Wednesday, Derby Development Company v. United StatesThe U.S. Court of Appeals for the Federal Circuit, which reviews eminent domain claims against the federal government, has ruled that an eminent domain lawsuit challenging the 2020-21 federal eviction moratorium can proceed. The decision overturns a trial court ruling from the Court of Claims that I criticized here. The decision could set important eminent domain precedent.
In September 2020, in the midst of the COVID-19 pandemic, the Centers for Disease Control and Prevention (CDC) of the Trump administration issued a nationwide eviction ban to curb the spread of the virus. The Biden administration extended the ban multiple times. In August 2021, the eviction ban was invalidated by the Supreme Court because the CDC did not have the proper legal authority to issue it. However, during that time, many landlords suffered financial losses as they were unable to evict tenants who did not pay rent.
Some property owners sued, arguing that the eviction ban violated the Fifth Amendment’s Takings Clause, which requires the government to pay “just compensation” whenever it expropriates private property. As I explained at the time, their position was bolstered by a 2021 Supreme Court decision. Cedar Point Nursery v. HasidThe judgment held that even temporary physical possession of property constitutes an expropriation “per se” (automatic) requiring compensation.
In May 2022, the U.S. Court of Claims dismissed an eviction lawsuit challenging the CDC eviction ban on the wrong grounds that there were no evictions because the CDC eviction ban was never properly “approved.” In other words, the government was able to avoid eviction liability because its actions were unlawful! A recent Federal Circuit decision overturned that ruling.
As Justice Sharon Prost wrote in the court’s majority opinion, an unlawful seizure of property can be considered an “authorized” seizure if it “imposes a burden” on the government.
Generally, an action is considered authorized if it is taken by a government agency “within the general scope of its functions,” meaning that it is “a natural consequence of measures authorized by Congress” or “pursuant to the good faith execution of an act of Congress.” Del Rio146 F.3d 1362 (cleared). See also Ramirez724 F.2d at 152 (“[O]There have been numerous cases in which the Tucker Act remedies have been held invalid when government agents acted within the scope of their ordinary responsibilities conferred upon them by Congress and took private property without express statutory authority or prohibition.”…..
In summary, even if an agency’s actions are illegal, if they are carried out within the scope of the agency’s normal duties – for example, “in good faith execution of an act of Congress” – they will likely be considered permissible for purposes of an expropriation claim. Del Rio146 F.3d at p. 1362 (cleaned up). Conduct is likely to be found unauthorized if it was outside the agency’s normal scope or, even if within its scope, violated an express prohibition or other affirmatively expressed intent of Congress. See ID1363; Ramirez, 724 F.2d at 151. The ultimate inquiry is whether the actions of a government agent “should be costly to the government.” Delurio, 146 F.3d at 1362.
The majority opinion engages in a lengthy and detailed discussion, with Judge Dyke dissenting, of the question of whether the above approach is the best interpretation of relevant Supreme Court and Federal Circuit case law, and we will not attempt to evaluate that discussion here.
The clincher for me is that nowhere in the Takings Clause does it say that compensation is required only for legitimate government actions or actions specifically authorized by law. Rather, the clause imposes a general rule that compensation must be paid whenever the government expropriates private property for a “public use.” Of course, that can happen even without proper legislative authorization. I can understand expropriation liability being denied when unscrupulous subordinate officials seize property without any plausible justification. But that is not what happened here. As the majority explains:
Setting aside the legal fine print, the dissent and the implications of the government’s position highlight its weakness. Taken to its logical conclusion, their position is that government officials can physically occupy private property for public use and block the owner’s legal action for months.
It is another matter to reach this result when it is clear that government officials are acting contrary to Congress’ will; in such cases, requiring just compensation would unduly infringe on Congress’ fiscal power…. But there is no justification for this result in cases such as this one, where (1) government officials acted with a good-faith understanding of the authority conferred on them by Congress after receiving instructions from the President, (2) there is no express congressional prohibition against denying that understanding, and (3) the government has strongly asserted that understanding in its litigation, seriously impeding the landowners’ efforts to end the occupation as alleged. To deprive the landowners of a potential Fifth Amendment remedy in this case would be to deprive them of any meaningful remedy at all.
I think this is clearly true. The CDC was acting at the behest of two US Presidents from different political parties. The federal government fought a months-long legal battle to prove that this policy was in fact properly authorized by law. The federal government ultimately lost that battle, so it cannot now turn around and claim that it doesn’t have to pay expropriation compensation. I’ve explained this in a bit more detail here.
