COVID-19 & Property Rights: Do Government Actions in Response to the Coronavirus Pandemic Create Compensable Takings?

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Numerous businesses around the country have been shuttered by state government shutdown orders adopted to try to contain the spread of the COVID-19 virus. Some have filed lawsuits claiming that such forced closures are takings requiring compensation under the Takings Clause of the Fifth Amendment. On the other side, state governments contend that no compensation is due, because the shutdowns are exercises of state police power to protect public health broadly. This teleforum will consider the extent to which takings claims against coronavirus shutdown orders have any validity.

Featuring: 

Prof. F. E. Guerra-Pujol, Instructor of Accounting, University of Central Florida College of Business

Prof. Ilya Somin, Professor of Law, George Mason University Antonin Scalia Law School

Moderator: Robert H. Thomas, Director, Damon Key Leong Kupchak Hastert

 

 

This call is open to the public - please dial 888-752-3232 to access the call.

Event Transcript

[Music]

 

Dean Reuter:  Welcome to Teleforum, a podcast of The Federalist Society's practice groups. I’m Dean Reuter, Vice President, General Counsel, and Director of Practice Groups at The Federalist Society. For exclusive access to live recordings of practice group teleforum calls, become a Federalist Society member today at fedsoc.org.

 

 

Greg Walsh:  Welcome to The Federalist Society's Teleforum conference call. This afternoon's topic is titled, "COVID-19 and Property Rights: Do Government Actions in Response to the Coronavirus Pandemic Create Compensable Takings?" My name is Greg Walsh, and I am Assistant Director of Practice Groups at The Federalist Society.

 

      As always, please note that all expressions of opinion are those of the experts on today's call.

 

      Today, we are fortunate to have with us Professor F. E. (Enrique) Guerra-Pujol, Instructor of Accounting at the University of Central Florida College of Business; Professor Ilya Somin, Professor of Law at George Mason University Antonin Scalia Law School; and our Moderator, Robert H. Thomas, Director at the Damon Key Leong Kupchak and Hastert.

 

      After our speakers give their opening remarks, we will go to audience Q&A. Thank you all for sharing with us today. Mr. Thomas, the floor is yours.

 

Robert H. Thomas:  Alright. Thank you very much. And good day, and welcome.

 

And thank you for joining us as our two experts, Professor Guerra and Professor Somin, discuss what has become a very important question. How should courts evaluate claims for just compensation arising out of emergency measures under either a state or the federal Takings Clause? Now, this is a question that the Supreme Court and the lower courts have examined not only over the years but indeed over the centuries. And we're going to learn today how our experts think through that question.

 

And so here's how we're going to use the next 58 minutes. First, each speaker will have ten minutes to make an uninterrupted presentation. Then, each will have three minutes apiece to respond to the other's point. Then, we'll have ten minutes or so where the moderator, and that's me, gets to ask them some questions. And in the balance of time, we'll open up the floor to your questions.

 

One reminder, please, do try and keep your question succinct so that your colleagues with their own questions will also have a chance. With that, Professor Guerra, the next ten minutes are yours.

 

Prof. F. E. (Enrique) Guerra-Pujol:  Thank you. I hope everyone can hear me properly.

 

First, I'd like to thank Professor Somin and The Federalist Society for inviting me to participate in this panel. It is a great honor, and I am happy to be here. Now, before proceeding, I would also like to dedicate this panel to small-business owners like Miss Shelley Luther of Dallas, Texas, who was put in jail for defying a government emergency measure.

 

Professor Somin and I are debating the question whether these business lockdowns are takings under the Constitution. I would like to begin my remarks by noting first off that this is not just a legal question but also a moral and a political one. Instead of waiting for the courts to decide whether shutdown orders are takings under the Constitution, I want to take this opportunity to offer what I call a Nozickian or natural rights reading of the Takings Clause and a Nozickian approach to the pandemic.

 

If I were a government official, beginning today, I would begin operating at once under the assumption that all such emergency measures are, in fact, constitutional takings. I think the dire economic consequences, which I don't need to go into at this time, resulting from the ad hoc patchwork of shutdown orders, are simply too severe. These consequences are too severe and urgent to leave to the courts.

 

Now, what do I mean by a Nozickian or natural rights approach? Well, my reading of the Takings Clause before I jump into the law is going to be inform—I want to lay my cards on the table—it's going to be informed by Robert Nozick's very famous work of Anarchy, State, and Utopia. He begins this book -- and the reason why I mention it here is because he begins this book with a very important premise that every individual has rights, including the right to liberty and property.

 

Now, these rights from a natural rights perspective are pre-political and must be respected by all. But at the same time, of course, these rights are limited by the existence of other right holders. So as a result,—this [inaudible 04:32] logic—you have to respect the rights of others, you do not have the right to cross moral or legal boundaries when you're exercising your rights. And specifically, as Nozick makes clear, you also do not have the right to impose unjustified harms or unjustified risks on others.

 

Now, I begin this way because this Nozickian or natural rights approach may appear unworkable in the context of a pandemic because one person's refusal to engage in social distancing by itself creates a significant risk for innocent third parties, including even the risk of death for persons with underlying medical conditions. And so I can see that every human activity no matter how benign its motivation or useful its consequences does carry some positive and non-trivial risk of injury to self and to others. And in fact, as Nozick himself points out on page 75 of his book, and I quote, "It is difficult to imagine a principled way in which the natural rights tradition can draw the line to fix which probabilities imposed unacceptably great risks upon others;" difficult but not impossible I say.

 

So this is where my Nozickian solution to the -- or reading of the Takings Clause comes into play. If an economic shutdown measure is indeed the most effective way of saving lives during a pandemic, then everyone who is inconvenienced by the order must be compensated for this inconvenience. One of the advantages of this natural rights approach is that it recognizes what [inaudible 06:08] would have called the reciprocal nature of the pandemic problem. That is, on one hand not shutting down non-essential businesses, where crowds can gather, makes it easier for the pandemic to spread. But on the other hand, the decision to order a shutdown also imposes significant costs on non-essential persons and business fronts.

