropriation.”).

19. Id. at 1019.


ment.20 At first, public uses encompassed takings simply for “use bythe public,”21 and included, for example, the taking of private land forthe purpose of building railroad tracks.22

However, as eminent domain cases became more complex and theline between public and private use became blurred, courts found thisstandard to be unworkable.23 Recently, the Court has gone so far as toinclude economic revitalization—from blight removal to simply ac-quiring and developing land for the purpose of increased tax reve-nue—greatly expanding the government’s power of eminentdomain.24

Broadly speaking, a two-step test is used when determining whethera taking for a public use violates the Constitution.25 The state mustfirst show that its use of eminent domain is rational, and then provethe taking is related to a conceivable governmental purpose.26 Nota-bly, this level of judicial scrutiny is highly deferential to the govern-ment, normally reserved for rights deemed by the courts to not befundamental under the Constitution.

A. Early Eminent Domain Doctrine

In order to better understand the significance of the public use doc-trine in the Takings Clause, we must first examine its history. Thepower of eminent domain (a phrase coined in the seventeenth centuryby the legal scholar Hugo Grotius) is broadly defined as the sover-eign’s inherent power to have control over its own lands,27 and hasbeen traced as far back as the Early Roman Empire.28 In England, thesovereign power of the king to acquire any property deemed neces-sary to the crown was remarkably broad.29 Further, the land taken bythe king was routinely taken without compensation to the land-owner.30 In contrast, property acquisition was markedly different inthe colonies, as settlers were given sole title of small plots of landupon arriving in America.31

20. 26 Am. Jur. 2d Eminent Domain § 44 (2014).21. See Fallbrook Irr. Dist. v. Bradley, 164 U.S. 112, 161 (1896).22. Aldridge v. Tuscumbia, C. & D.R. Co., 2 Stew. & P. 199, 201 (1832).23. Kelo v. City of New London, 545 U.S. 469, 485 (2005).24. See id. at 483.25. Id. at 476.26. Hawaii Hous. Auth. v. Midkiff, 467 U.S. 229, 241 (1984).27. Katherine M. McFarland, Privacy and Property: Two Sides of the Same Coin:

The Mandate for Stricter Scrutiny for Government Uses of Eminent Domain, 14 B.U.PUB. INT. L.J. 142, 144 (2004).

28. Steven E. Buckingham, Case Comment, The Kelo Threshold: Private Propertyand Public Use Reconsidered, 39 U. RICH. L. REV. 1279, 1295 n.127 (2005).

29. McFarland, supra note 27, at 145.30. Id.31. Id.


The founders sought to permanently protect the citizens’ right toproperty.32 One of the most vocal sponsors of this protection, JamesMadison, stated, “Government is instituted to protect property ofevery sort. This being the end of government, that alone is a just gov-ernment, which impartially secures to every man, whatever hisown.”33 While Madison recognized eminent domain as a power inher-ent in the sovereign, he was greatly influenced by the writings of JohnLocke, who was a staunch advocate for personal property rights.34

Therefore, by requiring that land taken be for a public use,35 it ap-pears Madison intended to limit the government from arbitrarily tak-ing land.36

Early American Supreme Court jurisprudence interpreting the FifthAmendment recognized the power of eminent domain as essential tothat of a sovereign government.37 The practice of eminent domain hashistorically been used in the United States to procure land for buildingpublic utilities such as railroads, public roads, schools, and post of-fices.38 This was generally accepted in early American society, as thefederal government was not forced to cite the power of eminent do-main in a Supreme Court case until 1875.39

In Kohl v. United States,40 the federal government invoked thepower of eminent domain to procure lands in Cincinnati to be usedfor a post office.41 The Court took the opportunity to lay a strongjudicial foundation for the protection of the government’s power ofeminent domain. Furthermore, the Court held that the eminent do-main powers vested “by the Constitution in the general government

32. Id.33. McFarland, supra note 27 at 142 (citing James Madison, Property National Ga-

zette (Philadelphia) Mar. 29, 1772, at 174).34. Id. at 145; William Michael Treanor, The Original Understanding of the Tak-

ings Clause and the Political Process, 95 COLUM. L. REV. 782, 817 n.185 (1995).35. See Matthew P. Harrington, “Public Use” and the Original Understanding of

the So-Called “Takings” Clause, 53 HASTINGS L.J. 1245, 1248 (2002) (explaining thatan argument has been made that the text of the Takings Clause requires the govern-ment to compensate landowners only for land taken for a public use and takings viataxation are not compensable; therefore, the public use language in the Fifth Amend-ment is meant to be descriptive, not proscriptive).

