Coronavirus

Does the Takings Clause Require Compensation for Coronavirus Shutdowns?

Under current Supreme Court precedent, the answer is almost always going to be "no." But some compensation may be morally imperative, even if not legally required.

|The Volokh Conspiracy |

State and local governments across the country are forcibly shutting down numerous businesses and other institutions in a desperate effort to limit the spread of the coronavirus. A number of people have asked me whether the Takings Clause of the Fifth Amendment requires compensation for such shutdowns. After all, the Clause mandates payment of "just compensation" any time the government takes "private property" for "public use." And a shutdown obviously imposes severe—sometimes even ruinous—limitations on the owner's use of their property.

In general, I am a big supporter of strengthening protection for private property under the Takings Clause, and have written many works arguing the case for doing so. In this situation, however, it is unlikely that the Clause mandates compensation in all but a few cases. At the very least, there is no such requirement in current Supreme Court precedent, and—on this point—that precedent is unlikely to change in the near future.

While court decisions have long recognized that the Takings Clause requires compensation in at least some situations where the government restricts property rights without actually seizing the property in question, they have also long held that many exercises of the "police power"—government's authority to protect public health and safety—do not qualify as takings. The most famous case of this type is the Supreme Court's decision in Miller v. Schoene (1928), where the Court ruled compensation is not required in a case where a state law required destruction of the owner's cedar trees in order to protect other trees in the area from the spread of a disease. Protecting large numbers of people from the spread of a disease is, of course, a much stronger police power imperative than protecting apple trees. This description is based on the conventional interpretation of Miller, which I have some reservations about. But, for present purposes, what matters is that the conventional view is the one embraced by courts.

Perhaps more relevantly, large numbers of businesses were forcibly shuttered by state and local governments during the influenza epidemic of 1918-19, the last time the US faced a public health crisis comparable in scale to this one. To my knowledge, none of them were ever held to be takings requiring compensation.

Not all exercises of the police power are exempt from the requirements of the Takings Clause. For example, a federal court recently ruled that compensation was owed in a case where the government deliberately flooded some property owners' land in order to protect others. I and a number of other commentators have been highly critical of another recent decision where an appellate court ruled that the government need not pay compensation in a case where the police virtually destroyed an innocent owner's home in order to smoke out a suspected shoplifter who had holed up inside.

But these types of cases differ from epidemic shutdowns in the important sense that they are not situations where the owner's use of the land in and of itself poses any threat to public health. Rather,  the government decides to destroy a perfectly innocent property right in order to protect the public against threats emanating from elsewhere. By contrast, the continued operation of businesses that risk spreading a deadly disease during an epidemic do indeed pose a threat. The Takings Clause generally does not provide compensation in such cases. Doing so would risk creating a serious moral hazard by incentivizing owners to engage in dangerous uses of their property in order to get paid to stop.

Some state courts have interpreted their state constitutional takings clauses as requiring compensation when a local government changes zoning rules to forbid previously lawful businesses. But I doubt that these "amortization" precedents require compensation in cases like the Covid-19 shutdowns. Among other differences, amortization cases involve permanent rather than "merely" temporary bans on the enterprises in question.

Assume, for the sake of argument, that the plaintiffs in one of these cases somehow get past the police power issue. Even then, their prospects are likely to be bleak. Current Supreme Court precedent holds that only a few types of government actions qualify as automatic "per se" takings: most notably permanent physical occupation of property and regulations that completely destroy all of the property's economic value. Most other regulations are evaluated under the three factor test laid out in the 1978 Penn Central decision, which requires courts to consider 1) the economic impact of the regulation in question, 2) whether and to what extent, the owner suffered the loss of "investment-backed expectations," and 3) the "character" of the government action (if the government physically occupied or damaged the property in question, it is more likely to be a taking).

To make a long story short, the Penn Central test is often unclear and confusing, but is usually applied in ways that tilt the outcome in favor of the government. In this case, the fact that the shutdowns are "only" temporary and that there is no physical invasion of the owners' land are likely to be sufficient to enable the state to win most cases—even if the police power issue is set aside.

There might be some unusual cases where the impact of the government's actions is so severe that it does effectively destroy the entire economic value of a given piece of land, and therefore could be a per se taking. But such cases are likely to be rare, since—again—the restrictions are temporary and the owner could—in theory—still use the property for other purposes.

