No, the Kelo Case Doesn't Require Takings Compensation for Businesses Closed by Coronavirus Shutdown Orders

Despite a contrary argument by Prof. Enrique Guerra-Pujol, Kelo doesn't even address the relevant issue.

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Numerous "nonessential" businesses around the country have been shuttered by state and local government "lockdown" orders in an attempt to control the spread of the coronavirus pandemic. This has inflicted huge losses on their owners and employees. Some have filed lawsuits arguing that they are entitled to compensation under the Takings Clause of the Fifth Amendment. In a March 20 post, I explained why the vast majority of such claims are highly unlikely to succeed under current Supreme Court precedent. Since then, the Pennsylvania Supreme Court has issued a decision rejecting coronavirus takings claims based on reasoning similar to that I outlined in my post. My sense is that most experts on the subject hold similar views.

But Prof. F.E. Guerra-Pujol of the University Central Florida has written an article, published by the Mercatus Center at George Mason University, which takes a contrarian position. He argues not only that businesses closed by shutdown orders are entitled to takings compensation, but that that outcome is required by an unlikely source: the Supreme Court's 2005 ruling in Kelo v. City of New London:

[T]here is a handy and well-known precedent that supports lockdown compensation under the takings clause. Consider the leading Supreme Court case on the takings clause, Kelo v. City of New London. In this 2005 ruling, the Supreme Court held that the city of New London, Connecticut, could acquire 15 residential properties without the owners' consent in order to transfer them to a private developer. However, the city had to compensate the owners for the value of the taken property.

How did the Supreme Court reach such an egregious result in that case? By taking a very broad and expansive interpretation of the "public use" requirement of the takings clause. In the Kelo Court's words, "When this Court began applying the Fifth Amendment to the States at the close of the 19th century, it embraced the broader and more natural interpretation of public use as 'public purpose.'. . . Without exception, our cases have defined that concept broadly, reflecting our longstanding policy of deference to legislative judgments in this field."

Although many conservative jurists, including [Ilya] Somin himself, have criticized this controversial Supreme Court decision for giving the government too much leeway, Kelo can be turned on its head to support the argument that the takings clause, including its requirement of just compensation, applies to coronavirus lockdowns. After all, the sole rationale of these lockdown orders is to promote public health. Accordingly, if "public use" under the takings clause means any legitimate public purpose, per Kelo, then what greater "public purpose" is there than public health?

Having written a book and numerous articles about the Kelo decision and its impact, I thought I was familiar with all of the different possible interpretations of that ruling. Still, I admit Guerra-Pujol's theory took me by surprise. It's definitely a creative and original idea. But, unfortunately, it has no basis in the Court's decision.

Kelo simply does not address the issue of what qualifies as a "taking"—the main point in contention in the shutdown cases. In Kelo, both sides agreed that the use of eminent domain to seize fifteen residential properties for "economic development" purposes was a taking requiring compensation. The point at issue whether it was for a "public use" or not. If the courts had ruled that the purpose of the taking was not a public use (which would have been the correct decision, in my view), the government would have been forbidden to take the property even if it did pay compensation. On the other hand, the absence of a public use would be irrelevant if the government action in question was not a taking in the first place.

By contrast, in the shutdown cases, the whole point at issue is whether the government has "taken" the property in question at all, as that term is understood under the Fifth Amendment. Kelo simply did not address that question. It is true, as Guerra-Pujol notes, that the Kelo majority points out that eminent domain can sometimes be used for "police power" purposes, including promoting "public health." But the Court did not overrule or limit earlier decisions holding there is no taking in many situations where the government restricts property rights for police power purposes. As I explained in my earlier post on takings and shutdowns, this is especially true in situations where the property in question—or the owner's use of it—itself poses a threat to public health, as opposed to one where the the government restricts property rights in order to combat a threat elsewhere. In the latter scenario, courts are more willing to grant takings compensation, but the coronavirus situation is an example of the former.

This distinction also undercuts Guerra-Pujol's reliance on the 2012 Arkansas Game and Fish Commission case, in which the courts ruled takings compensation was required when the federal government deliberately flooded land in order to prevent potentially more severe flooding elsewhere. In that case, the land destroyed by the federal government did not in any way itself threaten public health or safety. It was just in the wrong place at the wrong time. That isn't true of a business whose continued operation might facilitate the spread of a deadly disease.

Guerra-Pujol also argues that shutdown takings plaintiffs can prevail under the Penn Central test, which applies to takings challenges government regulations that are not automatic "per se" takings. For reasons laid out in my earlier post, I think most shutdown plaintiffs are likely to lose under that test—which, in general, tends to be applied in ways favorable to the government. Admitted, as I and other critics have long emphasized, the Penn Central is often vague and unclear. But unless the Supreme Court decides to reinterpret it in a way more favorable to property owners, it's unlikely that any but very atypical shutdown plaintiffs can prevail under it.

Even more importantly, the Penn Central test only comes into play if the plaintiffs can get around the police power issue. And that is itself highly unlikely. Guerra-Pujol speculates that "conservative" judges might be willing to reinterpret both Penn Central and the police power cases to enable the plaintiffs to prevail. But if these judges were going to greatly strengthen constitutional protection for property rights under the Takings Clause, it's highly unlikely they would use this particular set of cases to do so—a situation where the government has a much stronger than usual public health rationale for its actions, and large numbers of lives could be at stake.

As I previously noted, there might be unusual cases where shutdown plaintiffs could potentially prevail, as in situations where the public health benefits of shutting down a category of businesses might be extremely low, or situations where the shutdown has deprived plaintiffs' property of virtually all economic value. But such cases are likely to be rare.

Guerra-Pujol also errs in describing me as a  "conservative" legal scholar. I am, in fact, a libertarian—a distinction that is especially important in the Trump era, where the two differ on major issues such as immigration, trade, law enforcement abuses, and government spending; though admittedly it is the case that the two groups still largely agree on Kelo (with the notable exception of Donald Trump, who is a longtime defender of that decision).

From the outset, I have emphasized that there is a strong moral case for compensating at least some victims of shutdown orders. But the Takings Clause is unlikely to be an effective vehicle for getting it.