State Court Docket Watch: State of New Mexico v. Wilson

During the COVID-19 pandemic, the governor of New Mexico issued a series of public health orders (PHOs) which “restricted mass gatherings and the operations of certain businesses.”[1] These restrictions have “consistently manifested as operational limitations on occupancy to the extent of closure of some categories of businesses.”[2]

In response to these restrictions, twenty small businesses and business owners sued the State of New Mexico, its governor, and its secretary of the Department of Health in various state courts.[3] The plaintiffs sought just compensation for takings of and damage to their private property “due to the seizure, limitation and closure of their businesses pursuant to the public health emergency orders of the State.”[4] At the request of the government defendants, the New Mexico Supreme Court issued a stay on all those cases in November 2020, consolidated them in a single petition, and ordered briefing on the issues. The court heard oral argument in January 2021, but it did not announce its decision until June.

The businesses brought a claim for compensation under the alternative theories that New Mexico’s PHOs constituted regulatory takings under constitutional law or that they required just compensation under a state statute. The court ruled against the challengers on both theories.

The court first explained its decision to directly take a writ of supervisory jurisdiction over the lower courts and consolidate the cases before it. It held that the statewide nature of the case, the likelihood of future cases arising on the same topic, and the public’s interest in settling the question in a timely manner “present[ed] exceptional circumstances justifying this Court’s issuance of a writ of superintending control.”[5] The court’s decision is divided into analyses of the plaintiffs’ constitutional and statutory claims, which this summary covers in turn.

Constitutional Analysis

The state officials (who were in the posture of petitioners) argued that the PHOs were not a taking because they stemmed from a “proper exercise of the State’s police power to protect the public health,” and alternatively that the PHOs’ use regulations were “temporary and partial restrictions that are not compensable.”[6] The businesses argued that the PHOs went beyond mere “regulatory police exercise” and that the court’s issuance of a writ that the PHOs do not support claims for just compensation “would improperly foreclose their ability to bring fact-specific evidence under a takings inquiry or to show that the PHOs are ‘unreasonable, arbitrary or capricious.’”[7]

The court first held that the PHOs were a valid exercise of the state’s police power, citing many prior cases to the effect that state exercises of police power were not to be judicially invalidated whenever they are reasonably related to the “public safety, health or morals.”[8] It then considered the interaction between police power and the New Mexico Constitution’s equivalent to the federal Constitution’s Takings Clause. It noted both the general rule that property owners are to be compensated for regulations that deprive them of the economically beneficial use of their property and the exception for regulations on uses of property that are harmful to the public health—the public nuisance exception.           

The court held that the state’s limitations on occupancy and “closure of certain categories of businesses” were a reasonable exercise of the police power because they were directly tied to the reasonable public health purpose of reducing the spread of COVID-19.[9] Without precluding future arbitrary and capricious challenges, it also held that “the State[’s] . . . broad powers to act in the face of grave threats such as COVID-19” created a high evidentiary burden for plaintiffs to prove an arbitrary and capricious claim.[10]

The court held that the PHOs’ restrictions and closures fell under the public nuisance exception because they were “reasonable use regulation[s] under the police power to prevent injury to the health of the community.”[11] As such, the regulations were “insulated from further takings analysis.”[12] It further held that the temporary nature of the PHO restrictions counted against finding a regulatory taking, pointing out that canonical regulatory takings cases such as Pennsylvania Coal v. Mahon[13] and Lucas v. S.C. Coastal Council[14] “were predicated on the permanent nature of the property deprivations at hand.”[15] For these reasons, the court found that the challenged use restrictions could not support the plaintiffs’ claims for just compensation for regulatory takings.[16]

Statutory Analysis

Next, the court addressed the plaintiffs’ claims for just compensation under a provision of New Mexico’s Public Health Emergency Response Act (PHERA) that states:

The state shall pay just compensation to the owner of health care supplies, a health facility or any other property that is lawfully taken or appropriated by the secretary of health, the secretary of public safety or the director for temporary or permanent use during a public health emergency.[17]

The state officials argued that, consistent with the canon ejusdem generis, the term “any other property” was “bounded by the nature of its preceding specific terms: ‘health care supplies’ and ‘health facility.’”[18] The businesses argued that the term should be construed broadly “consistent with the liberal construction given to statutes enacted for the protection of public health during an emergency.”[19] The court came down on the side of the State, holding that “any other property” was limited to the healthcare context.

The court noted that ejusdem generis is both “a common law rule of construction” and, in New Mexico, “a statutory rule.”[20] It then examined the definitions of “health care supplies” and “health facility” found elsewhere in PHERA. Using those definitions to guide its ejusdem generis inquiry, it determined that the disputed term “was legislatively intended to be a catch-all limited within the category of physical property that is directly taken or appropriated by the State and used for, or in connection with, a public health emergency.”[21]

The court dispensed with the businesses’ rules-of-construction arguments, reasoning that their interpretation of “any other property” as including “purely financial losses incurred by businesses impacted by the PHOs’ occupancy limitations and closures” would render the specific terms adjacent to the catch-all term superfluous.[22] The court also found unpersuasive the businesses’ contention that a narrow definition of “any other property” would prevent the state from utilizing property unrelated to healthcare but nonetheless “necessary to combat the public health crisis,” such as refrigerated trucks for vaccine transport.[23]

Next, the court explained why a narrow interpretation of the compensation provision at issue was appropriate despite its earlier language of liberally construing public health statutes in an emergency.

First, it stated that the liberal construction statement applied to PHERA’s penalty provision but not its compensation provision. The penalty provision, it reasoned, applied broadly to “the special powers of the Secretary of Health and the general powers of her office, reflecting ‘the legislative intent . . . to permit enforcement of all measures lawfully taken under the PHERA.’”[24] By contrast, the compensation provision was an explicit due process applicable only to actions taken under PHERA’s special powers. As such, the court refused to apply its liberal construction of PHERA’s penalty provision to the act’s compensation provision.[25] Second, it reasoned that the plaintiffs’ broad construction of “any other property” would lead to the absurd result of “unlimited liability authorized by the Legislature.”[26] It noted the general rule that “A statute or rule is construed, if possible, to . . . avoid an unconstitutional, absurd or unachievable result.”[27] Third, it found that plaintiffs had not exhausted their administrative remedies before seeking judicial relief as required by the statute.[28] Therefore, a judicial remedy was inappropriate.[29]

The court concluded that “the PHOs to date cannot support a claim for just compensation under either . . . the New Mexico Constitution or . . . the PHERA.”[30] The opinion drew no concurrences or dissents.