CAN A LOCAL GOVERNMENT USE its eminent domain power to crush a business deal and keep jobs from leaving town?

For better than 30 years, eminent domain has been a development tool: local governments used the doctrine to claim farm fields and blighted city lots for such things as roads, parks, and public housing. Now, increasingly, cities are brandishing the doctrine against companies whose mergers, relocations, and plant closings are deemed threatening to the economic well-being of the community.

The most recent skirmish: Thorn Apple Valley Corp., a Michigan meat packer, acquired Boston's ailing Colonial Provision Corp. All Thorn really wanted was the use of Colonial's name and distribution channels to extend its sales of cold cuts into New England; its plan was to idle the plant and lay off 600 workers.

That didn't thrill the pols in Boston City Hall. They threatened to seize Colonial by eminent domain in order to prevent Thorn from padlocking the plant. The city had no intention of going into the meat-packing business; it merely planned to transfer Colonial's assets to a local company that would continue to operate the plant. Aftr weeks of toe-to-toe confrontation, however, the city backed down, its attorneys arguing that the courts might not uphold the transfer of ownership after all.

Some legal scholars think that Boston was escaping a financial disaster, not a legal one. They are convinced that the "public purpose" requirement for eminent domain, which the courts have expanded over the years, would encompass seizures carried out to preserve jobs. And they point out that ownership transfers have been commonplace since the early days of urban redevelopment in the 1950s. "It would be shocking in my judgment if the Supreme Court would have interpreted eminent domain to prohibit wht Boston wanted to do," says Joseph W. Singer, an associate professor at Boston University School of Law.

The real reason Boston bowed out, says Thorn president and chief executive officer Joel Dorfman, is that "Colonial's business wouldn't have survived even if the employees had worked for free. The city wouldn't have had to raise its saber if the business was viable. A buyer would have surfaced."

The Steel Valley Authority, a group of eight cities, including Pittsburgh, may be more successful than Boston. It is attempting to acquire and reopen two factories. "They've done the studies, they've launched the public education campaigns," says Mercedes Marquez, attorney for Georgetown University Law Center's Institute for Public Representation. "they know that eminent domain, in these circumstances, is a viable option for saving jobs."