Lawsuit Seeking Compensation for Mandatory Store Closures – Who’s Going to Pay for My Loss?

Illinois’ attorney general asked a federal judge Monday to dismiss a lawsuit alleging Gov. J.B. Pritzker’s executive orders closing nonessential businesses and workplaces are unconstitutional.

A group of Chicagoland business owners argued the governor’s COVID-19 restrictions amount to the confiscation of private property without monetary compensation.  Such an action would violate the U.S. and Illinois constitutions, they say.

Those orders “caused the seizure of property, business interests and livelihoods of individuals across the state, forcing indefinite closures and the layoff of hundreds of thousands of people,” according to the group’s complaint, an amended version of which was filed in June.

Their lawsuit asks a U.S. district court judge to compel the state to pay all “similarly situated persons, companies and entities … just compensation.”

In its response, the attorney general’s office argued mitigating the novel coronavirus’ spread for the benefit of state residents does not violate either the U.S. or Illinois constitution.  Pritzker, they wrote, used his “police powers,” not eminent domain, which would have required monetary compensation.

They added that all owners of private property in the U.S. are under an “implied obligation” to not use it in a way that would harm their community.  “Necessary restrictions” on Illinois businesses during the pandemic were designated to “protect the health and lives” of all residents.

We previously wrote on this subject in our May 28, 2020 Bulldozers at Your Doorstep blog, “I Know There is a Pandemic, But Who Compensates Me for My Losses? Property Rights v Police Power.”

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.

Posted in Pandemic, Police Power, Takings, Uncategorized
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