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Michigan, Over Dissent, Declines To Hear Co-19 Shutdown Takings Case

In this Order, the Michigan Supreme Court declined to consider a case which challenges the Michigan governor's Co-19 shutdown executive orders, which, in the words of the dissenting Justices, reached "nearly every aspect of life in our state."

There have been a lot of cases asserting that Co-19 shutdowns are takings, with most (but not all) of them crashing and burning, including this one. Here, the plaintiffs -- a class of owners whose businesses suffered devastating losses as a result of the shutdown orders -- sought just compensation for the regulatory taking. They alleged both types of takings, categorical and ad hoc (Penn Central). They also asserted claims under the Michigan Constitution (a trend we approve!).

We recommend you take a dive into the Statement of the two Justices who dissented. They would have taken up the case because "the majority leaves unresolved novel and important questions regarding federal and state takings jurisprudence." What are those novel and important questions? Glad you asked:

Can the temporary impairment of business operations be a categorical taking if there are no reasonable alternative uses of the business property during the period in which its intended and normal use is prohibited? And, if not, can the prohibition of the normal business operations nonetheless constitute a taking under the multifactor test established by the United States Supreme Court and employed by our courts? Because neither that Court nor this one has given significant guidance on the actual application of the test, and because this case is an appropriate case in which to provide clarity in this area of the law, I would take the opportunity to do so. Plaintiff, on behalf of a putative class, has raised plausible claims that the government took its property without just compensation, and genuine issues of material fact exist regarding its claims. Further factual development would aid in the proper resolution of these questions that should eventually be answered, such that summary disposition prior to the close of discovery was inappropriate. I would reverse the Court of Appeals and remand to the trial court to allow discovery to continue in this case.

Dissent at 1-2.

The Justices undertake what we view as very valid criticisms of the way the Michigan Court of Appeals analyzed the the claims. On that, some humblebragging (and what else is the internet good for but a good humblebrag?): the Justices apparently appreciated the article we published on "emergency takings," Evaluating Emergency Takings: Flattening the Economic Curve, 29 Wm & Mary Bill of Rights J. 1145 (2021)), which contains our own criticisms of the way that many courts approach these type of claims generally, and specifically how they apply the ad hoc Penn Central test. 

More on the story here:

• Michigan Supreme Court won’t hear appeals on COVID-19-related compensation lawsuits
• Mich. Supreme Court sides with state in COVID-19 shutdown cases
• Mich. Supreme Court Shuts Down COVID Closure Suits

Stay tuned.

Order, The Gym 24/7 Fitness, LLC v. Michigan, No. 164557 (Mich. Aug. 30, 2024)

Lawprof Somin: "Federal Appellate Court Rules in Favor of Takings Lawsuit Against the CDC's Covid-Era Eviction Moratorium"

Be sure to read the entirety of Lawprof Ilya Somin's recent post on Volokh, "Federal Appellate Court Rules in Favor of Takings Lawsuit Against the CDC's Covid-Era Eviction Moratorium."

There, he analyzes the Federal Circuit's recent 2-1 opinion in Darby Dev. Co., Inc. v. United States, No. 22-1929 (Aug. 7, 2024) (we wrote up the case here: "Deepening A Lower Court Split, Fed Cir (2-1) Reinstates CDC Co-19 Eviction Moratorium Temporary Takings Claim").

Professor Somin does a better job that we did offering his thoughts on the "authorized" issue, concluding:

To me, the decisive factor should be that the Takings Clause nowhere says that compensation is only required for legal government actions or for those specifically authorized by statute. Rather, the Clause imposes a general rule that compensation must be paid whenever the government takes private property for "public use." That, of course, can happen even without proper legislative authorization. I can understand if takings liability is nonetheless denied when rogue low-level officials seize property without any plausible justification. But that isn't what happened here.

He also dives into the question of whether leasing property to a tenant is an "invitation" to occupy the property that pretty much wipes out any claim that the government restricting the ability to recover the property upon expiration or breach of the lease is a physical taking:

To put it a different way, any "invitation" expires at the point where the property owner has a legal right to evict the tenant. At that point, there is no voluntary landlord-tenant relationship anymore; and if the government forces the owner to keep on housing the tenant on his land, we have a mandated physical occupation of property, which counts as a per se taking.

Well worth reading. Check it out.

Deepening A Lower Court Split, Fed Cir (2-1) Reinstates CDC Co-19 Eviction Moratorium Temporary Takings Claim

This one is a must-read.

In Darby Dev. Co., Inc. v. United States, No. 22-1929 (Aug. 7, 2024), the U.S. Court of Appeals for the Federal Circuit held that the Court of Federal Claims should not have dismissed Darby's complaint for failure to state a physical invasion takings claim.

The short takeaways:

• Takings claims do not require the government action be legally authorized (here, the courts invalidated the government action, after which the plaintiff sued for a taking), only that the government action was "authorized" and thus can be "chargeable to the government."
• Prohibiting evictions is not merely a regulation of the landlord-tenant relationship. Yee v. City of Escondido is distinguishable, and does not categorically exempt all actions that implicate the landlord-tenant relationship from physical takings challenge.

We think the longer story is worth your time. Here it is.

As you may recall, the Center for Disease Control purported to impose a nationwide moratorium on residential evictions during the Co-19 lockdowns. (Sidebar: we don't know about you, but the lockdowns now seem like eons ago -- some distant fever dream, no?) When the Supreme Court got a hold of a challenge to the CDC's authority to do this, the Court concluded, "[i]t strains credulity to believe that this statute grants the CDC the sweeping authority that it asserts."

Now remember, that was one of the cases challenging the CDC moratorium on non-takings grounds, primarily asserting that the CDC's enabling statute did not give it the authority to impose such a sweeping an action (or if it does, the statute is unconstitutional). The Court invalidated the moratorium. Or, more precisely, concluded the challengers in that case stood a pretty good chance of ultimately prevailing on the merits, since this went to the Court on a preliminary injunction. In any event, that was enough, and the CDC stood down.

But as we also noted, Court's opinion contained some tantalizing takings language that we thought then (and continue to think now) predicted a physical takings claim:

Despite the CDC's determination that landlords should bear a significant financial cost of the pandemic, many landlords have modest means. And preventing them from evicting tenants who breach their leases intrudes on one of the most fundamental elements of property ownership - the right to exclude. See Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 435 (1982).

Not surprisingly, some property owners took up the challenge, and several takings claims against the federal government in the Court of Federal Claims followed. Some of the claims were quite ... extraordinary. Others a bit more modest. But here's the general theory most of them employed:

In their operative complaint, they claimed that the Order, by preventing them from evicting non-rent-paying tenants, constituted a physical taking of their rental properties for public use, thus requiring just compensation under the Fifth Amendment’s Takings Clause. See J.A. 37 ¶ 31, 38 ¶¶ 36–37 (describing the Order as having deprived Appellants of their “fundamental right to exclude” and having “effected a government-authorized physical invasion, occupation, or appropriation of [their] private property, for the government itself or for third parties” (cleaned up)).

Slip op. at 6-7 (footnote omitted0.

To our surprise [more like "surprised not surprised"], most of those complaints went nowhere, and floundered on familiar shoals, as in the Darby case:

The government moved under Court of Federal Claims Rule 12(b)(6) to dismiss Appellants’ complaint for failing to state a claim upon which relief could be granted. The government made two primary arguments relevant here. First, it argued that a takings claim cannot be premised on government action that was unauthorized; and, in its view, the Supreme Court in Alabama Association of Realtors essentially confirmed that the Order was unauthorized. Second, it argued that, under Yee v. City of Escondido, 503 U.S. 519 (1992), the Order could not constitute a physical taking because it merely regulated the landlord-tenant relationship.

The Court of Federal Claims granted the government’s motion and dismissed the complaint. Darby Dev. Co. v. United States, 160 Fed. Cl. 45 (2022).

Apparent Authority and "Chargeable to the Government"

The Federal Circuit first considered the government's argument that only authorized actions result in takings liability. It argued that "authorized" means legal, or done with actual legal authority. The court rejected the claim, holding that "authorized" means "chargeable to the government" Slip op. at 10. So an action that is ultimately ultra vires or illegal can result in takings liability. This reminds us of the common law "apparent authority" vibe:

An action will normally be deemed authorized if it was done by government agents “within the general scope of their duties”—i.e., if it was “a natural consequence of congressionally approved measures” or “pursuant to the good faith implementation of a congressional act.” Del-Rio, 146 F.3d at 1362 (cleaned up); see also Ramirez, 724 F.2d at 152 (“[O]n numerous occasions when the government agent was acting within the ordinary scope of responsibilities conferred on him by Congress, and took private property without express statutory authority or prohibition, the Tucker Act remedy was held to lie.”).

Slip op. at 11 & n.7 (citing Restatement (Third) of Agency § 2.02 cmt. c (Am. Law. Inst. 2006) ("In determining when an agent’s act is attributable to a principal, it is not novel to define the agent’s authority based on its reasonable (even if ultimately mistaken) understanding of the authority that the principal gave it.")).

This portion of the opinion wraps up with this summary:

To summarize: even if an action by a government agent is unlawful, it will likely be deemed authorized for takings claim purposes if it was done within the normal scope of the agent’s duties—for example, if it was done “pursuant to the good faith implementation of a congressional act.” Del- Rio, 146 F.3d at 1362 (cleaned up). If instead the action was outside the normal scope of the government agent’s duties— or, despite being within that scope, it contravened an explicit prohibition or other positively expressed congressional intent—it will likely be deemed unauthorized. See id. at 1363; Ramirez, 724 F.2d at 151. The ultimate inquiry is whether the government agent’s action is “chargeable to the government.” Del-Rio, 146 F.3d at 1362.

Slip op. at 16.

The court concluded that "because the CDC issued the Order within the normal scope of its duties, and because it did not contravene any explicit prohibition or positively expressed congressional intent in so doing (far from it, as just discussed), we concluded that the Order was 'authorized' for takings-claim purposes." Slip op. at 20.

Yee Doesn't Go That Far: Cedar Point is More On-Point

Next, the court considered whether Yee v. Escondido -- a case which has caused all sorts of mischief in the takings field -- could be employed to deem the CDC's restriction on a lessor recovering possession of rented property via eviction merely a regulation on the landlord/tenant relationship, and not the government allowing third-party occupation of property.

The court found Cedar Point more on-point: "Cedar Point's reasoning indicates that the complaint stated a physical-takings claim. And, as explained below, we consider Yee distinguishable." Slip op. at 30.

[A]t a fundamental level, we cannot reconcile how forcing property owners to occasionally let union organizers on their property infringes their right to exclude, while forcing them to house non-rent-paying tenants (by removing their ability to evict) would not.

Slip op. at 31.

The court limited Yee ("the laws at issue in Yee expressly permitted eviction for nonpayment of rent"), and noted that "Yee was fundamentally a rent-control case." Id. The court rejected each of the government's Yee-based arguments. 

First, Yee is not a get-out-of-jail-free card, and did not hold that "government actions implicating the landlord-tenant relationship can never be a physical taking." Slip op. at 31-32. Yes, there's a broad power to regulate, but "we see nothing in Yee (or any other binding precedent we are aware of) that immunizes -- as a categorical matter -- government action implicating the landlord-tenant relationship from being treated as a physical taking." Slip op. at 32.

Second, the court rejected the notion that because the owner invited the tenant to occupy the property by entering into a lease, she thereby abandons a right to recover the property upon breach of that lease. "While we agree that this point distinguishes Cedar Point, we are not persuaded that it compels a different result." Slip op. at 33.

If a previous voluntary invitation (by itself) controlled the analysis, that would essentially mean that all government actions implicating the landlord-tenant relationship are immune from being treated as physical takings. (After all, we can safely assume that just about every landlord-tenant relationship stems from a voluntary “invitation” from the landlord to the tenant.) And yet, as noted above, we see no reason why government actions implicating that relationship must be categorically immune from being treated as a physical taking. At bottom, just because tenants (or other occupiers of property) were at one point “invited” does not mean that their continued, government-compelled occupation cannot, under any circumstances, be treated as a physical taking.

Id.

The court summarized by noting that the CDC's restriction "is hardly a run-of-the-mill law implicating the landlord-tenant relationship. Instead, it is a highly-unusual -- and, so far as the parties have shown, unprecedented -- Order that outright prevent evictions for nonpayment of rent." Slip op. at 34.

The Federal Circuit joins the Eighth in limiting the scope of Yee, while other circuits (see also this) -- and some state courts -- continue to to view Yee as allowing nearly any form of regulation as long as the tenancy originally was permissive. 

One judge dissented (Judge Dyk, in case you were wondering). He focused on the "authorized" argument, and would have concluded that the CDC's actions were not within the "normal scope" of the agency's duties, and was "well-outside" what the CDC is charged with doing. In other words, the more the CDC strayed outside the lines, the less its actions could result in a taking.

This, he asserted, would result in a massive expansion of government liability:

It would effectively make even clearly unauthorized agency action authorized for purposes of takings liability unless that action was contrary to a specific prohibition of the authorizing statute or taken in bad faith. That cannot be correct. The majority’s decision would work a sea change in our takings jurisprudence and impose significant takings liability on agencies for unauthorized acts, directly discouraging adoption of legitimate government programs because of the risk of takings liability in addition to injunctive and declaratory relief. Historically, unauthorized programs were enjoined. Now, in addition there is the specter of takings liability.

Dissent at 3.

The length of Judge Dyk's dissent tells us he was trying to set up en banc review, or even a government cert petition.

So stay tuned.

Darby Dev. Co., Inc. v. United States, No. 22-1929 (Fed. Cir. Aug. 7, 2024)

Games Government Play: Ninth Circuit Doesn't Buy Attempt To Moot Constitutional Challenge To Co-19 Vaccination Policy By Sandbagging And Withdrawing

Games people play
Night or day they're just not matchin'
What they should do
Keeps me feelin' blue
Been down too long
Right, wrong, I just can't stop it

This one isn't about takings, but is nonetheless a must-read.

In Health Freedom Defense Fund, Inc. v. Carvalho, No. 22-55908 (June 7, 2024), a panel of the U.S. Court of Appeals for the Ninth Circuit (yes, the Ninth Circuit!) held that the litigation was not moot even though the government had revised the challenged regulation. The Ninth Circuit also vacated and remanded the District Court's dismissal of the challenge to the Los Angeles Unified School District's requirement that its employees be vaccinated 

The sequence of facts is important. Check out the shell game shenanigans that LAUSD went through, after which it told the courts with a straight face that this was just routine and not it playing litigation games:

• LAUSD required all employees to have or get the Co-19 vaccination, and was silent about any exceptions.
• The plaintiffs sued, arguing that mandatory vaccinations are unconstitutional.
• The next day, LAUSD issued a "clarifying memorandum" that said that employees who didn't want to get the vaccine could get tested. Thus, it argued, we're not imposing a mandatory vaccine.
• LAUSD sought dismissal - the complaint was either unripe or moot.
• District Court agreed and dismissed for ripeness ("because that policy was changed before it was ever enforced, the dispute remained unripe").
• After dismissal, LAUSD "reversed course again two weeks later[,]" to eliminate the testing option.
• A second lawsuit followed. This time the plaintiffs also alleged that the vaccine is not really a vaccine as that term has been commonly used, meaning something to prevent transmission. Instead, they alleged, the Co-19 was merely a treatment, not a preventative.
• LAUSD sought judgment on the pleadings, which the District Court granted. It relied on Jacobson and rational basis review. As long as there's a conceivable public purpose all's ok. And here it is conceivable that the mandatory vaccine policy would help the public health.
• Next stop, Ninth Circuit. After its answering brief "vigorously defended" the vaccine mandate without making any suggestion that the mandate might be revoked, the court heard oral arguments, with LAUSD confirming during argument that the policy was "still in place."
• After the arguments, however, LAUSD's lawyer (at least according to a declaration submitted by plaintiffs' counsel) said to him "What are you going to do when we rescind the mandate?" Slip op. at 11.
• Same day: LAUSD began the process to rescind, and less than two weeks later, LAUSD "voted to rescind the Policy[.]" But it still kept its options open, and cautioned that if the situation required a return to the vaccine requirement, "LAUSD would reconsider the Policy."
• LAUSD then asked the Ninth Circuit to dismiss, arguing that the complaint was moot: after all we reversed the policy, right?

The Ninth Circuit concluded that the case was not moot: LAUSD's actions came after the litigation was instituted, and did not fall under the "voluntary cessation" exception to mootness. In most cases, the defendant stopping the challenged conduct on its own does not moot a case, unless it is "reasonably clear that the challenged practice will not happen again," and that "any effects of the alleged violation must be permanently reversed." Slip op. at 13.

Here, the Ninth Circuit held, "LAUSD's pattern of withdrawing and then reinstating its vaccination policies is enough to keep this case alive." Id. The pattern here was that "[t]wice LAUSD has withdrawing its policy only after facing some litigation risk[,]" after which it returned "to its old ways." Slip op. at 14. The court characterized this as a "willingness to tactically manipulate the federal courts[,]" rendering "LAUSD's timing ... suspect." Id.

This conclusion was driven by a practical and common sense view of the government's  pattern of strategic litigation behavior (we'd call it "sandbagging"), and not by simply accepting its arguments about what it was up to:

Given the detailed procedural history summarized earlier, the record at least supports a strong inference that LAUSD waited to see how the oral argument in this court proceeded before determining whether to maintain the Policy or to go forward with a pre-prepared repeal option. LAUSD appears to have twice sought to manipulate the federal courts to avoid an adverse ruling on this issue. Moreover, the Board expressly reserved the option to again consider imposing a vaccine mandate. This confirms that LAUSD has not carried its heavy burden to show that there is no reasonable possibility that it will again revert to imposing a similar policy.

Id.

On the merits, the panel rejected Jacobson's "direct" application, concluding that Jacobson only governs when the government requires a vaccine, which is an inoculation to prevent the spread of a disease. This distinction is critical:

The district court relied on Jacobson to hold that the Policy was rooted in a legitimate government interest. Reilly, 2022 WL 5442479, at *5−6. But Jacobson does not directly control based on Plaintiffs’ allegations. In Jacobson, the Supreme Court balanced an individual’s liberty interest in declining an unwanted smallpox vaccine against the State’s interest in preventing disease. 197 U.S. at 38. The Court explained that the “principle of vaccination” is “to prevent the spread of smallpox.” Id. at 31–32. Because of this, the Court concluded that the State’s interest superseded Jacobson’s liberty interest, and the vaccine requirement was constitutional. Id.

Plaintiffs argue that a “traditional vaccine” must provide immunity and prevent transmission, meaning that it must “prevent the spread” of COVID-19. Plaintiffs allege that the vaccine does not effectively prevent spread, but only mitigates symptoms for the recipient. And Plaintiffs claim that something that only does the latter, but not the former, is like a medical treatment, not a “traditional” vaccine. This interpretation distinguishes Jacobson, thus presenting a different government interest.

Putting that aside, the district court held that, even if it is true that the vaccine does not “prevent the spread,” Jacobson still dictates that the vaccine mandate challenged here is subject to, and survives, the rational basis test. The district court reasoned that “Jacobson does not require that a vaccine have the specific purpose of preventing disease.” Reilly, 2022 WL 5442479, at *5 (emphasis in original). It acknowledged Plaintiffs’ allegations that the vaccine did not “prevent transmission or contraction of COVID-19.” Id. at *6. But it declared that “these features of the vaccine further the purpose of protecting LAUSD students and employees from COVID-19,” and thus “the Policy survives rational basis review.” Id.

