A Takings Clause Lawsuit Against the CDC Eviction Moratorium

Thanks to the Supreme Court's decision in the Cedar Point case, this suit has much better odds of success than previous takings challenges to eviction moratoria.

The Centers for Disease Control's enactment of a new, modified version of its eviction moratorium is not the only significant new legal development on this front. Last week, a group of plaintiffs led by the National Apartment Association (a trade association of owners and managers of rental housing) filed a takings lawsuit against the original version of the CDC moratorium. They argue that the moratorium qualifies as a taking requiring "just compensation" under the Takings Clause of the Fifth Amendment. The cover sheet indicates they are seeking an estimated $26 billion in compensation payments.

Prominent takings lawyer Robert Thomas has a helpful summary of the complaint at the Inverse Condemnation blog:

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.

Previous efforts to challenge eviction moratoria on takings grounds have had little success. But, for reasons I summarized here, that may change as a result of the Supreme Court's recent ruling in Cedar Point Nursery v. Hassid:

A key reason why such claims faced bleak prospects is that Supreme Court precedent made it very difficult for property owners to prevail in a takings case if the government imposed a merely "temporary" physical occupation of their land. It was often difficult to tell the difference between a temporary occupation and a permanent one. But the CDC had a strong argument that the eviction moratorium was temporary, because each successive extension of the order included a specific time limit, generally only a few weeks in the future.

Cedar Point changes that. Now, at least a as a general rule, "a physical appropriation is a taking whether it is permanent or temporary." This makes potential takings challenges to the CDC order much stronger. A moratorium on evictions in situations where the property owner would otherwise have a right to remove the tenant pretty clearly imposes at least a temporary physical occupation against the owner's will. And the federal government isn't paying "just compensation" to affected landlords, as the Takings Clause requires.

While this case was filed against the earlier version of the CDC moratorium, it applies just as readily to the new one. The two are very similar. And, of course, the lawsuit against the original version is still valid, given that the plaintiffs are still entitled to seek compensation for losses incurred during the period when it was in effect.

Even after Cedar Point, issue isn't a complete slam dunk. The federal government can still make various arguments to try to avoid liability, such as the claim that the moratorium falls within the "police power" exception to takings liability, due to the fact that it was enacted for the purpose of controlling the spread of disease. But I am doubtful that courts will be willing to extend the police power exception so far, and hope they will not. At the very least, the plaintiffs have a substantial likelihood of success, far greater than before Cedar Point.

Prevailing on the takings claim won't necessarily get the NAA and other plaintiffs the massive $26 billion in compensation they seek. I don't know how they calculated that figure (the complaint gives little indication of their methodology), and it could easily be way off. Compensation will have to be calculated on a case-by-case basis, and may vary widely as between different property owners. Should the courts rule that the moratorium qualifies as a taking, it might take months—or even years—of additional litigation to determine how much compensation is due.

Regardless of the amount of compensation, this may well turn out to be an important case that sets a major precedent applicable to future eviction moratoria, and perhaps other regulations, as well. Anyone interested in takings and property rights issues would be well advised to keep an eye on it.