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

The 2-1 decision overrules a trial court decision that went the other way, and could set an important property rights precedent.

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On Wednesday, in Darby Development Co. v. United States, the US Court of Appeals for the Federal Circuit (which reviews takings claims against the federal government) ruled that a takings lawsuit against the 2020-21 federal eviction moratorium can proceed. In so doing, it overruled a trial court decision by the Court of Claims, which I criticized here. The Federal Circuit decision could well end up setting an important takings precedent.

In September 2020, during the Covid pandemic, the Trump Administration Centers for Disease Control (CDC) imposed a nationwide eviction moratorium, claiming that it would reduce the spread of the disease. The Biden Administration extended the moratorium multiple times. In August 2021, the eviction moratorium was invalidated by the Supreme Court because the CDC lacked proper statutory authority to institute it. But, in the meantime, numerous landlords suffered financial losses, because they could not evict tenants who weren't paying rent.

Some of the property owners filed a lawsuit arguing that the eviction moratorium violated the Takings Clause of the Fifth Amendment, which requires the government to pay "just compensation" whenever it takes private property. As I explained at the time, their position was backed by the Supreme Court's 2021 ruling in Cedar Point Nursery v. Hassid, which held that even temporary physical occupations of property qualify as "per se" (automatic) takings requiring compensation.

In May 2022, the US Court of Claims dismissed the takings lawsuit against the CDC moratorium on the perverse ground that there was no taking because the CDC's eviction moratorium was never properly "authorized." In other words, the government could escape takings liability because its actions were illegal! The recent Federal Circuit decision reversed that ruling.

As Judge Sharon Prost writes in her majority opinion for the court, an illegal seizure of property can nonetheless qualify as an "authorized" taking if it is "chargeable" to the government:

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.")…..

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.

The majority opinion engages in a long and detailed debate with Judge Dyk's dissent over the issue of whether the above approach is the best interpretation of relevant Supreme Court and Federal Circuit precedent. I won't try to assess that debate here.

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. As the majority explains:

Finer legal points aside, the implications of the dissent and government's position illustrate its weakness. Taken to its logical conclusion, their position is that government agents can physically occupy private property for public use, resist for months the owner's legal attempts to make them leave, and then, when finally made to leave, say they need not pay for their stay because they had no business being there in the first place. It would be one thing for this to be the result when government agents are clearly acting apart from Congress's will; in such a case, requiring just compensation would encroach too much on Congress's power of the purse…..  But there is no sound reason for such a result in a case like this, where (1) the government agent, after receiving a directive from the President, acted in good faith pursuant to a good-faith understanding of its congressionally conferred authority, (2) there was no explicit congressional prohibition foreclosing that understanding….. and (3) the government vehemently pressed that understanding in litigation so as to seriously impede the property owners' efforts to end the alleged occupation. Depriving property owners of a potential Fifth Amendment remedy in this case would deprive them of any meaningful remedy at all.

This strikes me as pretty obviously right. The CDC here was acting at the behest of two successive presidents of the United States, from different parties. And the federal government fought a months-long legal battle to prove that the policy was, in fact, properly authorized by legislation. They cannot now turn around and claim they don't owe takings compensation because they ultimately lost that fight. I expanded on this point in a bit more detail here.

Judge Dyk worries that the majority's rule would impose takings liability on the government in too many situations:

The majority's holding here would have significant consequences. 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.

I think the "specter of takings liability" is a feature, not a bug. If the government often engages in illegal seizures of property, then they should face "significant takings liability" for doing so. That might help deter such misconduct, or at least compensate victims, if it does not. If such misbehavior is relatively rare, then we need not worry about the ruling having "significant consequences." And if the program the government enacts really is "legitimate," then takings liability for "unauthorized acts" should not be a concern, because a legitimate program won't include much in the way of such unauthorized takings—if any.

The majority and dissent also dispute whether, in enacting the eviction moratorium, the CDC was acting within the scope of its "normal duties," a factor relevant to determining whether the taking was "authorized," under previous precedent. The dissent is right that the eviction moratorium was more sweeping than previous policies adopted under the statute the government claimed as authorization. But the majority has a fairly solid response:

[W]hen we say that the CDC issued the Order within the "normal scope" of its duties, we do not mean to suggest that the Order itself was normal. We readily agree it was not. But then again, neither was a burgeoning pandemic on the scale of COVID-19. The Order's abnormality flowed naturally from the abnormal circumstances the CDC was confronting—and from the CDC's reasonable (if ultimately incorrect) interpretation and application of its PHSA authority to those circumstances. In this case, simply because the Order was abnormal does not mean that the CDC—the agency charged with issuing regulations "as in [its] judgment" are necessary to prevent the interstate spread of communicable diseases, 42 U.S.C. § 264(a)—was acting outside the "normal scope" of its duties for takings-claim purposes when issuing it.

There is a complication here in so far as evidence indicates the Trump and Biden administrations enacted and extended the moratorium  in large part for political reasons, rather than because they were truly convinced it would curb the spread of disease. Still, the fact that the measure had a plausible public health rationale (public health is the CDC's main area of responsibility) still made it "normal" enough to qualify as authorized but unlawful. Broad measures—including many with dubious legal rationales— were common during the Covid pandemic.

Finally, the majority also concludes—correctly, in my view—that an eviction moratorium qualifies as a "physical taking" under Cedar Point. They rightly reject the argument that moratoria are merely regulations of the landlord-tenant relationship that should not be considered takings under current Supreme Court precedent. Rent control, ruled not a taking in Yee v. Escondido (1992), is distinguishable from a situation where the government forces a property owner to accept occupation of her land by a tenant that she would otherwise have the right to remove:

[T]he government argues that here, like Yee…, Appellants' tenants had been voluntarily "invited" onto Appellants' property—which, according to the government, means that there was no physical taking… See… Yee, 503 U.S. at 528 (observing that the park owners' "tenants were invited by [them], not forced upon them by the government"). While we agree that this point distinguishes this case from Cedar Point, we are not persuaded that it compels a different result. 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,… 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…

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.

This case could end up being reviewed by the en banc Federal Circuit or even the by the Supreme Court. But if not (or if the en banc court or the Supreme Court uphold this ruling), it will set an important precedent on both the nature of "authorization" for takings, and eviction moratoria.

The issue of whether eviction moratoria qualify as takings has also been litigated in state courts, which have mostly ruled they do not. I criticized one such decision here.

Robert Thomas of the Pacific Legal Foundation has additional insights on the Federal Circuit decision here.