Justice Dyck worries that the majority’s rule would subject the government to expropriation liability in too many circumstances.
The majority’s decision here will have important consequences: it will mean that clearly unauthorized agency actions will be authorized for purposes of expropriation liability unless the actions violate specific prohibitions in the enabling statute or are conducted in bad faith.
That is not true. The majority’s decision marks a major shift in our eminent domain, imposing significant eminent domain liability on government agencies for unauthorized conduct and directly inhibiting the adoption of legitimate government programs because the risk of eminent domain liability is in addition to injunctive and declaratory relief. Historically, unauthorized programs have been enjoined; now the spectre of eminent domain liability has been added.
I think the “spectre of expropriation liability” is a feature, not a bug. If a government frequently engages in illegal property seizures, it should incur “significant expropriation liability” for its actions. That way, it might be able to deter such misconduct or, if not, at least compensate the victims. If such misconduct is relatively rare, there is no need to worry about judgments having “significant consequences.” And if the programs a government enacts are truly “legal,” there is no need to worry about expropriation liability for “unauthorized acts,” because legal programs rarely involve such unauthorized expropriations.
The majority and dissenting parties also dispute whether the CDC was acting within the scope of its “ordinary duties” in enacting the eviction ban, a factor that is relevant in determining whether an eviction was “authorized” under prior case law. The dissenting parties correctly state that the eviction ban is more sweeping than previous policies adopted under laws that the government claims were authorized. But the majority makes a fairly robust counterargument.
[W]When we say the CDC issued the order “within the normal range,” we mean that the order itself We readily agree that it was not normal. But neither was the escalation of a pandemic the size of COVID-19 normal. The abnormality of the order arose naturally from the extraordinary circumstances CDC faced and from CDC’s reasonable (if ultimately erroneous) interpretation and application of its PHSA authority. In this case, just because the order was abnormal does not excuse the CDC’s (” [its] States that have found that a “judgment” is necessary to prevent the spread of a contagious disease among states have acted beyond the “ordinary scope” for purposes of eminent domain in issuing the judgment under 42 USC § 264(a).
The complication here is that The evidence is The Trump and Biden administrations enacted and extended the moratorium primarily for political reasons, not because they truly believed it would curb the spread of the disease. The fact that this measure had a plausible public health rationale (public health is the CDC’s primary area of responsibility) nevertheless made it “normal” enough to be considered authorized but illegal. A wide range of measures, including some with questionable legal rationales, have been common during the COVID-19 pandemic.
Finally, the majority concluded, which in my view is correct, that the eviction ban constitutes a “physical taking.” Cedar PointThey correctly reject the argument that the moratorium is merely a regulation of the landlord-tenant relationship and cannot be considered an expropriation under current Supreme Court precedent, which has held that rent control is not an expropriation. Yeh v. Escondido (1992) is distinguished from a situation in which a government forces a landowner to accept occupation of land by a tenant who it otherwise has the right to evict.
[T]The government here is Yeah…The appellant’s tenants were voluntarily “invited” onto the appellant’s land. According to the government, this means that there was no physical entry…See… Yep503 U.S. at 528 (the park owner’s “tenant [them]”It was not forced by the government.” I agree that this distinguishes this case from others, but Cedar PointBut we don’t think that forces a different outcome. If the earlier spontaneous invitation (in and of itself) controlled the analysis, then it would essentially all Government actions that relate to the landlord-tenant relationship cannot be treated as physical takings. (After all, we can safely assume that almost all landlord-tenant relationships arise from a voluntary “invitation” from the landlord to the tenant.) But … I see no reason why government actions that relate to that relationship should be entirely exempt from being treated as physical takings.
After all, just because a tenant (or other property occupier) was “invited” at one point in time does not mean that continued government-enforced occupation cannot be treated as a physical taking under all circumstances…
In other words, any “invitation” expires when the landowner has the legal right to evict the tenant. At that point, the voluntary landlord-tenant relationship no longer exists, and any government compulsion to allow the tenant to continue living on the property constitutes a forced physical occupation of the property, which is considered a “forced eviction.” By itself take.
The case may ultimately be heard en banc by the Federal Circuit or even by the Supreme Court, but if not (or if the decision is upheld by either the En banc or the Supreme Court), the case will set important precedent both regarding the nature of expropriation “permissions” and eviction moratoriums.
The question of whether eviction moratoriums constitute expropriation has also been challenged in state courts, and in most cases has been ruled not to be. I criticized one such ruling here.
Robert Thomas of the Pacific Legal Foundation further commented on yesterday’s Federal Circuit decision: here.
