Argument Recap

Last Thursday, the Federal Circuit heard oral argument in Darby Development Co. v. United States. In this case, the Federal Circuit is reviewing a decision by the Court of Federal Claims to grant the government’s motion to dismiss physical takings and illegal exaction claims. These claims relate to the Center for Disease Control’s eviction moratorium enacted during the onset of the COVID-19 pandemic. Judges Dyk, Prost, and Stoll heard the parties’ arguments. This is our argument recap.

Creighton R. Magid argued for Darby. He began by introducing the appellants, owners of residential properties, often “mom and pop” operations. He briefly discussed the CDC’s eviction moratorium and its impact on the appellants. One judge sought clarification on the status of the “authorized and appropriated” 50-billion-dollar relief fund allocated by the government. She asked Magid to stipulate that Congress and the executive branch “contemplated” compensating owners using this fund. Moreover, she suggested, this money should have “covered” renter’s “rental expenses,” avoiding the need for owners to make takings claims. In response, Magid asserted that, while the government did appropriate these funds and some of the money may have ultimately gone to owners, “much of it did not.” Furthermore, he emphasized, renters were “under no compulsion” to take advantage of these funds. The judge suggested that having a fund covering rental expenses might indicate “everyone involved in this program” believed there would be no takings. In response, Magid maintained that this government funding would have avoided takings only if the distribution of the funds was effective. 

The argument then shifted to the government authorization required for takings claims. A judge suggested that, according to precedent, one must “assume authorization.” But, he continued, “if the government action is unauthorized, that is a ground for enjoining the action but not for a taking.” This judge expressed difficulty applying the rule in this case, however, explaining that the Supreme Court has found the CDC’s actions were unauthorized in a prior case addressing injunctions related to the moratorium. In response, Magid argued authorization doesn’t need to be “explicit in the statute” for “purposes of taking law,” unlike in the injunction case. The judge, citing several cases where lack of authorization led to failed takings claims, asked, “which case finds a lack of authorization and still says there is a takings claim?” Magid answered by asserting authorization depends on the circumstances. He argued that, if the government agency’s action is “within the general purposes” of the agency, no express statutory authorization is required. The judge stated that the appellants “couldn’t” assume the action was authorized because the Supreme Court has said the CDC’s action was not authorized. Magid, however, argued the statute authorized the actions at issue.

One judge sought clarity on Magid’s position, asking if his position rests on the interpretation of authorization in the context of a takings claim. Citing a prior case addressing the scope of authority, she explained that “conduct is chargeable to the government when it is a good faith implementation of the statute.” Magid confirmed that this is the appellants’ position. Another judge, however, indicated disagreement with this “good faith standard,” calling it a “stray comment” by the Federal Circuit in a prior case. He maintained that authorization is required, and again maintained the Supreme Court found the CDC was “clearly not authorized.” Magid responded to this judge’s concern, contending that, while authorization is required, there is not a “dictionary definition” authorization for takings purposes. Moreover, he argued, just because the Supreme Court decides prior action is “too broad” in another context doesn’t preclude takings claims, where the relevant action is a “good faith interpretation” of its governing statute and “within its general scope.” 

Next, the argument addressed “ultra vires” actions. One judge asked, “Why isn’t this case under the ultra vires rule?”  Magid reasoned that the action taken by the CDC–which was “charged with doing this kind of control” at the direction of the President–was endorsed by Congress. He also cited a particular provision of the Public Health Act. One judge explained “that an agency action is ultra vires if it is not within the scope of the authorizing statute.” In response, Magid argued that the statute did authorize these actions, and Congress agreed by extending the moratorium, even if the Supreme Court subsequently decided the CDC overstepped its authority. He cited the recent Supreme Court case addressing the same CDC order, and completed his argument by stating this opinion “made it clear that this is a taking.”

Nathanael Yale argued for the United States. He began by asserting it is “well established in taking law that for the government to be liable for a taking, the government action at issue must be dually authorized by Congress.” Additionally, he asserted, Supreme Court case law has held that the CDC’s actions were not authorized. In response, one judge asked about the allocation of the relief funds and suggested that, if the “money had been used as intended by Congress in a timely fashion,” the landlords would not have been deprived of their rental income. She asked if Yale knows where the money went. Yale explained that the federal government has allocated all of the relief funds, but he admitted it is unclear if the states have distributed the money. 

Yale argued that the appellants’ claim is “contrary to Supreme Court precedent.” One judge asked for clarification on what prior cases apply, questioning whether the cited cases reached the issue of takings claims. Yale argued that the precedent did address takings claims, finding “no authorization expressed or implied.” According to Yale, “this court can’t contravene that precedent on the authority issue.” Therefore, he argued, once the Supreme Court rejected the CDC’s use of the statute, the action was outside its scope, and the court could not find authorization for any purpose. He argued that more than a general good faith standard is required to prove authorization. Even though the government was “acting in good faith,” he argued authorization is still required.

Finally, he quickly addressed the government’s alternate arguments regarding physical takings and illegal exaction. He disagreed with the appellants’ position regarding the law governing physical takings. One judge questioned whether the government’s case law is applicable outside of the context of rent control. He argued that it is and that the “Penn Central” test is still controlling law in the context of the takings claims in this case.

In rebuttal, Magid first argued one of the government’s cited cases does not turn on the takings issue in this case and that its other case was a rent control case, which is inapplicable. One judge questioned whether the court needs to address the illegal exaction issue if it finds a taking. She also asked whether appellants argue exclusively for physical takings. In response, Magid agreed that the claims are only physical takings claims. He also argued the court need not address the illegal exaction claim if it finds that takings occurred. He reiterated that not finding these actions to be takings would lead to “perverse consequences” that are “contrary to what the founding fathers had in mind.” Finally, Magid argued, not finding these actions to be takings would mean that, when “the government deliberately goes beyond its authority to take action and takes property, that there is no recompense” other than an injunction, which has been historically ineffective in this context. 

We will continue monitoring this case and report on developments.