"But we had to eat."
So begins the Washington Supreme Court's opinion in Washington Food Industry Ass'n v. City of Seattle, No. 99771-3 (Feb. 9, 2023), wherein the court held that a takings challenge to Seattle's ordinance requiring Co-19 combat pay for food delivery workers may proceed.
There's a lot in the opinion about the crisis and the early days of the response. And about the various claims brought by the WFIA challenging the city's ordinance, including a statutory claim under Washington law (this is a prohibited tax or fee on groceries), equal protection, takings, contracts clause, section 1983, a "police power" claim, and a privileges and immunities claim.
The opinion is long (39 pages, plus concurring opinions and dissents, adding up to 67 pages), so here's your scorecard:
I. The chapter 82.84 RCW claim is dismissed; we affirm.
II. The equal protection claim is dismissed; we reverse.
III. The privileges and immunities claim is dismissed; we reverse.
IV. The takings clause claim is not dismissed; we affirm.
V. The contracts clause claim is not dismissed; we affirm.
VI. The 42 U.S.C. § 1983 damages claim is not dismissed; we affirm.
VII. The police powers claim is not dismissed; we affirm.
Slip op. at 3-4 (footnote omitted).
The plaintiffs assert a Penn Central regulatory takings claim. The city sought dismissal of the complaint, but as noted above, the trial court declined to dismiss the takings claim.
The Supreme Court affirmed. Importantly, the opinion first notes that the takings inquiry doesn't challenge the police power validity of the ordinance. "A regulation that is otherwise a valid exercise of police power may go 'too far' in its impact on a property owner as to constitute a taking, requiring compensation." Slip op. at 27-28 (footnote omitted - but read that foonote, number 10 on page 28, since we think it's a pretty good summary of the relationship between the police power and the compensation requirement:
The problem of an excessive regulation may implicate either the question of whether it exceeds the scope of police powers or whether it amounts to a taking, requiring just compensation. See Orion Corp. v. State, 109 Wn.2d 621, 648-49, 747 P.2d 1062 (1987), abrogated on other grounds by Chong Yim v. City of Seattle, 194 Wn.2d 682, 451 P.3d 694 (2019) (Chong Yim II). Though the doctrines have, at times, been blurred, see, e.g., id. at 645-48, the analyses—and, moreover, the remedies—are distinct. The remedy for an excessive police power regulation is invalidation, whereas the remedy for a taking is just compensation. Id. at 649; Chong Yim I, 194 Wn.2d at 660. The takings clause “‘is designed not to limit the governmental interference with property rights per se, but rather to secure compensation in the event of otherwise proper interference amounting to a taking.’” Chevron, 544 U.S. at 537 (quoting First Eng. Evangelical Lutheran Church of Glendale v. County of Los Angeles, 482 U.S. 304, 315, 107 S. Ct. 2378, 96 L. Ed. 2d 250 (1987)).
Slip op. at 28 n.10.
The opinion first affirmed that the plaintiffs possess a property interest, here, Instacart's contracts with independent contractors who shop for other people and then deliver the groceries (the above-mentioned "gig workers"). The plaintiffs asserted the ordinance has taken these contracts "for the private benefit of the food delivery network workers receiving premium pay." Slip op. at 29. This might be intangible property, but these rights, "including valid contracts, are protected by the takings clause." Id.
Turning to whether the plaintiffs have pleaded a Penn Central claim, the opinion noted the "ad hoc, factual" nature of the inquiry, and concluded the "takings claims should not be dismissed. Instacart may be able to prove a set of circumstances that demonstrates the ordinance interferes with its economic interests to a degree that amounts to a taking under the Penn Central test." Slip op. at 32. Noting that "the economic impact, extent of the interference with investment-backed expectations, and character of the regulation are highly factual inquiries[,]" the court held that without factual development, "it is impossible to ascertain the economic impact of the ordinance on Instacart's business model[.]" Slip op. at 33.
That seems about right to us. As we've noted here many times before, whatever you think of the Penn Central test, the Court has labeled it the "default" regulatory takings standard, and reaffirmed that it is a highly factual inquiry. See, e.g., "Penn Central May Be A 'Fuzzy' Test, But What's A Court Doing Weighing The Factors?" Which to us means that these cases should not get tossed out on the pleadings (which many of them are) and if the plaintiff is doing even a modicum of work should survive summary judgment. Yet the courts continue to act as gatekeepers and prevent most of these claims from getting past the pleadings stage.
Is it really that hard to allege a regulatory taking? We don't think so, nor does the Washington Supreme Court.
Washington Food Industry Ass'n v. City of Seattle, No. 99771-3 (Wn. Feb. 9, 2023) (en banc)