36. See generally McFarland, supra note 27, at 145; Treanor supra note 16, at 709(discussing further evidence of Madison’s intention to protect citizens’ rights toproperty).

37. See, e.g., United States v. City of Chicago, 48 U.S. 185, 194 (1849) (“It is notquestioned that land within a State purchased by the United States as a mere proprie-tor, and not reserved or appropriated to any special purpose, may be liable to con-demnation for streets or highways, like the land of other proprietors, under the rightsof eminent domain.”).

38. See City of Chicago, 48 U.S. at 194.39. Kohl v. United States, 91 U.S. 367, 371 (1875); see also Donald J. Kochan,

“Public Use” and the Independent Judiciary: Condemnation in an Interest-Group Per-spective, 3 TEX. REV. L. & POL. 49 (1998).

40. Kohl, 91 U.S. at 367.41. Id. at 377.


demand for their exercise the acquisition of land in all States.”42 Justas each person is a citizen of his state, and subject to each state’spower of eminent domain, so too are the individual states subject tothe eminent domain power of the federal government.43 Thus, theissue in Kohl was as much about the issue of eminent domain as it wasabout federalism. The Court delineated a helpful list of public uses,including “forts, armories, and arsenals, for navy-yards and lighthouses, for custom houses, post offices, and court houses,” that couldbe used by the federal government as a framework for legitimate pub-lic uses.44 By giving examples of proper public uses, the Court madeclear that the acquisition of land by the federal government cannot becontingent on the approval of any private citizen or state government.Instead, the government may take an individual’s land against his will,as long as the use is for an acceptable public purpose.45 This was theCourt’s first attempt at balancing individual property rights with thegovernment’s power of eminent domain.

B. “Protecting the Public Welfare” as a Public Use

As the United States recovered from the Second World War, thegovernment began to pass nationwide programs aimed at redevelop-ing economically depressed urban areas.46 Congress passed one suchprogram, called the District of Columbia Redevelopment Act, in1945.47 The purpose of the Act was to condemn economically dis-tressed areas in the District of Columbia and redevelop the landthrough a designated agency appointed by Congress. Residentialproperty owners within one targeted area (whose property was notitself economically distressed but was surrounded by distressed prop-erty) brought suit challenging the power of Congress to use its emi-nent domain power to obtain property “merely to develop a morebalanced, attractive community.”48

In 1954, the Supreme Court responded by expanding upon the listof justifications for the use of eminent domain for the first time sinceKohl.49 In Berman v. Parker, a unanimous Court held in favor of thegovernment’s plan for using eminent domain for the purpose of eco-nomic redevelopment.50 The Court held that Congress had made alegislative determination that the land needed to be condemned andacquired using its eminent domain powers for the benefit of the public

42. Id. at 368.43. Id.44. Id.45. Kohl, 91 U.S. at 371.46. Martin E. Gold & Lynne B. Sagalyn, The Use and Abuse of Blight in Eminent

Domain, 38 FORDHAM URB. L.J. 1119, 1121 (2011).47. See Berman v. Parker, 348 U.S. 98 (1954).48. Id. at 101–02.49. Id.50. Kohl, 91 U.S. 367 (1875).


welfare, a concept the Court described as “broad and inclusive.”51

Protecting the public welfare, the Court stated, is inherent in the po-lice powers of each state.52 Public welfare is defined as a product of“legislative determinations addressed to the purposes of government,purposes neither abstractly nor historically capable of completedefinition.”53

Within this concept of protecting the public welfare, Congress is re-sponsible for making determinations with regard to the health, cleanli-ness, and balance of the community.54 Once Congress has made itsdeterminations using a wide variety of values, it is not the job of thejudiciary to reassess them.55 The Court went on to describe the gov-ernment’s power of eminent domain as a means to an end.56 Themethod of acquisition is irrelevant, as long as Congress has deter-mined that the acquisition itself is for a public purpose.57

The Berman decision was significant for a number of reasons. First,it greatly expanded the government’s power to acquire property. Aslong as the legislative body invoking its eminent domain power doesso for the purpose of a public use, as defined by that same legislativebody, the judiciary has no basis for review.58 Further, in an effort toavoid a holdout by a single landowner, the Court again deferred to thelegislature to determine the breadth of each project, as “communityredevelopment programs need not, by force of the Constitution, be ona piecemeal basis.”59 By disavowing even a rational basis of review,the Court arguably relinquished any responsibility for reviewing legis-lative public use determinations.60 In announcing that public use de-terminations are inherent in the police powers of the State, the Courtplaced such determinations outside the purview of the judiciary toexamine.