 

But to now return to the legal question. Do these orders constitute takings? Let me begin by saying this, I think, is a novel legal question. And if we look at the law of regulatory takings, we'll find a confusing snippet of contradictory cases. So I want to actually begin my legal analysis in the last part of my opening remarks by talking about a classic torts case Vincent v. Lake Erie Transportation Company, a case that is well known to most if not all lawyers from their first-year law school days.

 

The facts of this famous case are as follows -- just as a refresher. The crew of a steamship decided to tie their vessel against a private dock in Lake Erie in order to avoid an impending storm where they could have shipwrecked. Now, although the crew was able to save the ship, the vessel was so heavy it inflicted damages running up against the dock during the raging storm. And so to make a long story short, the owner of the dock successfully sued the steam shipowner to recover damages to his dock.

 

Now, analytically speaking, how are the facts in this classic case any different from what local and state governments are doing to non-essential business firms like Miss Shelley Luther when they close these firms down completely to stop the spread of a contagious virus? The government is amassing enormous economic loses on these firms for the greater good. Now, I'm not going to call into question the cost-benefit logic of these lockdown orders, but I will call out state and local governments for refusing to pay just compensation to lockdown victims.

 

But again, are they compelled as a matter of law? Well, I have to say because Takings Law is notoriously confusing and even contradictory in some respects, I'm going to have to answer this questions probabilistically. And I'll do my best.

 

Now, for the sake of brevity and clarity, I'm going to focus on the issue of a temporary taking. Most of the coronavirus shutdown orders are supposed to be temporary or remain in effect until further notice. So now that we've narrowed the question down this way, I'm not going to be able to take the easy way out. Specifically, I mean I won't be able to argue that a shutdown orders are per se takings under Lucas v. South Carolina Coastal Commission.

 

But that said, what I want to do is center my legal analysis of the Takings Clause with Lingle v. Chevron U.S.A. Lingle's not only a fairly recent case having been decided in 2005. In fact, having been decided unanimously, it's also a decision that did help to clarify regulatory takings. Specifically, the Court offered sort of a lens, a framework, for establishing a taking. And I think the decision in Lingle is more consistent with the Nozickian framework I have outlined in these remarks.

 

Under Lingle, this is -- paint a broad brush in my remaining time. A regulation or order will be classified as a taking if that order is, and I quote now from the Court's decision, "is so onerous that its effect is tantamount to a direct appropriation or ouster" or, quoting the Court again, "if it's functionally comparable to a government appropriation or invasion of property." In other words, or in plain English, a regulatory taking depends not under legitimacy of the ends being pursued by the government but rather on the magnitude or severity of the regulation's economic impact on the property being regulated.

 

And once we frame the takings question that way, then we have little doubt that most, if not all, of the statewide and local shutdown orders are, in fact, tantamount to a physical invasion or a physical ouster, at least as applied to non-essential business firms. These lockdown orders as Miss Shelley -- as individuals like Miss Shelley Luther found out are backed up by physical force and legal coercion, including the imposition of severe fines, and even the threat and actual imprisonment. These orders in fact -- I wouldn't even go as far as say that they constitute functional physical ousters of the property rights of non-essential business firms.

 

Lastly, even though these corona lockdown orders are supposed to be temporary measures, the temporal duration of these orders -- I don't think it changes their invasive character. The temporal aspect of these orders is relative only to the issue of compensation. The longer these orders remain in effect­—and I know many states are beginning to ease them—but the longer these orders remain in effect, the greater the amount of compensation that would have to be paid.

 

Now, perhaps we could do another panel on how to calculate the just compensation. I have some ideas, but I'll leave my remarks there to stay within the time limit. Thank you.

           

Robert H. Thomas:  Alright, then. Thank you, Professor Guerra. And now, for the next ten minutes, I'm going to turn over the floor to Professor Somin. Professor Somin, all yours.

 

Prof. Ilya Somin:  I'd like to start by thanking The Federalist Society for organizing this, Robert Thomas, for his thoughtful moderation, and also, Enrique Guerra for his excellent contribution.

 

I'm actually in a somewhat unaccustomed position here because it's very rare for me to be in the position of arguing that something is not a taking or shouldn't be compensated, or a property right not protected by the Takings Clause. I've made an entire career out of arguing that, in fact, the current structure of takings law is not protective enough. However, this is a rare case where I'd have to say that most coronavirus shutdown orders, maybe not all, but the vast majority do not amount to takings. At least not from a legal point of view.

 

I'll start off by explaining why that's so under the police power doctrine. I'll then talk about the Penn Central test that would apply to these kinds of takings if it's not covered by police power. And then finally, I'll talk a little bit about the morality of compensation where perhaps there is a little bit more common ground between Enrique and myself.

 

So while the specific issues presented by shutdowns of this scale are somewhat novel, the general idea of shutting down businesses in a time of an epidemic or a spread of contagious disease is not a new thing at all. It's a practice that had existed since the Founding era and even before. In the reach of American law in European and English law and there is, in fact, a long-standing practice of government shutting down various kinds of private facilities when there is a spread of contagious disease.

 

And generally speaking, this is held not to be a taking because it comes under the police power of the government, which is government's power to protect the health and safety of the public. And so even during the Founding era in the 19th century periods when property rights were much more strongly protected overall by the Judiciary than is often the case today. There was little if any effort to claim that such shutdowns qualify as takings because it was thought as covered by the police power.

