(FORTUNE Small Business) – It was enough to make William Minnich spit out his morning coffee. Four years ago, while eating breakfast and skimming the New York Times in his Harlem office one Sunday, Minnich discovered he could lose his family business. Minic Custom Woodwork, which makes high-end furniture, was founded by his father in 1927 and has operated in Manhattan ever since, including the past 23 years at its current location in Harlem. But according to the Times, a developer intended to build a Home Depot and a Costco nearby. The site wasn't big enough for all the new construction and parking, so New York State was planning to use the power of eminent domain to take property from some homeowners and businesses as well. "I said, 'My God, that's me,'" Minnich remembers. "And these guys never said a word to me."

Eminent domain is the right of the government to claim private property for public use as long as it pays the owner a fair price. A legal principle upheld by the Constitution, it's an inherent power that has long been used by states to make room for highways, railroads, schools, and hospitals. A Supreme Court ruling in the 1950s extended it to include commercial development after a rundown neighborhood in Washington, D.C., was condemned to make room for condos. Since then, developers have started leveraging the power of local government to lay claim to desirable property, even if the new project serves a private business aim and not a civic one.

Lately that has meant bringing in big national chains, which offer a town the advantages of more tax revenue and a larger pool of local jobs. Not surprisingly, that often comes at the expense of independent businesses. "A lot of mayors and county officials are hard-pressed to make development occur, so they're willing to use this blight law and get laws written that are so broad you can call almost anything 'blighted,' " says Jake Haulk, president of the Allegheny Institute, a conservative think tank that studies local-government issues. "They feel a lot of pressure to make things happen--it's the ribbon-cutting syndrome." Even some local officials agree: "Most states have some sort of economic development zone that expands the power of eminent domain," says Chris Norby, a former mayor of Fullerton, Calif., who now serves on the city council there. "It almost always targets small business and homes to the benefit of big-box retailers."

For Blumenfeld Development Group, the Harlem project represents a chance to bring a string of national retailers to one of the last large pieces of usable land in New York City. "It's the only place in Manhattan where you could get a major retailer floor space and parking that would be equivalent to a suburban location," says company vice president David Blumenfeld. He first contacted New York's Empire State Development Corp. back in 1995 about building on the land in Harlem.

William Minnich didn't find out about these plans until three years later. But unlike a lot of small business owners, who might feel outgunned and simply concede, he decided to fight back. After all, he'd worked in his father's shop from the age of 7. When he was a kid, Frank Lloyd Wright had come in once and commissioned his father to create prototypes for Wright's furniture line. (Some of those pieces are now in the Metropolitan Museum of Art's permanent collection.) The company even built wooden reindeer for a scene in the movie Miracle on 34th Street. Throughout the years, Minnich's wife, children, nieces, nephews, and in-laws have all helped out. Giving up, it seemed, wasn't an option.

In the four years since that fateful Sunday morning, he's filed lawsuits in both federal and state court, written hundreds of letters, called politicians, including Governor George Pataki and mayors Rudy Giuliani and Michael Bloomberg, and spent more than $100,000 to protect his business.

In fact, Minnich is part of a growing trend among small business owners, who are saying, in essence, "You can't kick us out so easily." Across the country, people are coming up with creative ways to resist condemnation orders, especially when it's not a hospital or a highway they're being asked to make way for but a Home Depot or a Wal-Mart. Some, like Minnich, hire lawyers to try to duke it out in court; others coordinate grassroots lobbying efforts; still others try to persuade politicians to support their cause. The issue has hit enough communities that the somewhat grandiosely named Institute for Justice, a Washington, D.C., law firm that takes on nationwide eminent domain cases, organized a conference in March to show property owners exactly what they can do when threatened with condemnation (see box, "Superheroes? Maybe"). "It's scary to know that this is happening everywhere and that property rights are being abused," says Brad Wallace, owner of a racing-engine business in Maryland who managed to hold out against a looming development. "There are similarities everywhere, and it seems the politicians don't want anyone to know before they act."

The businesses that have successfully fought off eminent domain claims have done so through political lobbying and grassroots work--and occasionally some luck. Take the Stone Pony, the Asbury Park, N.J., bar where Bruce Springsteen got his start and still occasionally performs. In 2001 a development company named Oceanfront Acquisitions took over a local real estate project that had been languishing for more than a decade. Oceanfront's plan was to put in luxury condominiums and shops along the beach, but it needed to claim the bar's property. However, the Springsteen factor helped the owner's chances of staying put. After packed rallies at the bar, a petition drive, a Website (savethestonepony.com), and political support, Asbury Park finally called in renowned Miami architect Andres Duany to draw up revised plans that would work around the Stone Pony, plus a few historical sites in town.