This misapplies Jacobson. Jacobson held that mandatory vaccinations were rationally related to “preventing the spread” of smallpox. 197 U.S. at 30[.]

Slip op. at 17-18. 

In short, "government's power to mandate prophylactic measures aimed at preventing the recipient from spreading disease to others" is not the same as "forced medical treatment" claimed to protect the recipient. Slip op. at 18. The property analogy is that you don't have a property right to use your property in a way that injures someone else's property, but it isn't a nuisance to make a use that is harmful to your property interests. That's your right.

This is a correct (narrow) reading of Jacobson, a case which, in our opinion, has been widely over-read (esp during the Co-19 lockdowns) to conclude that your life, liberty, and property could be curtailed as long as the government claims to be acting generally for the public health, and if taken to the logical extreme, in the public interest. That, in our view, is the limited exception swallowing the rule. But most courts have bought the argument. 

Before you get too excited about this, remember that this was up on appeal from a 12(b)(6) dismissal, so the complaint's factual allegations -- including, critically, the allegation that the Co-19 vaccine does not prevent the spread and only relieves symptoms -- are going to be subject to proof as the case progresses after remand. See slip op. at 19 ("We note the preliminary nature of our holding. We do not prejudge whether, on a more developed factual record, Plaintiffs’ allegations will prove true.").

A few thoughts for how this opinion might be useful for you takings mavens:

• Trial courts have no business evaluating the veracity of the factual allegations in the complaint, and Twiqbal doesn't change that by allowing a court to be skeptical under the guise of plausibility and act as a gatekeeper to screen the government from what the court views as claims that are unlikely to be proven. Yet we dirt lawyers know that in takings cases, trial courts do it all the time. Whether it is balancing the Penn Central factors at the pleadings stage, or the court apparently concluding that it doesn't buy the pleaded facts, courts are happy to bounce takings complaints at the pleadings stages. This opinion offers a better model.
• Courts often just take the government at its word. "Our law is ____." "Our procedures require ______." And the plaintiff's response that "what the government says its law is isn't really what its law says ... here, read it yourselves, Your Honors," and "the court is the expert on what the law requires, not the government" often fall on deaf ears. (It's also intellectually lazy, but you didn't hear that from us.) We see this most frequently in takings ripeness cases where the plaintiff says the government has taken a solid position about what uses are and are not allowed on the property, but then the government responds by asserting either that the plaintiff didn't follow the proper procedure to seek permission, or that the process isn't done just yet and the government has room to change its mind. There, courts frequently defer to whatever the government says the law or its own procedures require or even allow. Again, this case is a better model, with the court taking an active hand in evaluating for itself, and reaching its own conclusions about what the government did, and what the government's procedures are. 
• We often hear that when dealing with its constituents, government has an obligation to "turn square corners." But this case, in our experience, illustrates the reality. Government very often has its own interests in mind and zealously and aggressively scorched-earths it. It should not take the level of bad faith on exhibit in this case to convince a court that the government is more interested in playing games than it is a fair treatment of its constituents. For more, check our our colleague Deb LaFetra's recent Daily Journal piece, "Encouraging government lawyers to engage in the worst legal shenanigans" ("Playing games with people's constitutional rights is unworthy of our government, and their counsel.").

Be sure to check it out.

With both of the judges in the two-judge panel majority writing concurring opinions, and with a strong dissent, we don't anticipate that the panel opinion is going to be the final word in this one. Stay tuned.

Health Freedom Defense Fund, Inc. v. Carvalho, No. 22-55908 (9th Cir. June 7, 2024)

Blinded Me With Science! No Taking For Selective Co-19 Business Shut-Down, But Might Violate North Carolina's Fruits Of Labor Clause

Check out the North Carolina Court of Appeals opinion in North Carolina Bar and Tavern Ass'n v. Cooper, No. COA22-725 (Apr. 16, 2024).

We're not going to go into great detail, mostly because this one tracks the most common judicial approach to takings challenges to business shut-down orders during the Co-19 period. The court concluded that the State's selective shut down of certain bars but not others was neither an "emergency commandeering" under North Carolina's emergency response statute, not a physical, Lucas, or Penn Central taking. Read the opinion for the reasons why.

But there is more than one way to skin that cat. The court held that the trial court should not have rejected the plaintiff's motion for summary judgment on its North Carolina's Fruits of Labor Clause claim.

That provision states:

We hold it to be self-evident that all persons are created equal; that they are endowed by their Creator with certain inalienable rights; that among these are life, liberty, the enjoyment of the fruits of their own labor, and the pursuit of happiness.

N.C. Const. art. I, § 1.

The court held that the State's invocation that its treatment of the plaintiffs was backed by "data and science" was not enough. A government action violates the Fruits of Labor Clause if it bears "no rational, real, or substantial relation to the public health, morals, order, or safety, or the general welfare." Slip op. at 24.

In other words, "if the restrictions are arbitrary and unreasonable." Id. But unlike those situations where a court is reviewing governmental action under the rational basis test where the mere invocation of "science" is usually enough to satisfy the test, under the Fruits of Labor Clause that science has to be kinda good science. See slip op. at 27 ("Although we view the evidence in the light most favorable to Defendant for purposes of summary judgment, we must also review the scientific evidence that was before the trial court, which acts in its capacity as the gatekeeper of expert testimony, to determine whether it is sufficiently reliable.").

Check it out.

North Carolina Bar and Tavern Ass'n v. Cooper, No. COA22-725 (N.C. App. Apr. 16, 2024)

NY App Div: Inflation, Bah! Rent Gets Cheaper In Kingston!

New York state, as you might already know, regulates the rent an owner of residential property may charge to a tenant. Under a statute adopted in 1974, regulation is triggered by a locality's declaration of a housing emergency, and the restrictions extend for the duration of the declared emergency. Most famously -- or infamously -- New York City has declared a housing emergency under the statute since that time, and indeed has considered housing an "emergency" for over a century. The 1974 statute also applied to three other NYC-adjacent counties, but not the entire Empire State.

Well, in 2019 the legislature changed that, and "allowed municipalities statewide to opt in to the rent adjustment scheme created by the [1974 Emergency statute] upon a declaration of emergency due to a housing vacancy rate of 5% or less[.]"

In 2019, Kingston was thwarted when it determined its vacancy rate was 6.7% -- too high to invoke emergency powers. But then Co-19 came, and voila! the rate dropped below the magic 5%. Soon thereafter, the city adopted a resolution declaring a housing emergency, and invoked its powers under the 1974 statute to regulate rent on building containing six or more rental units.

The statute requires the formation of a Board to administer the law and determine the rents in the regulated units. The city did so, and the Board came up with this:

On November 9, 2022, following a series of public meetings and hearings, the Board voted to adopt an annual rent adjustment guideline and a fair market rent guideline for the properties subject to the emergency declaration. The fair market rent guideline provided that a tenant could file a fair market rent appeal with respondent Division of Housing and Community Renewal (hereinafter DHCR) to seek a refund if his or her rent increased by more than 16% between January 1, 2019 and July 30, 2022; the adjustment guideline, in turn, required that rent charged for one- and two-year leases commencing between August 1, 2022 and September 30, 2023 be reduced by 15% from the base rate.

Read that again. Max rent increase of 16% over base rate between 2019 and 2022. Check. And then a 15% rent reduction from base rate between 2022 and 2023.Who knew that with inflation and the cost of seemingly everything rising, that rent in Kingston is getting cheaper. Like magic!

An association of property owners sued. They challenged the city's claim that the 5% threshold was met, and also whether the city had the authority to lower existing rents. The Supreme Court (this is New York, so "Supreme Court" means a trial court, dun dun), concluded that indeed, the city had met the very low legal bar for showing that as a matter of fact, Kingston was experiencing a vacancy rate below 5%, but also that the city lacked the authority under the 1974 statute to lower rents. Both sides appealed.

In Hudson Valley Property Owners Ass'n Inc. v. City of Kingston, No. CV-23-0327 (Mar. 21, 2024), the Appellate Division did the city a solid: it affirmed the declaration of emergency, but on the city's appeal, reversed and concluded that nothing in the term "adjustment" of rent in the 1975 statute did not mean only an upwards adjustment of rent, but could include lowering rents. 

We're not going to get into the first issue too deeply, which the court viewed as a factual challenge. Yes, the studies and other data supporting the finding the 5% threshold was satisfied might be a bit off here and there, but as we know, the courts generally don't hold the government to very high standards in this area (or anywhere else in NY law), because the city was acting in good faith. Or at least there was no proof it wasn't. Slip op. at  6. The flaws the property owners pointed to were "perceived" and not actual flaws, and the resulting studies were "adequate." And as we know, that's enough to satisfy a court when the government is involved.

On the more interesting issue of whether "adjustment" means only an upwards adjustment of rent, the court had this to say:

Nothing in the applicable statutory language explicitly requires that the Board adjust the rent upward rather than downward as petitioners claim, and petitioners' argument as to why such a requirement should be implied is less than compelling.

Slip op. at 7. That's it. Exactly why that is so, the court does not really explain.

And a blanket downwards "adjustment" was just fine, and no individualized determinations were necessary: if you don't like how this works on your property, property owner, you can appeal.

As we've always thought, facial claims are tough. But find a situation in which a downwards adjustment (or even an inadequate upwards adjustment) forces a property owner to operate in the red (and the owner has the resources, financial and emotional, to push it), or where an owner who wants to exit the rental market and is prohibited from doing so by the law, and you've likely got a different case.

Hudson Valley Property Owners Ass'n Inc. v. City of Kingston, No. CV-23-0327 (N.Y.A.D. Mar. 21, 2024)

New Article: Missed Opportunities in State Takings Challenges to Pandemic-Era Restrictions (Brennan Center's State Court Report)

Thank you to the Brennan Center for Justice at NYU Law School's State Court Report (#statecourtreport) for publishing our piece "Missed Opportunities in State Takings Challenges to Pandemic-Era Restrictions." The title gives a hint about what this is about: how state and local government's reaction to Co-19 spurred challenges not only under the U.S. Constitution, but under state constitutions. We give examples of -- and comment on -- missed opportunities and out-and-out errors in several approaches.

Here are the opening paragraphs:

Responding to the Covid-19 pandemic, the federal government and many state and local governments imposed a variety of restrictions on individuals and businesses. The Centers for Disease Control and Prevention, for example, purported to suspend the ability of property owners to evict nonpaying tenants — a move the U.S. Supreme Court rejected as beyond the agency’s power. State and local governments adopted similar eviction moratoria, and many directed businesses to close or curtail operations. Litigation followed.

Much of that litigation focused on the federal Fifth Amendment’s requirement that the government provide just compensation when it takes private property for public use. Property and business owners have generally been unsuccessful in pressing federal takings claims for Covid-19 restrictions. But it is established that the rights acknowledged by the U.S. Constitution are merely a floor, not a ceiling. This notion recognizes that states may freely offer a higher level of protection of rights under their own laws or more severely restrict the state’s powers (or both). And many state constitutions go further, guaranteeing compensation when property is damaged. 

We also take a quick look at a still-pending case in Michigan, with the hope that the Michigan Supreme Court does not fall into these same traps.

We'd appreciate it if you were to read the entire piece -- it's short, we promise!

Indiana: Depriving Litigant Of Ability To Bring Class Action Challenging Co-19 Zoom Classes Isn't A Taking

Like a lot of us, Ball State University student Keller Mellowitz didn't care for "remote" or "Zoom" virtual classrooms which were imposed on us in varying degrees during the Co-19 thing.

But he didn't take it lying down. Believing that remote learning wasn't what was promised to him in return for his tuition dollars, he sued the University for breach of contract and unjust enrichment. He was fighting the fight for not just himself: he brought the claim as a class action on behalf of his fellow students similarly deprived.

Not to allow that sort of thing, the Indiana legislature adopted a statute -- applicable retroactively -- that prohibits class actions against "postsecondary educational institutions for contract or unjust enrichment claims to recover losses stemming from COVID-19." In response, the trial court limited Mellowitz's claims to those only on his own behalf, and not on behalf of the class (ha, we get that joke).

Mellowitz appealed, interlocutorily (is that even a word?), and lo, the Court of  Appeals agreed with him that the mid-stream revocation of his ability to bring a class action violated his constitutional rights.

The Indiana Supreme Court took up the case, and in Mellowitz v Ball State University, No. 23S-PL-60 (Nov. 21, 2023), the court affirmed the dismissal of Mellowitz's class action contract and unjust enrichment claims, and held that the legislature could  retroactively take those away those claims without violating the constitution:

First, we conclude the law does not violate the constitutional separation of powers because its limited scope (applying only to a narrow category of claims arising from COVID‐19 against a defined group of defendants during a narrow period of time) reflects that it predominantly furthers a public policy objective—reducing postsecondary educational institutions’ litigation exposure for their emergency responses to the pandemic—rather than a judicial administration objective. Second, the law does not unconstitutionally take Mellowitz’s property without just compensation because he has no property right to sue on behalf of others through a class action. And finally, the law does not unconstitutionally impair Mellowitz’s contract with Ball State because the General Assembly did not relieve Ball State of any of its contractual obligations to Mellowitz, which is why the trial court is permitting him to pursue his individual claims against the university.

Slip op. at 2. 

Most of the opinion was devoted to the first issue -- whether the legislature stepped too far into the judiciary's area of operations -- so if you aren't into that sort of thing, you can fast forward to page 17, where the court picks up the takings argument. Taking away an accrued cause of action midstream might seem to raise such problems.

But not so fast, held the court. It's not like the later legislation took away Mellowitz's ability to sue for breach and unjust enrichment, only his ability to do so on behalf of others similarly situated. Go chase your claims, Sir, you just can't do it for others. With that we have no problem (said the court). A class action "is just one potential means of pursuing [Mellowitz's] cause of action. A class action is not itself a cause of action[.]" Slip op. at 18.

The court also rejected Mellowitz's responsive argument that taking away the class action format effectively took away his underlying individual claims, because it isn't economically practical to bring an individual claim. Sorry, held the court, there's no factual record to support that assertion, and besides, "our state courts routinely handle individual claims for amounts in this ballpark." Id. Go to small claims court, dude!

The court also didn't care for Mellowitz's other argument that this was like when the court held that the legislature's alteration of a statute of limitations could only be applied prospectively, and not to claims already underway. To apply the law to already-filed claims would be a taking of a vested right. The court might have agreed this was a taking were the legislation here have retrospectively wiped out Mellowitz's individual claims. But it didn't so that's that. "Just the opposite, the General Assembly preserved Mellowitz's right to sue Ball State on his own behalf, which trial court is permitting him to do." Slip op. at 19. That's mighty kind of them, thanks.

Finally, the court held that the retroactive wipeout of class actions was not an unconstitutional impairment of contractual obligations under either the Indiana Constitution (yes, it has a Contracts Clause), or the U.S. Constitution. The law didn't impair Mellowitz's rights at all, and the statute "only prohibits [him] from seeking to enforce other students' alleged contracts[.]" Slip op. at 20.

[W]e cannot accept the invitation to simply assume Mellowitz is without an effective contract remedy because Section 7 is presumed constitutional unless Mellowitz demonstrates otherwise, and he has not demonstrated that his suit against Ball State to recover his own tuition and fees is an inadequate means for enforcing his alleged contract rights.

Slip op. at 22.

Mellowitz v Ball State University, No. 23S-PL-60 (Ind. Nov. 21, 2023)

New Cert Petition: Is Preventing Owners From Recovering Rental Units From Nonpaying Tenants A Compensable Taking?

Here's the latest in a case we've been following.

Not that long ago, the Ninth Circuit held that a challenge to Washington state's Co-19 eviction moratorium was moot because the moratorium had ended, and the plaintiffs had only sought declaratory relief. Thus, the court concluded, the moratorium did not have a "brooding presence" affecting the plaintiffs.

The owners have now asked the Supreme Court to review the case, and in this cert petition have posed these Questions Presented:

1. Because the Takings Clause of the Fifth Amendment demands just compensation for governmental takings, including temporary ones, did the Ninth Circuit err in dismissing as moot a challenge to Washington State’s COVID-19 eviction moratoria by landowners who suffered great losses by bearing the social burden of providing public housing during the pandemic against their will because those moratoria had ended by the time the case reached the Ninth Circuit on appeal?

2. When a Governor prohibits landowners from evicting non-paying or rule-breaking tenants for many months forcing those landowners to bear the social burden of providing housing during a health pandemic, has the State effected a regulatory taking that demands just compensation under the Takings Clause of the Fifth Amendment?

3. Did the Ninth Circuit depart from the settled precedent of this Court and other Circuits of the Court of Appeals by concluding that the landlords could not enforce the Takings Clause through a declaratory judgment action?

Stay tuned here, or follow along on the Court's docket.

Petition for a Writ of Certiorari, Jevons v. Inslee, No. 23-490 (U.S. Nov. 6, 2023)

Inverse Condemnation And Hawaii's Wildfires: Lawprof Shelley Saxer Joins Clint Schumacher's Eminent Domain Podcast

Another must-listen episode of Clint's Eminent Domain Podcast. He's joined by Pepperdine Law School Professor Shelley Ross Saxer:

Professor Shelley Ross Saxer joins the show to discuss the role that the damaging clauses found in more than half of state constitutions across the United States play in inverse condemnation claims related to natural disasters such as the recent Hawaii wildfires.

Definitely worth a listen (as always with EDP). Stream above, or download here.

CA9: No Physical Commandeering In Eviction Moratorium Because Yee Says "You Let The Tenants In, So You Can't Complain About Keeping Them (For Free)"

A short one from the Ninth Circuit on a topic that we keep revisiting, whether the various eviction moratoria adopted and enforced by the feds and many states and local governments during Co-19.

We keep revisiting the topic because the courts keep getting it wrong.

And before we go on, a disclosure: this is one of ours, and our law firm and our colleague Jon Houghton rep the property owners.

This moratorium is from the State of Washington (yes, the same State of Washington whose moratorium was recently challenged unsuccessfully in the state courts). But this challenge is to the City of Seattle's moratorium, and is in federal court.

Thus, it was the Ninth Circuit considering the question of whether, by commandeering rental property as pandemic public housing, Washington was on the hook for just compensation. Requiring to house residents -- whatever the reason -- is a physical occupation taking, right? 

Not to the Ninth Circuit (and most other courts that have considered the issue). Which in El Papel, LLC v. City of Seattle, No. 22-35656 (Oct. 26, 2023), rejected the owner/lessor's physical occupation takings claim.

Wait, you say, how is this not a physical occupation? After all, the leases which tenants sign onto all condition their right to occupy the premises on the timely payment of rent. Yes, the owner has conditionally transferred a right to occupy (and thus also transferred the right to exclude from the owner to the tenant), but the key word here is "conditionally." Pay rent on time and you can remain. Don't, and permission revoked, and the owner has the right to exclude.

