Last August, when apparently everyone was on vacation, the Federal Circuit issued a decision having far-reaching ramifications but getting little or no attention from the legal community. The case involves the issuance by the Centers for Disease Control and Prevention of a nationwide eviction moratorium temporarily halting all residential evictions. This moratorium was in place for almost a year. Owners of residential rental properties, including the Darby Development Company, Inc., sued the United States (Defendant-Appellee), claiming that the CDC’s eviction moratorium during the COVID-19 pandemic constituted a physical taking of their property requiring just compensation under the Fifth Amendment’s Just Compensation Clause.
The Court of Federal Claims dismissed the taking claim under Rule 12(b)(6), holding that the complaint failed to state a claim upon which relief could be granted. In a lengthy and strongly worded decision, the United States Court of Appeals for the Federal Circuit reversed the Court of Federal Claims’ dismissal, holding that the complaint stated a claim for a physical taking.
Background
In response to the COVID-19 pandemic, the CDC issued an order halting residential evictions, extending it multiple times.
Property owners claimed this order was a physical taking of their property, requiring compensation. The Court of Federal Claims dismissed the complaint, agreeing with the government’s argument that the order was unauthorized and thus could not support a taking claim.
Court’s Analysis
The Federal Circuit concluded that “Appellants’ position is straightforward. They claim that the Order, by imposing an eviction moratorium preventing them from evicting non-rent-paying tenants, constituted a physical taking of their rental properties for public use, thus requiring just compensation” under the Fifth Amendment.
The Federal Circuit flatly rejected the trial court’s ruling that the CDC’s order was not authorized. The court concluded that the CDC’s order was “authorized” for takings-claim purposes, as it was issued within the normal scope of the CDC’s duties under the Public Health Service Act to prevent the spread of communicable diseases. The court also found no explicit Congressional prohibition against the order, and despite changes in administrations, Congress had extended the order, indicating it was chargeable to the government.
The court emphasized that the CDC’s order prevented evictions, thus interfering with the property owners’ right to exclude, a fundamental property right.
In analyzing the physical taking claim, the court distinguished the case from Yee v. City of Escondido, where no physical taking was found, and concluded that the facts better aligned with the Supreme Court’s decision in Cedar Point Nursery v. Hassid, where a regulation was deemed a physical taking due to government-authorized invasion of property. The court emphasized that the CDC’s order prevented evictions, thus interfering with the property owners’ right to exclude, a fundamental property right.
Dissenting Opinion
Circuit Judge Dyk dissented, disagreeing that the taking was authorized. He contended that the CDC’s eviction moratorium exceeded its statutory authority under the relevant statute, as confirmed by the Supreme Court in Alabama Association of Realtors and was therefore unauthorized for taking purposes. Dyk warned that the majority’s decision could impose significant takings liability on agencies for unauthorized acts, potentially deterring legitimate government programs.
Read full decision here.
