The U.S. Court of Appeals for the Seventh Circuit's decision in Nowlin v. Pritzker, No. 21-1279 (May 20, 2022), adds to a long line of rulings denying takings claims for coronavirus-related business shutdowns.
This one challenged the Illinois governor's executive orders which required "non-essential" businesses to shut down or reduce operations, and limited the size of gatherings. The plaintiffs brought the usual host of constitutional claims (a total of six), which included (naturally) a takings claim. The district court, after granting leave to allow the filing of an amended complaint, dismissed all six claims, concluding either that the plaintiffs had not alleged particularized injuries (and thus lacked standing, and thus the court lacked jurisdiction), or that the complaint failed to state claims.
The Seventh Circuit affirmed that all claims, with the exception of the takings claims, lacked jurisdiction because the plaintiffs had not alleged specific injuries. The court subject the takings claim, however, to a separate analysis, because it saw a "glimmer of concreteness" in that claim (don't worry, it still affirmed the dismissal). Jump up to page 7 of the slip opinion if you don't want to hear about the nuances of federal court standing.
The opinion first noted that "[t]he Businesses do not allege any physical invasion or direct appropriation of their property." Slip op. at 7. So Cedar Point is out. So the only thing left is regulatory takings. On that, the court didn't need to ask whether the plaintiffs were alleging a Lucas wipeout or a Penn Central ad hoc taking, because it concluded that the complaint was too vague to figure out what the plaintiffs were claiming:
“While legal conclusions can provide the complaint’s framework, they must be supported by factual allegations.” Iqbal, 556 U.S. at 679. The Businesses have asserted legal conclusions, but they have not supported those conclusions with factual allegations that plausibly suggest that the Governor’s orders constituted regulatory takings. How much money did they lose? How long was each Business closed? Did one or more of them use its property in other, albeit less lucrative, ways? We don’t know. Allegations such as “Plaintiff Businesses were unable to open for business[]” and “Plaintiffs stand on the precipice of economic collapse” express conclusion, not facts that would permit an inference of the total or near-total deprivation of use or value required by Lucas and Penn Central.
Slip op. at 8.
The court called the pleading requirements in takings cases "demanding." See id. ("Our examination of the amended complaint convinces us that Plaintiffs have not met the demanding test for alleging a regulatory taking."). But we're not sure what's so "demanding" about making allegations that answer the questions the court posed. After all, Twiqbal's plausibility requirement has not overruled Rule 8's notice pleading standards, and as long as the defendant is on notice of the claims being made against it, we thought that was enough. Takings cases are not fraud cases, and you don't have to plead with particularly (or do you, Seventh Circuit?).
So here's your tip of the day: plead more, not less, in takings cases. We know you don't have to. But it will save time if you do.
And the court's final words about the takings claim seem to go out of the way to rub a bit of salt in the plaintiffs' wounds:
As we recently noted in a different but related context, while the preferred or intended use of many business properties was limited or even prohibited by the Governor’s COVID orders, those orders did not deprive property owners of all uses to which their premises might be put. See Sandy Point Dental, P.C., et al. v. Cincinnati Ins. Co., 20 F.4th 327, 335 (7th Cir. 2021). Like the plaintiffs in Sandy Point, the Businesses were free to make other uses of their properties consistent with the closure orders. See id. That such uses would not have been their preferred or most profitable uses does not mean that the closure orders effected a regulatory taking. This complaint fails to move the needle from the possible to the plausible with respect to the alleged Takings claim. It thus fails to state a claim upon which relief can be granted. See Fed. R. Civ. P. 12(b)(6).
Slip op. at 9. Hear that restaurant and bar owners? ... Shame on you for not retooling and opening up as an auto repair shop.
We understand that yes, the court's statement may be theoretically and legally accurate, but it is at the very least very tone-deaf, and blind to the everyday realities of the physical and regulatory milieu that most businesses operate under.
For our general thoughts on emergency takings, see our article, Evaluating Emergency Takings: Flattening the Economic Curve, 29 Wm. & Mary Bill of Rights J. 1145 (2021).
Nowlin v. Pritzker, No. 21-1479 (7th Cir. May 20, 2022)