Read the entire Ninth Circuit opinion (its unpublished, and thus short) for the reason why the panel rejected this reasoning. Yes, it is the Yee v. City of Escondido theory (mis)read yet again:

We likewise conclude that the district court did not err by granting summary judgment in favor of Seattle. We agree with Seattle that the Supreme Court’s decision in Yee v. City of Escondido, 503 U.S. 519 (1992), controls here and forecloses the Landlords’ per se physical-taking claim. The Landlords argue under Cedar Point Nursery v. Hassid, 141 S. Ct. 2063 (2021), that, as applied, Seattle’s eviction restrictions constituted a physical taking. While the Landlords make some compelling points, Cedar Point Nursery does not support their claim.

Unlike in Cedar Point Nursery, where a state regulation required agricultural employers to grant entry onto their property to union organizers for up to three hours a day so that the organizers could solicit support for unionization, see 141 S. Ct. at 2069–70, Seattle’s eviction restrictions did not impose a physical occupation on the Landlords, see Yee, 503 U.S. at 527 (“The government effects a physical taking only where it requires the landowner to submit to the physical occupation of his land.”). Nor did Seattle’s restrictions compel the Landlords to use their property for a specific purpose. The Landlords here chose to use their property as residential rentals; the tenants’ occupancy was not imposed over the Landlords’ objection in the first instance. Cf. Yee, 503 U.S. at 528 (finding that the government had not “required any physical invasion of [the owners’] property” by the park owners’ existing tenants).

Slip op. at 5-6.

Is the distinction that the Ninth Circuit relies on really a distinction? True enough, the moratorium didn't force open the metaphorical gate to El Papel's property like California in Cedar Point. The property owners here invited the tenants to occupy, and Seattle simply required the owners to keep the gate open and prohibited the owner from getting a trespasser out. Is that really the score, that once you invite someone in, you can be required to house them indefinitely?

When someone's property is pressed into public service and commandeered for pandemic housing, they can't be made to shoulder the cost by themselves, can they?

Something tells us this isn't the end of this issue, for not all courts misread Yee (see here and here, for example).

El Papel, LLC v. City of Seattle, No. 22-35656 (9th Cir. Oct. 26, 2023) (memo.)

No "Brooding Presence" - Takings Challenge To Co-19 Eviction Moratorium Seeking Declaratory Relief Is Moot

A short one from the U.S. Court of Appeals for the Ninth Circuit.

In Jevon v. Inslee, No. 22-35050 (Aug. 8, 2023), the panel summarily concluded that a takings challenge to the Washington governor's eviction moratorium -- imposed in response to the Co-19 emergency -- is moot.

The plaintiffs limited the relief sought to a declaratory judgment (understandable, because as a federal court lawsuit, they likely wanted to avoid the usual Eleventh Amendment fight if suing a state in federal court for retrospective monetary relief), and the court thus concluded that a declaratory judgment today, now that the moratorium has expired, would not do much of anything:

[A] declaratory judgment merely adjudicating past violations of federal law -- as opposed to continuing or future violations of federal law -- is not an appropriate exercise of federal jurisdiction." Thus, this case is moot because the challenged activity -- the eviction moratorium -- has expired and no longer has a "continuing and brooding presence" that would have a "substantial adverse effect" on Plaintiffs.

Slip op. at 3.

Well, not exactly. The effects of the moratorium do indeed have a continuing and brooding presence for the property owners who were prevented from trying to collect the owed rent -- or recover possession of their properties -- during the effectiveness of the moratorium. And they're gonna be feeling a whole lot of substantial adverse effects today and probably forever (good luck collecting any of the back rent).

It's just that the remedy sought -- declaratory relief -- would not do much to address those substantial adverse effects. At least not the way the panel sees it. The property owners argued that "they seek to use a declaratory judgment that a constitutional violation occurred to later secure just compensation or damages in state court." Slip op. at 4-5. But that argument flies too close to the Eleventh Amendment sun for the Ninth Circuit, which concluded that "[t]he issuance of a declaratory judgment for such a purpose is barred by the Eleventh Amendment." Id.

Besides, we already know what would happen to such a claim in a Washington court: nothing.

Jevons v. Inslee, No. 22-35050 (9th Cir. Aug. 8, 2023) (Memo.)

PruneYard Revisited: Washington SCT Says No Physical Occupation Taking In State's Eviction Ban - You Invited Tenants In, So Forcing Owners To House Them For Free Is Merely Regulating That Voluntary Relationship

We're not going to ask you to read the entire 24 pages of the Washington Supreme Court's 5-4 opinion in Gonzales v. Inslee, No. 1000992-5 (Sep. 28, 2023), in which the court seriatim rejects every challenge to the Governor's Co-19 emergency eviction moratorium for tenants, which allowed tenants who did not pay rent to remain in occupation for the up to 15 months the moratorium was in place.

Instead, we're going to focus only on the takings challenge under the Washington Constitution. The plaintiffs asserted a physical takings claim, based on their right to exclude nonpaying tenants. Rejecting the argument (as several other courts have done), the Washington court concluded that the moratorium on evictions was merely regulation of the "voluntary relationship" between an owner and tenant.

Hang on, you say, what do you mean "voluntary relationship?" If I am an owner, yes, I voluntarily handed over the keys and established a contractual relationship with the tenant, but that relationship was based on several essential terms, foremost of which was you get to stay as long as you pay rent. I most certainly did not agree to let tenants continue to occupy my property if they do not pay rent. How can this be "voluntary."

The court rejected this notion, concluding instead that you let 'em in owner, so after that it doesn't matter what happens. Sky's the limit. Getting 'em out is merely "[g]overnment regulation of that voluntary relationship[.]" Slip op. at 16. And that, "without more, is not a taking." Id. (And if you predicted that the court relied on Yee v. City of Escondido, you'd be right.)

Yee, by the way, indeed holds that merely adjusting some of the terms of the voluntary owner/tenant relationship isn't necessarily a taking. Remember, that case involved a facial challenge to a rent control ordinance, and the Court concluded the government wasn't forcing anyone into the rental business, didn't keep anyone from getting out of the rental business, and acknowledged that there was no allegation the amount of the regulated rent kept the owner from receiving a fair return.

That case said nothing along the lines that the Gonzales opinion (and a lot of others) claim it says: once you let someone in (even if their entry was conditioned on continuing to pay rent), that you can be prohibited from getting them out. Take that, suckers!

After all, doesn't it seem like a pretty far stretch to say that a case in which the government only diddled with the amount of rent charged is the same as a case in which the government tells existing tenants "you don't have to leave if you stop paying rent." The first might not be wiping out an essential stick of property (after all, the owner can still collect rent, get out of the business, etc.). The second radically undermines an essential property stick (the ability to recover and possess property, get out of the business, etc.). Seems like a pretty darn significant difference to us.

Indeed, the U.S. Supreme Court seems to take a very dim view of the way the Yee opinion has been cited. In Alabama Ass'n of Realtors v. Dep't of Health and Human Services, the Court seemingly went out of its way to point out that the inability to evict nonpaying tenants "intrudes" on the "fundamental" right to exclude. What case is notably missing from the opinion? That's right, any mention of Yee v. City of Escondido. You might think that a rent-control decision in which the right to exclude might also be referenced. But no. So what this tells us is that maybe the Supreme Court does not share the same view of Yee as the kryptonite to physical occupation takings challenges for eviction prohibitions, temporary or permanent.

And here's the most bizarre part of the opinion, in our opinion. Indeed, one of the oddest things we've ever seen in a judicial opinion. We call your attention to footnote 9 on pages 17-18, which we reproduce here in its entirety. And we're highlighting the weirdest part, just so you don't miss it:

We are not without sympathy to the fact that the petitioners have been made to bear the cost of accommodating a public need. We note that both Congress and the Washington State Legislature have appropriated significant funds to defray at least some of that cost in situations where the tenants have not paid rent and have avoided paying their debts. See Laws of 2021, ch. 334, § 129(45) (appropriating $658 million for emergency rental and utility assistance); American Rescue Plan Act of 2021, Pub. L. No. 117-2, § 3201, 135 Stat. 4, 54-58 (2021); Consolidated Appropriations Act, 2021, Pub. L No. 116-260, 134 Stat. 1182 (2020); see also Treasury Rent Assistance Program (T-RAP), Wash. St. Dep't of Com., https://www.commerce.wa.gov/serving-communities/homelessness/cares-act-and-state-rent-assistance
[https://perma.cc/6VBV-GNH3].

Read that highlighted part again, just to make sure you got it right. We had to do so just to be sure our eyes were working. (They are.)

Yes, indeed, the court is acknowledging that impressing private rental units into public service as public housing is "accommodating a public need." And that owners of rental property are being forced to bear the cost of that accommodation.

To which we say ... what about Armstrong? Isn't this the fundamental point of the Just Compensation Clause to spread the cost of public benefits to everyone, and ensure that the poor saps whom the political process has left without a chair when the music stopped are not also left holding the economic bag? This part of Armstrong has been quoted so many times in opinions, briefs, and law review articles that surely it must be imprinted on your brain by now and like me, you can recite it from practically from memory:

The Fifth Amendment's guarantee that private property shall not be taken for a public use without just compensation was designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.

So it isn't like the Gonzales majority doesn't get what's going on, and that property owners were forced by the eviction moratorium to provide public housing for free. Which to us makes it worse: the majority believes that the Washington Constitution doesn't require distribution of the cost of public benefits to the entire public. 

Hate to break it to you, but the Washington Constitution cannot recognize lesser rights than the U.S. Constitution.

So stay tuned. That footnote is the Achilles heel, as it brings down the entirety of the opinion's no-taking conclusion. 

Gonzales v. Inslee, No. 100992-5 (Wash. Sep. 28, 2023) (en banc)

CA9: Property Owner Has Standing To Challenge Commercial Eviction Moratorium Under Contracts Clause

This is one of ours -- argued by our Pacific Legal Foundation colleague Kady Valois -- so we won't be offering any commentary.

But we just have to post the U.S. Court of Appeals' opinion in Iten v. County of Los Angeles, No. 22-55480 (Aug. 30, 2023), because it discusses two significant issues, and sets out a roadmap for how to successfully plead a Contracts Clause claim.

First, standing. The court held that a commercial property owner -- a retired auto mechanic who leased his premises to an auto repair shop -- has Article III standing to challenge the County's commercial eviction moratorium which prevented the owner from evicting the tenant when it stopped paying rent but did not vacate. The court distinguished the standing requirement of "demonstrating injury in fact" from the question of whether the plaintiff has actually been injured. The first is a pleading requirement and turns on the nature of the claim, while the latter is a factual question for the trier-of-fact. Slip op. at 10-12. That is an important distinction that many frequently forget. We've all been in cases where the merits question gets bootstrapped into a question of whether the plaintiff is injured.

Second, to see whether Iten met the pleading requirement, the opinion goes into the nature of a claim under the Contracts Clause, noting it "was the most litigated constitutional provision in the nineteenth century." Slip op. at 13. But as we know, the Contracts Clause later fell out of favor with the courts, and "[s]trict application of the Contracts Clause ended in the Minnesota Moratorium case." Slip op. at 15. The Ninth Circuit continued:

The modern approach to the Contract Clause now considers not only whether the law impairs the obligation of the contract, but asks how “substantial” that impairment is and whether the state law is an “appropriate” and “reasonable” use of state police power. See Sveen v. Melin, 138 S. Ct. 1815, 1821–22 (2018) (quoting Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 411–12 (1983)). Although, post-Blaisdell, a Contracts Clause claim analysis requires additional inquiries, the merits of a Contracts Clause claim has always started with whether or not there is a change in a law (an “obligation”) that has impaired the original agreement of the parties.

Id.

Next, the court noted that "mortgage moratoria were, from the beginning, at the heart of the Contracts Clause. A law affecting or changing the terms the parties previously agreed to is the quintessential example of what the Contracts Clause was designed to prohibit." Id. This means that Iten, who is prohibited from evicting his non-paying commercial tenant because the County's prohibition, has standing to challenge the County's (alleged) realignment of the agreement between him and the tenant.

The court rejected the district court's rationale that despite the legal prohibition, Iten might have tried to evict the nonpaying tenant. The moratorium requires nonpaying tenants who wish to invoke the ordinance's protection to inform an owner, but the tenant here did not. Thus, the district court reasoned, Iten could have evicted for nonpayment of rent. The Ninth Circuit had a different view:

To show injury and causation for standing purposes, Iten need not allege that he would have been able to evict his Tenant “but for” the Moratorium. Nor need he show that his Tenant qualifies for the affirmative defense provided by the Moratorium. Rather, Iten need only allege that the Moratorium imposed additional rights, remedies, conditions, or procedures that impair the obligations to which he and his Tenant had contracted. Iten has made that showing here. He has alleged that Los Angeles County changed the framework for his lease with his Tenant by creating an additional affirmative defense for the Tenant, enacting a year-long forbearance period for unpaid rent, prohibiting Iten from charging late fees or interest, and adding civil and criminal penalties beyond those previously provided under California landlord-tenant law. Furthermore, the value of a commercial property is often tied to the value of its leases. Iten alleged that the Moratorium “undercut the economic value and security of [his commercial leases].” Thus, so long as the Moratorium was in effect, the economic value of Iten’s property, as influenced by the value and strength of the leases of that property, was diminished, and “[a] specific, concrete, and particularized allegation of a reduction in the value of property owned by the plaintiff is sufficient to demonstrate injury-in-fact at the pleading stage.” Barnum Timber Co. v. EPA, 633 F.3d 894, 898 (9th Cir. 2011).

Slip op. at 17-18.

The Ninth Circuit also rejected the conclusion that Iten "would have prevailed" in a state court eviction action, instead holding that "it was improper to speculate how a California court would have responded to an eviction action brought by Iten." Slip op. at 19.

The essence of the Contracts Clause claim is that the owner "is protesting the fact that he even has to run the gauntlet of additional procedures that were not in place when the Tenant signed the lease." Slip op. at 20. The court cautioned against "conflat[ing] constitutional injury with contractual impairment," and set out a roadmap for how to plead these claims (at least in the Ninth Circuit):

For purposes of standing, Iten alleged facts sufficient to state a claim that he suffered an injury traceable to the Moratorium for purposes of standing: He alleged that he was a commercial landlord living in Los Angeles County; that both he and the Tenant believed that the Moratorium applied to their lease agreement; and that the Moratorium altered the terms of his contract with his Tenant. Iten alleged that the Moratorium limited the legal procedures he may take to evict his Tenant for nonpayment of rent; that it prevented him from charging late fees or interest, which his lease otherwise allows him to do; and that it imposed additional penalties that chilled his ability to test the viability of eviction. In sum, Iten, at least for purposes of filing a complaint, has alleged that the obligations of his contract had been “taken away or materially lessened.”

Slip op. at 24.

Our congratulations to our colleague Kady for the win!

Iten v. County of Los Angeles, No. 22-55480 (9th Cir. Aug. 30, 2023)

"YIMBY Martial Law" - More On Hawaii Gov's Gordian Knot Cutting

Here's an excellent report on a situation we've been following, the Hawaii governor's proclamation of a housing emergency. In "To Tackle Highest Housing Costs in the Country, Hawaii's Governor Declares YIMBY Martial Law," Christian Britschgi at Reason writes:

Developers with a [Beyond Barriers] working group [what we cheekily referred to as the "Privy Council"]–certified project wouldn't have to comply with normal zoning restrictions. They wouldn't have to go through Hawaii's cumbersome environmental review process (which can add months or years to a project's approval). They could avoid historic preservation regulations, and get relief from normal impact fees and taxes. They could also skip the need to get approval from the state's Land Use Commission—a duplicative zoning body.

The story is an excellent summary of the substance of the emergency proclamation, the support and objections it has received, and some prognostication (including ours):

Thomas says that Hawaii courts have generally been unwilling to second-guess the governor's use of emergency powers. Numerous lawsuits challenging emergency proclamations during the pandemic all failed. "COVID taught us that [the state's emergency statute] is extremely robust," he tells Reason. "It is essentially a political question is how the Hawaii Supreme Court has treated it."

At the same time, Thomas does suggest that a court might look differently on the use of emergency powers to address something like Hawaii's housing shortage. "Maybe it's an emergency but it's one that's been festering for 50 years. It's been on the longest fuse one can imagine," he says.

A legal colleague of ours has a less sanguine view (or maybe we should say "a rather blunt assessment"):

Lawsuits challenging the order are almost inevitable, said one Maui land use attorney to Civil Beat. "There's no disagreement that we need more affordable housing. But using the state constitution as toilet paper isn't the right approach," he told the publication.

Strong letter to follow.

The Governor issued this emergency proclamation before the big wildfire on Maui. The Governor subsequently announced that for the next 60 days, the housing emergency proclamation efforts will be directed at Maui disaster recovery.

The big picture question we have is whether the Governor's declare-an-emergency-and- bypass-the-laws approach to Hawaii's housing shortage will spread to other jurisdictions. Co-19 taught a whole lot of government officials that emergency orders are the shortcut to getting what they want done.

Stay tuned.

What If The Hawaii Governor's Cutting Of The Gordian Land Use/Environmental Knot Actually Works?

The two-plus years under the declared Co-19 emergency surely have given Hawaii's executive-branch officials a clear vision of how much easier they could get their agendas accomplished without all that pesky democracy.

Hawaii's Sweeping Emergency Management Act: Governor is the "Sole Judge"

Hawaii's Emergency Management Act gives state and county executives broad and nearly unreviewable authority to suspend a wide spectrum of the usual laws, regulations, and rules. As we wrote in Hoist The Yellow Flag and Spam® Up: The Separation of Powers Limitation on Hawaii's Emergency Authority, 43 U. Hawaii L. Rev. 71 (2020), Hawaii's Act confers among the nation's most muscular and sweeping powers. For example, the governor is the "sole judge of the existence of the danger, threat, or circumstances giving rise to a declaration of a state of emergency." The Act's one limitation -- the 60-day time limit on how long an emergency may be declared and acted upon without legislative action -- is, in reality, a paper tiger, as the courts have refused to meaningfully enforce it.

Build Baby Build: Governor Green's Emergency Housing Proclamation Sidelines Decades of Land Use and Environmental Regulations and Restrictions

And it appears that executive officials really dig these powers. As you may already know, in July -- just a couple of months after the Co-19 emergency was officially declared pau -- the Governor of Hawaii discovered a new emergency, and issued a Proclamation that the longstanding "shortfall of affordable housing" is an "emergency or disaster" as defined by the Act.

If it is an emergency, it surely has been on a very long fuse, and is primarily a self-inflicted crisis. As is widely reported (see, e.g., Jason Sorens, Zoned Out: How Housing Regulation Drives Young Americans Towards Socialism (Am Inst. for Econ. Rsh. July 24, 2023)), Hawaii is the most highly-restricted and regulated residential land in the nation (see Fig. 3):

We're Number One! We're Number One!

The costs of the current regulatory and environmental system in time, expense, and effort, is cited as a leading contributor to the fact that Hawaii is one of the most expensive housing markets in the country. As the Proclamation notes:

WHEREAS, this [housing] shortfall has never been adequately addressed, contributing to a 1,200% increase in home prices over the last 45 years, which is double the 600% growth in income over the same period[.]

Not at all good.