I am one of many takings scholars who have argued that the Penn Central test is a mess and that it should be replaced by something clearer and more protective of property owners' rights. So far, however, we have failed to persuade a majority of Supreme Court justices to agree with us. And that is unlikely to change in the near future, except in incrementally. If the justices do overrule Penn Central or revise its rules to provide stronger protection for property owners, a Coronavirus shutdown case strikes me as a highly unlikely vehicle for such a shift.

That gets me to final reason why courts are unlikely to rule that Coronavirus shutdowns qualify as takings: no judge will want to be seen as impeding an effort to save large numbers of lives in the midst of a grave menace to public health. As a general rule, I am not a "legal realist"—a person who believes court decisions are primarily the product of judges' personal values and political commitments. But it would be naive to imagine that such commitments never play a role. And few if any judges want to be remembered for having endangered large numbers of lives. That might not matter if the legal arguments were overwhelmingly in favor of the plaintiffs. But, as we have seen, they are at best a stretch—at least under current doctrine.

To be sure, a ruling that the government must pay compensation to owners of shuttered properties would not actually prevent the shutdowns, as such. It would merely require the state to pay for the privilege. I routinely make this point when critics argue that takings liability should not be expanded in other contexts, for fear that doing so would stop supposedly valuable government actions. But, in this case, the urgency of the crisis combined with the enormous scale of the compensation that would be required make it more likely that an adverse judicial ruling really would impede the government's policy—potentially even shutting down the shutdown, so to speak.

The Takings Clause might still require compensation in situations where the government physically appropriates property in order to combat the epidemic. For example, it could  potentially seize currently empty hotels or college dormitories in order to use them as temporary hospitals to treat Covid-19 patients. In such a case, there would be an actual physical occupation of property. And the police power exception would not apply, because the mere existence of an (unoccupied) hotel or dorm does not pose any threat to public health. But such cases are likely to be rare. If the need arises, owners of such structures would probably be happy to rent them to the government for fairly modest prices, given that they are unlikely to bring in much other revenue while the pandemic continues.

It gives me no pleasure to write any of the above. In an ideal world, I think at least some shutdown burdens should be compensable under the Constitution. But the Takings Clause is unlikely to be a vehicle for such compensation in all but a few marginal cases.

That said, I do think the principle underlying the Takings Clause points the way towards a moral rationale for compensation, even if such compensation is not legally required. As the Supreme Court put it in Armstrong v. United States (1960), "[t]he 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." That is exactly what is happening in the coronavirus shutdowns: owners and employees of the shuttered enterprises are bearing a hugely disproportionate share of the burden of protecting the population as a whole against the virus.

Moreover, the people in question haven't done anything wrong. They simply own and operate businesses that—in normal times—are not only innocent but actually make important contributions to the community.

I am not sure what the best way to compensate them is. But I do think there is a strong case for providing at least some substantial relief. On that score, I agree with much of what co-blogger Keith Whittington says here. As he points out, "the government itself has ordered businesses to stop operating" and "[i]n such circumstances, the government should compensate individuals for the damage it has wrought and relieve individuals from the unforeseen burdens that they have been asked to assume."

But, if the shutdowns continue for any significant length of time, I am not optimistic that even the best designed relief program can compensate for more than a fraction of the enormous losses large numbers of people will suffer. The only truly effective relief would be to figure out a way to safely end the shutdowns as soon as possible, while moving to something like a South Korean-style regime, under which freedom of movement is restored, but the virus is kept in check by a combination of widespread testing and effective quarantines of infected individuals until the need for it is obviated by the development of a vaccine.

But I readily admit I lack the expertise needed to figure out how to achieve that goal. In this post, I have tried to achieve the much humbler task of explaining why the Takings Clause is unlikely to relieve the distress of property owners suffering enormous losses due to the coronavirus shutdowns.

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  1. I presume that you agree that if the govt orders your dress show to, say, make hospital masks and nursing/surgical gowns, you would be legally entitle to–at a bare minimum–your actual costs for making these, right? Materials, labor, workman’s comp insurance, benefits, etc.? I have to assume your answer will be: Yes.

    (If so, are you also legally entitled to the profit you would have realized if you sold these new items on the open, fair, market? “Fair” = . . . Let’s say that any price that was being charged on the open market the 3 months prior to the date the crisis started creates a presumption that your requested price will not equal price-gouging.)

    1. dress show = dress shop.
      entitle = entitled

      [sigh]

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  2. The most recent round of orders (i.e., that mortgage holders can’t collect for some time) might be interesting b/c r they don’t have a direct tie to public safety.

    I suppose the government could argue that these orders necessary/proper because they make it more likely that people will obey the main quarantine order. But injured parties could just as easily argue the motivation is primarily political.

