Friday, March 20, 2020

Does the Takings Clause Require Compensation for Coronavirus Shutdowns?

By Ilya Somin - March 20, 2020 at 10:20PM

State and local governments across the country are forcibly shutting down numerous businesses and other institutions in a desperate effort to limit the spread of the coronavirus. A number of people have asked me whether the Takings Clause of the Fifth Amendment requires compensation for such shutdowns. After all, the Clause mandates payment of "just compensation" any time the government takes "private property" for "public use." And a shutdown obviously imposes severe—sometimes even ruinous—limitations on the owner's use of their property.

In general, I am a big supporter of strengthening protection for private property under the Takings Clause, and have written many works arguing the case for doing so. In this situation, however, it is unlikely that the Clause mandates compensation in all but a few cases. At the very least, there is no such requirement in current Supreme Court precedent, and—on this point—that precedent is unlikely to change in the near future.

While court decisions have long recognized that the Takings Clause requires compensation in at least some situations where the government restricts property rights without actually seizing the property in question, they have also long held that many exercises of the "police power"—government's authority to protect public health and safety—do not qualify as takings. The most famous case of this type is the Supreme Court's decision in Miller v. Schoene (1928), where the Court ruled compensation is not required in a case where a state law required destruction of the owner's cedar trees in order to protect other trees in the area from the spread of a disease. Protecting large numbers of people from the spread of a disease is, of course, a much stronger police power imperative than protecting apple trees. This description is based on the conventional interpretation of Miller, which I have some reservations about. But, for present purposes, what matters is that the conventional view is the one embraced by courts.

Perhaps more relevantly, large numbers of businesses were forcibly shuttered by state and local governments during the influenza epidemic of 1918-19, the last time the US faced a public health crisis comparable in scale to this one. To my knowledge, none of them were ever held to be takings requiring compensation.

Not all exercises of the police power are exempt from the requirements of the Takings Clause. For example, a federal court recently ruled that compensation was owed in a case where the government deliberately flooded some property owners' land in order to protect others. I and a number of other commentators have been highly critical of another recent decision where an appellate court ruled that the government need not pay compensation in a case where the police virtually destroyed an innocent owner's home in order to smoke out a suspected shoplifter who had holed up inside.

But these types of cases differ from epidemic shutdowns in the important sense that they are not situations where the owner's use of the land in and of itself poses any threat to public health. Rather,  the government decides to destroy a perfectly innocent property right in order to protect the public against threats emanating from elsewhere. By contrast, the continued operation of businesses that risk spreading a deadly disease during an epidemic do indeed pose a threat. The Takings Clause generally does not provide compensation in such cases. Doing so would risk creating a serious moral hazard by incentivizing owners to engage in dangerous uses of their property in order to get paid to stop.

Some state courts have interpreted their state constitutional takings clauses as requiring compensation when a local government changes zoning rules to forbid previously lawful businesses. But I doubt that these "amortization" precedents require compensation in cases like the Covid-19 shutdowns. Among other differences, amortization cases involve permanent rather than "merely" temporary bans on the enterprises in question.

Assume, for the sake of argument, that the plaintiffs in one of these cases somehow get past the police power issue. Even then, their prospects are likely to be bleak. Current Supreme Court precedent holds that only a few types of government actions qualify as automatic "per se" takings: most notably permanent physical occupation of property and regulations that completely destroy all of the property's economic value. Most other regulations are evaluated under the three factor test laid out in the 1978 Penn Central decision, which requires courts to consider 1) the economic impact of the regulation in question, 2) whether and to what extent, the owner suffered the loss of "investment-backed expectations," and 3) the "character" of the government action (if the government physically occupied or damaged the property in question, it is more likely to be a taking).

To make a long story short, the Penn Central test is often unclear and confusing, but is usually applied in ways that tilt the outcome in favor of the government. In this case, the fact that the shutdowns are "only" temporary and that there is no physical invasion of the owners' land are likely to be sufficient to enable the state to win most cases—even if the police power issue is set aside.

