Argument Preview

Two cases being argued in September at the Federal Circuit attracted amicus briefs. One of these cases is Darby Development Co. v. United States. In this case, the Federal Circuit will review a decision by the Court of Federal Claims granting the government’s motion to dismiss physical takings and illegal exaction claims related to the Center for Disease Control’s eviction moratorium enacted during the onset of the COVID-19 pandemic. This is our argument preview.

Plaintiffs, a group of 38 residential property owners, argue in their opening brief that the Court of Federal Claims erred in dismissing their Fifth Amendment takings claims. According to the Court of Federal Claims, the CDC order in question was “unauthorized”‘ and “beyond the scope of the CDC’s statutory authority.” Plaintiffs contend that the question for the court is not whether the order was a “lawful exercise of the agency’s authority” but instead “whether the invasion of property rights at issue is chargeable to the Government” rather than a “rogue act” of a government agency acting “ultra vires.” Plaintiffs also address the government’s three alternative arguments for dismissal, that Plaintiffs did not “state a physical takings claim,” did not “possess property rights,” and “the CDC Order was an exercise of some ‘police power’ for which compensation cannot be awarded.” According to Plaintiffs, these arguments fail to provide a basis for dismissing their takings claims. Alternatively, Plaintiffs argue, even if the court finds no valid takings claim exists, Plaintiffs have a viable claim for illegal exaction because they were “compelled by the Government to pay the expenses associated with housing people the Government desired to be housed, in violation of their leases.”

In its response brief, the government argues the trial court correctly dismissed Plaintiff’s complaint because Supreme Court precedent precludes a Fifth Amendment takings claim against “agency action that was unauthorized by statute.” In the alternative, the government argues, Plaintiffs “cannot establish that the Eviction Moratorium amounted to a physical invasion of their property.” The government cites Supreme Court precedent it says indicates that once tenants are invited onto a property, “laws that regulate that relationship do not amount to a physical taking” and instead must be analyzed under the multi-factor “Penn Central test.” The government also asserts the Court of Federal Claims correctly dismissed the illegal exaction claim. According to the government, this claim is available only when, “acting contrary to law, the Government forces a plaintiff to pay money to the Government or to a third party at the Government’s direction.” And, the government continues, it did not require Plaintiffs to pay any money to the government or any third parties.

In their reply brief, Plaintiffs maintain the government’s conduct is subject to the takings clause because “the CDC issued the moratorium within the general scope of its expansive duties to fight communicable disease and to protect public health.” Further, Plaintiffs argue, that conduct is “unauthorized” under the takings clause only if it is “explicitly prohibited” or “outside the normal scope of the government officials’ duties.” Moreover, they contend, even actions that are “unlawful, illegal, or invalid” are still “authorized” if “undertaken within the general scope of the officials’ duties.” Plaintiffs also claim Congress endorsed the CDC’s conduct by enacting and extending the moratorium. Plaintiffs argue the government cannot “shift immense financial burdens of governmental actions onto the private sector” and then subsequently claim that “the actions were unauthorized,” allowing them to escape paying the “just compensation as required by the Fifth Amendment.” Further, Plaintiffs maintain, they have stated viable takings claims because “[t]he CDC Order appropriated their right to exclude and constituted a physical taking, occupation, or appropriation of their property, for the Government itself or third parties.” Finally, Plaintiffs reiterate, they have stated an actionable claim of illegal exaction because “the CDC Order not only effectively precluded Appellants from collecting rent, it required Appellants to house people and to incur the associated costs.”

The New Civil Liberties Alliance filed an amicus brief supporting the Plaintiff and reversal. The NCLA expresses concerns that “dismissing the Fifth Amendment takings claims of property owners irreparably injured by a massive government-wide effort” will “encourage similar action in the future.” It further argues Congress’s extension of the moratorium was an “explicit and wholesale endorsement” of the CDC’s conduct “meant to aid, encourage, and embolden the Executive Branch.” Finally, NCLA contends, the Judiciary also “played a significant role in the uncompensated taking of Appellants’ property” when it “refused to enjoin it.” It concludes that “[p]ermitting such an about-face would incentivize the government to occupy private property, fight any attempts to enjoin continued occupation, to confess error before the Supreme Court at the last possible moment, and then argue that no compensation was due because the occupation was illegal all along.”

The National Association of Home Builders filed an amicus brief in support of Plaintiffs and reversal. In its brief, the Association argues “the CDC, in placing a moratorium on evictions during the COVID-19 pandemic, acted with apparent authority imbued upon it by Congress.” It goes on to assert that “denying compensation for a taking made based on apparent authority unfairly penalizes acquiescence with the law and encourages resistance to Government regulations.” Lastly, it asserts, allowing the lower court’s ruling to stand may “embolden the Government agencies to attempt to avoid their obligation to provide just compensation by deliberately overstepping their authority.”

The National Association of Realtors also filed an amicus brief in support of Plaintiffs and reversal of the court’s holdings. It argues that, by keeping property owners from evicting breaching tenants, “the moratorium intrudes on one of the most fundamental elements of  property  ownership—the  right  to  exclude.” It contends the court has recently held that an “abrogation of the right to exclude” qualifies as a “per se taking.” Finally, it highlights how the lower court’s approach provides “perverse incentives” and “rewards federal agencies for deliberately pushing the envelope” of their statutory authority.

This case will be argued on Thursday, September 7. We will report on any developments.