  3. The interesting question here is that this isn’t an “either-or” but an “either/or/else” — most of these businesses have a “business continuity” policy which the insurance companies are refusing to pay because this is governmental action.

    There’s no precedent on that — back in 1919 most stores owned both their stores and the land underneath then, they didn’t have an April 1st rent payment due to a developer who himself has an April 1st mortgage payment due. Different circumstances and hence (likely) different decisions.

    And aren’t most of the SCOTUS decisions on compensation for loss of use of property fairly recent, i.e last 40 years? Well, umm, if precedent is followed, then won’t those precedents also have to be followed?

    Personally, I think there will be a deal, similar to post-9-11, where there is a waiver of the right to sue as a condition to receive a governmental handout, and that probably makes the most sense. But a century ago, “separate but equal” was still good law, and no one would argue that today….

    1. To the best of my knowledge, the Third Amendment has never been litigated — but using college dormitories to house people is exactly what the British did with the Quartering Act, which is why the Third Amendment was written.

      1. The third amendment only applies if the government is using private property to house military personnel( soldiers).

      2. There were actually some (now deprecated) provisions in the US Code that specifically allowed the President to seize/use DC area college dorms for military need, upon sufficient declaration of emergency. No idea if there’s any legislative history behind them or if they were ever tested in court.

  4. On this we agree. We have all heard of sanctuary cities and we are certainly proud of their spirit: the role of sacrificial cities is equally honorable. If we as a republic decide that we should sacrifice cities within the states of California, Washington, and New York so that the resources they now consume can be used to save lives in more favored jurisdictions, what of it? The taking of sacrificial cities is merely a taking of an order equal to the taking of resources by sanctuary cities, yet the taking of sacrificial cities has the approval of a majority of the citizens of the totality of the republic rather than the whim of those occupying a handful of its subdivisions.

    1. Nuke them???
      The heat would definitely disinfect everything… 🙂

      1. Nuke them from orbit. It’s the only way to be sure.

  5. Yeah, this is some fucked shit. I’m on track to lose at least a few grand a month from this shit… Which will hurt. I’ve never taken “government cheese” of any variety in my life, not even unemployment when I was entitled it when I was younger… But I may well take some government cash this time, because this shit WAS NOT my fault.

    I actually agree that some level of action was needed, but some areas have gone beyond what is reasonable IMO. Big stadium events, maybe bars/etc, is perhaps reasonable… But shutting down ALL businesses except select ones? Crazy. Selective shutting down is perhaps reasonable, but selective allowed open is retarded.

    1. Vek,
      Since repeating the word “shit” many many times will likely not convince anyone of your argument’s merits; can you lay out some of your own educational and professional background, which might persuade us that your opinions are correct and the opinions of highly educated and highly-trained people (who spend their entire careers studying epidemics) is incorrect?

      1. LOL I guess I did use the word shit a few times in that post!

        Seriously, a lot of the “professionals” are basically saying what I am. I’ve seen several who didn’t advocate for closing every single factory or small office in the country or whatever.

        Mass events, sure. Really crowded places like bars? Okay.

        But the fact is since we’re past containment, us keeping the # of cases at saaay half what our medical systems capacity is doesn’t really help us any. We need to avoid being outright overloaded, but killing everything to keep us WAY under capacity achieves little/nothing.

        Korea and other places that are seemingly on the upswing didn’t go that far, so I doubt we will have to either.

        Is that good enough for ya???

    2. I’ve never taken “government cheese” of any variety in my life

      Says man posting on the Internet.

      1. Ugh.

        Yeah, because the entire concept of networking never would have existed without the military! Give me a break.

        I won’t argue that the government throwing insane amounts of money at things will sometimes get things done earlier than they would have by private industry… But that’s largely just because private industry wouldn’t have seen fit to do some stuff until the technology was ready to be economically deployed… AKA they don’t waste a shit ton of money on dumb stuff that isn’t ready to exist yet, just because it theoretically COULD be done.

        If FedGov had mandated every home have a mainframe computer in it in 1975, it would have been jumping the gun, right? That’s the kind of shit the government does. But letting it take its course, and the PC revolution occurring at the speed that made market sense, was a far better alternative. Internet would have been the same.

        Without ANY government involvement, I doubt the internet would have been running 5 years behind where it ended up timeline wise. By now we’d probably be in the exact same spot, as a lot of it was limited by other related computer tech (processors etc) anyway.

        But yeah, I’ve never taken welfare money, or even “entitlements” that I’m theoretically owed.