 

The same thing was true 100 years ago when you had the massive Spanish Flu epidemic of 1918–‘19. At that time, too many cities ordered businesses to shut down, at least some types of businesses. But there was no claim or understanding that that would be a taking requiring compensation, and many business, restaurants, saloons, and so forth suffered tremendous losses, didn't get compensated. There is even a policy argument for doing this in that if you say that compensation is required in situations where you have this shutting down of actions that pose a threat to the public that might actually incentivize people to run enterprise in such way as to create such a threat to get compensation. So there is that concern as well.

 

Now, it is not my view or the Court's view that anything that comes under the police power qualifies as automatically -- is not a taking. There are some exceptions, but those exceptions are generally situations where government uses the police power to damage or occupy private property, which itself poses no threat, but which the government thinks it needs to damage or take over in order to protect against a threat from elsewhere. That was true in the Arkansas Game and Fish case decided by the Supreme Court a few years ago. And in the recent Houston flooding cases where the Army Corps of Engineers flooded some property in order to prevent greater flooding elsewhere.

 

On the other hand, this Supreme Court has never held that the police power exception to taking cannot apply in a case where the actual property that is damaged, or destroyed, or shut down, or that property or the activities on it pose a threat. And the leading case here is Miller v. Schoene, from 1928, where the Supreme Court said there is no taking in a situation where the government forced a property owner to chop down or destroy his cedar trees in order to prevent the spread of a contagious disease to nearby apple trees. Obviously, if it's not a taking when your protecting trees, it's even more clearly not a taking, I think, when you're protecting, you know, when you're protecting humans from a -- the spread of a deadly contagious disease.

 

So I think the bottom line here is, that at least in cases where there is a genuine threat to health and safety from the coronavirus, that this does fall within the police power. A well-established exception to the takings doctrine that has been in place for the entire 200 years of our history. You can make arguments, perhaps, about cases where some businesses shut down, or the evidence clearly showed that it just isn't the threat of spreading the coronavirus, but for the vast majority of these cases, it falls within the police power, and therefore, would not be a taking and this is actually pretty well-established, long-standing Supreme Court precedent, and there are also state court precedents on this as well. 

 

Now, let's assume for the sake of argument, that for whatever reason courts decide that the police power does not apply. In that situation, in most cases, as I think Enrique eluded to, the so-called Penn Central test would apply. And under the approach here the -- there can be an automatic taking if the government does a permanent physical occupation of the property or if its measures impose a total loss of all economic value. I think in the vast majority of coronavirus cases, neither of these things occurs. There is not a physical occupation, permanent or otherwise, nor is there a total loss of economic value. Though there might be some exception.

 

So if that isn't the case, then Penn Central says a three-part test applies. You have to consider first, the character of the government action. Second, whether their investment-backed expectations would get upset. And third, the economic impact. This test is extremely vague. I and other scholars have urged the Supreme Court either get rid of the test or at least clarify it. But so far they have not done so, they haven't listened to us, and I don't expect that they will listen to us in the near future. And, however, although the test if vague under current precedent it generally gets applied in ways that are very favorable to the government.

 

In here, two facts are likely to control. One is that the shutdowns are temporary and expected last only for a few weeks or months. And second, in most cases, there is not a total loss or anything close to it of all economic value of the property. And I would add that there already has been one major Court decision on these issues, the Pennsylvania Supreme Court decision in Friends of Danny DeVito v. Wolf.

 

I should add the actor Danny DeVito was not actually involved in this case, just some people calling themselves his friends. And the Supreme Court of Pennsylvania ruled against these claims, basically the same basis that I just outlined the police power plus some aspects of the Penn Central test. And while there was disagreement among the justices about some issues, even the three justices who dissented on other grounds did not do so on the takings issue.

 

So I do agree, at least in part, with Enrique that there is a moral case for compensation. Many of these cases I think unlike in cases where somebody deliberately operates some kind of harmful or dangerous enterprise, most of these business owners or owners of other facilities they're not doing anything that before coronavirus could be foreseen as dangerous or wrong. They're just in the wrong place at the wrong time in the wrong business.

 

So there is a moral case for compensation, though I am skeptical that we will ever be able to compensate these people on anything like the scale to fully offset their losses just because the losses are so great. They also would be extremely difficult to calculate. So I fear the only way to really get out of this problem is to find a way to reopen at least reasonably safely as soon as possible.

 

Perhaps, that requires better contact test -- tracing and testing, perhaps, other measures. That's a separate teleforum that perhaps we should have. But sadly, with rare exceptions, perhaps, such as ones where there is clear evidence that this particular business doesn't actually pose any threat, I think these kinds of cases will be rejected as takings cases as it already happened in Pennsylvania. And few, if any, of these businesses will be entitled to compensation under the Constitution, even if morally speaking there might be a case for doing so.

 

And on that, I hope I stayed within my time, and I look forward to the rest of the discussion.

 

Robert H. Thomas:  Thank you, Ilya. And yes, you both stayed well within your time. So thank you for that. And with that, Professor Guerra, you have three minutes to respond. It's all yours.

 

Prof. F. E. (Enrique) Guerra-Pujol:  Thank you. Actually, Ilya made a number of great points, I think. So I'll just go in reverse order beginning with the Danny DeVito case. I [inaudible 21:04] case the parties, the plaintiffs, made a strategic blunder. They were actually requesting the Court to strike the order the Governor Wolf's -- Pennsylvania is shut down, ordered down. They really weren't asking for just compensation, and I think that there is some takings on which in that decision the Court is really -- the Court was right. And also, Ilya's right the government does have -- state and local governments do have this police power to take measures, even emergency measures, to protect public health.

 

      And I'm reading some other due process issues and things of that nature. There's a Wisconsin case that was decided a couple of days ago. But having, generally speaking, that was a strategic blunder. I also thought that the Court also got it wrong because they're sort of categorically saying part of the opinion that deals with taking [inaudible 21:57]. But the Courts said if it's a temporary measure --

 

Robert H. Thomas:  -- Professor Guerra, do you mind speaking into the mic a little bit more?