Finally, the Court acknowledged that blight removal, in addition toslum clearance, is well within the definition of a public use.61 Prior tothe Berman decision, eminent domain was used by legislators for theclearance of inner city slums.62 Following Berman, not only does thelegislature have an interest in clearing unlivable housing, it also hasthe power to “determine that the community should be beautiful as

51. Id.52. Berman, 348 U.S. at 102.53. Id.54. Id.55. Id. at 103 (citing Luxton v. N. River Bridge Co., 153 U.S. 525, 529–30 (1894)).56. Id.57. Berman, 348 U.S. at 103.58. Id.59. Id. at 104.60. McFarland, supra note 27, at 148.61. Berman, 348 U.S. at 103–04.62. See Olga V. Kotlyarevskaya, “Public Use” Requirement in Eminent Domain

Cases Based on Slum Clearance, Elimination of Urban Blight, and Economic Develop-ment, 5 CONN. PUB. INT. L.J. 197, 203 (2006).


well as healthy, spacious as well as clean, well-balanced as well ascarefully patrolled.”63 Due to this abstract expansion of what consti-tutes a public purpose, legislatures have been granted almost unfet-tered access to private property for any conceivable reason.

C. Public Use Examined Under Rational Basis Scrutiny

Thirty years after the Berman decision, the Supreme Court wasagain confronted with the issue of the public use doctrine in Hawaii v.Midkiff.64 In the 1950s and 1960s, the ownership of Hawaiian landgradually became more consolidated into a land oligopoly; wherebythe vast majority of the land in Hawaii was owned by a relatively smallpercentage of the population, with the remainder of citizens as lessorsof smaller parcels.65 In order to “reduce the perceived social and eco-nomic evils” of this system of land ownership, the Hawaiian legisla-ture enacted the Land Reform Act of 1967.66 The Act formed asystem of condemnation whereby title of the smaller parcels of landwere taken from the lessors and transferred to the lessees in order toreduce the concentration of land ownership.67 The determination ofwhether or not the state’s acquisition of each parcel of land was to“effectuate the public purposes” of the Act was made individually bythe Hawaiian Housing Authority.68 This led the relatively few land-owners of Hawaii to challenge the law based on their claim that thecondemnation of their property for sale to their lessees violated thepublic use requirement of the Fifth Amendment.

Justice O’Connor wrote a unanimous opinion that built upon thedefinition of public use described in Berman as “coterminous with thescope of a sovereign’s police powers.”69 However, the Court acknowl-edged in Berman a role for the courts to play in reviewing the judg-ment of a legislature as to what constitutes a public use, albeit “anextremely narrow one.”70 This extremely narrow form of judicial re-view may come only when the public use determination is “shown toinvolve an impossibility.”71 In order to avoid judicial interference inlegislative findings, the Court may only examine a public use determi-nation if the use is “palpably without reasonable foundation.”72 Thus,the Midkiff Court outlined some sort of judicial check on the power ofthe legislature to condemn property for a public use, albeit a relativelysmall one.

63. Berman, 348 U.S. at 33.64. Hawaii Hous. Auth. v. Midkiff, 467 U.S. 229, 241 (1984).65. Id. at 229.66. Id.67. Id. at 230.68. Id.69. Hawaii Hous. Auth., 467 U.S. at 240.70. Id.71. Id. at 241.72. Id. (citing United States. v. Gettysburg Elec. R. Co., 160 U.S. 668, 680 (1896)).


In doing so, the Court introduced what is commonly known as arational basis of review for public use determinations. When the exer-cise of eminent domain power is rationally related to a conceivablepublic purpose, the Court will find the taking to be within the bound-ary of the Fifth Amendment.73 In applying this basis of review, theMidkiff Court had no trouble finding that Hawaii’s Land Reform Actof 1967 was constitutional.74 The Court saw the Act as a comprehen-sive and rational approach to curing a market failure.75 Whether thisapproach would actually correct the market failure was irrelevant be-cause the constitutional public use requirement is “satisfied as long asthe legislature rationally could have believed that the Act would pro-mote its objective.”76

In the latter part of its decision, the Court dealt with the issue ofwhether or not this transfer of land was a purely private taking, as wascontended by the Hawaiian landowners. A purely private taking, thatis, a taking for no reason other than to “confer a private benefit on aparticular private party,” cannot survive the scrutiny of the public userequirement.77 However, in this case the Court found the Act not tobenefit a particular class of individuals, but to “attack certain per-ceived evils of concentrated property ownership in Hawaii—a legiti-mate public purpose.”78 As this public purpose was not irrational inthe eyes of the Court, the requirements of the Fifth Amendment weremet.