Pointing to these infamous "regulatory barriers" to building housing (and just about anything else), the Governor deployed his office's broad powers under the Act to suspend a slew of significant land use and environmental regulations, including the State environmental impact statement and reporting requirements, historic preservation restrictions, certain county home rule and zoning laws, civil service laws, collective bargaining with public worker unions, the "open meetings" requirements, the procurement code, the rezoning powers of the State Land Use Commission for certain parcels, school impact fees, and even the Emergency Management Act's own rulemaking requirements. The Proclamation establishes a Privy Council (the "Building Beyond Barriers Working Group" -- how appropriate, given Hawaii's royal history -- or perhaps you prefer "rule-by-junta") that can, according to this report, "block projects deemed to go too far outside the guardrails that would have been in place but for the proclamation." That's comforting. 

Acting under his dictatorial emergency powers (and we are not exaggerating when we say that the powers conferred by Hawaii's Act are truly "dictatorial" as we noted in this law review article), the Governor asserts this will "streamline processes for housing development, while ensuring respect for our iwi kūpuna and environment." To emphasize the so-let-it-be-written-so-let-it-be-done nature of this enterprise, the Proclamation even comes accompanied by its own set of Rules for how it is to be implemented (you know, just like a real law). 

What Others Are Saying

For a nuanced view -- by an analyst with no dog in the Hawaii hunt -- see zoning expert and author M. Nolan Gray, who writes at Bloomberg's City Lab that this "could provide a model for chief executives in housing-strapped states across the country." See M. Nolan Gray, Can Hawaii Solve Its Housing Emergency? (Bloomberg City Lab, July 31, 2023).

Other commentators are less sanguine. Andrew Walden writes that "Housing Emergency Designed to Fail" (Hawaii Free Press, July 31, 2023), arguing that these temporary measures can only work if they are permanent ("Because it is temporary, Green’s Proclamation ensures that too few projects will be approved to actually bring down the cost of housing. ... So when the legislature reconvenes you may be 100% certain that Green’s emergency orders will not be enshrined into law.").

Schadenfreude Alert

Now don't get us wrong: the Governor is absolutely right about Hawaii's oppressive system of regulations and restrictions on building housing that ends up restricting supply, and massively driving up costs. So although we are patently against the routine use of extraordinary emergency powers to accomplish things that should be done through the normal channels of democracy, our long experience playing the land use game in the 808 can't help but turn us into a keen observer of this experiment. We also can't help but being a bit bemused by all of this gnashing of teeth by all involved. As noted above this is a self-inflicted wound and the result of longstanding voting patterns; on a very basic level you get what you vote for, and the voters of Hawaii must either want to restrict the supply of housing to keep things exclusive and preserved, or they are deep-down okay with paying a lot for their homes or living in three-generation households.

And now, instead of doing the right thing and making fundamental needed reform and convincing the voters that now is the time to realize that the system as it stands doesn't work, we get the lazy shortcut. 

Thus, although we are no longer in the day-to-day dirt law and land use game in Hawaii, we're going to be watching this closely.

Fear of Success?

Of course, the usual suspects are already voicing the predictable objections that this will result in cowboy land use (our description, not theirs) and environmental degradation, and are already mentioning possible legal challenges. See, e.g., Stewart Yerton, Can An Emergency Proclamation Solve Hawaii's Housing Crisis? 'That's the Million Dollar Question'' (Civil Beat, July 30, 2023).

Other than the Governor's sweeping repudiation of democratic processes, what is spurring the substantive objections to this? You might think that this is just one more example of NIMBYism and "drawbridge protectionism" (or maybe just a naked "I got mine" and the hell with those who don't -- those vibes play extraordinarily well in the 808, in courts and in the public).

But we sense that a more fundamental fear is driving objections. This may well be the closest we'll ever get to a real-time experiment in whether Hawaii's byzantine land use and environmental regulations -- touted for decades as absolutely necessary to "preserve paradise" -- are worth their massive costs. We've been told that the current system is the only thing standing between us and foul air, water evaporating, beaches disappearing, and historical and cultural resources being despoiled.

What if, when this experiment winds down (whenever that is, since by law an emergency can last a maximum of 60 days, even though this time limit is illusory, because the emergency can be renewed indefinitely), there are 50,000 new residential units built out and the the environmental sky has not fallen? If that's the case, what more empirical evidence does the legislature need that the touted Hawaii system of restrictions, regulations, and the precautionary principle simply are unnecessary?

Or does Hawaii just go back to business as usual? 

The Hole Card

So now we shall see. We predict a lawsuit will soon be filed to challenge this, because Hawaii's courts are the objectors' hole card. Look for a claim under the Hawaii Constitution to lead the charge, because the Hawaii Supreme Court is the final arbiter of the state constitution and a ruling from that court would be armored up against revision by the other branches of government. There's a long judicial history in Hawaii of doing just that.

Hawaii's courts will be the preferred forum: lax standing rules (nearly anyone can be a plaintiff), a Supreme Court that historically has been open to such claims (as a study published in the University of Hawaii Law Review in 2011 reported, environmental plaintiffs enjoy an enviable record of success in the Hawaii Supreme Court, which during the years studied (1993-2010) found in favor of such groups "approximately eighty-two percent of the time, sixty-five percent of which reversed the Intermediate Court of Appeals."), and a judicial ruling that would be immune from the Governor's or the Legislature's tampering. That's the play.

With two of the current bench of five Hawaii Supreme Court Justices in the process of being replaced, does this make the game even more interesting, and the moving pieces more in motion? You bet.

So stay tuned and follow along with us.

That sound you hear right now is the late-night typing of someone drafting up a state-court complaint.

Office of the Governor, State of Hawaii, Proclamation Related to Housing (July 17, 2023)

New Article - "Necessity Exceptions to Takings" (Shelley Ross Saxer)

Worth checking out: a new article from Pepperdine Law School's Shelley Ross Saxer, published in the University of Hawaii Law Review, "Necessity Exceptions to Takings," 44 U. Haw. L. Rev. 60 (2022). [Disclosure: as noted in the author's note, we reviewed an earlier draft of the piece and provided some thoughts.]

Here's the Abstract:

The doctrine of necessity has strong roots in the common law of tort and property going back hundreds of years. In the United States the doctrine has been applied in various situations to negate judicial review of constitutional challenges to government action, most recently in some of the wildfire and flood claims resulting from disasters. But now, the states’ responses to the COVID-19 pandemic have brought one of these necessity doctrines—the public health necessity relying on Jacobson v. Massachusetts—to the forefront as courts across the country review constitutional challenges to state public health measures. With such intense review of Jacobson’s public health necessity in a short timeframe, it appears that the courts, including the Supreme Court, are recognizing that common law emergency exceptions cannot be applied to prevent constitutional review. This development supports the goal of this Article, which is to discourage the use of the necessity doctrine to bypass constitutional scrutiny of asserted rights, particularly as to takings claims under the Fifth Amendment. This Article examines the historical development of the diverse categorical exceptions to takings claims under the Fifth and Fourteenth Amendments and addresses the continued viability of these exceptions following the decision in Pennsylvania Coal v. Mahon. After reviewing four categories of necessity exceptions that include: 1) the doctrine of destruction (general, military, and law enforcement); 2) the public health exception; 3) the nuisance and background principles of property law exception; and 4) the police power exception, this Article concludes that the only doctrinally acceptable categorical defenses to a regulatory taking are the nuisance and background principles of property law exceptions. Nuisance and background principles of state law will determine whether the property owner has a property interest subject to a government taking. If the property owner never had a right to use their property in a manner that constitutes a nuisance or interferes with a public resource, it cannot be taken and does not deserve compensation. Government actions that constitute a taking, but benefit the public as a whole whether by conferring a benefit or preventing a harm, should not burden individual property owners when, under the Armstrong principle, in all fairness and justice, we the public should share in paying for the benefits received.

Download the piece on SSRN here.

New Cert Petition: Is Barring You From Accessing Your Own Property A Categorical Taking?

Here's the cert petition in a case we've been following. 

This is the one where a North Carolina county went bonkers in the early days of Co-19, and truly "locked down" by banning nonresident property owners from entering the county. This wasn't done all at once, but in phases, with nonresident property owners being informed that if they didn't get to their Dare County homes by March 20, they were going to be prohibited from even entering the county. As the Fourth Circuit put it, "In effect, Dare County told non-resident property owners:'“If you want to quarantine at your beach house, get there by March 20.' This gave non-resident property owners four days to travel to the county."

Blackburn was stopped from accessing his property for 45 days.

The Fourth Circuit upheld the district court's rejection of his takings claim, concluding that this was not a physical invasion or occupation ("But temporarily excluding an owner from their own property differs from eliminating the owner’s right to exclude."), nor was it a total or near-total deprivation of the property's beneficial uses. 

The owner has now sought Supreme Court review.

Here's the Question Presented:

Whether a governmental regulation prohibiting all physical access to a landowner’s property is a “per se” taking under the Fifth Amendment of the United States Constitution.

Stay tuned. Follow along here, or on the Court's docket.

Petition for a Writ of Certiorari, Blackburn v. Dare County, No. 22-1048 (U.S. Apr. 25, 2023)

Bust A Deal, Face The Wheel: NYC Rendering Commercial Lease Guaranty Clauses Unenforceable For Co-19 Violates Contracts Clause

This just in: the U.S. District Court for the Southern District of New York has issued this Opinion & Order in the case which challenges New York City's rendering "guaranty clauses" in commercial leases unenforceable due to the declared Co-19 emergency.

This is a case we've been following. Earlier, the Second Circuit vacated the district court's dismissal of the case, holding that the city's ordinance rendering forever unenforceable certain provisions in commercial leases:

A provision in a commercial lease or other rental agreement involving real property located within the city that provides for one or more natural persons who are not the tenant under such agreement to become, upon the occurrence of a default or other event, wholly or partially personally liable for payment of rent, utility expenses or taxes owed by the tenant under such agreement, or fees and charges relating to routine building maintenance owed by the tenant under such agreement, shall not be enforceable against such natural persons if the conditions of paragraph 1 and 2 are satisfied.

The district court held that the plaintiffs have Article III standing, because they have been permanently barred from ever enforcing these guaranty clauses. Slip op. at 12 ("This kind of 'monetary injury' to the Plaintiffs—permanently barring them from collecting more than a hundred thousand dollars in unpaid rent for a prime commercial tenancy in the heart of Manhattan—plainly establishes that they ha[ve] suffered a concrete injury in fact under Article III.'"). The court also concluded that the remedy the plaintiffs seek -- invalidation -- would redress that injury, because freed of the city's prohibition, plaintiffs could then attempt to enforce the clauses in their leases.

The heart of the ruling starts of page 14 of the slip opinion. The bottom line is that the court concluded the ordinance is a substantial impairment of the commercial owner/tenant contracts, because

Yes, "the City's effort to mitigate the devastating economic impact of the COVID-19 pandemic constituted a legitimate public purpose[,]" slip op. at 16, but that does not get the city off the hook, because "the Court finds that the Law fails to withstand means-ends scrutiny under the final prong of the Sullivan test." Id. 

The court concluded that the city failed to support with additional evidence its decision to place the entire burden of alleviating the emergency on property owners. The city argued that the ordinance merely encouraged owners to renegotiate their leases on terms more favorable to their tenants, but the court wasn't buying it: "But it does not explain how the City concluded, with a change to the commercial leases rendering guaranty clauses permanently unenforceable, that guarantors would have any incentive based on the Law to enter negotiations with landlords regarding unpaid rent." Slip op. at 28.

There were four other reasons set out in the Opinion & Order, and the one we're going to focus on is set out starting on page 31. There, the court held that the ordinance does not compensate property owners for unpaid rent. Unlike other laws of this nature which included what we might call "mitigation" provisions (and were temporary), the court noted that New York's ordinance did no such thing, and permanently wiped out the obligation and did not contain any provision mitigating the damage to the owners, or otherwise providing for compensation:

The record now confirms that Plaintiff Bochner has been unable to recover unpaid rent amounts totaling approximately $110,000, and that, via another business account, he paid $35,000 in taxes for the property due July 1, 2020. Dkt. 104, Ex. NN at 46. As neither party disputes, the Guaranty Law itself provides no assistance to landlords like Bochner. The City, however, argues that the Court should concentrate on the fact that Bochner did not pay property takes on 287 7th Avenue from a personal account, see Def. Mem. at 20 n.12, and that Plaintiff 7th Avenue was able to obtain a pandemic relief loan from the SBA, see id. at 24. The City also emphasizes Plaintiffs were able to borrow from other successful business ventures, and that they “weather[ed] the pandemic” in other ways, including because the tenant left behind restaurant fixtures which were then leased along with the commercial space to a different restaurant in October 2020. Def. 56.1 ¶¶ 102–03; Dkt. 104, Ex. NN 34:24–35:18, 55:17–18.

Such obfuscation is unavailing. The fact remains that Plaintiffs here were damaged, to the tune of approximately $150,000, and have not been compensated—precisely the concern that the Second Circuit wanted the City to address on remand. As to the SBA disaster loan, Bochner explained that it has not been forgiven, and that he must pay “four [or] five” percent interest until it is fully paid off. Dkt. 104, Def. Ex. VV, at 46–47.

Slip op. at 32.  

No way the city quits, so next stop we presume is back with the Second Circuit.

Opinion & Order, Melendez v. City of New York, No. 1:20-cv-05301-RA (S.D.N.Y. Mar. 31, 2023)52

Seattle's Hazard Pay For Food Delivery Gig Workers Might Be A Penn Central Taking

"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)

CA4: Being Blocked From Accessing Your Beach House For 45 Days Isn't A Physical Taking (Or Any Kind Of Taking)

You remember, don't you? In the early days of the Co-19 epidemic, government and public health authorities were scrambling to do something ... sometimes anything! ... to respond.

Dare County, North Carolina might have been one of those local governments that went maybe just a bit too far in the precaution vs effectiveness departments: it banned nonresident property owners from entering the county (and apparently didn't ban anyone else from coming and going, only outsiders).

Dare County announced the restrictions on March 16 and implemented them over three phases. Phase one, which took effect immediately, declared a state of emergency and prohibited mass gatherings. Phase two, which took effect one day later, prohibited non-resident visitors from entering the county. Phase three, which took effect four days after the restrictions were announced, prohibited non-resident property owners from entering the county. In effect, Dare County told non-resident property owners: “If you want to quarantine at your beach house, get there by March 20.” This gave non-resident property owners four days to travel to the county.

Seems a bit over-the-top and not really a measure that had much effect, especially in retrospect. 

But no matter, we know that courts are generally very hesitant to seriously entertain challenges to these type of police power actions as arbitrary or capricious, and won't do much if anything to say "hang on, this doesn't seem like an approach that's really going to work, or even do much."

But there are other ways to challenge these, such as state law, Contracts Clause, Equal Protection, or maybe takings, right? As we explained in an article on emergency takings last year, ("Evaluating Emergency Takings: Flattening the Economic Curve," 29 Wm & Mary Bill of Rights J. 1145 (2021)), takings claims are not a sure-fire winner (even where the cost-spreading rationale of takings is accounted for). 

The U.S. Court of Appeals' recent opinion in Blackburn v. Dare County, No. 20-2056 (Jan. 25, 2023), confirms. There, the court held that Dare County's extreme reaction to Co-19, which prohibited the plaintiffs from "reach[ing] their beach house for forty-five days[,]" was not any kind of taking. Slip op. at 3.

The court first rejected the physical takings claim. The stay-out order "did not physically appropriate anything from them." Slip op. at 7. The County didn't authorize government agents or third parties to come onto the plaintiffs' property. The court rejected the argument that the County keeping an owner from accessing his or her own property is a physical appropriation. "This, they say, makes the order a physical appropriation, because the Supreme Court has repeatedly held that an appropriation occurs when the government eliminates a property owner’s right to exclude. But temporarily excluding an owner from their own property differs from eliminating the owner’s right to exclude." Id.

Next, the court made short work of the Lucas wipeout claim:

But Lucas’s per se rule does not apply here. Accepting the allegations in the complaint as true, Dare County’s order did not deprive the Blackburns’ property of all economic value. The restriction was enacted under the County’s State of Emergency declaration and so would only be operative while that state of emergency persisted. And it lasted only forty-five days. This “temporary prohibition” could not have rendered the Blackburns’ property valueless. See Tahoe-Sierra, 535 U.S. at 332. Moreover, the Blackburns could have lived in their house so long as they arrived before the ban took effect. And even during the forty-five days that the ban lasted, they were still able to rent their property to someone within the County or certain adjoining counties. So the order was not a per se taking under the Lucas framework.

Slip op. at 8.

Finally, the court did not address the merits of the Penn Central claim, but affirmed the dismissal of that theory for failure to plead it correctly. The complaint did not allege facts which show a "substantial" diminution of value caused by the restriction. See slip op. at 9. All the complaint alleged was that the plaintiffs "suffered damage" and lost the "fair market rental value and value of use of said property by governmental regulations for 45 days." Id. The court held this is a legal conclusion. We're not sure what the court suggests the plaintiffs could have alleged to make it more clear. The before-and-after? A specific amount of rent allegedly lost? Use the magic word "substantial?" To us, this seems like a too-technical and crabbed reading of the pleading requirements.

On the "expectations" Penn Central factor, the court seemed to be evaluating it on the merits when it concluded that "the non-resident property order did not deny the Blackburns the use of their vacation home. It simply requied them to be at their home by March 20, 2020, if they wanted to use it personally. And the Blackburns remained free to rent the house to those within the county, or to sell it." Slip op. at 10-11.

And finally, "[t]he third Penn Central factor favors Dare County." Slip op. at 11. The court's analysis starts off with this intriguing note: "This factor requires courts to examine 'the character' of the use restriction. Penn Cent., 438 U.S. at 124. Exactly what this factor refers to is, admittedly, a little fuzzy." Id. The court settled on this requiring an inquiry into whether the regulation results in the "functional equivalent" of a classic taking. Slip op. at 12.

Applying this principle suggests that the order is not a taking. Based on the allegations in the Blackburns’ complaint, the order is not “functionally equivalent” to a government appropriation of private property. See Clayland Farms, 987 F.3d at 355. The Blackburns controlled their home during the entire time the order was in effect, and could have personally used it had they arrived in Dare County by March 20, 2020. Cf. Horne, 576 U.S. at 361–62 (holding that a physical appropriation occurred when a regulation physically transferred raisins from farmers to the government).

Nor is the order “functionally equivalent” to an ouster. See Clayland Farms, 978 F.3d at 355. The Blackburns were not dispossessed of their vacation home. And they were never forced to leave Dare County. In fact, just the opposite. Despite promulgating the order on March 16 and implementing the non-resident visitor ban a day later, Dare County delayed implementing this order until March 20 to give homeowners like the Blackburns a chance to travel to the County. This is a far cry from an ouster. See Ouster, Black’s Law Dictionary (11th ed. 2019) (“The wrongful dispossession or exclusion of someone (esp. a cotenant) from property.”).

Slip op. at 12-13.

Dismissal affirmed.

Blackburn v. Dare County, No. 20-2056 (4th Cir. Jan. 25, 2023)

(Nearly) Last Call: There's Still Time To Join Us For The 40th ALI-CLE Eminent Domain & Land Valuation Litigation Conference, Feb 1-4, Austin

We really want you there...

One (nearly) last reminder that there's still time to register for your space at the 40th ALI-CLE Eminent Domain & Land Valuation Litigation Conference, February 1-4, 2023, in Austin. In the past several years, we have sold out due to the conference room capacity and the conference hotel block. But there's still space, although we are nearly full. So register now - don't delay any further! 