Other businesses that don't have famous names behind them have to work harder. In April 2000, when Maryland Governor Parris Glendening signed a bill allowing eminent domain in the redevelopment of Essex, more than a dozen property owners were suddenly in danger of being kicked out. Brad Wallace, 57, stood to lose both the home where he had grown up and his racing-engine manufacturing business (which has sold engines to racing teams in the Daytona 500). On the property where Wallace's shop and home were located, the proposed development plan envisioned a waterfront commercial district where people could dock their boats to eat and shop.

Determined to get Maryland residents to vote down the plan, Wallace helped rally a group of local business owners for help. Meeting every night at one another's offices or at local bars, the group of 12 pored over legislation and plotted strategy. They also spoke to hundreds of people. "We met with political organizations, hunting groups, fishing clubs, church groups," Wallace says. "We called and asked to be invited. They explained to these groups how the development would have an impact on them and left petitions behind. Wallace says they spent about $30,000 making copies of the legislation to hand out. They even hired a pilot to fly over a Baltimore Orioles game with a banner urging people to vote against the Essex project.

But they also got crucial help from two Maryland legislators, representatives Jim Ports and Diane DeCarlo. The group invited Ports, a Republican, to see the properties in danger of condemnation and convinced him that they weren't blighted. DeCarlo, a Democrat who represents the district, also helped out. Ports showed slides of the property to other legislators and instructed people in Wallace's group how to get their message across, even down to details like the ideal color and thickness for cardboard signs. Both he and DeCarlo spent nights helping the group verify names on their petition--after a few months they had more than 40,000 signatures--and on Election Day they deployed people to the most crowded polls throughout Baltimore to hand out leaflets. All that work paid off--in a state referendum the development plan was voted down 70% to 30%. "They needed guidance on how to run a campaign," says Ports, "and we needed help in the grassroots area to make things happen."

Ports and Decarlo aren't the only local representatives to argue against eminent domain cases. In Pittsburgh a downtown retail development threatened to replace 125 businesses with a shopping mall that included Nordstrom as the anchor tenant. But state representative William Robinson drafted a bill that challenged the city government's largely unchecked power to control redevelopment. Robinson says he thinks eminent domain can help revitalize an area, but too often it benefits big builders at the expense of the little guy. "Real questions are raised when you use eminent domain to build ballparks and condos and shopping malls," he says.

In response to the Nordstrom project, a group of Pittsburgh business owners came together to study new ways to revamp the city's downtown area. The plan they put together doesn't completely solve the eminent domain problem--some small businesses will still probably have to be moved, since often there's simply no way around it--but at least they'll be aware of what's happening and involved in the decision. As of press time the mayor of Pittsburgh had yet to approve the alternate plan, but his signature is considered a formality.

Small businesses have also been winning in the courts, suing to stop development projects in California, Connecticut, Michigan, Minnesota, New Jersey, and Pennsylvania in the past year alone. In most of the cases, the courts held that the condemnation orders were serving an improper--usually private--purpose. For example, the Connecticut case involved a diner in Stamford that was condemned using a declaration of blight that was 40 years old. The Connecticut constitution guarantees that private property will be taken only it if serves a public purpose, but in this case the developer wanted to put up--surprise--high-end condos. Fortunately, the state supreme court struck that down as insufficient to justify condemning an existing business.

As promising as rulings like that are, William Minnich still hasn't gotten the legal decision that will let him keep his woodworking shop in Harlem. He's filed state and federal lawsuits against New York, and the results haven't been entirely successful. In the state case, Minnich and several other plaintiffs tried to prove that, among other things, the condemnation of his business wasn't legitimate because the state's "notification" requirement--a legal posting in the fine print of the newspaper--never gave him a realistic chance to formally oppose it. The ruling in that case went against him in June 2000. The federal case, in which Minnich is claiming that a retail redevelopment isn't sufficient "public use" to take property through eminent domain, is pending. He lost the initial ruling but immediately appealed; a judgment on that appeal isn't expected until sometime this summer.

"It sets a dangerous precedent, because every small business site in the U.S. could be earning more for the town as a big-box store," says Dana Berliner, an attorney at the Institute for Justice who has handled Minnich's case from the beginning. "So if your standard is 'Could we be getting more tax dollars another way?' the answer is always yes."

In the meantime, his fight has drawn the attention of some state legislators, who have introduced a bill that would require the state government to give businesses direct notice that they may be threatened. And Minnich considers all his time and money well spent, as he's already managed to hold off the developers and stall a major real estate development for years. "If we hadn't fought back," he says, gesturing around his 10,000-square-foot shop, "all this would have been bulldozed the second year." Berliner is hopeful but probably being realistic when she says he won't be able to hold out forever. Still, Minnich hasn't lost faith. "She says our odds of winning are very, very small," he says. "But she said the odds of getting to this point were very, very small too."