        1. Point is, you’re enjoying government cheese right now even as your proudly decry it.

          Welcome to a proud conservative tradition.

  6. If there was any justice in the world it should all come out of the PRC’s pockets

    1. Amos….I tend to think that in the aftermath of SARS-CoV-2, the entire planet will probably reassess their relationship with China. I don’t think that reassessment will be a positive development for China. In fact, I am certain it won’t be.

      1. You also gotta wonder about the stability of the (quite corrupt) ChiCom Government and the likelyhood of another revolution in China. The corruption is so severe that it interferes with peoples’ ability to do stuff, and even before this I was wondering about a revolution. Same thing even moreso in Iran.

      2. I really do hope this makes some people realize how DUMB not domestically producing certain shit can be too.

        We’re almost guaranteed to have medication shortages for a lot of stuff soon, because the stockpiles have been getting used up this whole time due to supply chain/manufacturing issues… Because 90%+ of medicines have at least some ingredients from China.

        Purist libertarians think we shouldn’t pay ANY mind to this shit… But you have to be insane not to. It’s not that we need to make 100% of everything in the USA, but there ARE some strategic things that are not a bad idea. Society can live for quite awhile without a new pair of blue jeans if we must… But when ALL the antibiotics run out or something… Not a good place to be.

  7. I’m curious as to whether you think a ban on evictions constitutes a taking. There is a physical occupation. Or in places where evictions are not technically banned, but the courts are shut down, does the rule against self help constitute a taking when there is no non self help remedy?

  8. The real question here is the Taking Clause and Bankruptcy Court because a lot of people are going to default on April 1st.

    A lot of commercial real estate is a leveraged house of cards that is depending on rent payments to pay mortgages, and vendors depending on commercial customer’s paying 30-day bills to pay their suppliers. The closed restaurants & bars & stores aren’t going to be able to pay and it’s going to cascade.

    And it isn’t a “temporary” taking anymore once shopping malls are in Bankruptcy, or major retail firms go under.

  9. Many states, and the federal government, are already underwater. Where the discussion on the morality of heaving this onto future generations.

    If might be likened to war, which, along with infrastructure, is seen to benefit future generations, and so is ethical to borrow, but general ongoing benefit consumption by the current generation is not.

  10. Presumably, if law enforcement physically boards up an establishment, and the statute does not explicitly provide for such a penalty or remedy, the case for a taking grows much stronger.

    One of many factors that indicates that these orders and statutes should be drafted much more carefully than they are currently being drafted. If the curve is flattened and this does stretch out for a year, this legal framework won’t hold up against challenges by the percentage of the people who will be (of unavoidable necessity) hurt by it.

  11. Shouldn’t the government be required to show there were no alternatives? I think this is the most clear example of unconstitutional conduct since 9/11.

    It is not necessary to shut down the economy. Restaurants could remain open by removing half the tables, which (in most cases) would give the 6 foot distance. The workers are already under requirements for cleanliness that are effective against damn near anything not fired by a military unit. The fascists could just use the bully pulpit to persuade citizens at risk to modify their behavior. Employers could do an ‘odd/even’ workforce split to let half the staff work alternate days, or even alternate shifts, to add distance. The population will wash themselves silly if given a chance to earn the price of a bar of soap.
    Any or all of these would mitigate the economic disaster called down by the statists.

    1. I imagine stuff like this will happen shortly… We can’t stay at this level of shutdown forever. I think when we have a handle on more realistic numbers of what is going on, or we see the numbers start to decline, we will transition back into more activity like above.

      Whether or not that level would have been enough to contain the initial spread may never be known…

  12. From a moral and perhaps a legal perspective, I think the fact that the burden of dealing with COVID is shared across the entire population is quite salient. We’re not asking a small group of business owners to exclusively bear costs which should be borne by the public as a whole. Do I get financial compensation for being subjected to a shelter-in-place order? A system where we have to compensate property owners, but don’t have to compensate curtailment of non-property liberty, will incentivize policymakers to shift the burden away from restrictions on property rights onto restrictions on non-property rights. And compensating everyone’s curtailment of rights would be largely pointless because the necessary tax revenue comes from everyone.

    1. The burden isn’t being equally shared — public sector workers are still receiving their full paychecks.

      1. Your myopia is telling – All white collar workers are, regardless of sector.

  13. If the shutdown does not have an end date, is it a temporary taking?

  14. “In this case, the fact that the shutdowns are “only” temporary”

    And many of the affected businesses will not be able to financially survive a shutdown of more than a week or two. And your “temporary” shutdown will have effectively taken the entire business.

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