 

Prof. F. E. (Enrique) Guerra-Pujol:  Oh, yes. I apologize for that. Yes, I'll go back into the -- I think the Court made the mistake of if this is a temporary taking or a temporary measure, so we're not even going to bother applying or going through the Penn Central factors. I -- now we don't have time in three minutes to go over the Penn Central factors, but I think a strong case can be made even under the indeterminate multi-factored Penn Central test that in fact that these -- at least for the duration of the orders they are severe enough to trigger takings.

 

On the other arguments, it's true, and I even got a New York Times digital subscription to look at what the local governments were doing in the 1918 pandemic. And it's true, governments did—in Philadelphia, St. Louis, New York City—order saloons, churches, schools, a lot of businesses close down. But I will say that those -- the 1918 pandemic is really before the Court decided Pennsylvania Coal v. Mahon, and I find myself a very odd position defending a living Constitution approach versus the originalist approach to the Constitution. A consistent originalist would say, "Look, only a physical seizure of property should count as a taking." But post Pennsylvania Coal and Penn Central, which interprets Coal, government regulations that lead to extreme diminution of value, can constitute a taking.

 

And so -- now on this novel issue I'll close on this point. There's a novel issue that if it's only temporary like is that sufficient diminution versus the overall value of a property. But I would frame it differently as looking at the temporary scope of the measure, during the time the measure is in place to have a total taking. And so there should be at least some partial just compensation to reflect.

 

And I'll go a little bit over just to say if you look at the CARES Act and other legislation now being considered by Congress and measured by the Federal Reserve, trillions of dollars are being allocated to provide partial relief. But these trillions of dollars, I would argue are being misspent, they're being sent to people who don’t even need our government assistance because they happen to fall under the income threshold. My takings approach, a Nozickian approach, would at least target government money to the people who really need it, the people, and firms, whose businesses have been shut down.

 

And I thank you for allowing me to go over, a little bit over.

 

Robert H. Thomas:  Of course. We have a little bit of elasticity built-in and thank you for that. Professor Somin, you have, let's say, approximately three minutes, maybe a little more, to respond to Professor Guerra's theories and assertions. What say you?

 

Prof. Ilya Somin:  Yeah, sure. So I just would like to make a couple points. First, on Pennsylvania Coal in the 1918 pandemic. It is true that the Mahon case was only decided in 1922, and that was the first time that the federal Supreme Court had said that a regulatory taking would be something that required compensation. But there was previous jurisprudence of this kind from state Supreme Courts going back to the 19th century. And most takings litigation in that era was, in fact, in state courts.

 

And yes, these kind of shutdowns during the 1918 pandemic and during previous epidemics were never held to be takings. I don't think even there was even much thought that they could, because of the police power exception which applied. And indeed, even in the Mahon case, the Supreme Court specifically indicated that there would be compensation required in that case because the police power did not apply, that it was not an exercise of police power. They said if it had been, things would have been different. That's right in Justice Oliver Wendell Holmes' majority opinion for the Court.

 

On the Danny DeVito -- I'm sorry the Friends of Danny DeVito case, they made a bunch of different claims there. But they did specifically make a claim that they were demanding compensation under the Takings Clause, and that claim was specifically rejected by the Pennsylvania Supreme Court. There were also a lot of other kind of issues that were raised that we don't have time to touch on, but I think pretty significant.

 

I would also like to briefly advert to the claim that Enrique made, that these takings are the same as direct appropriations or because they're indefinite that means they're a total destruction of economic value. I think first, they're not direct appropriations, and if the government doesn't actually start occupying or using the property or take away title, in principle, there could be situations where there's a total loss of economic value.

 

I think in the vast majority of cases, that won't be true. But even if it was true, it would only be relevant if you get around the police power issue. So long as you're within the police power exception, the whole Penn Central test is actually irrelevant. Penn Central only comes into play if the government action in question is the kind that could potentially be a taking, which if it falls within the police power exception, it would not.

 

Finally, I certainly agree that the CARES Act and other measures taken by the federal government often they're poorly targeted, they're wasteful, there's are a lot of problems with them. I'm not sure that a takings approach would be the best alternative to it. I also am very skeptical given the real-world way the government works that they can be brought to act in a sort of efficient and effectively targeted just manner in a big crisis like this where there's lots of opportunities for different interests groups and ideologues to sort of put their fingers in the trough.

 

But I'm skeptical that a takings style approach will fix matters. I fear that the only way to really fix them would be to try to get to a safe reopening as quickly as reasonably possible. Perhaps, learn from the lessons of other countries, some of which have handled the pandemic better than we have – South Korea and others. 

 

And on that note, I turn over to Professor Guerra, and I look forward to the other questions. [Inaudible 28:29].

 

Robert H. Thomas:  Well, very good. Thank you. And again, appreciate you all keeping within your time. We're right on track. But Professor Somin, I'm going to hold you on the line because the next ten minutes or so, I'm going to try to see if I can challenge some of your assertions. And so I'm going to ask you first. You mentioned, or you argued, that these cases are not likely to result in compensation. But are there any in your understanding in the history of quarantine and police powers? Again, these go back even well before the establishment of the United States. And do you know are there cases in which these type of measures, in response to a pandemic or otherwise, have ever resulted in a successful takings claim?

 

Prof. Ilya Somin:  Not to my knowledge. Now, I admit I haven't done a comprehensive search of every case in the history of the United States on quarantines and takings or in the history of England before then. But to my knowledge, there has not been such a case. There have been a few cases where quarantine measures were strapped down on other kinds of ground, such as racial or ethnic discrimination. But not on the basis that they were takings, no.

