IN NOVEMBER 2001, long before the Kelo ruling threw the floodlights on eminent domain abuse, Susan Watson sent a distressed letter to James D. Sinegal, the president and CEO of Costco. She owned several hundred shares in the retail giant--and, as she put it, had been "a loyal customer and ardent fan" for many years--but now feared the company "may be violating the rules of our free market economy" to swell its business.

"I recently learned that Costco has been or will be the beneficiary of at least four pending eminent domain actions, where private property was or may be condemned so that Costco could build or expand a warehouse," Watson wrote, ticking off examples in New York, Missouri, and California. "If Costco had benefited from eminent domain once, I might regard it as a lucky break. Twice would be a happy--albeit unlikely--coincidence. But the list is long, and it appears to be a strategy of Costco Wholesale Corporation to deprive others of their private property rights. To bully small business with the power of eminent domain is wrong." For that matter, she added, "among Costco's most valuable customers are small business owners."

Watson received a prompt reply from Joel Benoliel, a senior vice president at Costco and its chief legal officer. He robustly defended each of the four projects in question, assuring Watson that Costco "will not profit by violating the law, and like you, we firmly believe in the free market economy." The four cases were not anomalies, and

"In truth," he wrote, "there are probably dozens of other Costco projects where eminent domain or the threat of it has been involved in acquiring land for redevelopment. In some states, the constitution or laws prohibit this from happening. But, in places like California, Redevelopment Districts with bonding authority and powers of condemnation have been the norm for many decades. Much of urban America has been built using this tool. We don't see any legal or moral wrong in this. The fact is, if we refrained from participating in these deals, our competitors for these sites like Target, Home Depot, K-Mart, Wal-Mart, BJ's, Sam's Club, and many others would take advantage of our reticence, and our shareholders would be the losers. In short, we are not violating laws or any rules of the free market economy. We would be doing exactly that if we refused to participate in these deals when they are offered, while other retailers continued to do so."

However self-serving his argument, Benoliel was correct that eschewing eminent domain would hamstring Costco in relation to its fellow retailers. Such corporate behemoths had long benefited from "economic development" takings, often at the expense of smaller proprietors and homeowners. Keeping up with the competition also meant keeping up with ever-evolving definitions of "public use."

"Desperate for tax revenue, cities and towns across the country now routinely take property from unwilling sellers to make way for big-box retailers," the Wall Street Journal reported in December 2004. "Condemnation cases aren't tracked nationally, but even retailers themselves acknowledge that the explosive growth of the format in the 1990s and torrid competition for land has increasingly pushed them into increasingly problematic areas--including sites owned by other people."