Landlords file legal challenge to eviction moratorium

Yesterday a group of landlords filed a lawsuit in U.S. District Court to challenge the temporary bans on evictions enacted by Governor Inslee and Mayor Durkan, the extension of Durkan’s ban passed by the City Council, and the Council’s ordinance requiring landlords to allow tenants to repay back rent in installments.

The group of landlords are being represented by the Pacific Legal Foundation, a law firm known for championing conservative legal causes. The firm previously sued to challenge the city’s “First in Time” tenant protection ordinance, and has a pending lawsuit challenging the “Fair Chance Housing” ordinance. In a post on its web site, Pacific Legal Foundation says that it is representing the landlords free of charge.

The plaintiffs argue that the eviction moratorium and the rent-installment ordinance violate two articles of both the U.S. and Washington State Constitutions:

• the prohibition on government “taking” of property without just compensation;
• the prohibition on the government impairing contracts.

In ordinary times, they would clearly have the law on their side. But during emergencies — and we have plenty of those at the moment, including both a pandemic and an economic collapse — the courts have ruled differently. In fact, the U.S. Supreme Court case law dates back to the Great Depression, and before it, finding that while the Constitution doesn’t explicitly give the government the right to suspend constitutional rights during an emergency, it does require the government to promote public health and safety — and if temporarily restricting rights is required to do that, the government is empowered to do so. That is why the executive orders from the Governor and the Mayor, and the Council’s bills, explicitly call out that their actions are to promote public health and safety: they are invoking the Court’s prior rulings that validate their powers.

But those powers are not unlimited; the courts weigh whether the government’s actions are reasonable under the circumstances. In particular, their test looks at:

• the circumstances that led to the government taking action;
• whether the government action addresses the circumstances;
• whether the government action is narrowly tailored to the circumstances, or goes beyond what is required in its restriction of constitutional rights.

And that is at the heart of the lawsuit filed yesterday: whether the actions by the Governor, Mayor and City Council go too far — or have gone on too long.

If the eviction moratorium had lasted only one month, there would be no cause for a lawsuit. On the other extreme, if the government had enacted an eviction moratorium that lasted for ten years, there would be broad agreement that it went well beyond what the circumstances require. Somewhere in between those two polar extremes is a threshold at which point the balance of hardships between landlords and tenants shifts. The lawsuit alleges that the threshold has already been reached: one landlords claims to be owed over $14,000 in back rent, and another claims over $10,000.  A landlord managing a single rental unit claims that his tenant has been steadily employed throughout the COVID pandemic and economic crisis, but has a track record of unreliable rent payments and six separate pay-or-vacate notices were issued between August 2019 and February 2020; now the tenant has stopped paying rent altogether, but the landlord has no recourse because of the eviction moratorium. In the meantime, the landlord is still required to not only pay his own expenses, but continue to provide some utilities to the unit.

The City Council’s ordinance allowing back rent to be repaid in installments is challenged in similar terms: it impairs the terms of the rental contract for up to a year after the termination of the COVID-19 civil emergency. It also forbids landlords from charging interest or late fees on unpaid rent, terms which are also stated int he rental contract. That raises the same set of questions: to what extent and for how long can the government impair the financial terms of a valid contract?

It’s important to note that the eviction moratorium doesn’t grant what many tenant advocates have asked for: rent forgiveness. That would be a much larger step toward a “government taking,” as well as an impairment of contracts, in that the government would be depriving landlords of the economic value of their property (one of the textbook examples of a government taking) and would be forbidding the collection of rent entirely. Part of the legal reasoning for the validity of the moratorium alone is that when the moratorium is lifted the tenant will still owe all the rent, so no economic value has been taken away from the landlord. The case law around this speaks to this difference, in finding a Minnesota moratorium on foreclosures was valid in part because the borrower was required to continue making mortgage payments during the moratorium; and in finding a New York emergency law allowing tenants to “holdover” after the expiration of their lease was legal.

Again, this case is a question of degrees: there is substantial case law supporting the government’s right to impose this kind of moratorium during an emergency, but the government must still defend the specific terms and length of the moratorium (and the rent-installment ordinance) from assertions that it is too expansive, or simply has gone on too long.

It seems likely that the plaintiffs will file a motion for either a temporary restraining order or a preliminary injunction in the coming days, though it’s not at all clear that they would get one. They would need to show not only that they are likely to win their case on the merits, that the balance of hardships tips in their favor, and that an injunction would be in the public interest. That’s going to be a tough sell.

But even if they don’t get an injunction, the case shouldn’t take long to resolve — at least at the trial court level. There are no relevant facts in dispute, so the case depends solely on interpretation of the law. There will be a motion of summary judgment, briefs traded back and forth, and the judge will ultimately rule. Then the case will start the climb up through appeals — another interesting aspect of this case. The relevant case law, extending through most of the 20th century, covers a period when the doctrine of emergency government powers was greatly expanded. That flies in the face of the “textualist” school of constitutional jurisprudence, which holds that the only proper way to interpret the Constitution and laws is by the words alone. Textualism does not tolerate re-interpreting the meaning of the Constitution over time based upon current context or the legislators’ intent, and it takes issue with the expansion of emergency government powers to curtail constitutional rights.

Take the “contracts clause,” which prohibits the government from impairing contracts. If you’ve seen the musical Hamilton, you know a bit about the dire financial situation that the United States found itself in during its earliest days. Much of private industry at the time was based upon contracts and other business arrangements that preceded the formation of the United States, and the process of creating a new nation called into question many of the basic principles that businesses relied upon, from the solvency of currency (and the treasury) to whether the new country’s laws might render a business contract unenforceable (or simply illegal). So the “contracts clause” was added to the Constitution to stabilize the economy, providing a level of assurance that the government would not interfere with arrangements already in place. But as mentioned earlier, the Constitution’s authors did not write in a provision giving the government permission to temporarily restrict parts of the Constitution; that was added later by the courts in order to maintain public health and safety, using the logic that a contract is worthless anyway without a functioning society and economy underlying it. Thus the government’s need in an emergency to temporarily curb constitutional guarantees in order to protect public health and safety must ultimately win out over other considerations.

Scalia is no longer sitting on the Supreme Court, but there are several other justices who are more or less textualists, particularly Justices Alito, Gorsuch, Kavanaugh, and Thomas. So from the Pacific Legal Foundation’s point of view this case might be a good opportunity to try to convince them to push back on the drum-beat of expanding government emergency powers, and re-assert both the contracts clause and property rights. The fact that they are representing the clients free of charge suggests that they have bigger ambitions for this case. Whether the case eventually reaches the Supreme Court depends on how the lower courts rule on the issue, but equally on how long it takes the case to work its way through the court system: it becomes moot when the moratorium is lifted and the rent-installment ordinance plays itself out.

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