There might be some unusual cases where the impact of the government's actions is so severe that it does effectively destroy the entire economic value of a given piece of land, and therefore could be a per se taking. But such cases are likely to be rare, since—again—the restrictions are temporary and the owner could—in theory—still use the property for other purposes.

I am one of many takings scholars who have argued that the Penn Central test is a mess and that it should be replaced by something clearer and more protective of property owners' rights. So far, however, we have failed to persuade a majority of Supreme Court justices to agree with us. And that is unlikely to change in the near future, except in incrementally. If the justices do overrule Penn Central or revise its rules to provide stronger protection for property owners, a Coronavirus shutdown case strikes me as a highly unlikely vehicle for such a shift.

That gets me to final reason why courts are unlikely to rule that Coronavirus shutdowns qualify as takings: no judge will want to be seen as impeding an effort to save large numbers of lives in the midst of a grave menace to public health. As a general rule, I am not a "legal realist"—a person who believes court decisions are primarily the product of judges' personal values and political commitments. But it would be naive to imagine that such commitments never play a role. And few if any judges want to be remembered for having endangered large numbers of lives. That might not matter if the legal arguments were overwhelmingly in favor of the plaintiffs. But, as we have seen, they are at best a stretch—at least under current doctrine.

To be sure, a ruling that the government must pay compensation to owners of shuttered properties would not actually prevent the shutdowns, as such. It would merely require the state to pay for the privilege. I routinely make this point when critics argue that takings liability should not be expanded in other contexts, for fear that doing so would stop supposedly valuable government actions. But, in this case, the urgency of the crisis combined with the enormous scale of the compensation that would be required make it more likely that an adverse judicial ruling really would impede the government's policy—potentially even shutting down the shutdown, so to speak.

The Takings Clause might still require compensation in situations where the government physically appropriates property in order to combat the epidemic. For example, it could  potentially seize currently empty hotels or college dormitories in order to use them as temporary hospitals to treat Covid-19 patients. In such a case, there would be an actual physical occupation of property. And the police power exception would not apply, because the mere existence of an (unoccupied) hotel or dorm does not pose any threat to public health. But such cases are likely to be rare. If the need arises, owners of such structures would probably be happy to rent them to the government for fairly modest prices, given that they are unlikely to bring in much other revenue while the pandemic continues.

It gives me no pleasure to write any of the above. In an ideal world, I think at least some shutdown burdens should be compensable under the Constitution. But the Takings Clause is unlikely to be a vehicle for such compensation in all but a few marginal cases.

That said, I do think the principle underlying the Takings Clause points the way towards a moral rationale for compensation, even if such compensation is not legally required. As the Supreme Court put it in Armstrong v. United States (1960), "[t]he Fifth Amendment's guarantee that private property shall not be taken for a public use without just compensation was designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole." That is exactly what is happening in the coronavirus shutdowns: owners and employees of the shuttered enterprises are bearing a hugely disproportionate share of the burden of protecting the population as a whole against the virus.

Moreover, the people in question haven't done anything wrong. They simply own and operate businesses that—in normal times—are not only innocent but actually make important contributions to the community.

I am not sure what the best way to compensate them is. But I do think there is a strong case for providing at least some substantial relief. On that score, I agree with much of what co-blogger Keith Whittington says here. As he points out, "the government itself has ordered businesses to stop operating" and "[i]n such circumstances, the government should compensate individuals for the damage it has wrought and relieve individuals from the unforeseen burdens that they have been asked to assume."

But, if the shutdowns continue for any significant length of time, I am not optimistic that even the best designed relief program can compensate for more than a fraction of the enormous losses large numbers of people will suffer. The only truly effective relief would be to figure out a way to safely end the shutdowns as soon as possible, while moving to something like a South Korean-style regime, under which freedom of movement is restored, but the virus is kept in check by a combination of widespread testing and effective quarantines of infected individuals until the need for it is obviated by the development of a vaccine.

But I readily admit I lack the expertise needed to figure out how to achieve that goal. In this post, I have tried to achieve the much humbler taks of explaining why the Takings Clause is unlikely to relieve the distress of property owners suffering enormous losses due to the coronavirus shutdowns.

 


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