 

Robert H. Thomas:  Yeah, while I have you on that question, I mean, I don't want to take us too far-field from the call of the question today, which is the compensation issue. But what about, let's say, how much due process is involved in this and are there potential challenges to either procedural or what we call in the United States substantive due process to these sort of measures that you think could or couldn't be successful?

 

Prof. Ilya Somin:  That's a good question. It is one of the issues that was litigated in the Pennsylvania case, and while the majority rejected this argument, the dissenting justices said that the lower court should have been allowed to look at that more closely. I think that at the very least there can be challenges in more extreme cases where it seems like what's being shut down poses little or no threat and there can sometimes also be challenges under state law, state separation of powers law, or arguments that the governor or a lower-level bureaucrat has exceeded their authority.

 

There is the recent Wisconsin Supreme Court decision on that very issue which said that a state health official, not the governor, but a state health official had exceeded her authority. So I think some of these kinds of questions will vary based on the details of state law, but they're different from takings arguments.

 

Robert H. Thomas:  Right. And we've seen these could be matters of state law or even local ordinance and delegations of power and even in emergencies government officials have to act within the scope of whatever power that's delegated them under either the Constitution or say a statute or city charter, right?

 

Prof. Ilya Somin:  Yes, I think that's right. And that will vary by state. It varies somewhat how much power is delegated to the governor by the state legislature or the state constitution. There are also variations in terms of how much power localities have relative to state governments. I think these are important questions and certainly don't rule out the possibility at least in some cases governors, other state officials, or in perhaps localities have exceeded the scope of their powers. That, I think, is a different issue from the question that we're debating today.

 

I do want to also note that it's my understanding that Enrique was supposed to have a further rebuttal for, I think, three minutes if I'm not sure about -- oh no, I'm sorry. Never mind. He had his previously. I apologize for that. Any event I'm sorry for interrupting your question time. Please continue.

 

Robert H. Thomas:  Oh no, not at all. In fact, we gave him a little bit of anticipatory pleading there. We put -- we asked him to go first on the rebuttal. So with that I'm going to turn the questioning over to Professor Guerra.

 

And let's get back to the takings question. And I think this one is one that's very important. And now that in light of the Fourteenth Amendment there's, of course, some debate whether it's a Due Process Clause or the Privileges the -- oh my gosh, I want to say or immunities, but I think it's and Immunities Clause of the Fourteenth Amendment applies the Bill of Rights to the states. For the most part, that settles that it does. What's the relationship in your view between the government's police power to act to further the public health safety and welfare and the power of eminent domain, which is the power to seize property for public use with the payment of just compensation? How do you see those two powers working together or in conflict in these type of cases?

 

Prof. F. E. (Enrique) Guerra-Pujol:  Thank you. That is actually an excellent question. And it will also allow me to make a rebuttal point that I wanted to make regarding the police power. But I ran out of time. So I'll go ahead and combine those two.

 

I have to say, I'm in a very unenviable position because Ilya is right about the law. Generally speaking, courts are—and I think as they should be—are very differential when state and local governments are exercising their police powers. And it's worth for our audience just to reiterate why. It’s because we have a federal system. And the powers that have not been delegated to Congress are reserved to the states sort of as a general principle.

 

But that said, and I'm perfectly willing -- I want to be intellectually honest and just concede that the police power is a very broad power. But what I'm not willing to concede is that the police power overrides the power of eminent domain. And here I'd like to cite a very important historical case, though it's not a takings case, is a very important police power case Jacobson v. Massachusetts that was decided in 1905. And this is the case involving compulsory vaccination. And for those students of Oliver Wendell Holmes, I think this case is referred to in his famous Lochner dissent. But one of the things -- now the case is not really a good case for me because it affirms the police power, including the power to even compel an individual to get a vaccination against their will.

 

But there are some general -- there's some dicta in there that I think's very important. Among the dicta is the statement that the police power, though yes liberty under the Fourteenth Amendment, has to give way to the police power, especially in a public emergency. At the same time, the police power right it cannot be exercised independent of the federal and state constitutions. That even the police power is subject to constitutional limits. Otherwise, we're not really living in a constitutional Republic. And I think this is the fundamental point as being lost sight of. 

 

Now, having said that, we've established those first principles. It's not clear what the -- I'll be willing to concede the relationship between the police power and power of eminent domain is an uneasy one. But I do like the framework in Lingle v. Chevron where the Court says look there's three ways you can establish a taking. If it's a regulatory taking, then we go with Penn Central. If it is a total diminution of value, permanent diminution of value will go with Lucas. Call it a per se taking or if there's a physical ouster, physical invasion.

 

And I'm willing to say that I think a strong argument can be made under the first prong. I want to get away from Penn Central. I'm willing to concede Lucas doesn’t apply that if we're going to back up these coronavirus orders, even though they're issued under the police power, but if we're going to back them up with coercion, that operates as a physical ouster. And that doesn't mean the government lacks the power to protect public health, but it does mean to have to pay target just compensation.

 

And I'm willing to be reasonable on what is just compensation. Maybe even all -- just so many businesses are affected maybe they'll have to take haircuts. Won't get full compensation, but that's how I would look at that relationship. I wouldn't be as categorical as my friend Ilya would be when it comes to police power.

 

Robert H. Thomas:  Well, good. Well, thanks. And we've got just over a minute. And maybe we do kind of a one-light before we open it up. And get ready with your questions, folks, because in about just over a minute we'll open up the floor to your questions.

 

But how about this, respond as briefly as you can to this assertion. And this takes a little bit of cue off of your recent article, Professor Guerra, that argued that -- it's an intriguing one Kelo, Supreme Court's controversial ruling that exercises that eminent domain power only have to pass a really low bar under the public use clause, is actually decision supporting what you say is a "strong argument for taking down lockdown compensations."

