U.S. Supreme Court strikes down CDC eviction moratorium, and undermines local moratoriums in the process

The big legal news yesterday was a 6-3 ruling by the U.S. Supreme Court that dissolved the CDC’s most recent version of a moratorium on evictions during the COVID-19 emergency. That in itself was not surprising, as the Court had signaled earlier in the summer that it was heading in that direction.  But buried in its ruling are two paragraphs that quietly undermine state and local moratoriums as well, including those in effect in Washington and Seattle.

Let’s quickly begin by summarizing the Court’s ruling on the CDC’s eviction moratorium. The Biden administration had based its defense of the moratorium on a provision of the federal Public Health Services Act, which reads:

The Surgeon General, with the approval of the [Secretary of Health and Human Services], is authorized to make and enforce such regulations as in his judgment are necessary to prevent the introduction, transmission, or spread of communicable diseases from foreign countries into the States or possessions, or from one State or possession into any other State or possession. For purposes of carrying out and enforcing such regulations, the Surgeon General may provide for such inspection, fumigation, disinfection, sanitation, pest extermination, destruction of animals or articles found to be so infected or contaminated as to be sources of dangerous infection to human beings, and other measures,as in his judgment may be necessary.

The first sentence confers very broad authority, but at issue here is how to interpret the second sentence. The majority said that it is suggestive of the type and scope of regulations that Congress intended the CDC to make, and a nationwide moratorium on evictions goes far beyond that authority. The minority dissent argued that the second sentence should instead be interpreted instead as specific authority to order administrative acts for the purposes of implementation and enforcement of any regulations that it makes under the authority in the first sentence. But the majority carries the day, and it reiterated its finding from earlier in the summer that the CDC does not have the authority to issue an nationwide eviction ban and it would take an act of Congress to give it such authority.

The cases challenging eviction moratoriums at the state and local level are being argued on very different grounds — and here we can focus in on our local court case, El Papel vs. the State of Washington and the City of Seattle. Mirroring other challenges, most notably one in Los Angeles, it did not argue that the Governor or Mayor do not have the direct authority to issue an eviction moratorium. Rather, it argued two constitutional violations: that the moratoriums unconstitutionally impair contracts (i.e. lease agreements), and that they are government “takings” of property under the Fifth Amendment to the Constitution.

The arguments that the moratoriums impair contracts have largely been rejected, based on about ninety years of case law that have systematically whittled away the impact of the Contracts Clause of the U.S. Constitution. In fact, just this week the Ninth Circuit ruled decidedly against a Contracts Clause challenge to the Los Angeles eviction moratorium — a ruling that has precedential power over the pending El Papel case here.

But the Takings Clause argument has gone down a different, and complex, path. As SCC Insight explained in June, the courts have generally been hesitant to find that regulations affecting landlord-tenant relationships were “takings,” ruling instead that they were lawful exercises of government regulatory power over an industry rather than a physical “invasion” of a property. But a U.S. Supreme Court ruling in June, Cedar Point Nursery vs. Hassid, strongly suggested that the Court was moving in a different direction by finding that an “invasion” doesn’t need to be permanent to be a taking, nor does it need to be constant. Rather, it said that a regulation that “grants a formal entitlement to physically invade” is also a per se taking. In the instance of today’s case, “rather than restraining the [owners’] use of their own property, the regulation appropriates for the enjoyment of third parties the owners’ right to exclude.”

The plaintiffs in the El Papel case quickly brought this ruling to the attention of the U.S. District Court judge hearing its case. And the city and state fired back, arguing that the Supreme Court ruling didn’t apply to this case because the courts have long recognized a different case, Yee vs. City of Escondido, as the controlling case. Further, they argued that granting a lease to a tenant — even an expired one, or one where the tenant has breached the terms — means that the landlord invited the tenant (and thereby “the public”) onto its property, thus distinguishing the Cedar Point case from the eviction moratoriums. Thus, they argue, there is no “physical invasion” of the property, and so it doesn’t impair a fundamental property right, the “right to exclude” persons from the property.

