It’s been more than a year since the first Covid-19 cases were identified, and almost as long since much of the United States locked down its economy in an attempt to slow the progress of the virus and save the lives of the vulnerable. Fortunately, the end now appears to be in sight: as vaccination continues to ramp up across the country, cases and deaths have dramatically dropped. But we haven’t yet begun to assess the long-term consequences of the yearlong pandemic. This blog post will briefly assess some of the consequences that have faced small business owners over the course of the pandemic in relation to the 5th Amendment Takings Clause.
What is the Takings Clause?
The Takings Clause of the 5th Amendment forbids that “private property be taken for public use, without just compensation.” But legal scholars and jurists have disagreed on what it means for property to be “taken.” Property theorists have often described property rights as a “bundle of sticks,” with each stick in the bundle representing a distinct property right. Property ownership may grant the right to sell property, to occupy it, to leave it to your descendants—but these rights can be separated from one another. You may have the right to earn income from a piece of property, but not to sell it. In certain circumstances, the government is allowed to disturb this bundle of rights and compensate owners for their losses. The public is most familiar with this through the concept of eminent domain.
Regulation and the Takings Clause
The government’s responsibility to compensate property owners for a taking is not limited to situations in which the government physically removes property from its private owner. Rather, actions which diminish the value of property, such as government regulations, are also compensated under certain circumstances. However, not everyone agrees about the extent to which property value must be diminished by a regulation before courts will find that a regulatory taking has occurred. The Supreme Court has yet to establish a test for indicating that a taking has occurred.
Could the coronavirus shutdown amount to a regulatory taking?
After the coronavirus shutdown began, and its impact on business became apparent, some property owners filed suits claiming that they had been subject to an uncompensated regulatory taking by the government. Essentially, these suits made the case that business owners who were forbidden to conduct normal business activities had been deprived of the economic value of their property. The harm that occurred is not a matter of much factual dispute; it’s a matter of public record that millions of business owners across the country lost income and opportunity as a result of the pandemic and resulting government shutdown orders. Legal scholars disagreed as to whether courts would or should find these claims plausible. With about a year’s worth of coronavirus jurisprudence now in existence, we can evaluate the successes and failures of lawsuits based on the Takings Clause.
The Road So Far
Although economic harm has been caused by the coronavirus regulations, state and local governments issuing shutdown orders have several defenses at their disposal. In an order denying a request for a preliminary court injunction, judges in Colorado noted that “states have broad powers to act during an emergency to secure public health and safety.” The Court further noted that “temporary moratoria on various business activities […] are not compensable takings (particularly to an employee, rather than the business owner).”
Similarly, the Supreme Court of Pennsylvania held that business shutdowns did not amount to a regulatory taking. The Court in this case relied on both the temporary nature of the shutdown and its seeming necessity, noting that the shutdown “result[ed] in only a temporary loss of the use of the Petitioners’ business premises, and the Governor’s reason for imposing said restrictions on the use of their property, namely to protect the lives and health of millions of Pennsylvania citizens, undoubtedly constitute[d] a classic example of the use of the police power to ‘protect the lives, health, morals, comfort, and general welfare of the people.’” Indeed, there is a long history of judicial skepticism against takings claims made against public health and safety regulations. Taken to an extreme, it could be noted that almost any public benefit comes at the cost of some private inconvenience; courts are simply drawing lines to address when the private burden becomes too high.
In a case similar to the one in Pennsylvania, the US District Court for the District of Connecticut denied a preliminary injunction to landlords who claimed that an eviction moratorium represented a violation of the Takings Clause. The Court noted that the plaintiffs had failed to quantify the economic impact they felt they would suffer as a result of the moratorium.
What is the current status of coronavirus takings cases?
At least some coronavirus takings cases have survived motions to dismiss and are currently making their way through the court system. Moreover, as the coronavirus pandemic enters its second year, it seems at least possible that some courts will look more favorably upon the claims of plaintiffs who believe they have been forced to bear a disproportionate share of the public health burden.
While the original emergency orders that forced businesses to shutdown have long since expired, business owners in some states have been subject to stringent and sometimes costly regulations for the better part of a year now. If part of courts’ justification for denying relief is that the economic deprivation was temporary, it might be time to question how long a “temporary” situation must last before it qualifies as a taking. Some progressives have noted that there is precedent for multi-year takings to be seen as temporary. On the other hand, states that continued to enforce extensive business shutdowns after the first peak of the coronavirus pandemic subsided may face questions about whether, at times when coronavirus was not circulating at levels seen in spring 2020, strict regulations on businesses were truly necessary to preserve public health under states’ police powers.
New cases continue to be filed, and there is no reason to expect this trend to reverse itself as the country enters a second year of coronavirus regulation. It’s possible, though painful, to imagine, that we might be living with the coronavirus to the end of 2021 and beyond. If that’s the case, even those who have generally favored the coronavirus lockdowns may begin to feel that business owners should be granted some degree of compensation. While some business owners have received at least some assistance from the government, it hasn’t been enough for some entrepreneurs. Small business ownership fell by 6% nationwide in October to December of last year alone; an even higher percentage of minority-owned small businesses have been affected. While there are signs of an impending economic recovery, it remains to be seen whether it will be enough to save the small business landscape.
 Lawrence v. Colorado, 2020 U.S. Dist. LEXIS 92910.
 Friends of Devito v. Wolf, 227 A.3d 872, 2020 Pa. LEXIS 1987.
 Auracle Homes, LLC v. Lamont, 2020 U.S. Dist. LEXIS 141500, __ F. Supp. 3d __, 2020 WL 4558682