 

I think in one of the citrus canker cases, the Florida Supreme Court actually agrees with the approach. It held that a regulation creates the public benefit if it's preventing harm, and it's more likely that there is a taking. Both of you, if you would respond briefly as you can to this question. Do you think emergency measures are done as a public benefit or as harm prevention? And does it matter? And is there any difference? Professor Somin, how about you go first?

 

Prof. Ilya Somin:  So I would say two things about this. One is I think not all emergency measures are harm prevention, but preventing the spread of a pandemic pretty clearly is harm prevention if anything is. And I would also say that it's just simply not true that the Kelo case somehow strengthens the argument that this is a taking. I've written a book about the Kelo case, and I thought I knew every argument that had been made for and against it. But Professor Guerra has come up with something novel, but I don't think it holds up.

 

The Kelo case simply doesn't address the issue of what qualifies as a taking. It only addresses the issue of if there is a taking what counts as a public use because under relevant Supreme Court precedent and under the Fifth Amendment if there is no public use, then the government cannot take private property even if there is just compensation. But on the other hand, if something is not a taking at all, then it actually doesn't matter whether it's for a public use or not because the public use constraint only applies where there is taking.

 

So in Kelo, the Supreme Court took a very broad view of what counts of a public use, but it in no way altered the previous jurisprudence on police power and how various exercises of police power do not qualify takings. Kelo simply didn't address that. The Florida case you mentioned, I believe, is under the state constitution, and it also I think does not actually build on Kelo.

 

But in any event, if anything falls within the police power exception to takings, then it would have to be a situation where what is being done is preventing the spread of a deadly contagious disease. If that doesn't qualify, it's hard for me to say what would.

 

Robert H. Thomas:  Okay, very good. And Professor Guerra, we'll give you the last word. If you would in the next 30 seconds, can you give us your counterpoint before we move to audience questions?

 

Prof. F. E. (Enrique) Guerra-Pujol:  Well, thank you. I'll keep it brief. I will say, again, being intellectually honest, Ilya is right about Kelo. My interpretation is a bit novel, maybe even rhetorical, but I was trying to make a deeper point, that was what bothers me about Kelo is that the government wants to have its cake and eat it too so to speak.

 

I'm certainly willing to give, especially state and local governments, the benefit of the doubt as to the exercise of their police powers. But whether we classify something as a harm prevention measure or a -- a harm prevention does confer a public benefit and the Lockean logic that we can't impose the costs on a smaller fraction of the population to benefit everyone else in a time of emergency—we're really all in this together—that's why I took the liberty of interpreting Kelo quite novelly, but I need to rethink that.

 

Robert H. Thomas:  Well, before we move on to audience questions, I'll end -- I'll use the moderator's prerogative to end on this.

 

I invite you both, as well as our audience, to go read the majority and the dissenting opinions in that Florida Canker case. And because I too agreed with Professor Somin -- my first reaction to your piece was, "What?" But upon savoring the lime, let's put it -- a little letting it breathe, I think at least, in that case, the justices -- the Florida justices were debating that very point. Because they said, if something is truly needed, then it becomes under the public use clause, at least something that's even a better taking, which requires compensation and one that's sort of just plain old regulation, which is rearranging the economic burdens and benefits.

 

Well, and with that, I'm going to turn it back to our host to get our audience questions, and I'm also -- if we don't have any, I also have some that have come in via email and Twitter. So with that, let me turn it back to our host in the remaining time to open up the floor.

 

Greg Walsh:  We'll now go to our first question.

 

Mike Daugherty:  Hi, this is Mike Daugherty. And I have a real controversy going in the Florida panhandle about property essentially being taken, I guess, as a layperson would say. Whereas, DeSantis has allowed all hotels and resorts to be fully open but shut down all vacation rentals. So literally, the Sandestin Hilton, for example, is open for business on the beach, but the condos at the building right next door are totally closed. As he might not have anticipated, this has created quite a kerfuffle with YouTube videos, lawsuits, demand letters.

 

And it's fascinating because I'll tell you, you don't want to be a Republican in Florida and run for state office or nationally and lose the panhandle and people are livid. So as far as the Takings Clause goes, how much do they get to split the baby when one building gets to stay open, and the other one has to stay closed because of a category?

 

Prof. Ilya Somin:  Yeah, so I think there may well be inconsistencies and flaws in the policy that DeSantis has adopted, and I'm not trying to endorse it, or for that manner, any other governor’s policy. At the same time, under the police power theory, it's not enough to prove that something else has been left open, which is similar to be closed you would have to show that the facility that has been closed actually doesn't pose a threat. And that --

 

Mike Daugherty:  -- Well, that would be simple. There's arbitrary and capricious, but that's fine. I'd like to see them try to prove that there is a difference, there's not. I own a medical laboratory, and I can tell you there's no scientific basis, but [laughs] --

 

Prof. Ilya Somin:  -- I wonder if I could finish my answer, please. I didn't interrupt your question when you were talking --

 

Mike Daugherty:  -- Oh, [inaudible 44:09] for me. Let's just hit mute. Thank you so much.

 

Prof. Ilya Somin:  As I said before, under the police power analysis, in order to win it would not be enough for the plaintiff to prove that something else left open is similar to that which is closed, rather, they would have to show that the facility which is closed does not pose any meaningful threat. And I don't know enough about these beach condos to know whether that's true in those instances, but I suspect the governor would come up with evidence that there's a risk of their spreading the coronavirus.

 

So you can argue that maybe that making seemingly arbitrary distinctions between different types of facilities violates equal protection or that it violates due process or something of that sort. That's different from saying that it violates the Takings Clause or doesn't fall within the police power exception.

 

Robert H. Thomas:  Very good. Thank you. --

 

Greg Walsh:  Okay --

 

Robert H. Thomas:  -- Next question.

 

Greg Walsh:  Our next caller is on the line.