D. “Public Purpose” as a Public Use

In 2005, the Court again tackled the issue of what constitutes a pub-lic use. In Kelo v. City of New London, the Court was forced to di-rectly decide whether legislatures may use economic revitalization as ajustification for exercising their eminent domain powers.79

The decision addressed a development plan approved by the City ofNew London, Connecticut, aimed at “revitaliz[ing] an economicallydistressed city.”80 This plan was preceded by a determination in 1990by a state agency that the city of New London was a “distressed mu-nicipality.”81 The development plan passed in 2000 designated a pri-vate non-profit agency, the New London Development Corporation(“NLDC”), to be in charge of the implementation of the revitalization

73. Id.74. Hawaii Hous. Auth., 467 U.S. at 241.75. Id. at 242.76. Id. (citing W. & S. Life Ins. Co. v. State Bd. of Equalization, 451 U.S. 648,

671–72 (1981)).77. Id. at 245.78. Id.79. Kelo v. City of New London 545 U.S. 469, 472 (2005).80. Id. at 472.81. Id. at 473.


plan.82 The plan itself was meant to create jobs, generate tax revenue,make the City more attractive, and “create leisure and recreationalopportunities.”83 The NLDC targeted real estate in a ninety-acrearea, and began making offers to the landowners within the area foracquisition of the property. While some landowners accepted the of-fers, some residents refused, including the petitioners in this case, andthe NLDC initiated condemnation proceedings that gave rise to thesuit.84

The Kelo case gave the Court an opportunity to reiterate some of itsprevious eminent domain determinations, while also broadening thedefinition of public use. While the plan was found to not benefit aparticular class of individuals, some of the land to be acquired was notto be used by the general public.85 A section of the property to beacquired was earmarked for commercial space for private busi-nesses.86 Still, the Court cited the continuous expansion of the publicuse requirement, finding that the definition of public use was “use bythe public” which was an unworkable standard.87 In doing so, theCourt embraced a broader and “more natural interpretation of publicuse as ‘public purpose.’”88 While the term “public purpose” had beenused previously in Supreme Court eminent domain cases, this was thefirst time the Court unambiguously adopted the much broader publicpurpose definition of public use.

Writing for the majority, Justice Stevens found economic revitaliza-tion to be a sufficient public purpose, satisfying the public use require-ment of the Fifth Amendment.89 While the City was not confrontedwith the need to remove blight, the Court found that the City’s deter-mination that the area was sufficiently distressed as to justify a pro-gram of economic rejuvenation was entitled to the Court’sdeference.90 In comparing the City’s goals to those of the legislaturesin Midkiff and Berman, the Court held it had no basis to exempt eco-nomic development from its “traditionally broad understanding ofpublic purpose.”91

III. THE REACTION TO THE PUBLIC USE EXPANSION

Some scholars argue the courts have greatly expanded upon theoriginal meaning of public use within the Takings Clause,92 while

82. Id. at 475.83. Id. at 474–75.84. Kelo, 545 U.S. at 474–75.85. Id. at 479.86. Id. at 480.87. Id. at 485.88. Id. at 480.89. Kelo, 545 U.S. at 485.90. Id. at 483.91. Id. at 485.92. See, e.g., McFarland, supra note 27; Kochan, supra note 39.


others believe the public use clause is merely a derscription of a com-pensable taking.93 Many scholars look for evidence of the intent ofthe founders to create a solid definition of what constitutes a publicuse.94 While some scholars see the attitudes at the time of the found-ing of the United States as fiercely protective of property rights,95

others have interpreted historical documents as showing the recentjudicial view of public use within the Fifth Amendment is in further-ance of how colonial law and the early U.S. government regulatedland.96

