The New Mexico Supreme Court
In what amounts to an advisory opinion, in State of New Mexico v. Wilson, No. S-1-SC-3850 (June 7, 2021), the New Mexico Supreme Court (courthouse pictured above) concluded that the State's public health orders that impose "restrictions on business operations regarding occupancy limits and closures cannot support a claim for a regulatory taking requiring compensation[,]" either under the New Mexico Constitution or under New Mexico's statutes.
We just published an article in the William and Mary Bill of Rights Journal about the subject of "coronavirus takings," so naturally we're intrigued by what the New Mexico court has to say. If you are also interested, read on.
This case is in the Supreme Court as a result of the State's petition, asking the court to weigh in after 14 separate lawsuits were filed by business owners and others challenging the state's orders that "restricted mass gatherings and the operations of certain businesses, requiring some to close entirely." Slip op. at 4. The restrictions included capacity limitations, differentiated between types of establishments, and tiered reopenings. In each of the cases, the plaintiffs are seeking compensation (inter alia, one presumes).
The Supreme Court ordered briefing and stayed the lower court lawsuits.
Hold on, you say, shouldn't the court let the lower court lawsuits develop, and just rule on one of them that works its way up the appellate food chain? No, the court concluded, these are "exceptional circumstances" in which the court's exercise of its superintending control because "[t]he potential compensability of alleged injuries caused by the PHOs raises a question of public importance that will benefit from resolution. There is an obvious public interest in ensuring fair and consistent adjudication of an issue touching the concerns of thousands of owners of business property throughout New Mexico." Slip op. at 11.
So let's settle the question now, employing what the court called "legislative facts."
The court first addressed the claims under the New Mexico constitution. The State's main argument was that these orders were valid exercises of police power to respond to a public health emergency. Slip op. at 13. Thus, the State argued, no taking. [Barista's note: our article referenced above addresses such arguments, concluding that the validity of the government's exercise of police powers should not play any substantial role in a takings analysis.]
The opinion thus spends a lot of time on what we think is a red-herring issue. Yes, the State has the power to act to preserve the public health. But as we noted, this is a very "due processey" analysis, not really one for takings. See slip op. at 17 ("Otherwise, a reasonable exercise of the police power comports with due process."). See also slip op. at 25 ("Regulation under the police power that does not bear a reasonable relationship to the object for which it was enacted will be 'deemed ... invalid.'").
The court concluded that the regulations were reasonable exercises of the police power. Slip op. at 27. To us, that merely establishes the predicate question (takings generally must be the product of valid exercises of government power).
The court gets to what we think is the heart of the analysis at page 32 of the opinion. Likening COVID regulations to those that address a public nuisance, the court concluded that "[s]ince 'there is no ‘taking'' where this exception applies, id., the PHOs, as reasonable use regulation to prevent injury to the public health, are insulated from further takings analysis." Slip op. at 33-34. [Barista's note: if that's correct, there is no such thing as a regulatory taking, is there? After all, under the rational basis test, courts are not supposed to weigh or rank-order various species of police power regulations, are they?]
Next, the court concluded that the temporary nature of the COVID regulations means they are not takings. Slip op. at 35. We think this one is pretty weak sauce on the court's part, since we all know that temporary restrictions can be takings requiring compensation, and the temporary nature of the regulations does not give the government a free pass.
The court pays what we see as lip service to the notion that "courts cannot simply ratify the decisions of a coordinate branch of government," and that "[e]ven during a public health emergency, the judiciary cannot write a blank check to the executive or legislative branch." Slip op. at 36. But in our view, that's exactly what results from the court's faulty analysis for a couple of reasons.
First, it effectively recasted the takings and compensation claims as due process claims. As we've noted, however, these are radically different inquiries, with the due process question asking whether the regulations are (un)reasonable, and the takings question by contrast asking whether it is fair to impose the costs of otherwise reasonable regulations on the plaintiffs. Second, having taken the wrong fork in the road, the court then exacerbated the error by concluding that the regulations can't be takings because the regulations are reasonable. See slip op. at 36 ("It is in this light that we have taken judicial notice of changes over time regarding the PHOs and the circumstances of the public health emergency. Our reasonableness conclusion herein incorporates those changed realities.").
In the very next sentence, the court concluded:
However, the only question for this stage of analysis is whether the uncontested public health purpose of the PHOs insulates those orders against takings analysis. As we have established, the answer is “yes.”
Slip op. at 36.
The opinion dismisses the economic impact calculation (under Lucas and [presumably] Penn Central) by likening the public health regulations as "nuisance prevention" measures:
New Mexico’s background principles of public nuisance law clearly affirm the power of the State to prevent injurious use applicable to the PHOs....Based on our clearly established background principles of state nuisance law, the public nuisance exception to the categorical rule in Lucas would apply to a claim against the PHOs alleging total deprivation of all beneficial use.For the foregoing reasons, a Lucas claim against the PHOs cannot avail the Real Parties.
Slip op. at 38, 40.
Finally, the court concluded that the business owners would not be entitled to compensation under the New Mexico statute requiring compensation for property taken during emergencies. The court held that when the statute refers to "property," it means "health care supplies" and "health facilities," not literally any property such as business (in other words, when your hospital or medical supplies are commandeered). Check out that part of the opinion if you are interested.
In sum, here are your takeaway points from the opinion:
- Advisory opinion (or pretty close to one). We think the court wanted to nip these cases in the bud, and tamp down any takings claims.
- Although the court cited a lot of U.S. Supreme Court takings cases, this case was solely under the New Mexico Constitution, not the Fifth or Fourteenth Amendments. So we suppose it is still an open question if the business owners take their federal takings claims to a federal court.
- The conflating of the due process and takings inquires really throws the court's analysis askew, in our view.
- If health regulations are really just background principles and nuisance prevention, is there anything left of the regulatory takings doctrine?