 

Phil Goldstein:  Thanks. This is Phil Goldstein. I have a question about, not a shutdown, but what do you think about these government ordered moratoriums on evictions or foreclosures. That doesn't seem -- I don't know if that counts as a taking or violation of the contract clause, but it's certainly not a taking for public use because it would only apply to certain individuals who are not paying their rent.

 

Prof. Ilya Somin:  So in my view, that should be a taking because it's not an exercise of the police power to -- requiring people to pay rent does not in of itself spread the coronavirus or whatnot. However, under current Supreme Court precedent, it probably would not be held as a taking because of the Penn Central test.

 

Similarly, while I think such a thing is a violation of the Contract Clause under the 1934 Blaisdell case decided during The Depression, the Supreme Court ruled otherwise, and it upheld a mortgage moratorium enacted by Minnesota during The Great Depression.

 

So to my mind, if the government wants to keep people from being evicted or from having to pay mortgages, the proper thing to do would be to subsidize their payment of rent for a period of time under the emergency, rather than lay the burden on landowners or on lenders. And I think that's the right constitutional approach. However, this is an area where the Supreme Court has simply interpreted the Constitution differently from what I think is correct. And I don't think it's very likely that the Court will overturn the relevant precedent in the near future.

 

Robert H. Thomas:  Yeah. Professor Guerra, do you have anything thoughts on that? The question of whether rent control -- that sets the rent at zero even for a temporary time or an indefinite time that might be considered a better takings case say than the universal business shutdown order. Do you have any thoughts on that?

 

Prof. F. E. (Enrique) Guerra-Pujol:  Well, I actually agree with Ilya so I'll just -- the only thing I would add is where I think the Supreme Court has gone wrong and where Justice Holmes and Pennsylvania Coal -- to go back to that landmark case is a better approach. It would be in the way the Court looks at property.

 

The way lawyers, common law lawyers, look at property is as a bundle of rights. And so I would say Ilya's right and the Court has gone astray because any interference, with any part of that bundle, should constitute a taking. If in fact there is a severe enough diminution in value, either under the Penn Central factors, or if we could argue, that it's the functional equivalent of a physical ouster. And so, again, I would go back to first principles of property law there.

 

Greg Walsh:  Let's now go to our next question.

 

Peter:  So my name is Peter. I'm an incoming law student to University of Michigan. And I wanted to ask about not necessary closures, but about Governor Cuomo's seizures of ventilators. Would that qualify under the Takings Clause, or is that like a police power? I just wanted to know your thoughts.

 

Prof. Ilya Somin:  I'm not familiar with what Cuomo has done in terms of seizing ventilators. I have heard cases about the federal government seizing shipments of masks and other supplies that had been contracted for by state governments. To my mind, if the facts on those cases are as reported by various media sources, I think that does -- those cases are takings. And the federal government does owe those states or in some cases private parties, compensation.

 

We have the ridiculous situation going on now, here in the D.C. region, where the Governor of Maryland got a shipment of testing supplies from South Korea and then he actually had the State National Guard guard the shipment under -- in an undisclosed location lest the federal government seize it. So to my mind, that is a taking, although I don't know whether there would ever be litigation on it.

 

On the Cuomo thing, there I'm not sure that I know he reallocated -- or he ordered reallocation of some ventilators. Where I'm not entirely sure is sort of who owned those ventilators in the first place, and where the hospitals in question were owned by the state government or by local governments that must obey the state and the like. But, also, unlike the federal seizure of masks and the like, the ventilator reallocation, as I understand it, was temporary. And therefore, it's not quite the same thing as a permanent seizure of the property.

 

Nonetheless, in both the case of Cuomo and the case of Trump, it certainly strikes me that at least based on the limited facts available, they're at the very least a good reason to query what happened. Whether it qualified as a taking, and more generally, it's not great to see essentially different levels of government stealing supplies from each other and from private parties. It's just one of many ways in which the government's response [to] this pandemic so far, to put it mildly, has been far from wonderful.

 

Robert H. Thomas:  I think this -- what we'll see here, these are what we might call commandeering's of property, is a—this is Robert—a little shift in the burden.  I would think that these are presumptively compensable events. And then the question is, is there any reason they shouldn't be compensable? Because the Court -- I think the Supreme Court has made clear that even during wartime how the now commandeering's of property, even if temporary in the case of Kimble Laundry, don't necessarily wipe out the obligation to pay compensation.

 

But we're also going to see maybe public use questions. If the feds are seizing it from the state, does the state have an argument maybe that this is a prior? You can't seize it for public use when it's already being used for the public, and perhaps supremacy clause type of arguments shifting us over into -- maybe back into the Kelo territory as to whether these are truly takings for what public. Do we have more questions in the queue?

 

Prof. F. E. (Enrique) Guerra-Pujol:  Before we do another question. If I could just quickly follow up. This is Enrique.

 

Robert H. Thomas:  Yes.

 

Prof. F. E. (Enrique) Guerra-Pujol:  I agree with Ilya's analysis, based on the facts as we know them. And if you look at it—sort of take a step back—it's really a difference of degree between an outright commandeering or grabbing of masks and supplies, and closing down a non-essential business. And this is why I always like to go back to Jacobson. I'm not going to question -- courts should not be questioning, at least under the clear mistake doctrine that was used back then, the exercise of a police power. But that exercise needs to fall within the Takings Clause when you actually have a physical grab or its equivalent, as I do borrow the language in Lingle. And so that's all I would add to that.

 

Robert H. Thomas:  And here let's -- I think it's -- even in a regular old, plain old taking, there's no need to compensate upfront. I mean compensation, generally speaking, is okay after the fact. And you can't necessarily stop a taking simply because if they haven't paid you contemporaneous, for whatever seizure there might be.

 

Okay. Host, more questions in the queue, please.