In support of her argument that the expansion of the judicial defini-tion of a public use is unjustified, Katherine McFarland points out thatthe courts have continually asked the legislatures for increasinglyhigher levels of justification for encroachments on individual rightsoutside the takings arena.97 While courts continue to question gov-ernment intrusion into citizens’ freedom of expression and equal pro-tection, the level of scrutiny courts give to government takings hasconsistently diminished over the past half century.98 By implementinga reverence to unchecked legislative determinations of what consti-tutes a public use, the door has been opened for misuse of the eminentdomain power.99

Frequently, scholars who argue against the expansion of the publicuse definition point to the potential for legislative abuse of eminentdomain brought on by powerful special interests. Examples that pur-port to show this include large companies using the legislature to con-demn property needed for strip malls and casinos.100 As the argumentgoes, this continued expansion of the public use definition has madeenforcement of the public use requirement impossible, will lead to a

93. See, e.g., Harrington, supra note 8, at 1248.94. See, e.g., McFarland, supra note 27, at 144 (“To understand the true purpose of

the eminent domain power, it is necessary to look both to its historical use and theunderstanding of property rights at the time of the nation’s founding.”); WilliamMichael Treanor, supra note 16; John F. Hart, Colonial Land Use Law and Its Signifi-cance for Modern Takings Doctrine, 109 HARV. L. REV. 1252 (1996).

95. See, e.g., BERNARD H. SAIGEN, Land Use Without Zoning 227 (1972).96. See, e.g., Hart, supra note 94, at 1281. (“Property ownership was ‘not an abso-

lute right that exempted the individual owner from corporate oversight,’ but rather ‘aright of stewardship that the public entrusted to an individual, for both private andpublic benefit.’”) (citing Barry A. Shain, The Myth of American Individualism: TheProtestant Origins of American Political Thought 183 (1994)).

97. McFarland, supra note 27, at 142.98. See Stephen J. Jones, Trumping Eminent Domain Law: An Argument for Strict

Scrutiny Analysis Under the Public Use Requirement of the Fifth Amendment, 50 SYR-

ACUSE L. REV. 285, 287 (2000) (“The conclusion that follows is that so far as thefederal courts are concerned neither the state legislatures nor Congress need be con-cerned about the public use test in any of its ramifications.”).

99. Id.100. See, e.g., Casino Reinvestment Dev. Auth. v. Banin, 727 A.2d. 102 (N.J. Super.

1998); Poletown Neighborhood Council v. City of Detroit, 304 N.W.2d 455 (Mich.1981); Walser Auto Sales, Inc. v. City of Richfield, 644 N.W.2d 425 (Minn. 2002).


distortion of natural market forces, and could cause a detrimental ef-fect on states unwilling to use the courts’ broadened definition.101

While Justice Kennedy, in his concurring opinion, wrote that theCity of New London’s plan did not warrant a more stringent standardof judicial review, he opined that a more narrowly drawn category oftakings may be appropriate for increased judicial scrutiny.102 One cat-egory may be “private transfers in which the risk of undetected imper-missible favoritism of private parties is so acute that a presumption ofinvalidity is warranted under the Public Use Clause.”103 In the Kelocase, the private parties were unknown at the time of the drafting ofthe redevelopment plan.104 Justice Kennedy seemed to hint that if alegislature draws up a plan with a specific private party involved fordevelopment, suspicions of favoritism may lead to a rebuttable pre-sumption of invalidity.105 Justice Kennedy did not flesh out this alter-native “test” for examining public use determinations, he onlyspecified that eminent domain disputes must be decided based on thespecific facts of each case. Nevertheless, the inclusion of a private de-veloper at the latter stages of planning by the City of New Londonwas not enough in the eyes of Justice Kennedy to justify an exceptionto the public use doctrine developed through Midkiff and Berman.

On the forefront of the backlash from the Kelo decision were thefour dissenting Justices. Justice O’Connor wrote the dissenting opin-ion, joined by Chief Justice Roberts, Justice Scalia, and JusticeThomas.106 Justice O’Connor’s main argument was that, by allowingprivate property to be taken “under the banner of economic develop-ment,” all private property may now be vulnerable to a governmentaltaking, as long as the legislature deems that the new party will use it ina more publicly beneficial way.107 Not only is all private property nowvulnerable to governmental taking, Justice O’Connor wrote, but tohold that “the incidental public benefits resulting from the subsequentordinary use of private property render economic development tak-ings ‘for public use’ is to wash out any distinction between private andpublic use of property—and thereby effectively to delete the words‘for public use’ from the Takings Clause.”108

Justice O’Connor goes on to question the Court’s reliance on the“secondary benefits” to be enjoyed by the public, as a result of the

101. Kristi M. Burkard, No More Government Theft of Property! A Call to Returnto A Heightened Standard of Review After the United States Supreme Court Decisionin Kelo v. City of New London, 27 HAMLINE J. PUB. L. & POL’Y 115, 132 (2005-2006).

