Are Shut-Down Orders "a Taking" of Your Labor in Violation of the "Takings Clause" for which the State Must Pay Just Compensation? The Answer is Yes if You Believe Constitutional Rights Actually Exist

From [HERE] Governors across the country have issued executive orders mandating the closure of businesses they deem non-essential in an effort to slow the spread of COVID-19. Slowing the spread of COVID-19, in turn, benefits all the state’s residents. Thus, the owner of the closed business is made to sacrifice the use of his or her property for the good of the general public. Has the state thereby effected a taking under the Fifth and Fourteenth Amendments for which it must compensate the business owner?

There are good arguments for getting to yes. Because the orders would be characterized to effect an alleged regulatory (rather than physical) taking, a fact-intensive, multi-factor analysis applies. While public health and safety justifications would be given substantial weight by the courts, the unprecedented nature of the crisis and sweeping closure orders leave room to develop arguments that the orders effect a taking by barring a select group of property owners from using their property for the good of everyone in the state.

The Takings Clause

The Fifth Amendment’s Takings Clause, made applicable to the states through the Fourteenth Amendment, states: “nor shall private property be taken for public use, without just compensation.” “The Takings Clause is 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.” Ark. Game & Fish Comm’n v. United States, 568 U.S. 23, 31 (2012) (internal quotation marks omitted).

Framework For Analyzing Regulatory Takings

The U.S. Supreme Court has long recognized that a taking may be effected not only by the government’s physical occupation or appropriation of private property, but also by regulation that “‘goes too far.'” Tahoe-Sierra Pres. Council v. Tahoe Reg’l Planning Agency, 535 U.S. 302, 326 (2002) (quoting Justice Holmes’ opinion in Penn. Coal Co. v. Mahon, 260 U.S. 393, 415 (1922)). Since the COVID-19 shut-down orders do not involve the states in physically occupying or appropriating property, the question of whether the orders effect a taking is analyzed under the Court’s regulatory takings jurisprudence.

Regulatory takings, in turn, come in two varieties. First, there are categorical takings such as “where regulation denies all economically beneficial or productive use of land.” Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1015 (1992). The Court has cautioned that this kind of regulatory taking is likely to be “rare,” id. at 1018, because it requires a complete and permanent elimination of value. See also Tahoe Sierra Pres. Council, 535 U.S. at 332 (“Lucas was carved out for the ‘extraordinary case’ in which a regulation permanently deprives property of all value.”). Enactments that fall outside this limited category are analyzed under the fact-specific standard established in Penn Central Transp. Co. v. City of New York, 438 U.S. 104 (1978), a case that arose from New York City’s denial of a permit to build an office tower above Grand Central Terminal based on the train station’s designation as a historic landmark.

While there is no “‘set formula’ for evaluating regulatory takings claims,” Penn Central is understood to have identified “several factors that have particular significance,” namely “‘the economic impact of the regulation on the claimant;'” “‘the extent to which the regulation has interfered with distinct investment-backed expectations;'” and “the ‘character of the governmental action–for instance whether it amounts to a physical invasion or instead merely affects property interests through ‘some public program adjusting the benefits and burdens of economic life to promote the common good.'” Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 538-39 (2005) (quoting Penn Central, additional internal quotations omitted). (Applying this analysis the Penn Central Court rejected the plaintiffs’ contention that a taking resulted from application of the New York City landmarks law to forbid the building of the office tower, see 438 U.S. at 138.).

Business owners shut down by COVID-19 closure orders will have strong arguments on the first two Penn Central factors, given the severe economic impact and lack of foreseeability of the global pandemic. Courts, however, can be expected to give significant weight to the public health and safety justifications for the closure orders in examining the character of the government’s action (third factor), potentially tilting the Penn Central analysis in the government’s favor. See, e.g., Nat’l Amusements, Inc. v. Borough of Palmyra, 716 F.3d 57, 63 (3d Cir. 2013) (no taking in temporary closure of flea market to allow for identification of unexploded munitions under parking lot due to safety threat of munitions); Rose Acre Farms, Inc. v. United States, 559 F.3d 1260, 1283 (Fed. Cir. 2009) (no taking in USDA regulation barring sale of eggs from salmonella-infected chickens that prohibited plaintiff from selling eggs from certain facilities for 25 months even if chickens were not infected; “potential for physical harm to the public is significant,” as “infected eggs could have caused serious illness and possibly even death”); Brakke v. Iowa Dep’t of Natural Resources, 897 N.W.2d 522 , 526, 550 (Iowa 2017) (no taking in emergency state agency order mandating quarantine of hunting preserve “for five years after whitetail deer harvested on the property tested positive for chronic wasting disease;” although order rendered land unusable as hunting preserve, purpose of order was “to protect wildlife in Iowa from a potentially contagious disease”).

Nonetheless, the court’s objective in weighing the Penn Central factors is to determine whether “it is unfair to force the property owner to bear the cost of the regulatory action.” Rose Acre Farms, Inc. v. United States, 559 F.3d at 1282. The unprecedented nature of the COVID-19 crisis and breadth of the individual closure orders leave room for novel arguments. Should the states’ differential treatment of businesses deemed essential versus non-essential be a factor in the analysis? Should public health missteps that arguably gave rise to the need for sweeping action–such as a lack of testing and initial advice against wearing masks–be a factor? Can the court look behind the public health and safety justification to ask whether similar safety effects could have been achieved through a more narrowly tailored order that would have been less devastating to the property owner? Does the absence of traditional scientific evidence underlying the closure orders diminish the public health justification? We should hope that any court hearing a COVID-19 takings claim takes to heart the Supreme Court’s repeated reminders that the analysis requires “essentially ad hoc, factual inquiries” that are “designed to allow careful examination and weighing of all the relevant circumstances.” Tahoe-Sierra Pres. Council, 535 U.S.at 322 (internal quotation marks omitted). [MORE]

A lawsuit filed recently to challenge shelter in place orders in Pennsylvania explained that although such orders may be necessary they are nevertheless Government seizures of people’s livelihoods and businesses that have forced indefinite closures and widespread layoffs. The suit correctly described the government’s actions as “uncompensated takings” that violate the Takings Clause of the 5th Amendment. That is, the government is legally obligated to properly compensate citizens for their tangible losses - and this does not mean some bullshit $1200 check. The suit says:

‘Without extending constitutionally required just compensation to Plaintiffs and those similarly situated, [shelter in place] Orders jeopardize the sustainability of many businesses and the livelihoods those businesses provide to individuals.’ [MORE]

This all assumes of course that a Government has given you some Constitutional Rights or you believe that you have them. Even if such rights actually exist they do so upon the “thought standard” - in that they only exist if a government orderly also agrees they do. FUNKTIONARY explains, “Rights are myths—obedience to servitude or jail is the reality” [MORE]. Belief is a motherfucker.