In Darby Development Company, Inc. v. United States, the Federal Circuit held that landlords plausibly stated a Fifth Amendment takings claim based on the CDC’s (Centers for Disease Control and Prevention) pandemic-era eviction moratorium. The court reversed the Court of Federal Claims and allowed the case to proceed even though the CDC order was later held unlawful.
The decision matters because it confirms that a takings claim may remain available even when the challenged government action is later invalidated. For property owners and takings practitioners, that is a key takeaway.
The Background: The Federal Eviction Moratorium
The case arose from the federal response to COVID-19. Congress imposed a temporary eviction moratorium in the CARES Act in March 2020 for certain federally connected properties. When that moratorium expired in July 2020, the Executive Branch acted.
In August 2020, the President directed HHS and the CDC to consider whether halting residential evictions was necessary to prevent the interstate spread of COVID-19. The CDC then issued a nationwide eviction moratorium under the Public Health Service Act that barred landlords from removing qualifying tenants for nonpayment of rent.
The order swept more broadly than the CARES Act moratorium. It applied nationwide, not just to federally assisted or financed properties, and it exposed landlords who violated it to potential criminal penalties, including fines and imprisonment.
The order did not forgive rent. Tenants still owed it, and landlords could still charge fees, penalties, and interest. But landlords could not remove covered tenants.
Challenges followed almost immediately. In the related Alabama Association of Realtors litigation, the Supreme Court concluded that the CDC likely exceeded its statutory authority. The order ended in August 2021.
The Court of Federal Claims: No Taking Because the CDC Lacked Authority
After the Supreme Court’s ruling, dozens of landlords and property owners sued in the Court of Federal Claims for compensation under the Fifth Amendment. They argued that the government effectively commandeered their properties by forcing them to continue housing nonpaying tenants for a public purpose.
The landlords framed the case as a physical takings claim centered on the right to exclude. They alleged that the government barred them from removing nonpaying tenants and threatened penalties if they tried.
The Court of Federal Claims dismissed the suit based primarily on the scope of the CDC’s authority.
After the Supreme Court’s ruling, dozens of landlords and property owners sued in the Court of Federal Claims for compensation under the Fifth Amendment. They argued that the government effectively commandeered their properties by forcing them to continue housing nonpaying tenants for a public purpose.
The trial court held that because the CDC exceeded its authority under the Public Health Service Act, the moratorium was ultra vires and could not support a compensable takings claim. In the court’s view, such a claim requires government action authorized by Congress.
The court also rejected the argument that Congress ratified the CDC order by extending it for one month in the Consolidated Appropriations Act. In its view, Congress merely referenced and temporarily extended the order; it did not supply authority the CDC lacked.
The court also rejected the plaintiffs’ illegal-exaction theory because the landlords had neither paid money to the government nor been required to do so.
In practical terms, the ruling meant that even a significant interference with landlords’ property rights would not support a Fifth Amendment remedy if the CDC had acted beyond its statutory authority.
The Federal Circuit Reverses
The Federal Circuit disagreed. In an opinion by Judge Prost, it reversed and remanded, holding that the landlords plausibly alleged a physical takings claim.
The key question on appeal was whether the CDC order was authorized for takings purposes even though the Supreme Court later concluded the agency likely exceeded its statutory authority. The Federal Circuit said yes.
The key question on appeal was whether the CDC order was authorized for takings purposes even though the Supreme Court later concluded the agency likely exceeded its statutory authority. The Federal Circuit said yes.
“Authorized” Does Not Mean “Lawful”
The court distinguished between actions that are unlawful and actions that are unauthorized for takings purposes.
Relying on Federal Circuit and D.C. Circuit precedent, the court explained that an action may be authorized for takings purposes even if it is later found unlawful. The question is not whether the agency interpreted its statute correctly, but whether the action is chargeable to the government.
Government action is generally authorized, the court said, when officials act within the normal scope of their duties in good-faith implementation of congressional directives.
Applying that framework, the Federal Circuit concluded that the CDC’s moratorium qualified as authorized governmental action for takings purposes. The agency was acting in its ordinary public-health role and invoking a statute that expressly empowers it to combat communicable disease.
The Federal Circuit concluded that the CDC’s moratorium qualified as authorized governmental action for takings purposes. The agency was acting in its ordinary public-health role and invoking a statute that expressly empowers it to combat communicable disease.
The court also noted that the government vigorously defended the order’s legality and that multiple courts, including several Supreme Court Justices, viewed its interpretation as at least plausible.
The court also pointed to Congress’s conduct during the pandemic. Congress extended the CDC order for one month and appropriated billions of dollars in rental assistance to address its effects. Although the court stopped short of finding formal ratification, it held that Congress’s actions supported treating the moratorium as an official government program attributable to the United States.
A Plausible Physical Takings Claim
The Federal Circuit also rejected the government’s argument that the case involved only regulation of the landlord-tenant relationship rather than a physical occupation.
The court distinguished Yee v. City of Escondido, where landlords voluntarily rented their properties and challenged rent-control restrictions. Here, the landlords alleged that the government stripped them of the ability to remove nonpaying tenants.
That distinction mattered because the right to exclude sits at the core of physical takings doctrine. The court emphasized that the landlords alleged a government-authorized occupation by tenants they otherwise would have removed. At the pleading stage, that was enough.
The court did not decide whether a compensable taking occurred. It held only that the landlords plausibly stated a claim sufficient to survive dismissal. The case now returns to the Court of Federal Claims.
Why the Decision Matters
The decision has implications beyond the CDC moratorium.
- First, the ruling confirms that the government cannot automatically avoid takings liability simply because a court later invalidates its action.
- Second, the opinion reinforces the constitutional importance of the right to exclude, a point likely to matter in future disputes over occupancy mandates, emergency restrictions, and access requirements.
- Third, the case shows that emergency conditions do not eliminate constitutional compensation principles.
The decision may prompt more takings litigation over rental restrictions. Whether the landlords ultimately recover remains to be seen, but the Federal Circuit has made clear that their theory is legally viable.