102. Kelo v. City of New London, 545 U.S. 469, 493 (2005) (Kennedy, J.,concurring).

103. Id.104. Id.105. Id.106. Kelo, 545 U.S. at 494.107. Id. (O’Connor, J., dissenting).108. Id. (O’Connor, J., dissenting).


revitalization plan, as evidence of the satisfaction of the public userequirement.109 When the legislature’s aim is to cure a pre-existingharm, such as in Midkiff and Berman, the public purpose was realizedwhen the harmful use was eliminated.110 “Because each taking di-rectly achieved a public benefit, it did not matter that the property wasturned over to private use.”111 Here, Justice O’Connor argued, theresult of the revitalization plan is a mere upgrade, adding only periph-eral benefits to the public.112 These benefits are not meant to curesome pre-existing harm to the local landowners, such as the blight andunequal landownership dealt with in earlier eminent domain cases.

The dissenting Justices in the Kelo case laid the groundwork for abevy of criticism aimed at the Supreme Court, with some states show-ing concern over the potential for abuse of eminent domain power bythe government.113

In contrast, other scholars contend that the words “public use” aswritten in the Fifth Amendment are no more than a description of atype of taking that is compensable.114 Scholars argue that “the mem-bers of the founding generation generally understood that the powerto take property for public use is reserved to the legislature alone andis a function of the principle of consent inherent in a representativegovernment.”115 As a result, those who read the public use require-ment as a limitation on the legislative power of eminent domain aremisreading the intent of the drafters.116

However, as discussed below, characterizing the phrase “publicuse” as descriptive rather than limiting renders its inclusion a nullity.Further, if property rights are properly placed in the class of funda-mental rights, then the infringement of that right for the purpose of apublic use must be examined under heightened judicial scrutiny.

IV. A PROPOSAL FOR THE FUTURE OF THE PUBLIC

USE REQUIREMENT

There are two changes the Court must make in order to protect thepeople’s individual right to property. First, the Court must narrow thedefinition of public use to fit within the original intent of the founders.Second, the Court must recognize the right to property as a funda-mental right, thereby making it subject to strict judicial scrutiny. Fur-ther, the Court must expand upon Justice Kennedy’s concurrence in

109. Id. at 501.110. Id. at 500.111. Kelo, 545 U.S. at 500 (O’Connor, J., dissenting).112. Id. at 501.113. See, e.g., Justin B. Kamen, A Standardless Standard: How A Misapplication of

Kelo Enabled Columbia University to Benefit from Eminent Domain Abuse, 77BROOK. L. REV. 1217 (2012); Gold, supra note 46, at 1119.

114. See, e.g., Harrington, supra note 8, at 1248.115. See, e.g., id. at 1247.116. Id. at 1248.


the Kelo case, and find that eminent domain takings performed forthe reason of economic revitalization must be viewed with a rebutta-ble presumption of invalidity.

A. The Definition of Public Use Must Fall Within theOriginal Intent of the Founders

As discussed above, lack of historical documentation as to the foun-ders’ intent in writing the Fifth Amendment has left a void when try-ing to determine the true meaning of public use. However, if we lookat the language of the Fifth Amendment, the modern interpretation ofwhat constitutes a public use is much broader than what the text in-tends.117 Indeed, if the founders intended a broad definition of publicuse, that is, “if the only requirement were that the federal governmentbe acting pursuant to a legitimate purpose, then no phrase would beneeded at all, since that requirement is implicit throughout the Consti-tution.”118 The modern interpretation of public use is so broad as tobe “simply duplicative of the legitimate-state-interest test that everydeprivation of property must satisfy under the Due Process and EqualProtection Clauses.”119

In fact, if the phrase “for public use” is not a narrowing requirementfor the taking of land under the Fifth Amendment, then the clause isessentially meaningless.120 Specifically, the Fifth Amendment con-tains two other prepositional phrases beginning with the word “for” inaddition to the phrase “for public use”:

No person shall be held to answer for a capital, or otherwise infa-mous crime, unless on a presentment or indictment of a Grand Jury. . . ; nor shall any person be subject for the same offence to be twiceput in jeopardy of life or limb; . . . nor shall private property betaken for public use, without just compensation.121