Here's the brochure with the complete agenda, schedule, and faculty listing. But to tempt you, here are some of the highlights of the program:

• Everything Old is New Again: Why Today’s Practitioners Need to Understand the Original Meaning of the Takings and Just Compensation Clauses
  
• When the SWAT Team Comes (No) Knocking: Police Power Takings

• Private Utility Takeovers – Lessons From a 67 Day Trial

• "Contraband": How Property Rights Helped Pave the Way for Civil Rights

• Valuation Issues When Billboards and Signs are Condemned

• Setting Client Expectations and Identifying Red Flags

• Preparing Your Expert Witness to Shine in Virtual Proceedings: Tools and Tips for Trial Lawyers

• Developing Property Right Issues in Texas - Questions and Answers from the Bench (with Texas Supreme Court Justice Jimmy Blacklock)

• Eminent Domain and Regulatory Takings Updates: Important Decisions You Need to Know

• Ethics: Building Your Practice by Mentoring the Next Generation of Eminent Domain Lawyers

• the Condemnation 101 program (a one-day course for those new to the practice, or for experienced practitioners wanting a refresher)
• ...and much more!

To register, go here.

Looking forward to seeing everyone in Austin for the 40th edition of the Conference.

Program Brochure, 40th ALI-CLE Eminent Domain & Land Valuation Litigation Conference, Austin, Texas, Feb 1-...

You Can't Just Say "Redevelopment" - Take Now, Decide Later Isn't A Public Use

A classically short opinion from the New York Supreme Court (Appellate Division, Fourth District) in HBC Victor LLC v. Town of Victor, No. 683 (Dec. 23, 2022). (So short that we were tempted to simply post the opinion and let you read it, because it will probably take you just as long to read our summary; but we're up to the challenge of making our summary even shorter than the opinion, so here goes.)

The town wants to take property "connected to an enclosed regional shopping center known as Eastview Mall[.]" Slip op. at 1. Until Co-19, the property was occupied by a retail department store, but the store closed permanently in February 2021. The owner tried to get a new tenant, but unsurprisingly, that came up short.

Perhaps sensing an opportunity, the Town sought to condemn for redevelopment. But its resolution of taking did not specify what it wants the property for:

"[t]he proposed Acquisition is required for and is in connection with a certain project . . . consisting of facilitating the productive reuse and redevelopment of the vacant and underutilized Proposed Site through municipal and/or economic development projects . . . by attracting and accommodating new tenant(s) and/or end user(s)."

Slip op. at 2.

Even in condemnor-friendly New York, this one should raise a red flag. But not enough: "[i]n its determinations and findings, the Town stated that 'no specific future uses or actions have been formulated and/or specifically identified." Id.

When you draft your findings like that, condemning agency, shame on you. (Kudos, however, for your honesty.)

Pointing to a recent similar case by the Second Department, the Appellate Division concluded that "[b]ecause the Town has not indicated what it intends to do with the property, we are unable to determine whether 'the acquisition will serve a public use.'" Slip op. at 2. The public use for the taking is determined at the time of the taking, and simply speculating that the taking will produce future public benefits isn't enough:

In simple terms, the government cannot take your land and then decide later what to do with it without running afoul of the Takings Clause of the Fifth Amendment of the United States Constitution, as applied to the states by the Fourteenth Amendment.

Slip op. at 2. 

The court rejected the Town's argument that it doesn't need a particularized plan, and the government can take property for redevelopment even if it hasn't yet decided how the property will be used. The court first noted that "the Town professes to have no idea what it intends to do with petitioner's property." Slip op. at 3. It might even transfer the property to the owner of the adjoining shopping mall. "Again, unless and until the Town says what it plans to do with the property upon taking, we cannot determine whether the taking will serve a public use." Id.

And there's no indication or claim that the property here is blighted, even under New York's notoriously low standards for blight:

To the contrary, the evidence at the public hearing established that petitioner has cleaned and maintained the premises since the Lord & Taylor vacancy and continues to pay property taxes at the assessed value of more than $4,000,000. We do not equate mere vacancy with blight, especially when the vacancy occurs unexpectedly in the midst of a global pandemic.

Slip op. at 3.

Taking invalidated; attorneys' fees to the owner.

Think the Town will have another go at it? If so, think it'll draft the resolution the same way (or will it heed Justice Scalia's Lucas dictum)?

HBC Victor LLC v. Town of Victor, No. 683 (N.Y. App. Div. Dec. 23, 2022)

New Cert Petition: There Must Be A Real Emergency Before Commandeerings Are Exempt From Compensation

Here's the latest in a case we've been following.

In this cert petition, business owners on the losing end of a Co-19 shutdown order assert that the Sixth Circuit got it wrong when it concluded that the "overriding public purpose" of the shutdown orders should be given what amounts to dispositive weight under the "character of the government action" Penn Central factor.

The Sixth Circuit correctly (in our view) rejected the district court's rationale that the takings claim could be rejected simply because "the state acts pursuant to its police powers to protect public health." Slip op. at 15. But the Sixth Circuit didn't stop there, and affirmed the dismissal because the "character" of responding to the Co-19 emergency was so overwhelming that it outweighed the other two factors (which the court had already concluded "weigh in favor of the Plaintiffs").

As we explained in an article on emergency takings last year, ("Evaluating Emergency Takings: Flattening the Economic Curve," 29 Wm & Mary Bill of Rights J. 1145 (2021)), the Penn Central "character" inquiry does not ask about the government's reasons or motive. That is a due process inquiry. No, the character of the government action inquiry asks about the nature of the intrusion on the owner's property rights. [Hat tip to the cert petition, which refers to our article several times.]

Here's the Question Presented:

Is the government required to prove with evidence that its action taken during an emergency which intrudes on private property rights was a necessity in order to be relieved of its duty of compensation for a taking under the Fifth Amendment?

Follow along on the Court's docket here.

Petition for a Writ of Certiorari, Bojicic v. DeWine, No. 22-493 (U.S. Nov. 23, 2022) by RHT on Scribd

Tanning Beds v. Liquor Stores - No Equal Protection, No Physical Take, No Lucas Take For Co-19 Biz Shutdown Order

To "slow the spread" in the early days of the Co-19 thing, the City ordered businesses to shut down. But not Wal-Mart, liquor stores, or churches. Golden Glow, a tanning salon objected, and told anyone who would listen that it could operate without person-to-person contact. Sorry, no exceptions.

Federal lawsuit followed, alleging the claims you might expect: equal protection and takings claims. Predictably, the district court granted summary judgment to the City.

And just as predictably, in Golden Glow Tanning Salon, Inc. v. City of Columbus, No. 21-60898 (Nov. 8, 2022), the U.S. Court of Appeals for the Fifth Circuit affirmed. The opinion, as you might expect is short.

Was Golden Glow treated differently from other businesses similarly situated without a rational reason? No. First, Golden Glow is similar to other shut down businesses: "[e]ach class of shut-down business provides recreational, social, or, as some would say, 'nonessential' services; the clientele typically spend more than a few minutes at the location; and the likelihood of close person-to-person contact may pose risks." Slip op. at 4. Second, the distinction between which businesses got shut down and which didn't isn't subject to any meaningful judicial scrutiny because of rational basis review.

The right to work isn't a "fundamental" right so you get whatever the City wants to give:

Golden Glow contends that the City Ordinance created an arbitrary distinction between tanning salons and liquor stores that bore no rational relationship to public health given the salon’s ability to operate safely and without customer contact. The City responds that tanning salons, when compared to liquor stores, were not “so important to society that the benefits of continued operations . . . outweigh[ed] the risks of spreading the virus.” The City rationalizes that the length of time spent in a tanning bed as compared to a liquor store raised the probability that the virus was more likely to spread in a tanning salon.

Slip op. at 7-8. The ordinance's reach might have been too over or underinclusive, but so what? Invisible aliens might be walking among us.

The takings claim fared no better. The court rejected the physical invasion claim because there was not a physical invasion "because the City Ordinance did not authorize physical intrusions onto Golden Glow's property." Slip op. at 9 (footnote omitted). Of course, this was not like other physical-invasion-by-regulation cases in which the government invites third-parties to come on your property. But that conclusion dodges the real question of whether a business owner has a right to include patrons. Yeah, maybe Golden Glow would have lost that argument as well, but it would be nice to at least see the proper question being answered.

The court just as easily rejected the Lucas takings claim, concluding that the shutdown order did not render "the entire property 'valueless.'" Slip op. at 10. Apparently, Golden Glow did not assert a Penn Central taking in the district court, so the Fifth Circuit declined to rule on that issue on appeal. See slip op. at 10 n.8.

Judge Ho issued an interesting concurring opinion, arguing that "[i]f we're going to recognize unenumerated rights as fundamental, why not the right to earn a living?" Slip op. at 11, 12 ("Under the Court’s approach to unenumerated rights, we privilege a broad swath of non-economic human activities, while leaving economic activities out in the cold."). Check it out.

Golden Glow Tanning Salon, Inc. v. City of Columbus, No. 21-60898 (5th Cir. Nov. 8, 2022)

County: We're Short Of Housing, So Let's Do Rent Control! Court: Not So Fast.

Florida law makes it really difficult for municipalities to adopt rent controls. State statutes and the Florida Constitution erect all sorts of substantive and procedural hurdles that must be crossed. For example, a statute requires findings that any such measures are responding to an emergency, a "grave ... menace to the general public," and places the burden on the municipality to not just make findings, but back up those findings with facts, and show that rent control will actually "eliminate" the emergency. Single-family properties cannot be rent controlled. And any ordinance adopted by a municipality must be approved by the voters.

Facing what it concluded was a problem -- a shortage of 26,500 housing units and a population increase of 25% in the last decade - Orange County's County Commission voted, 3-2, to control rents. The measure limited the frequency and amount of rent increases.

After the measure was placed on the ballot for [today's] general election, the Realtors Association sued to declare the ordinance unconstitutional and to prevent the measure from being placed on the ballot. It sought an injunction, and even though the trial court concluded the Association had a substantial likelihood of winning on the merits, it declined to remove the measure from the ballot because even if invalid, a vote would allow the public to offer its opinion on rent control. Both parties appealed.

In Florida Ass'n of Realtors v. Orange County, No. 5D22-2277 (Oct. 27, 2022), the Florida District Court of Appeal agreed that the measure was likely to be illegal, but reversed the trial court's allowing it on the ballot. The court concluded that Orange County could not meet its burden to show that there is a housing emergency, nor its burden to prove that rent control would alleviate any such emergency. "Emergency" means a "sudden or unexpected" and temporary condition, and here, the housing shortage is the result of "historical structural issues" and not a surprise. Things like population growth, and longstanding housing shortages are not sudden. Moreover, the "County Attorney warned the County that these factors would be legally insufficient before it enacted the Ordinance." Slip op. at 18.

Even if the housing shortage qualified as an emergency, the County didn't prove that that it was "so grave as to constitute a serious menace to the general public." Slip op. at 19. To be a "menace," the threat must be a "grave threat or danger to the Orange County citizens as a whole." Slip op. at 20. "At most, the County cites to a low rental vacancy rate and low availability of affordable housing." Slip op. at 21. Yes, this affects renters in Orange County, but that isn't enough. It has to affect everyone.

Next, the court concluded that even if such conditions exist, the rent control measure would not address or remedy the problems. Not only would the measure not "eliminate" the problem as the statute requires, testimony at trial showed that it would have little effect, and even the County's consultant report conclude that rent control "may actually hurt rental conditions by 'imped[ing] the objective of speeding overall housing deliveries as well as creat[ing] a number of unintended consequences.'" Slip op. at 23.

"In sum, for this third and independent reason, the trial court correctly concluded that the Association satisfied its burden to demonstrate a substantial likelihood of success on the merits of its challenge to the Ordinance's validity." Slip op. at 24.

The court of appeal also concluded the ballot summary was misleading: "[t]he summary is misleading not because of what it says, but because of what it does not say." Slip op. at 27. The summary stated:

Rent Stabilization Ordinance to
Limit Rent Increase for Certain
Residential Rental Units

Shall the Orange County Rent Stabilization Ordinance, which limits rent increases for certain residential rental unites in multifamily structures to the average annual increase in the Consumer Price Index, and requires the County to create a process for landlords to request an exception to the limitation on the rent increase based on an opportunity to receive a fair and reasonable return on investment, be approved for a period of one year?

The summary "only advises the voter about the amount of rent control, but not its frequency," even though the actual ordinance limits increases to once in a twelve-month period. Slip op. at 27. The summary thus makes the measure appear less extensive than it actually is.

Finally, the court of appeal disagreed with the trial court's refusal to enjoin the election and keep the issue from the voters:

No public interest can be served by allowing the potential enforcement of a rent control ordinance that fails to meet the facial requirements of section 125.0103, and Article 8, section 1 of the Florida Constitution. We recognize that a local government's aim to enact legislation to address a complex, multifaceted issue is noble, and citizens might believe that rent control is a harmless was to accomplish that aim. But as we stated at the outset of this opinion, the power of local government is limited, and a critical limitation on this power is the Florida Constitution.

Similarly, no public interest can be served by having the electorate vote on a misleading ballot measure.

Slip op. at 32-33.

Fla. Ass'n of Realtors v. Orange County, No. 5D22-2277 (Fla. Dist. Ct. App. Oct. 27, 2022)

CA6: No "Police Power" Exception To Takings (But It's Nonetheless Dispositive As Penn Central's Character)

A short one (unpublished) from the U.S. Court of Appeals for the Sixth Circuit, considering an issue we've been following: what is the effect of the government's claim that it is regulating property for what looks like a valid "police power" purpose?

As noted, that's a road we've been down before. Here's a sampling:

• Wait, I Thought The Police Power and the Public Use Clause Were "Coterminous"
• CA3: Claim That Govt Is Keeping Property Seized (But Not Used) As Evidence "checks all the Fifth Amendment boxes."
• Cert Denied In Police Power Takings Case (Lech v. Greenwood Village)
• Fed Cir Tries To Avoid "Police Power" Takings Exception In Bump Stock Case By (Unsuccessfully) Finessing The Property Interest

In Bojicic v. Dewine, No. 21-4123 (Aug. 22, 2022), the Sixth Circuit was considering a takings and due process challenge to the governor's Co-19 shutdown orders. The court rejected the district court's rationale that the claim could be rejected simply because "the state acts pursuant to its police powers to protect public health." Slip op. at 15.  

In support, the court cited United States v. Droganes, in which we held that seizure and retention of property under the police power is not a public use. 728 F.3d 580, 591 (6th Cir. 2013). But that case involved the government’s failure to return property the plaintiff had agreed to forfeit after being charged criminally. Id. at 585. It did not concern the kind of regulatory taking at issue here.

Defendants cite several other cases purportedly holding that exercises of the police power are not compensable takings. Principally, the Defendants rely on Keystone Bituminous Coal Association v. DeBenedictis, 480 U.S. 470 (1987), decided after Penn Central. That case discussed whether the government must compensate property owners when it prevented them using their property for certain purposes. The Court explained that “‘all property in this country is held under the implied obligation that the owner’s use of it shall not be injurious to the community,’ and the Takings Clause did not transform that principle to one that requires compensation whenever the State asserts its power to enforce it.” 480 U.S. at 491–92 (cleaned up) (quoting Mugler v. Kansas, 123 U.S. 623, 665 (1887)). And it added that “the public interest in preventing activities similar to public nuisances is a substantial one, which in many instances has not required compensation.” Id. at 492.

Slip op. at 15-16.

The appeals court acknowledged that yes, the state has a strong interest in preventing harm, but "no appellate court seems to have applied the police-power language so broadly as to categorically declare that no state response to a public-health emergency could be a taking. True, this police-power exception has been applied in the context of criminal forfeitures and abating nuisances. But to hold that a regulation intended to benefit public health can never be a compensable taking would be an unwarranted extension of existing precedent." Slip op. at 16.

That's something we argued in this article ("Evaluating Emergency Takings: Flattening the Economic Curve," 29 Wm & Mary Bill of Rights J. 1145 (2021)). We view a valid police power reason as the predicate to a takings claim, and not a bar. After all, if the government lacks a valid health, safety, welfare, or morals reason supporting the restriction, that's a due process problem (mostly). It's only after a court makes that call that it can consider whether compensation might be owed.

So score one for the property owner!

But that was not the end of the story. Having rejected the district court's rationale for dismissing, the Sixth Circuit didn't stop there: "[w]e therefore analyze this issue under the Penn Central framework" since no Lucas economic wipeout was alleged by the plaintiff. Id.

And don't miss the way the court analyzes the multi-factor test. First, it concluded that "[t]he first two factors—the economic impact of the regulation on the plaintiff and the extent to which the regulation had interfered with the plaintiff’s distinct investment-backed expectation—weigh in favor of the Plaintiffs." Id. Oh boy, things are really looking up, no?

Not so fast. The court concluded that the final factor--the character of the government action--"weighs even more heavily in the Defendants' favor." Slip op. at 17. Indeed, the character is "dispositive." Id. Why, you ask? It looks like the court went back and cut the police power argument, and paste it here. The character of the government action was that the state imposed the restrictions "to protect public health by reacting quickly in the face of a fast-spreading and novel virus." Id. As we suggested in the article referenced above, the "character" inquiry is not just another way of asking whether the government has a good police power reason for the regulations. Character asks about the nature of the imposition on the plaintiff's rights by asking does it require some surrender of a fundamental aspect of property, or is it more a rearrangement of the benefits and burdens of life? It's not some kind of alternative police power test as the Sixth Circuit concluded. 

Next, the court held that the character of the state's Co-19 restrictions here were temporary ("in effect for only a little over two months"). The court recognized that Tahoe-Sierra "analyzed a per se regulatory taking," but also asserted "the language applies equally here." Slip op. at 17. But again, what does that have to do with character? Aren't temporary takings also compensable (we sure think so)?

The court, of course, expressed it's "sympathy" for the plaintiffs because "they were forced to shut down their businesses, give up income, and endure the uncertain difficulties of the pandemic." Slip op. at 18. But because the government was "facing the unexpected arrival of a virus of unknown destructive capacity," it was "forced to act and to act quickly." Slip op. at 18. Thus, no taking.

Bojicic v. Dewine, No 21-4123 (6th Cir Aug. 22, 2022) (unpub.)

Oklahoma: The "Taking" Occurs When Govt Changes Its Use Of A Previously-Granted Easement

Even though the Oklahoma Supreme Court's decision in Snow v. Town of Calumet, No. 119,758 (June 21, 2022) is short, we think it is worth reading because is clarifies who can bring an inverse claim, and what exactly do these claims allege.

In 1978, the Snows' predecessor-in-title granted the Town an easement to maintain sewer lines. The easement was temporary and expired 6 months after the Snows purchased the property in 2010. But after the temporary easement expired, the Town didn't cease its use of the property. Flash forward 7 more years, and the Town asked the Snows to grant it perpetual easements for its continued use. The Snows asked for compensation, but the Town said no.

Next up, the Snows' trespass and inverse lawsuit in state court, with the Town counterclaiming with a quiet title claim asserting it had acquired a perpetual easement by prescription. Cross motions for summary judgment flew: the Snows won the prescription claim (the prescription period is 15 years in Oklahoma), while the Town won the trespass and inverse claim, the latter dismissed because the Snows lacked standing (the claim, the court concluded, belonged to the former owners who had consented to the Town's invasion of the property).