 

Greg Walsh:  Yes, sir. We will now go to caller from area code 617.

 

Caller 4:  Hi. Yeah, I was calling because I know there are problems with business continuation insurance claims. But I think that might be a good venue for the government to use to kind of let the insurance companies pay off the claims and then be the reinsurer for the claims that was paid off. I think it would set a good precedent too. 

 

Greg Walsh:  To whom was that directed?

 

Caller 4:  Oh, I -- just a general -- I don't -- just really if it makes sense from a policy standpoint for the government to authorize insurance companies to pay business continuation claims. Because people are paying for business continuation, but even though they're been forced to close, they're not able to make claims on their business continuation.

 

Prof. F. E. (Enrique) Guerra-Pujol:  This is Enrique --

 

Greg Walsh:  -- Robert.

 

Prof. F. E. (Enrique) Guerra-Pujol:  -- Oh, sorry.

 

Greg Walsh:  Enrique, go ahead.

 

[Crosstalk]

 

Prof. F. E. (Enrique) Guerra-Pujol:  That was, actually, a wonderful comment. I've been toying with this idea of a -- sort of an insurance perspective. And I do appreciate that comment. I think it's a good one. And I'll just say this, it really is, ultimately, more of a policy. There's a legal aspect to the question, but it's really a policy question, what do governments want to do. And what worries me as citizen of our country is that government is -- we're not going back to our first principles based on natural rights or Lockean first principles. And really that's what I'm trying to do in this conversation.

 

Greg Walsh:  Ok, let's go to our next caller.

 

Caller 5:  Yes. Thank you. I'm out here in Northern California, a college instructor, and this is addressed to either guest, if the federal appellate courts say, would rule in favor of takings claims, how would the court as a practical matter deal with the flood of lawsuits? It seems to me you'd have just millions of claims, businesses of all stripes making claims under either federal or state law. That's my question.

 

Prof. F. E. (Enrique) Guerra-Pujol:  This is Enrique. May I jump in?

 

Robert H. Thomas:  Oh, sure.

 

Prof. F. E. (Enrique) Guerra-Pujol:  That's actually an excellent -- another excellent question. I haven't written about this, but it's a valid point. And what I've been toying with the idea is, once we get our first principles straight, I think we can be creative. And I'm thinking here maybe of the BP Claims Facility or the Victim Compensation Fund of 9/11. I know those were on a much smaller scale compared to the current shutdown, but I think if we get our first principles right, I think we can get the logistical details in order.

 

And I'll say, Ilya had mentioned -- and I certainly sympathize with being skeptical of government getting the takings payments right. But I'll say as Winston -- as we -- towards the end here -- as Winston Churchill once said about democracy being the worst form of government except all the others that have been tried. I think the same can be said of a takings approach here. None of these approaches are perfect, but I think the takings approach -- if we just committed to that principle would be the lesser of all the evils we're facing today.

 

Prof. Ilya Somin:  I'm not sure that it actually would be because the takings approach would essentially require -- would essentially be a case-by-case evaluation of the value of different property and how much it was diminished by the order in question. And that approach has problems even when you deal with your more conventional compensation claim.

 

There's a lot of evidence that compensation is not very well calculated when you're dealing with thousands, or even millions, of people who might file these claims if those problems are magnified and the risk of chaos, is even greater to the extent that we are able to pay compensation at all it might be better to just come up with sort of a standardized legislative formula which avoids the need for an attempt to make detailed analysis of many thousands or millions of properties.

 

But really I'm pessimistic that we can compensate all these people on anything like the full scale of their losses at all. And I think to the extent that we are going to spend government resources in this area which obviously we are, it might be better to concentrate the resources in finding a way to quickly and safely reopen or at least relatively safely. That I think is more likely to minimize the cost of businesses and others in the long run than any attempt to try to find case-by-case compensation for perhaps a fraction of the cost. The money we're currently spending on so-called stimulus payments and the like, perhaps we can set up a testing and tracing regime which is at least reasonably functional and therefore enables people to open up safely. And perhaps also there could be other kinds of safeguards as well. That perhaps is a subject for a different teleforum.

 

I don't rule out certainly having some compensation payments, but I'm very pessimistic that they can be done in anything like the scale of the losses. And if they were on that scale, it would essentially mean inflicting a large cost on the taxpayers and also probably some significant deadweight losses in terms of setting up the administration to collect the money for this and transfer it and decide who it should be handed out to and so on.

 

Robert H. Thomas:  Well, thank you, Ilya. We have just about run out the clock. But before we go and thank our speakers as well as you audience members, I'll just add this. Thank goodness we have Knick. Because now the federal courts can share in the processing of these takings cases. This time a little over a year ago they couldn't, it was all on state courts. So thank you Supreme Court for Knick.

 

And two, one model questioner you might want to look at is how the federal court is dealing -- has dealt with the flooding cases down in the south. The Court of Federal Claims specifically where I think at one point there was a hearing with 168 lawyers in the room. Whether that's the most efficient model, I'll leave to you. And with that, I think we're just about -- well, just a little over time.

 

And so I'm going to thank our two presenters for an exciting and interesting back and forth. I want to thank you, the audience members, for listening and for contributing your questions. If you have additional questions that were not answered and you'd like us to pose it to your panelists, email me rhthomas@wm.edu, and I'll push them out to them. And with that, Greg, back to you as the host.

 

Greg Walsh:  Thank you, Robert. On behalf of The Federalist Society, I want to thank our speakers for the benefit of their valuable time and expertise today. We welcome listener feedback by email at info@fedsoc.org. Thank you all for joining us. We are adjourned.

 

[Music]

 

Dean Reuter:  Thank you for listening to this episode of Teleforum, a podcast of The Federalist Society’s practice groups. For more information about The Federalist Society, the practice groups, and to become a Federalist Society member, please visit our website at fedsoc.org.