In each case, “the prepositional phrase cannot be read as broadeningrather than narrowing the clause’s scope.”122

At this point, the Court has failed to address the argument that thephrase “for public use” must be a narrowing of the Amendment. In-stead, the Court holds that the narrow view of public use as strictly“use by the public” has been eroded over time, and the expansivemodern view of public use is a product of the State’s police powers.123

The strict public use requirement is dismissed as a test too difficult toadminister and supposedly proved to be “impractical given the diverse

117. Falls, supra note 2, at 369.118. Roger Clegg, Reclaiming the Text of the Takings Clause, 46 S.C. L. REV. 531,

537 (1995).119. Jed Rubenfeld, Usings, 102 YALE L.J. 1077, 1079 (1993).120. Id. (citing Richard Epstein, TAKINGS 161 (1985)).121. U.S. CONST. amend. V (emphasis added).122. Clegg, supra note 118, at 537.123. Kelo v. City of New London, 545 U.S. 469, 479 (2005).


and always evolving needs of society.”124 This language is curious,however; a judicial determination over whether or not condemnedproperty will be used by the public would seem necessary when theelimination of an individual’s property rights are at stake.

Further, as discussed below, while it is true that legislatures oftenuse their eminent domain powers for the economic benefit of theircommunity, the increasingly expansive definition of public use fails toproperly reflect the intent of the founders.125 The Supreme Courtneed not look any further than the text of the Fifth Amendment andeschew the expansive modern definition of public use in favor of theintended narrow definition.

B. The Right to Property Is a Fundamental Right and Must BeSubject to Strict Judicial Scrutiny

While the right to property is listed in the Fifth Amendment along-side the rights of life and liberty, which have long been held to befundamental rights, it has not enjoyed the same judicial protection. Ifwe follow the line of thinking that the framers viewed property rightsas tantamount to liberty interests, then the public use requirement ofthe Fifth Amendment must be viewed as protecting a fundamentalright.126 It is well established that when reviewing a violation of a fun-damental right, the courts use a heightened form of judicial scru-tiny.127 While the government’s exercise of its eminent domain poweremanates from its police power, this police power cannot burden anindividual’s fundamental right without first passing a heightened stan-dard of judicial review.128

When examining a constitutional violation under strict scrutiny, thecourt looks to whether or not the legislative enactments are narrowlytailored to serve a compelling state interest.129 While legislative deter-minations subject to strict scrutiny are routinely held to be in violationof the Constitution, invocations of the public use requirement rarelymeet the same fate. The Land Reform Act of 1967 as described in theMidkiff case is a good example. The legislation was written with thegoal of equalizing the housing market in the State of Hawaii.130 Thelaw itself is narrowly tailored to achieve this goal, as the Act wouldhave little relevance once the housing market was adjusted. Further, acompelling state interest was delineated by the Hawaiian legisla-ture.131 The inflated real estate prices resulting from the majority of

124. Id.125. See, e.g., Tschetter, supra note 60, at 226.126. See Treanor, supra note 16, at 709.127. See Washington v. Glucksberg, 521 U.S. 702, 721 (1997).128. Id. at 722.129. Roe v. Wade, 410 U.S. 113, 155 (1973).130. See Hawaii Hous. Auth. v. Midkiff, 467 U.S. at 241.131. See id.


the state’s land being concentrated within relatively few owners werea legitimate threat to the public welfare.132 Thus, Hawaii’s Land Re-form Act of 1967 would likely have survived a strict scrutiny review bythe courts.

An example of a legislative determination that is less likely to sur-vive strict scrutiny is one similar to the integrated development planpassed in the Kelo decision. In making its determination that its rede-velopment plan was a valid public use, the City of New London citedConnecticut’s legislative declaration of a policy recognizing that thestate’s “economic welfare” hinges upon the “growth of industry andbusiness.”133 Therefore, “permitting and assisting municipalities toacquire and improve unified land . . . for industrial and business pur-poses . . . are public uses.”134 This broad declaration of what consti-tutes a public use is less likely to survive strict scrutiny. No explicitgoal is mentioned, only a blanket statement that the state may procurelands for “industrial and business purposes.”135 Therefore, legislativedeterminations such as that of New London’s City Council are un-likely to be narrowly tailored enough to pass strict scrutiny.