The Oklahoma Supreme Court reversed, concluding that the Snows had standing to bring an inverse claim. While acknowledging the "general rule" that "the right of inverse condemnation belongs to the owner at the time of the taking," slip op. at 4, the court held the general rule wasn't applicable here because the inverse claim wasn't based on the original physical incursion (which was indeed permissive), but on the Town's continued use of the Snow land even after that permission expired. See slip op. at 5 ("When the Town sought perpetual easements from the Snows for the continued use and maintenance of the sewer lines more than seven years after the temporary easements expired, the Snows owned the property, giving them standing to allege an inverse condemnation claim.").

Takings claims are not limited to one-per-property, and "[m]ore than one taking can occur involving a single piece of property." Slip op. at 6. Thus, the fact that the Town had installed the sewer lines with the prior owners' permission didn't really tell us much about whether the Town's continuing use of the property after that permission expired was a taking. There's a difference, after all, between a temporary easement and a perpetual easement, and an owner is within her rights to tell third party users of her property that "you can use it for only a certain amount of time after which your possession becomes adverse to me."  

Reversed and remanded for trial.

We posted this one because it emphasizes a related point relating to Co-19 eviction moratoria. Most of the takings challenges have gone nowhere due to the courts seeing the property right being invaded by a tenant remaining past the expiration of the owner's permission as the right to exclude. Ah ha, the courts exclaim, you landlords invited these now-nonpaying tenants to possess your properties, so you can't say that moratoria allowing them to remain rent-free has taken your right to exclude. For an example of that thinking, see here.

But we think the analysis should be more like the Oklahoma Supreme Court applied here. Yes, property owners may have initially invited tenants to possess and occupy their properties, but that permission was subject to two conditions: first, the continuing payment of rent; and second, the expiration of the original permission after a certain time (the expiration of the lease, for example). So it isn't so much the right to exclude that is being interfered with, but some other right (the right to recover property, the right to re-possess it, or maybe a "reverter"). 

Snow v. Town of Calumet, No. 119,748 (Ok. June 21, 2022)

CA6: State Officials Enjoy 11th Amendment Immunity From Just Compensation Claims In Federal Court

In Skatemore, Inc. v. Whitmer, No. 21-2985 (July 19, 2022), the U.S. Court of Appeals for the Sixth Circuit held that neither the Just Compensation Clause, nor the Fourteenth Amendment abrogated the states' immunity from being sued in federal court for compensation for takings.

This is another one of those cases where -- due to Co-19 -- businesses forced to close or limit operations by the state (here, Michigan) brought regulatory takings claims in federal court. The claims included takings, and the relief sought was just compensation (no prospective injunction or declaratory judgment). The complaint named state officials (in their official capacities) and state agencies as the defendants. The district court dismissed for lack of jurisdiction and for failure to state a claim. 

The Sixth Circuit affirmed. The court rejected the argument that a state's Eleventh Amendment immunity from being haled into a federal court without consent does not apply in takings claims seeking just compensation. It concluded that the Supreme Court in Knick didn't recognize such an exception, distinguishing that case's holding that a property owner has a claim for compensation that may be vindicated in federal court when her property has been taken, because in Knick the defendant was a local government and not the state. Local governments are not covered by the Eleventh Amendment. See slip op. at 8-9.

Next, the court made short work of the argument that the adoption of the Fourteenth Amendment altered the immunity states enjoy from being sued in federal courts. Slip op. at 9. "This argument is meritless." Id. The Fourteenth Amendment only empowers Congress to enforce its provisions with legislation, and "[r]emedies against states under the 14th Amendment are created by legislation, not by other constitutional amendments." Id. [So something like section 1983?] The court also rejected the argument that states consented to federal court jurisdiction by ratifying the Fourteenth Amendment. Slip op. at 10. 

Skatemore, Inc. v. Whitmer, No. 21-2985 (6th Cir. July 19, 2022)

New Article: "Taking One for the Team: COVID-19 Eviction Moratoria as Regulatory Takings"

Check it out: a new article from the San Diego Law Review that's worth reading. Here's the Abstract:

This Comment explores potential Fifth Amendment challenges to COVID-19 eviction restrictions. Part II introduces California and federal COVID-19 eviction laws and lays out an organizational framework for analysis. Part III provides background on relevant regulatory takings jurisprudence. Part IV analyzes COVID-19 residential eviction laws under relevant regulatory takings tests. Part V considers judges’ potential impact on eviction moratorium challenges. Finally, Part VI proposes the solution that the Federal Government should pass legislation to provide direct rent relief for COVID-19-affected tenants.

Get the pdf here: "Taking One for the Team: COVID-19 Eviction Moratoria as Regulatory Takings," 59 San Diego L. Rev. 345 (2022).

Our take on Co-19 takings (not just eviction moratoria) here. And our thoughts on emergency response laws, generally.

CA7: Co-19 Shutdown Complaint Does Not Meet "Demanding test for alleging a regulatory taking"

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)

District Court: City Liable For Physical Taking For Destroying Home While Apprehending A Criminal

Here's a pretty rare one: a trial court entering summary judgment on liability in favor of the property owner in a takings case. Yes, you read that right.

And to top it off, this ruling comes in a case in which the taking alleged was a police invasion and destruction of a home for the valid public purpose of apprehending a holed-up criminal, a brand of claim that has not met with a whole lot of success. See, for example, this case from the Tenth Circuit, and this case from the Supreme Court of South Carolina.

In this order, the U.S. District Court for the Eastern District of Texas held the City of McKinney liable for a physical taking. The entire order is worth reading, but here are some of the highlights.

• The court rejected the Tenth Circuit's rationale, which concluded that these are "police power" actions, and thus never a taking.
• Lech relied on cases like Mugler (the one where the Supreme Court held that Kansas' banning manufacture and sale of liquor was a valid exercise of its police power).
• But there's a difference between physical takings (the case here) and regulatory takings (not this).
• Check out the law review article the district court cited, Emilio Longoria, Lech's Mess with the Tenth Circuit: Why Governmental Entites Are Not Exempt from Paying Just Compensation When They Destroy Property Pursuant to Their Police Powers, 11 Wake Forest J. L & Pol'y 297 (2021).
• The district court's opinion also picked up on a familiar vibe: a valid police power action doesn't mean it isn't a taking, merely that the government action likely qualifies as a public use. Slip op. at 19 (citing Zachary Hunter, You Break It, You Buy It—Unless You Have a Badge? An Argument Against a Categorical Police Powers Exception to Just Compensation, 82 Ohio St. L.J. 695, 703 (2021).

Definitely check it out.

Memorandum Opinion and Order, Baker v. City of McKinney, No. 4:21-cv-00176-ALM (E.D. Tex. Apr. 29, 2022)

Cal: A "mandated-but-temporary" Business Closure Isn't A Penn Central Taking

Yet another case rejecting a takings claim for a Co-19 related business shut down.

In 640 Tenth, LP v. Newsom, No. D070339 (May 13, 2022) the California Court of Appeal expressed sympathy for the property owners who have been required to shoulder more than their share of the burdens of these shutdowns. See slip op. at 2 ("We fully appreciate that the adverse effects of the present pandemic have not fallen equally on all segments of society, and that some small business owners are among those who have borne an especially heavy burden.").

But sympathy is all they get.

This case is another challenge to California's emergency order prohibiting both indoor and outdoor dining at restaurants. The state adopted a plan for staged reopening, depending on the assessed risk for viral transmissions in each county, and these total-to-partial shut down orders stayed in place until June 2021, when the enabling executive order was rescinded.

The plaintiffs sued for (among other things) a taking. Skip to page 17 of the Court of Appeal's slip opinion for the takings analysis. "The owners have not alleged a physical taking," slip op. at 17, and therefore the court focused on the Penn Central factors. It concluded that the owners "have not alleged a legally sufficient regulatory taking claim." Slip op. at 19. As we have noted, these type of claims have resulted in "a virtual torrent of California federal district court decisions rejecting similar challenges[.]" Id.

Here's how the court evaluated the factors:

• Economic impact: the plaintiffs' allegation that they suffered "significant" loss is not enough. And their allegation that they were "threatened" with these losses also isn't enough, "[a] regulatory taking requires actual severe economic loss, not merely threatened harm." Slip op. at 21.
• Investment-backed expectations: this factor favored the plaintiffs because although they were already subject to health regulations, "it is fair to say that almost everyone was expecting to conduct business as usual when 2019 transitioned to 2020," and "the public health orders at issue here are different from the type of health restrictions typically imposed on restaurants." Slip op. at 21.
• Character of the government action: the character prong focuses on whether the government action involves a temporary physical occupation. But the plaintiffs here did not allege a physical invasion. The court noted that "there are other ways courts have approached the 'character' issue," pointing out that some courts have balanced the advantages to the plaintiff resulting from the regulation, while others have asked whether the regulation is designed to prevent serious public harm. Slip op. at 22-23. The court concluded that this factor cut against the plaintiffs: "The character of these actions is akin to that of other historical examples of governmental actions undertaken to counter serious threats to the public that were subsequently found not to be takings." Slip op. at 24.

In short, no taking.

640 Tenth, LP v. Newsom, No. D079339 (Cal. Ct. App. May 13, 2022)

Fla App: No Taking, Because COVID Is A Really Good Reason To Shut Bars Down

Another takings challenge to a Co-19 shutdown, another "no taking" result.

This time, it is from the Florida District Court of Appeal (Fifth District). In Orlando Bar Group, LLC v. Desantis, No.5D21-1248 (Apr. 8, 2022), the court affirmed dismissal of takings challenges to the governor's emergency order that barred certain alcohol sales, and limited the service in bars. Orlando-area bar owners sued for inverse condemnation.

The Fifth District concluded that this did not result in a taking. First, the court held that it would not apply a categorical physical rule, because Cedar Point Nursery is not applicable. In that case, the owners were asserting their right to exclude the public, but here the bar owners claimed that the restrictions abrogated their right to include patrons and others. Slip op. at 7 ("The COVID orders at issue here did not permit third parties to access Appellants’ property; they did the opposite by preventing Appellants from having patrons on their premises and temporarily prohibiting Appellants from selling alcohol for on-premises consumption. As such, the COVID orders did not result in a physical appropriation and per se taking of Appellants’ property; rather, the COVID orders regulated Appellants’ use of their property."

Next, the court rejected the categorical Lucas claim, because even though "significant," the "impact of the orders amounted to a complete prohibition on the sale of alcoholic beverages for only seventeen days, following which Appellants’ businesses were incrementally permitted to return to limited sales and operation before being allowed to return to their pre-pandemic mode in approximately six months." Slip op. at 9. No loss of beneficial and productive use, it seems.

Finally, the court considered a Penn Central ad hoc takings claim (what the court unfortunately labeled "as-applied regulatory taking" even though we all know that an "as-applied" challenge is a description of a claim's procedural posture, and not of its substance). Here's how the court evaluated the three ad hoc factors:

Applying the Penn Central factors to the case at hand, it is clear that the COVID orders did not constitute a taking. For the first factor, it is undisputed that Appellants, along with numerous other businesses, were financially impacted by the COVID orders. For the second factor, just like firework sellers, sellers of alcohol are also in a highly regulated business. See generally Ch. 561-568, Fla. Stat. (2021). For example, one of the emergency powers granted to the Governor by statute is the ability to halt the sale of alcohol during an emergency. See § 252.36(6)(h), Fla. Stat. (2021) (granting governor ability to suspend or limit the “sale, dispensing, or transportation of alcoholic beverages”). Thus, Appellants should have also been on notice that further regulations could be enacted. Lastly, in consideration of the third factor, the COVID orders represented a valid use of the state’s police power to protect the general welfare, as noted by the trial court with citations to several other contemporary COVID decisions. If the state can use its police power to temporarily prohibit the sale of fireworks to prevent wildfires during an exceptionally dry period in Florida, it stands to reason that the state can also use its police powers in an effort to limit the spread of a highly infectious and deadly virus.

Slip op. at 11-12.

In short, the "economic impact" factor cut in favor of the bar owners. "Significant" impact. But the "investment-backed expectations" cut against them because the bar industry is highly regulated because the governor's emergency powers include the power to "halt the sale of alcohol." Now hold on a minute -- that seems like a bit of bootstrap logic: the governor's power to stop alcohol sales during an emergency isn't a taking because the governor has the power to stop alcohol sales during an emergency and thus owners don't have any expectations of selling alcohol during an emergency. Call us skeptical that this is the right way to analyze this. Finally, the court seems to have equated the character inquiry with the due process test (does the government have a really good reason for doing what it did?). As we wrote here, and as the Fourth Circuit got right in this case, the character of the government action question is about the nature of the restriction, and its impact on the owner’s property rights, and does not mean the government’s reasons. It merely asks the nature of the action: Is it a regulation of property use? Does it result in a transfer of title to private property? Does the owner retain title, but is nevertheless being required to open up their property to others? Does it require the owner to destroy their property for the public good? Are the owner’s rights being interfered with temporarily, permanently, or indefinitely? So invoking the police power as the reason this isn't a taking doesn't get you anywhere.

But there it is. Will this go further up the chain? If so, will this meet with more success than other similar challenges?

Orlando Bar Group, LLC v. Desantis, No. 5D21-1248 (Fla. Dist. Ct. App. Apr. 8, 2022)

CA8: Yee v. Escondido Doesn't Save Eviction Moratorium From Takings Review

Here's the latest case challenging a pandemic-related eviction moratorium, this one from Minnesota and the U.S. Court of Appeals for the Eighth Circuit.

In Heights Apts, LLC v. Walz, No. 21-1278 (Apr. 5, 2022), the court reversed the district court's dismissal of a property owner's takings claims. The owner challenged the Minnesota governor's residential eviction moratorium and later extensions. Like a lot of these things, the Minnesota version was not a rent "holiday" (tenants were still, technically speaking, on the hook for the rent, and there were several limited exceptions under which the property owner could evict). But for the most part, the Minnesota measure, like a lot of these things, effectively left property owners holding the economic bag (good luck collecting thousands in back rent), and turned their units into public pandemic housing. 

The owner's complaint raised Contract Clause, Petition Clause, and Takings claims.

Before we get to the good stuff (takings), a short word about the Contracts and Petition claims. The Eighth Circuit reversed the district court's dismissal of the Contracts claim, concluding that "[a] cognizable Contract Clause claim requires a showing of a substantial impairment in a contractual relationship that is not reasonably tailored to advance a significant and legitimate public purpose." Slip op. at 15. "Given the breadth and impact of the EOs on landlords’ rights, as alleged by Heights, the complaint contains sufficient facts to meet the plausibility requirement for the second prong of its Contract Clause claim[.]" Id. But the Petition claim did not similarly survive because the property owner didn't plead that the damage remedy it sought was "somehow unique to its Petition Clause claim[.]" Slip op. at 16. 

With those out of the way, we get to the takings claims. The complaint alleged a physical taking, because the moratorium "forced landlords to accept the physical occupation of their property regardless of whether tenants provided compensation." Slip op. at 17. As in many other of these moratorium cases, relying on Yee v. City of Escondido, 503 U.S. 519 (1992), the state argued that the moratorium only restricted an owner's ability to evict (you let 'em in, property owner; we're only telling you that you can't get 'em out).

The Eighth Circuit instead focused on Cedar Point Nursery, concluding that that case "controls here and Yee, which the Walz Defendants rely on, is distinguishable."

The rent controls in Yee limited the amount of rent that could be charged and neither deprived landlords of their right to evict nor compelled landlords to continue leasing the property past the leases’ termination. 503 U.S. at 527–28. The landlords in Yee sought to exclude future or incoming tenants rather than existing tenants. Id. at 530–31. Here, the EOs forbade the nonrenewal and termination of ongoing leases, even after they had been materially violated, unless the tenants seriously endangered the safety of others or damaged property significantly. See 307, 712, 2103 & 3151 LLC v. City of Minneapolis, 27 F.4th 1377, No. 20-3493, slip op. at *3 (8th Cir. Mar. 14, 2022) (noting “an ordinance that would require landlords to rent to individuals they would otherwise reject might be a physical-invasion taking”).

Slip op. at 17-18. The complaint here alleged that the moratoria had made each lease "indefinite," and that was enough for the court to conclude that the complaint sufficiently alleged a physical taking.

The complaint also alleged a non-physical (regulatory) takings claim. The court first rejected the government's "notice" defense (the property owners "closed on the properties shortly after the first EO was signed"). Nope, the court concluded, the timing of the acquisition was "immaterial to our analysis," because this was too narrow a view of the property allegedly taken. Here, the complaint alleged that the moratoria "deprived it of the economic and beneficial use and decision-making related to its property and investments." Slip op. at 18. It wasn't just the value of the property, or the lost income that was alleged to have been taken. "here, since the EO's affected the least terms of every residential unit (paying or non-paying), the allegedly taken property consists of all of Heights' residential rental property." Slip op. at 18-19.

Looking at Penn Central, the court concluded that the complaint adequately pleaded the three factors. The most interesting was the court's treatment of the "character" factor, which the opinion calls "the nature of the regulation." Slip op. at 19. This perked up our ears, because it looked like the court was going to go down the valid-police-power-cannot-be-a-taking path, an analysis we've harshly criticized.

We're not quite sure whether the court went down that road (because it cited to a case in which the Supreme Court held that if a "regulation's effects are so publicly beneficial," then it cannot be a taking), but eventually distinguished that case and concluded that the complaint pleaded that the moratoria was a benefit only to a narrow class of the public. Slip op. at 19 ("Heights asserts the EOs are not in this category because, in comparison to the legislation discussed in Connolly, the EOs were not as broadly beneficial, and they improperly imposed the public cost of fighting homelessness on a subset of the population: rental property owners."). The court concluded that the complaint therefore adequately pleaded the "character" prong.

While we remain skittish of this approach, all's well that ends well, we suppose, because the court concluded, that "[c]onsidering the Supreme Court’s recent pronouncement regarding the now-defunct CDC eviction moratorium, we are unconvinced that as a matter of law the EOs are permissible non-compensable takings." Slip op. at 20.

Now that an overbroad application of Yee is off the table, but an overbroad view of Penn Central's "character" factor is in play, let's see what the district court does with this on remand.

Heights Apartments, LLC v. Walz, No. 21-1278 (8th Cir. Apr. 5, 2022)

Wash App: No Taking Of Right To Exclude Because Eviction Moratorium Merely Lets Tenants Remain

Lately, we've been zeroing in on one of the lesser known parts of the Supreme Court's takings canon, Yee v. City of Escondido, 503 U.S. 519 (1992), where the Court concluded that a city ordinance that limited the amount a property owner could charge a tenant for rent was not a physical invasion taking.

In Yee, the Court held that the ordinance did not intrude on the owner's right to exclude because the owners had invited their tenants to intrude on their property when they let them become tenants. Yeah, that invitation and resulting intrusion was conditioned on the tenant paying each month a specific amount of rent and the ordinance effectively rewrote that agreement, but the plaintiff raised only a facial categorical takings claim (and thus the question of whether the city-mandated lower rent prohibited a fair return to the owner was an issue that the owners could challenge in as as-applied claim (employing a Lucas or more likely, a Penn Central theory)). And Yee was limited to a government-mandated reduction in rent, and the Court recognized that an owner could still recover possession if the tenant didn't pay at all).