And that brings us back to the Supreme Court’s ruling yesterday, where the majority included this paragraph:

The equities do not justify depriving the applicants of the District Court’s judgment in their favor. The moratorium has put the applicants, along with millions of landlords across the country, at risk of irreparable harm by depriving them of rent payments with no guarantee of eventual recovery. Despite the CDC’s determination that landlords should bear a significant financial cost of the pandemic, many landlords have modest means. And preventing them from evicting tenants who breach their leases intrudes on one of the most fundamental elements of property ownership—the right to exclude.

It goes on to expand upon a related, sensitive issue in this and other eviction moratorium cases: the effect of the passage of time on the balance of equities:

As harm to the applicants has increased, the Government’s interests have decreased. Since the District Court entered its stay, the Government has had three additional months to distribute rental-assistance funds to help ease the transition away from the moratorium. Whatever interest the Government had in maintaining the moratorium’s original end date to ensure the orderly administration of those programs has since diminished. And Congress was on notice that a further extension would almost surely require new legislation, yet it failed to act in the several weeks leading up to the moratorium’s expiration.

These two paragraphs severely undermine the defense of the local and state eviction moratoriums. First, they state unequivocally that preventing the eviction of a tenant who violates the terms of a lease is, in fact, an intrusion on the “right to exclude.” That, combined, with the Cedar Point ruling, arguably makes the eviction moratorium a per se “taking.” Second, it emphasizes that the Court believes the harms to landlords are increasing with time, and the governments’ interest in maintaining the moratoriums are waning as time gives them the opportunity to put other less intrusive measures (like rent assistance) in place.

Third, it recognizes that the harms on landlords can be irreparable — which leads into a discussion of what happens from here.  Under the Takings Clause of the U.S. Constitution, it isn’t illegal for the government to take property; it’s just illegal for it to do so without “just compensation.” (it is illegal for the government to take it without due process, but the plaintiffs have not argued a due process violation occurred here) While the plaintiffs have argued for an injunction to block the moratoriums, the city and state have argued that if the courts were to find that a taking had indeed occurred, the proper remedy — well supported by numerous case law precedents — is compensation, not an injunction. But there are two exceptions to that rule where the courts have enjoined takings: when the harm they cause is irreparable, i.e. compensation for the taken property cannot remedy the loss; and where the uncompensated taking (and harm) continues. Before yesterday, it was extremely unlikely that the plaintiffs would get an injunction, even if the court found that a taking had occurred; the court would instead order the governments to compensate them for their loss. But with the Supreme Court acknowledging that the moratoriums are a taking, the harm is continuing, and it may be irreparable, the odds of an injunction just got much better (though not assured — the plaintiffs have not presented significant evidence that the harm is irreparable).

But even if the court doesn’t enjoin the moratoriums, the city and state are in a difficult spot, because the Supreme Court has made it all but certain that they will owe compensation to landlords for the impact of the moratoriums. That makes continuing the moratoriums potentially very expensive endeavors, creating enough liability to cause the Mayor and Governor to rethink whether the city and state can afford it.  To be sure, the court proceedings to determine “just compensation” for the landlords’ losses would be complex and would likely drag out for years (if not settled), especially if the cases turn into class-action lawsuits representing larger sets of landlords. But it could be tens of millions of dollars for the City of Seattle, and much larger sums for the State of Washington.

But what about the Delta variant?  The Supreme Court noted that too in its ruling yesterday:

It is indisputable that the public has a strong interest in combating the spread of the COVID–19 Delta variant. But our system does not permit agencies to act unlawfully even in pursuit of desirable ends.

The conservative wing of the Supreme Court seems to be on a path to strengthen property rights, even in the face of a global pandemic. And it seems the impacts of that effort will trickle down to the local level, quickly. The plaintiffs in the El Papel case just filed a supplemental brief with the court raising attention to yesterday’s ruling. All of the required briefs in the case have already been filed, and the judge could rule at any time.

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