Eminent domain is one of the most powerful tools wielded by thegovernment. The power to deprive a person of property should notbe subject to a lower standard of review such as rational basis thatalmost guarantees the government prevails. It is clear then, that thecourts must act to provide more protection for individual propertyrights with the stricter form of scrutiny reserved for other fundamen-tal rights such as life and liberty. The State should have the burden toshow that the public’s need for a particular piece of private propertyserves a compelling government interest, and the forced transfer ofland should only occur in exigent socioeconomic circumstances.136

C. In the Alternative, Takings Under the Pretense of EconomicDevelopment Must Overcome A Presumption of Invalidity

When legislation “on its face . . . [falls] within a specific prohibitionof the Constitution,” the Court is required to use a heightened form ofscrutiny.137 While Justice Kennedy in his concurrence in the Kelo casestates that a “presumption of invalidity is not warranted for economicdevelopment takings in general,” he does agree that a more stringentstandard of review than that announced in Berman and Midkiff mightbe appropriate for a more narrowly drawn category of takings.138

132. Id. at 242.133. Conn. Gen. Stat. § 8-186 (2004).134. Id.135. Id.136. See generally Jones, supra note 98, at 312.137. Falls, supra note 2, at 376 (citing United States v. Carolene Prods. Co., 304

U.S. 144, 153 (1938)).138. Kelo v. City of New London, 545 U.S. at 493 (Kennedy, J., concurring).


There is judicial precedent for a heightened standard of review whenmaking a legislative determination that seems to violate a specific pro-hibition in the Constitution.139

Justice Kennedy’s test would trigger a heightened form of review ina narrower category of cases, such as when a legislature decides toinvoke its eminent domain powers for anything that, on its face, is nota public use. Justice Kennedy frets that a “broad per se rule or astrong presumption of invalidity . . . would prohibit a large number ofgovernment takings that have the purpose and expected effect of con-ferring substantial benefits on the public at large and so do not offendthe Public Use Clause.”140 However, just as Justice Kennedy has ac-knowledged, “there may be categories of cases in which the transfersare so suspicious, or the procedures employed so prone to abuse, orthe purported benefits are so trivial or implausible, that courts shouldpresume an impermissible private purpose.”141

In order to rebut the presumption of invalidity, all the State wouldhave to show is the transfer of land is not aimed at conferring “bene-fits on particular, favored private entities, and with only incidental orpre-textual public benefits.”142 While this more moderate approachstill fails to sufficiently protect property rights as fundamental orwithin the intent of the founders, it does provide more protection thanwhat currently exists. Additionally, by delineating what triggers a re-view under heightened scrutiny, this framework may lead to less litiga-tion and a more efficient land development process.

In summary, with such an expansive definition of public use, andthe Court’s unfettered deference to legislative determinations, thecurrent judicial approach fails to protect the people from unjust tak-ings. A heightened standard of review for takings outside the narrowview of a public use, while not ideal, would provide increased protec-tion for individual property rights without being insurmountable forlegislatures.

V. CONCLUSION

As America grows older, the need for urban revitalization has in-creased. The use of eminent domain by Congress and state legisla-tures as a means of effectuating change has grown in recent times.With this advent of a heavier reliance by the government on eminentdomain comes the need for reform. While the government has an in-terest in using eminent domain to protect the public welfare, such pro-tection should not come at the expense of the fundamental rights ofthe people. The power of eminent domain is unique in this respect;

139. United States v. Carolene Prods. Co., 304 U.S. 144, 153 (1938)140. Kelo, 545 U.S. at 492 (Kennedy, J., concurring).141. Id. at 493.142. Id. at 490.


the sovereign’s inherent power over the lands under its control mustharmonize with the peoples’ fundamental right to property. While abroad definition of public use is inherently a limitation in theory,courts rarely overturn a legislative determination of public use.143

Though the use of strict scrutiny for public use determinationswould be consistent with the founders’ intent, even a heightened formof review for a narrow category of cases would provide more protec-tion for property rights. The current lack of a judicial check on thegovernment’s use of eminent domain tips the scales too far in favor ofthe government. The expansion of the public use requirement hasmade it virtually impossible for a landowner to successfully challengea public use determination by a legislature, and the time has come forthe Court to properly regulate the eminent domain power of thelegislature.

143. The Public Use Limitation on Eminent Domain: An Advance Requiem, 58YALE L.J. 599, 608 (1949) (“True, even a broad concept of “public use” implies alimitation, and many state courts still accord vocal acknowledgment to the concept.But they invariably find that the particular project under consideration is satisfactorilypublic in nature.”).