We were never that down with the Court's rationale, because allowing someone to intrude conditioned on their payment of a certain amount of rent each month does become an infringement on the owner's right to exclude if the city prohibits them from doing so after the city uses the law to alter the agreed-upon conditions for the tenant remaining on the property. But hey, that's just us. 

But beyond that criticism, we have another that has little to do with the Supreme Court's rationale. Yee has always struck as as being leveraged to do a whole lot more than what the actual ruling in the case said.

The latest example of that is the Court of Appeals of Washington's opinion in Gonzales v. Inslee, No. 55915-3-II (Feb. 23, 2022), where the court affirmed summary judgment in favor of the State, rejecting several property owners' constitutional challenges to the State's residential eviction moratorium, including a takings challenge.

After Co-19 bore down, the governor declared an emergency (dig into those more here) and imposed a seemingly-endless continuation of a moratorium on property owners from evicting, and "prohibited landlords from treating unpaid rent resulting from COVID-19 as an enforceable debt, unless the landlord offered and the tenant refused a reasonable repayment plan." Slip op. at 4. Lawsuit ensued, including the above-mentioned takings claim.

Trial court: summary judgment. Court of appeals: affirmed.

You can read the stuff about whether the appeal was moot (no), whether the governor has the authority under Washington law to do what he did (yes), whether there was a problem with separation of powers (no), or a denial of the right to court access (no) on your own. Naturally, we skipped ahead to the takings part (starting on page 20 of the slip opinion).

The plaintiffs alleged a physical invasion taking. The State interfered with their right to exclude their nonpaying tenants. And there, on page 23, the inevitable reliance on Yee.

As in Yee, the eviction moratorium did not require the appellants to submit to the physical occupation of their property. Instead, the appellants were the ones who invited their tenants to occupy their rental property. And unlike in Cedar Point Nursery, the moratorium did not require that the appellants allow third parties to enter and take access to their property. The proclamations merely operated to “regulate [appellants’] use of their land by regulating the relationship between landlord and tenant.” Yee, 503 U.S. at 528. Therefore, we conclude that the eviction moratorium did not constitute a physical per se taking.

Slip op. at 23. No interference with the right to exclude, so no taking.

In other words, if you let someone on your property subject to agreed-upon conditions (I'll let you stay as long as you pay rent), the government may fundamentally rewrite those conditions (you can stay even if you are not paying rent) and it has not, according to this court and others, interfered with your right to exclude them. That not only seems wrong, but not something that even the actual rationale of Yee would support. 

Let's see where this goes.

Gonzales v. Inslee, No. 55915-3-II (Wash. App. Feb. 23, 2022)

Illinois Governor Did Not "Take" Property Within Meaning Of Emergency Act By Co-19 Business Shut-Down Orders

A fitting way to bid adieu to 2021: Ruble v. Tate-Nadeau, No. 4-20-0641 (Dec. 28, 2021), in which the Illinois Appellate Court held that the governor's tavern and dine-in restaurant Covid-19 shut-down orders were not takings of personal property under section 7(4) of the Illinois Emergency Management Act.

This was not a claim for a constitutional taking, but only under the Act, which obligates "the State to pay just compensation" if it "take[s] possession" of personal or real property. The plaintiffs alleged that the governor had taken possession of their properties by forbidding use of their businesses. The trial court dismissed the petition for failing to state a claim.

Because the plaintiffs' claims were "solely and exclusively" under the Act, the appeals' court's analysis was limited to statutory construction of the term "take possession of" personal or real property. The court concluded that "[t]his language contemplates the physical acquisition of property by the Governor for use in ameliorating a statewide disaster." Slip op. at 9. Ordering businesses to shut down isn't "taking possession" -

Here, plaintiffs do not allege that the Governor took physical possession of, acquired title to, or even used their personal property. Instead, plaintiffs merely allege that he forbade them from using their personal property. Although they allege that he acquired a “specified interest” in their property by forbidding its use, they do not state what that interest was. Nor can they, because forbidding others’ use of their personal property is not the same as acquiring it for one’s own use. Instead, forbidding the use of personal property is regulating others’ use of property, which is governed by other provisions of section 7.

Slip op. at 9-10.

Here, the governor merely "regulated" the use of the plaintiffs' property:

For example, section 7(9) grants the Governor the power to “suspend or limit the sale, dispensing, or transportation of alcoholic beverages.” Id. § 7(9). Section 7(12) grants the Governor the power to “[c]ontrol, restrict, and regulate by rationing, freezing, use of quotas, prohibitions on shipments, price fixing, allocation or other means, the use, sale or distribution of food *** and other commodities, materials, goods or services[.]” (Emphases added.) Id. § 7(12). These sections, which appear to pertain directly to the actions the Governor took regulating plaintiffs’ operation of their restaurant and tavern businesses, do not require the payment of “just compensation.” Section 7(4) is the only emergency power that contains such a requirement.

Slip op. at 10. "The existence of specific statutory provisions governing the suspension, limitation, restriction, or rationing of food and alcohol in sections 7(9) and 7(12) supports our conclusion that section 7(4) applies to the physical taking or acquisition of property, and not to the regulation of use of personal property, such as occurred here. Slip op. at 10-11.

That rationale (regulation isn't an acquisition) doesn't quite hold water as a logical matter. It shouldn't be hard to see how a  permanent and total ban on these businesses, for example, would be a de facto deprivation. That's the rationale for the "too far" vibe in constitutional takings where the government may be obligated to provide compensation even if it exercises police power and has no acquisitory intent. But this is not a constitutional takings case, but only a question of the statutory language and the legislature's intent.

Accordingly, we agree with defendants that the plain language section 7 of the Act “makes a clear distinction between the State’s actual possession and use of personal property” and “the State’s regulation of others’ use of private property.” Plaintiffs may be entitled to just compensation under section 7(4) only when a physical taking of property has occurred. Because plaintiffs failed to allege in their petition that the Governor took physical possession of or acquired title to (or some lesser interest in), their personal or real property, they did not establish that they are entitled to just compensation or an order commanding the Director to seek the payment of just compensation. And because plaintiffs failed to establish a right to mandamus relief under section 7 of the Act, the trial court correctly dismissed the petition pursuant to section 2-615 for failure to state a claim upon which relief could be granted.

Slip op. at 11-12.

The court was "sympathetic to the difficulties plaintiffs have suffered as a result of COVID-19. However, defendants correctly point out that plaintiffs have limited their argument to the Governor's authorized actions under the Act. They have not argued that he exceeded his authority or violated any other statute or state or federal constitutional provision." Slip op. at 12. 

The court summed up: "Accordingly, we need not and do not consider defendants’ alternative argument that plaintiffs failed to allege a regulatory taking, which would require compensation under the federal and state constitutions." Id.

More here: "IL appeals panel: State doesn't need to pay business owners for shutdowns forced by Pritzker's COVID orders."

For more on commandeerings and Co-19 takings (of the constitutional sort), check our our piece, "Evaluating Emergency Takings: Flattening the Economic Curve," 29 Wm. & Mary Bill of Rights J. 1145 (2021). For more on emergency management acts generally, see "Hoist the Yellow Flag and Spam® Up: The Separation of Powers Limitation on Hawaii's Emergency Authority," 43 U. Haw. L. Rev. 71 (2020) .

See you in 2022!

Ruble v. Tate-Nadeau, No. 4-20-0641 (Ill. Ct. App. Dec. 28, 2021)

CA2: NYC's Eviction Moratorium May Have A Contracts Clause Problem

There's not a lot of direct takings love in the U.S. Court of Appeals for the Second Circuit's opinion in Melendez v. City of New York, No. 20-4238 (Oct. 28, 2021), but there's enough there that you might want to read it anyway.

Because the opinion resurrected the plaintiffs' Contracts Clause claim. You heard that right, their Contracts Clause claim. The plaintiffs asserted that New York City's ordinance that prohibiting "threatening" a tenant due to their Co-19 status violated free speech and due process rights, and the city's ordinance voiding personal guarantees for commercial leases impaired their lease contracts. The district court dismissed the case for failure to state a claim, concluding that the guaranty ordinance served a legitimate public purpose and did not favor any class.

The Second Circuit affirmed dismissal of the free speech and due process claims, but also concluded that the complaint alleged a plausible Contracts Clause claim because an ordinance that renders unenforceable personal guaranties for rent obligations could result in a "substantial" impairment of that contract. The opinion is long on this (and other) points -- it is a whopping 109 pages, with 83 (83!) footnotes, with a 37-page dissent -- but we recommend you try and slog through it. Any time a court even hints that a Contracts Clause claim could be successful, we pay attention.

And what of the takings crumbs? They are there, but you have to hunt. The most interesting is footnote 81 on page 106. In noting that Contracts Clause analysis turns in part on compensation (but does not require it), the court contrasted takings analysis which naturally requires compensation if there's been a taking:

Compensation is a factor in Contracts Clause analysis; it is a requirement under the Takings Clause. See generally Apartment Ass’n of L.A. Cnty. v. City of Los Angeles, 10 F.4th at 915 (acknowledging that reasonable rent has been a “relevant consideration” in Contracts Clause challenges to eviction moratoria, but not a “constitutional floor”). While plaintiffs have not here pleaded a Takings Clause claim, nothing in this opinion is intended to preclude the parties or the district court from considering how these two constitutional protections might overlap in the circumstances of this case.

Slip op. at 106 n.81.

Has the Second Circuit picked up the Supreme Court's big hint in the recent CDC moratorium case about takings? Enquiring minds want to know!

Melendez v. City of New York, No. 20-4238 (2d Cir. Oct. 28, 2021)

Join Us (For Free!): Lawprof Ilya Somin On "Cedar Point Nursery v. Hassid and the Future of the Takings Clause: Physical Occupation, Eviction Moratoria, and More" (Tues. Sep. 28, 2021, 12:50pm ET)

Next Tuesday, September 28, starting at 12:50pm ET, we'll be moderating a talk sponsored by the William and Mary Law School chapter of the Federalist Society.

Professor Ilya Somin, a nationally-recognized expert in eminent domain, takings, and related topics, is zooming in to speak about "Cedar Point Nursery v. Hassid and the Future of the Takings Clause: Physical Occupation, Eviction Moratoria, and More."

And guess what? You can Zoom in too. It's open to the public, and it's free.

So mark your calendars and join us for Prof Somin's thoughts on the cutting-edge issues in property rights. Here's the Zoom link: https://us02web.zoom.us/j/89365248145. See you on Tuesday!

Registration Open Now: ALI-CLE Eminent Domain & Land Valuation Litigation Conference, Jan 26-29, 2022, Scottsdale

All the topics you want to know about, presented by top-notch faculty from across the nation. Sessions include:

• Keynote: Do Animals Have Property Rights?
• Did the Supreme Court Signal a New Direction in Property Rights in Cedar Point Nursery?
• Maximizing Relocation Benefits: Understanding the Law and Regulations to Ensure Fairness
• Challenging Public Use: Lessons From a 67-Day Trial
• COVID Takings
• Property Rights as Civil Rights
• Eminent Domain National Update
• Federal Court and the Daubert Challenge: How to Prepare
• How to Position Your Client for the Fallout When Projects Don't Get Built
• Rural Broadband and the Emerging Constitutional Challenges
• Are Precondemnation Entry Statutes Still Valid After Cedar Point Nursery?
• How Condemnor and Property Owners' Counsel Prepare the Battlefield
• How Will the Trillion Dollar Infrastructure Bill Impact Your Practice?
• Ethics
• ...and more, including a full slate of networking and social events!

We've sold out the last few years, so don't miss out. Room block now taking reservations. Registration and agenda information here.

Join us in Scottsdale in January!

Three Justices: After An Eviction Moratorium Expires, "eviction proceedings will be conducted exactly as they were before"

There's not a whole lot in the U.S. Supreme Court's order granting an injunction on appeal that suspends application of a part of New York State's eviction moratorium until such time as a cert petition is filed. The claims in that case are due process claims regarding the deprivation of a hearing, not takings. 

But check out the three-Justice dissent, authored by Justice Breyer (joined by Justices Sotomayor and Kagan).

Why? Because it may give some clues how they see the various federal, state, and local moratoria operating, and in doing so may have given us clues about how they might treat a takings challenge. As you know, several takings challenges are in the pipeline, including cases against the CDC moratorium, California's, and the City of Los Angeles's.

Check out page 3 of the dissent:

First, the legal rights at issue in this case are not “indisputably clear.” Applicants argue that CEEFPA denies landlords due process of law because once a tenant submits an attestation of financial hardship, evictions cannot proceed and the landlord cannot challenge the tenant’s claim of hardship, for example, in court. Respondent argues, however, that the law is best viewed not as a deprivation of the right to challenge a tenant’s hardship claim but as simply delaying the exercise of that right—as of now for less than three weeks until the law expires. After August 31, New York’s eviction proceedings will be conducted exactly as they were before CEEFPA’s enactment. Our precedents do not make it “indisputably clear” that this delay violates the Constitution. See Sosna v. Iowa, 419 U. S. 393, 410 (1975) (due process is not offended when “the gravamen of [the] claim is not total deprivation . . . but only delay”).

Order at 3 (Breyer, J., dissenting).

This should ring your Tahoe-Sierra "mere delay" bell,  friends, especially that bit about "eviction proceedings will be conducted exactly as they were before[.]" Same as it ever was. That may be correct in the narrow sense ("exactly" ... really?) that owners will not be prohibited from resorting to the eviction process to recover possession, but critically, it overlooks that it is very, very (very!) unlikely that much of the owed rent that has accumulated all these months is ever going to be collected or otherwise recovered. These moratoria all seem to rest on a divorced-from-reality assumption, which is, in our view, a very shaky foundation. 

The dissenters continued on the next page:

Second, applicants have not shown that critical or exigent circumstances justify our intervention. As I have said, CEEFPA’s pause on eviction proceedings will expire in less than three weeks, alleviating the hardship to New York landlords. Any hardship is further alleviated by pro-visions of CEEFPA that provide relief from foreclosure for property owners who own 10 or fewer dwelling units. See 2020 N. Y. Laws ch. 381, pt. B, subpts. A–B. Further, landlords’ hardship is alleviated because CEEFPA does not preclude them from seeking unpaid rent and other damages in a common-law action. Finally, respondent states that New York is currently distributing more than $2 billion in aid that can be used in part to pay back rent, thereby helping to alleviate the need for evictions. See 2021 N. Y. Laws ch. 53, p. 635.

While applicants correctly point out that there are landlords who suffer hardship, we must balance against the landlords’ hardship the hardship to New York tenants who have relied on CEEFPA’s protections and will now be forced to face eviction proceedings earlier than expected. This is troubling because, as noted, New York is in the process of distributing over $2 billion in federal assistance that will help tenants affected by the pandemic avoid eviction.

Order at 4 (Breyer, J., dissenting).

This should also give a clue how the Three Dissenters might treat a takings claim. With funds theoretically available to offset some of the back rent owed (if a property owner qualifies, if a ghosted former tenant cooperates, etc.) is that some kind of pressure valve for takings liability? 

Maybe we're just desperately looking for clues where none may exist. But the fact that this one broke along the same 6-3 lines as Cedar Point suggests to us that at least we might be getting a bit warm.

Order, Chrysafis v. Marks, No. 21A-8 (U.S. Aug. 12, 2021)

New Complaint: LA's Eviction Moratorium Is A Taking

The hits keep coming. There have already been complaints alleging takings against the feds for the CDC eviction moratorium, and against the State of California for its moratorium. 

Now this, a complaint against the City of Angels alleging that its version of the moratorium works a taking, either a per se physical invasion taking, a regulatory taking, and a taking under California law.  

Not much more to say about it, unless you want to check out the LA Times' report on the filing, "Landlord sues L.A. for $100 million, saying anti-eviction law caused ‘astronomical’ losses."

Barista's note: sorry about the potty-mouth movie clip at the top, but we've always thought this character's sardonic comment about an ongoing situation (the 1968 Tet Offensive) really encapsulated the burden-spreading vibe of Armstrong v. United States, 364 U.S. 40, 49 (1960) ("The purpose of the Takings Clause is to "bar [] Government from forcing some people alone to bear the public burdens which, in all fairness and justice, should be borne by the public as a whole.").

Stay tuned.

Complaint, GHP Management Corp. v. City of Los Angeles, No. 2:21-cv-06311 (C.D. Cal. Aug. 4, 2021)

What The Deus Ex Machina? - Federal Court Complaint: California's Eviction Moratorium Is A Taking

According to that trustworthy source Wikipedia, in drama, the term deus ex machina ("God from the machine") "is a plot device whereby a seemingly unsolvable problem in a story is suddenly and abruptly resolved by an unexpected and unlikely occurrence. Its function is generally to resolve an otherwise irresolvable plot situation, to surprise the audience, to bring the tale to a happy ending, or act as a comedic device." It is mostly considered a "lazy or cheap" trope.

And that takes us to the various federal, state, and local eviction moratoria that are (or were) in effect at various points in the covid epidemic. To us, those have mostly seemed like cases of kicking the can down the road (to use another overworn trope) because although couched as merely temporary withholding of the usual eviction remedy for nonpayment of rent, in a great number of cases the practical effect of these things is to force property owners to house third parties for free, because -- come on, who's kidding who now -- we all know that most of the back rent piling up never realistically going to get collected. In our view that turns what is sold as a mere delay in collection, into a process by which private property has been knowingly commandeered to house people during a public health calamity.

That's where the deus ex machina concept comes in. To us, it has seemed that the propounders of these things have not really thought out (in good faith, at least) where this all ends, and instead hoped for some kind of miracle plot device to swoop in and save the day once the music stops and the can-kicking can no longer continue. After all, at some point, everyone must realize that someone's got to eat the sandwich.

So maybe the deus is hoping against hope that tenants are going to make good on their merely delayed rent obligations. Or maybe it is making a pile of money available that property owners might access to offset the lost rent (but let's make the tenant's cooperation an essential element of the process to request it). Or maybe its what some have alleged: that these things are just a naked use of government power to transfer owners' property to tenants on for the public good.

And that, in turn, takes us to takings (we always get to takings, don't we?). Maybe -- just maybe -- the true deus ex machina are these takings claims we're now starting to see. (For the recent big federal takings challenge to the CDC moratorium, see here.)

With that, here's the complaint filed late last week in federal court, the latest takings challenge to an eviction moratorium.

This time, it's California's which, in August 2020, adopted AB 3088. That statute allows a tenant who claims decreased income or increased expenses due to the pandemic is automatically protected against eviction for rent due between March and August 2020. That window is extended to January 2021 for tenants who pay 25% of missed rent payments. Actual ability or inability to pay is irrelevant. In January 2021, California extended the moratorium to June 2021. And in June, the moratorium was extended again, to the end of September 2021.

In addition to a physical invasion takings claim, a claim that the takings are for private benefit, and an alternative Penn Central claim, the complaint asserts a Contracts Clause violation.

Relief sought: a declaration that California's moratoria are "null and void, and of no effect" (alleging that California has deprived the plaintiffs "of the rights, privileges, and immunities secured by the United States Constitution" (the right to just comp and freedom of contract), and "nominal and compensatory damages to individual Plaintiffs" for violation of their rights under section 1983.

