I KNOW THERE IS A PANDEMIC, BUT WHO COMPENSATES ME FOR MY LOSSES? PROPERTY RIGHTS v POLICY POWER

When government directly takes or inversely takes private property, our Federal and State Constitutions require the payment of just compensation.  But when property is taken for an emergency, the result may be different.  The federal government has an inherent “police power” to seize property without providing just compensation.

The coronavirus (COVID-19) crisis is unprecedented.  In the United States, as of May 21, 2020, 93,439 people have died.  At least 1,551,853 cases of the disease have been recorded according to Johns Hopkins University.  The disease is extremely infectious and has spread across the world resulting in a pandemic which has, so far, caused more than 328,000 deaths from 5.01 million cases.  Preventive measures to reduce the chance of infection include staying at home, avoiding crowded places, keeping distance from others and avoiding touching your face with unwashed hands.  Governors and Mayors have issued Executive Orders which have required businesses to close, blocked access to public areas, and precluded visitation to friends and relatives.  Other directive have included using hotels and properties to house healthcare workers.  There is no doubt that these quarantine edicts have had a major effect on the economic health of income producing properties and businesses.  Many people have been deprived of the ability to earn money to pay landlords their rent.  Many small businesses simply will not re-open.

What is a property owner’s remedy when the government mandates surrender of property rights in service of the public good?  We know that when government takes property it is obligated to pay “just compensation.”  But the line between an eminent domain taking and regulating the property to prevent harm to the public interest starts to blur in connection with pandemic orders.

The first analytical step is to determine whether the government action can be characterized as a taking of property as opposed to a regulation of the parcel’s use.  Impacts caused by the exercise of police power are usually not compensable, while the exercise of eminent domain is compensable.  Under the Tenth Amendment of the Constitution, the powers not delegated to the Federal Government are reserved to the States or the people.  This is the genesis for police power which enables States to regulate behavior and enforce order within their territory for the betterment of the health, safety, morals, and general welfare of their inhabitants.  Sligh v. Kirkwood, 237 US 52 [1915].

If a case could be made for a taking, it would be an inverse condemnation claim.  Government has taken property but not by a de jure proceeding.  Rather an inverse taking results when government exacts a taking often by land use restrictions.  There will be a diminution of property’s use or value.  In an inverse taking the property owner must commence the suit.

Clearly, if government proceeds with a de jure proceeding, it will follow statutory requirements set forth in Article I of the Eminent Domain Procedure Law and file a Petition to condemn.  The former owner of the condemned property is entitled under the Constitution to “just compensation.”

As Chief Justice Roberts wrote, “the Government has a categorical duty to pay just compensation when it takes your car, just as when it takes your home.”  Horne v. Department of Agriculture, 135 S. Ct. 2419 [2015].  This is true in temporary takings as well.  Kimball Laundry Co v. United States, 338 US 1 [1949].  Kimball involved the temporary taking of a laundry for use by the Army.  While the Condemnor paid rent, Kimball sued for the intangible loss in the value of the business.  Justice Frankfurter held that the loss must be compensated.  Certainly, World War II created an emergency condition, but “just compensation” was awarded.

In the present Covid-19 emergency, government is not using the property.  The order to close because of the extremely contagious deadly disease was intended to stop the pandemic’s spread.

This clearly is an exercise of the State’s inherent police power.  As the Supreme Court has stated, “[t]he limitations upon the police power are hard to define, and its far-reaching scope has been recognized in many decisions of this Court.”  Sligh v Kirkwood, 237 US 52 [1915].  Sligh involved the shipment of citrus fruit in Florida.  The fruit was immature and unfit for consumption.  Mr. Sligh was arrested and placed in custody.  The Judgment was affirmed with the Supreme Court noting that interstate commerce will not prevent a State from exercising its police power.

The moral of the story is that you better respect oranges in the State of Florida.

Another example is Case v. United States Department of Agriculture, 642 F. Supp 341, 343-44 (M.D. Pa. 1986, aff’d 829 F.2d 30 (3rd Cir. 1987)) where there was a quarantine of shipping chickens out of the zone.  The Court held that there was no taking under the law and that Plaintiffs were not entitled to any compensation.  The government had acted within the proper scope of the police power in imposing the quarantine, had not entered onto the Plaintiffs’ property, had not destroyed any animals, and had not singled out the Plaintiffs for unique treatment – all of which means that Plaintiffs’ property had not been taken.

Under the Tenth Amendment, the powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively or to the people.  The authority for use of police power under the Constitution has its roots in English and European Common law traditions.

On May 22, 2020, President Trump announced that he will over-rule the Governors and order religious houses of worship to open the coming weekend for religious services.  Thankfully, he can’t do that.  This is not the first time the President has claimed that he has “ultimate authority.”  In April, he announced that he was opening the County.  He stated, “I’m going to put it very simply, the President of the United States has authority to do what the President has the authority to do, which is very powerful.”

As usual, the President is wrong.  Quarantine and stay at home orders are entirely the decision of the State governors.  States exercising their police powers have the authority to quarantine.  The President has not authority to override such orders and order the Country open.  No federal statute gives the President such authority.

 

Conclusion

The impact of the Covid-19 pandemic is unprecedented.  There is no history of the role and action of Federal and local governments in responding to this horrible pandemic.  The effects of the quarantine and limitations on businesses has caused devastation and economic ruin despite any bailout relief payments.  All business will be permanently damaged.  Many will never be able to re-open.  It seems clear that the damages sustained by State and local governments’ closure orders will not be compensable as they are the result of the exercise of the State’s police power.  On the other hand, if the Federal or State government order a property owner to use privately owned property in a specific manner, that would be a taking.  This will be based on an ad hoc factual analysis that can demonstrate particular harm to a Claimant, separate from negative impacts to the general public.

 

Posted in Covid-19, Property Rights
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