WASHINGTON -- The Supreme Court yesterday granted cities and towns the right to force the sale of private property to make way for economic development projects, ending a closely watched battle between homeowners and the City of New London, Conn., over a plan for a sprawling waterfront complex of private housing, stores, restaurants, and businesses.
The owners of nine houses charged that the city was abusing its power to take private property for public purposes with a plan that would enrich businesses and real estate developers, not the public at large. The city maintained that the public would benefit with the creation of 1,000 new jobs and higher tax receipts.
Over five years, the case drew progressively greater scrutiny in the real estate world as a David-and-Goliath battle, with many believing a conservative-dominated Supreme Court would impose new restrictions on the forced sale of private property.
It did not. In a 5-to-4 decision that cut mostly along the court's liberal-conservative fault line, with moderate Justice Anthony Kennedy siding with the four most liberal justices, the court expanded the power of cities to order the taking of homes or businesses.
It declared that economic development is a reasonable use of a city's power of eminent domain.
New London's ''determination that the area was sufficiently distressed to justify a program of economic rejuvenation is entitled to our deference," wrote Justice John Paul Stevens for the majority, which also included justices Ruth Bader Ginsburg, David Souter, and Stephen Breyer. ''The city has carefully formulated an economic development plan that it believes will provide appreciable benefits to the community, including -- but by no means limited to -- jobs and increased tax revenues."
Cities have long used their property-taking power to clear the way for roads, bridges, sewers, and other public improvements. They have also forced the cleanup of blighted neighborhoods and made room for sports stadiums, conference centers, and railroads -- all of which, even if privately owned, are used by the general public.
Any owner whose home or business is taken for such a purpose is to receive a fair price.
But the bulldozing of homes and businesses has often brought a passionate backlash -- such as with the still-lamented destruction of Boston's West End in the 1960s -- and courts have struggled to determine what is a constitutionally permissible justification for taking property.
Some states have refused to use eminent domain to help employers build larger offices and expanded research facilities. Other states have insisted that economic development has clear public benefits.
Yesterday, city planners across the country cheered the Supreme Court ruling, saying it preserves an important tool in assuring the economic competitiveness of cities at a time when employers can be enticed to cheaper suburban and rural locations.
Economic development is ''an essential public purpose of cities and towns," Boston Redevelopment Authority spokeswoman Susan Elsbree said.
''While the BRA does not utilize eminent domain in the same manner as New London, we do believe that this ruling affirms the importance of maintaining a strong planning and economic development agency to help create and implement the public vision for growth," Elsbree said in a statement.
But Justice Sandra Day O'Connor, in a sharply written dissent, declared that the decision will ''wash out" any distinction between public and private uses of property, leaving homeowners vulnerable to the whims of unelected planning agencies.
''Any property may now be taken for the benefit of another private party, but the fallout from this decision will not be random," wrote O'Connor, joined by Chief Justice William Rehnquist and justices Antonin Scalia and Clarence Thomas. ''The beneficiaries are likely to be those citizens with disproportionate influence and power in the political process, including large corporations and development firms."
New London's development agency devised its plan for the Fort Trumbull neighborhood along the Thames River after the pharmaceutical company
The city hoped to use Pfizer's commitment to attract new companies, stores, restaurants, a museum, a marina, and more homes to the area.
The plan encompassed public land and 115 private properties, most of which were purchased at a negotiated price.
But nine property owners refused to sell, and brought suit against the city in 2000.
The named plaintiff in the case, Susette Kelo, said she had made significant improvements in her house and prized its water view.
Another plaintiff, Wilhelmina Dery, was born in her home in 1918 and did not want to give up a house that had been in her family for about a century.
The owners won an injunction against the city from a state judge, but it was overturned by the Connecticut Supreme Court last year. The US Supreme Court heard arguments in February.
Yesterday, the homeowners expressed bitter disappointment.
''It's unbelievable that the court would do this," said Bill Von Winkle, who owns rental property as well as a home in the development area. ''After this ruling, no home in the country will be safe."
But in New London's City Hall, still reeling from the announcement earlier this year of the planned closure of the city's naval base, city attorney Tom Londregan expressed relief.
''It is the urban cities of this country that provide for the poor, the disadvantaged," he said. ''Cities need to be given the tools to develop the economic base to carry their urban agenda."
The court majority drew heavily on past cases in which cities and states obtained permission to use eminent domain power for new purposes.
The Supreme Court in the past has given strong deference to a state's or city's own determination of what constitutes a public benefit, Stevens wrote in the majority opinion.
He noted that the Supreme Court had upheld a massive redevelopment plan for a depressed Washington, D.C., neighborhood, and a plan by the State of Hawaii to break up the landholdings of a small group of owners whose influence was deemed harmful to the state.
O'Connor, writing for the dissenting justices, argued in favor of overruling recent precedent and allowing cities to take property only if they are going to use it themselves or open it to the public.
Eugene Volokh, a law school professor at the University of California at Los Angeles, said the decision was consistent with a century-long string of decisions granting more power to governments to force the sale of property.
The greater legal jolt would have come if O'Connor's opinion had prevailed, he said.
''There are real money and real lives at issue here," Volokh said. ''But it's not much of a change. It's long been understood that the government has broad powers to order the sale of property."
Globe correspondent Kaitlin Bell contributed to this report.