So check it out. It isn't one of those massive, pages-long, complex-situation complaints. It won't take too much of your time.

Complaint for Declaratory and Injunctive Relief, Cal. Rental Housing Ass'n v. Newsom, No. 2:21-cv-01394-JAM...

New Takings Complaint: $26 Billion For CDC's Eviction Moratorium

Programming note: as we noted here, we've recently moved our email subscribers to a new service. If you are already subscribed to our email updates you should not need to do anything, except look for the emails coming from Feedblitz, not Feedburner. If you want to sign up for email updates anew, go here. If you experience technical issues, or receive duplicate email notifications, please let me know.

Now back to your regularly scheduled programming...

Check out this Complaint, filed last week which asks the U.S. Court of Federal Claims to award property owners an unspecified amount (noted as $26 billion in the cover sheet) in just compensation for the taking of the plaintiffs' property by the Center for Disease Control's order temporarily halting residential evictions.

The Complaint alleges a physical invasion taking because it precludes "property owners from excluding [tenants] and leasing the rental homes to rent-paying persons, even as the property owners must continue paying taxes, utility payments, employee salaries, maintenance costs, the cost of capital, and other expenses." Complaint at 10. Alternatively, the property owners allege that the CDC order is an "illegal exaction because the CDC exceeded and contravened its statutory and regulatory authority and as a direct result exacted Plaintiffs' private property and property interests[.]" Id. at 2.

The just compensation sought "includes the amount of rental income Plaintiffs would have received in the absence of the physical occupation and taking or exaction of their property ..." Id.

Stay tuned, we'll follow along as this one progresses.

Complaint, Nat'l Apt. Ass'n v. United States, No. 21-1621 (Fed. Cl. July 27, 2021)

New L. Rev. Article: "Temporary Eminent Domain"

For your Monday reading, Amnon Lehavi, Temporary Eminent Domain, 69 Buff. L. Rev. 683 (2021). From the Abstract:

Times of emergency call for drastic measures. These steps may include the physical takeover of privately-owned assets by the government for a certain period of time and for various purposes, aimed at addressing the state of emergency. When will such acts amount to a taking, and what compensation should be paid to the property owner? How do temporary physical appropriations during times of emergency diverge, if at all, from temporary takeovers in more ordinary times?

The doctrinal and theoretical analysis of potential temporary takings has been done mostly in the context of non-physical government intervention with private property, such as when a local government imposes a temporary moratorium on land development until a certain condition is met. This Article focuses, however, on less investigated scenarios of temporary physical takeovers or other forms of government invasions. It seeks to identify the differences between a temporary invasion and a permanent occupation of property considered a per se taking under the Loretto rule. In so doing, this Article argues that while the alleged distinction between prevention of public harm and promotion of public benefit often proves untenable in evaluating whether a permanent government measure constitutes a taking, it might make more sense in exploring temporary acts.

Temporary eminent domain—referring here to various types of acts amounting to time-limited physical takings, even if not initially recognized as such by the government—may diverge from permanent eminent domain in yet another key element: identifying the basis for just compensation. Under long established (although often criticized) rules, compensation for a permanent taking is based on identifying the “fair market value” of the rights taken, while ignoring the effects that the public use for which the underlying asset is taken might have on the property’s long-term value.

The allegedly parallel metric used in the case of temporary takings,one of “fair rental value,” may often prove inadequate, both practically and normatively. This Article argues that because of unique aspects of temporary physical takings, legal rules on compensation should often seek to identify lost profits or actual damage. Moreover, in some cases, in which there is a direct relation between the pre-appropriation use of the asset and its post-appropriation use by the government, just compensation might also be based on a certain portion of the value of the public use. This is especially so when the time-sensitive value of the asset during such public use is particularly high. On this point, the Article offers an analogy to rules pertaining to compulsory licenses for patents.

Check it out.

CA4: No Taking When Aerial Pesticide Spray Killed Bees ... But Not Why You Think

The facts that compelled the U.S. Court of Appeal to conclude as it did in Yawn v. Dorchester County, No. 20-1584 (June 11, 2011) are pretty straightforward.

In response to a threatened public health viral crisis (no, not COVID, but Zika [remember that one?]), the county decided to spray insecticide. Some areas could not be reached by truck, so it was decided that aerial delivery was the way to go. The county put out press releases, and called local beekeepers to allow them to cover their hives (the insecticide, you see, doesn't discriminate between mosquitos and bees, and is equally fatal to the latter unless the hive is covered). The pilot even testified that he had a map of the location of beehives, and that he turned off the sprayers as he approached those areas.

But Yawn, a beekeeper, did not get the warnings. The result: lots of dead bees. Slip op. at 5 ("the morning after the aerial spray, Appellants discovered mounds of dead bees surrounding their hives"). There's no direct evidence that the pesticide killed the bees, but an investigation concluded that the the dead bees were "consistent with pesticide exposure." Id.  

A federal lawsuit, including both a takings claim as well as a claim under South Carolina tort law, followed.

The district court entered summary judgment in favor of the county, concluding that the pesticide spraying was "squarely within the police power" and that the injury to Yawn's bees was only incidental, and therefore no taking: "[b]ecause [the County] was exercising its police power, and not its power of eminent domain, the Takings Clause is not implicated." On to the Fourth Circuit.

Barista's note: before we go further, disclosures. The property owners are represented by my law firm (Pacific Legal Foundation) and as co-counsel with my friend and colleague W. Andrew Gowder.

First, the good news. The appeals court rejected the district court's conclusion that the mere fact that the court was (validly) exercising its police power in the furtherance of the public health was not blanket immunity from takings liability. As the court put it, "[t]hat Government actions taken pursuant to the police power are not per se exempt from the Takings Clause is axiomatic in the Supreme Court’s jurisprudence." Slip op. at 8.

That's a point we've often made, most recently in the context of COVID restrictions, and in this amicus brief in the "SWAT takings" case. The entire regulatory takings doctrine would make no sense if all the government need do to avoid liability is show that the regulations claimed to effect a taking are valid exercises of the police power. Indeed, the takings doctrine pretty much presumes that the taking is the consequence of an otherwise valid exercise of power. To conclude, as the district court did, that the regulation can't be a taking because it isn't an exercise of eminent domain power simply gets you into a self-proving rule. And of course regulatory takings claims are not based on the government's exercise of eminent domain power. In those instances, the government acknowledges it is taking property and has an obligation to provide compensation. Not so in regulatory takings. 

The Fourth Circuit didn't exactly say it that way (instead, the opinion puts it in terms of takings remedies not putting direct limits on government's ability to act for the public good), but who's complaining? That's the good.

Now the not-so-good. The court nonetheless affirmed the district court's conclusion that the bee apocalypse was not a taking. Why? Because "the death of Appellants' bees was neither intentional nor foreseeable." Slip op. at 9. Concluding that bee death was merely a consequential damage resulting from a valid exercise of the county's police power, the court held that "[i]f the invasion is not intended or foreseeable, then it does not constitute a taking." Slip op. at 9.

Relying on dicta in Chicago, B. & Q. Railroad and Arkansas Game and Fish cases, (and otherwise notable for the lack of on-point Supreme Court authority, presumably because there isn't any), and adopting the Federal Circuit's tort/takings distinction, the court held that because the invasion here was unintentional, there could be no takings liability. Slip op. at 9 ("Here, the death of Appellants' bees was plainly unintentional."). The court rejected the owners' argument that the bee deaths were foreseeable because the insecticide is highly toxic to all insects, including bees:

Appellants argue that the death of the bees was nonetheless foreseeable because of an “explicit warning in the pesticide use instructions stating that dispersal of the substance is ‘highly toxic’ to bees.” Appellants’ Reply Br. 10 (citing J.A. 157). But this frames the foreseeability analysis too narrowly. The question is not simply whether applying the pesticide to bees would foreseeably result in their death, but rather, whether the bees would die despite the County’s specific efforts to avoid exposing the bees to the pesticide. We conclude that it was not foreseeable that the press release would fail to reach Appellants, leaving Appellants and their bees unprepared for the spray. Appellants testified that they had previously successfully taken protective measures prior to sprays of which they were aware, such as closing the hive entrances and laying a damp bed sheets across the hives. Thus, previous sprays did not result in the death of Appellants’ bees. And the fact that the spray in question was conducted aerially while previous sprays were conducted via truck is likewise not enough to conclude that the bees’ death was foreseeable. This is because there is no evidence that Appellants’ protective measures would have been ineffective in this instance had they known about the spray, especially given the pilot’s effort to avoid direct exposure by turning off the sprayer. Indeed, this spray did not kill other local beekeepers’ bees.

The death of Appellants' bees is undoubtedly a tragedy, but we cannot conclude that it was the foreseeable or probable result of the County’s action when it is a clear outlier in terms of collateral damage arising out of the County’s mosquito abatement effort.

Slip op. at 10. 

To us, this approach presents two potential problems.

First, identifying the property alleged to have been taken. If it was the invasion of the owner's airspace that resulted in injury to his other property, as in United States v. Causby, 328 U.S. 256 (1946), then foreseeability does not seem to count for all that much, as long as the invasion was "substantial" and "direct." See id. at 265-266 ("In this case as in Portsmouth Co. v. United States supra, the damages were not merely consequential. They were the produce of a direct invasion of respondents' domain."). Maybe the single incursion here, not being the "regular" flights in Causby that resulted in takings liability when those incursions resulted in dead chickens instead of dead bees, was not considered substantial. But since a single invasion is, according to Arkansas Game, not an automatic exemption, you might think the Fourth Circuit would at least walk through the factors which the Arkansas Game opinion laid out, instead of Penn Centralizing the foreseeability factor alone. In Arkansas Game, for example, the Court told us to look at the length of the invasion, the foreseeabilty of the consequences, the character of the property, the owner's investment-backed expectations regarding use of the property, and the severity of the interference. Arkansas Game, 568 U.S. at 38-39. Or was the property alleged to have been taken limited to the bees themselves?

Second, as noted above, the Fourth Circuit adopted the Federal Circuit's very torty approach, which looks at whether the alleged condemnor predicted the consequences of its actions. In these cases, the court looks at the "direct, natural, or probable" result of the government action, which sounds to us an awful lot like a tort analysis despite the Federal Circuit's disclaimer in Moden v. United States, 404 F.3d 1335, 1345 (Fed. Cir. 2005) (the sole case on which the Fourth Circuit cited in its opinion) that "the government's liability for a taking does not turn, as it would in tort, on its level of care." Id. Sure does to us, sorry.

But this is not the only approach that courts have taken. In California and a few other states, for example, inverse condemnation liability does not look at predictability or foreseeability, but on causal connection.

Public entities are not strictly or otherwise automatically liable for any conceivable damage bearing some kind of connection, however remote, to a public improvement. To succeed on an inverse condemnation action, a plaintiff must ordinarily show — assuming the public entity made reasonable assumptions about the public improvement in question –– that the damage to private property was substantially caused by inherent risks associated with the design, construction, or maintenance of the public improvement.

City of Oroville v. Superior Court, 446 P.3d 304, 307 (Cal. 2019).

The most notable example is in wildfire cases, but the California courts also apply this analysis in physical flood cases as well. If that analysis were applicable, it would not venture (unnecessarily, in our view) into the tort sphere, and would not make takings liability turn on the implied reasonableless of the government's beliefs about what might happen. Instead, takings would turn on a factual question about whether the damage was substantially caused by the government's action.

Yawn v. Dorchester County, No. 20-1584 (4th Cir. June 11, 2011)

NM Supreme Court's Advisory Opinion: COVID Orders "cannot support a claim for a regulatory taking" - Health Measures Are "Background Principles"

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?

New Mexico v. Wilson, No. S-1-SC-38510 (N.M. June 7, 2021)

New Law Review Article (Ours) - "Evaluating Emergency Takings: Flattening the Economic Curve," 29 Wm. & Mary Bill of Rights J. 1145 (2021)

Wondering about so-called "covid takings" such as business lockdowns, seizures, commandeerings, eviction moratoria, and whether these might be takings?

If so, check out our latest article, Evaluating Emergency Takings: Flattening the Economic Curve, just published in the latest issue of the William and Mary Bill of Rights Journal.

Here's the Intro to the article:

Desperate times may breed desperate measures, but when do desperate measures undertaken as a response to an emergency trigger the Fifth Amendment’s requirement that the government provide just compensation when it takes private property for public use? The answer to that question has commonly been posed as a choice between the “police power”—a sovereign government’s power to regulate property’s use in order to further the public health, safety, and welfare —and the eminent domain power, the authority to seize private property for public use with the corresponding requirement to pay compensation. But that should not be the question. After all, emergencies do not increase government power, nor do they necessarily alter constitutional rights, and an invocation of police power by itself does not solve the compensation question, but is merely the predicate issue: all government actions must be for the public health, safety, or welfare, in the same way that an exercise of eminent domain power must be for a public use.

This Article provides a roadmap for analyzing these questions, hoping that it will result in a more consistent approach for resolving claims for compensation that arise out of claims of emergencies. This Article analyzes the potential takings claims stemming from emergency measures, mostly under current takings doctrine. Which types of claims are likely to succeed or fail? In “normal” times, it is very difficult to win a regulatory takings claim for compensation. In the midst of emergencies—real or perceived—the courts are even more reluctant to provide a remedy, even when they should, and emergencies are a good time to make bad law, especially in takings law. Can a better case be made analytically for compensation?

Part I summarizes the economic “flattening the curve” principle that motivates takings claims for compensation. Part II sets out the prevailing three-factor Penn Central standard for how courts evaluate claims that a health, safety, or welfare measure “goes too far” and requires compensation as a taking, examining the character of the government action, the impact of the action on the owner, and the extent of the owner’s property rights. Deep criticism of the Penn Central standard is beyond the scope of this Article, and here, I accept it as the default takings test. But I argue that the government’s motivation and reason for its actions—generally reviewed under the “rational basis” standard—should not be a major question in takings claims. Rather, as this Article argues in Part III, the government’s emergency justifications should be considered as part of a necessity defense, not subject to the low bar of rational basis, but a more fact and evidence driven standard of “actual necessity.” Part IV attempts to apply these standards and examines the various ways that emergency actions can take property for public use: commandeerings, occupations of property, and restrictions on use. I do not conclude that the approach will result in more (or less) successful claims for compensation, merely a more straightforward method of evaluating emergency takings claims than the current disjointed analytical methods.

In sum, this article argues there is no blanket immunity from the requirement to provide just compensation when property is taken simply because the government claims to be acting in response to an emergency, even though its actions and reasons may satisfy the rational basis test. Instead, claims that the taking is not compensable because of the exigency of an emergency should only win the day if the government successfully shows that the measure was actually needed to avoid imminent danger posed by the property owner’s use and that the restriction on use was narrowly tailored to further that end.

One final word: the editors at the Bill of Rights Journal have been fantastic to work with to get this piece publication ready. Offering helpful comments, gently suggesting that certain parts are not working (but never insisting, and giving the author a lot of discretion), and getting the citations squared away: I could not have asked for more helpful editing. Congratulations on the publication of your latest issue. 

Thomas, Evaluating Emergency Takings: Flattening the Economic Curve, 29 Wm. & Mary Bill of Rights J. 1145 (2021)

Florida Court: No Regulatory Takings Claim For Personal Property, Unless Govt Actually Seizes It

If we were to ask you for your best guess whether a state's ban of "bump-fire" stocks (a topic we've covered before) effects a regulatory taking, requiring compensation, what might you predict as the result knowing nothing else about the case?

As we noted here, it doesn't take a rocket scientist (or even a legal scholar) to figure out that a court is going to be hard-pressed to order compensation, especially where the ban isn't an outright confiscation requiring the owner to turn over the item to the government for the government's use. This is not so much a legal conclusion, but one based on the fact that few judges want to be highlighted in tomorrow's paper as having "approved" of a device that can turn a semi-auto rifle into a dreaded sturmgewehr. Especially in a state like Florida where judges are elected.

A Florida federal court has already rejected a similar challenge, and in Hunt v. Florida, No. 1D19-2143 (Jan. 28, 2021), the Florida District Court of Appeal reached the same result. There, the court concluded that bump stocks are personal property, and unless the regulation requires the owner to turn the property over to the government for the government's use, the government otherwise has a free hand to define such property as noxious, and regulate the heck out of it (to the point of uselessness). In short, the Lucas wipeout test only applies to real property.

No big surprise. After all, Mugler v. Kansas, 123 U.S. 623 (1887) still carries a lot of power, as the pandemic has taught us.

A couple of random thoughts on this case:

• Yes, the Florida regulation does not require the owner of a bump stock to actually turn it over to the government for the government's use. But what can an owner do with it? After all, the regulation prohibits an owner, upon pain of felony, from importing a stock into Florida, or transferring, distributing, selling, keeping for sale, offering for sale, possessing, or giving it to someone else. Bump stocks are pretty much radioactive now. Destroy it is about the only thing left, it seems.
  
• Is the real vs personal property a valid distinction? The concurring opinion seems to so conclude, relying on language from Lucas suggesting that real property isn't subject traditionally to the same degree of regulation as personal property. See Concurring Op. at 5 ("The highlighted passage makes evident that items of personal property may be rendered worthless by valid laws adopted pursuant to the legitimate exercise of governmental police powers, yet not amount to a compensable taking. In comparison, laws that appropriate the entire value of a parcel of real property amount to per se takings because of the historical and constitutional “culture” that protects that species of property.")

By the way, recall that a cert petition is pending, asking SCOTUS to review a similar issue, so maybe this issue isn't done yet.

Hunt v. Florida, No. 1D19-2143 (Fla. Dist. Ct. App. Jan. 28, 2021)

Still Time To Join Us: ALI-CLE Eminent Domain & Land Valuation Litigation Conference (Online!) This Thursday & Friday. Tuition Deals! #EminentDomain2021

Yes, it starts tomorrow, Thursday, January 28, 2021, but we're "remote" this year, so it is not too late to register to join us for the 38th Annual ALI-CLE Eminent Domain & Land Valuation Litigation Conference. This is the "big one" where the nation's best practitioners, scholars, jurists, and other industry professionals gather to talk shop about the subjects we know and love.

Details here (ALI-CLE's page with faculty, agenda, and times), or here (a recent episode of Clint Schumacher's Eminent Domain Podcast, where we preview the Conference). Here's your chance to be a part of what is the best conference on these topics.

We have set it up to take advantage of the remote format, and tuition has been reduced (thank you to ALI-CLE for recognizing this, and for our sponsors for being so generous). We're seeing a lot of first-time registrations, and this is a great opportunity to give us a test drive if you've always thought about attending, but never wanted to spend 4 days away from the office to do so.

A long-timer coming back? Look for the special deal which includes a discount on the 2022 conference.

We're having programs with intriguing subjects such as "Planning to Win: Practical Strategies for a Successful Inverse Condemnation Case," "How Do I Keep My Firm’s Doors Open When the Courthouse Doors Are Closed? Making Your Practice More Efficient When You Can’t Try Cases," "Where Is the Supreme Court Headed on Takings Cases? Regulatory Takings Update and Cedar Point Preview," "No Show and All Tell: Breaking News in Property Rights and Takings," "More Than the Fifth Amendment: Other Tools for Upholding Property Rights," and "Evaluating Lockdown, Moratorium, and Emergency Claims."