COVID-19 Response: Constitutional Protections for Private Property

COVID-19 Response: Constitutional Protections for Private Property

Legal Sidebari

COVID-19 Response: Constitutional
Protections for Private Property
March 27, 2020
As communities respond to the Coronavirus Disease 2019 (COVID-19) pandemic, the interests of
governments and property owners may clash. Governments have an interest in controlling spread of the
disease, providing testing and treatment, and helping individuals and businesses cope with widespread
disruptions of daily life. State and local governments pursue these interests through their police powers,
which give them broad latitude to take measures addressing public health, safety, and the general welfare
of those within their jurisdictions. The federal government lacks “a general federal authority akin to the
police power.” But acting under its enumerated authorities, including under the Commerce Clause and the
General Welfare Clause (as supplemented by the Necessary and Proper Clause), Congress has ample
power to enact legislation to deter the spread of COVID-19, and indeed several laws enacted long before
COVID-19’s outbreak afford the President and executive agencies significant discretion to take measures
to curtail the outbreak.
Exercising these broad powers, the federal government has curtailed international travel. Many state and
local governments have prohibited dining in at restaurants and bars, halted residential evictions for
delinquent rent, and ordered casinos, gyms, and theaters closed. Several states and municipalities have
gone further, adopting “stay-at-home” measures to limit residents’ travel and the operation of “non-
essential” businesses. More such measures may be on the horizon. On March 19, 2020, President Donald
J. Trump raised the possibility of invoking the Defense Production Act (DPA), which includes authority to
“require acceptance and performance” under “contracts or orders” that the President finds “necessary or
appropriate to promote the national defense.” A business that is able to fulfill a DPA contract generally
must accept the contract and may need to give it preference over any non-DPA work. Thus, for example, a
distillery required to produce hand sanitizer for a DPA contract may need to scale back its liquor
production.
Many of these measures may impair a person’s use of their property, directly or indirectly. For example,
the airline with airplanes sitting idle on account of travel restrictions cannot use a capital investment,
while a company required by the government to manufacture face masks could not prioritize other work.
For the most part, property owners have to accept limitations on their private property rights. The
Supreme Court has recognized that “Congress routinely creates burdens for some that directly benefit
others,” and that “a State in the exercise of its police power may adopt reasonable restrictions on private
property.” In limited circumstances, though, the Constitution requires federal or state governments to
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provide a property owner “just compensation” where government action leads to a “taking” of “private
property.” (State constitutions include similar requirements.) This Sidebar summarizes federal takings law
and analyzes how it may apply to property restrictions in a national public health emergency like the
COVID-19 pandemic.
The Takings Clause
As with any government act, COVID-19 response measures must comport with any applicable limitation
of the U.S. Constitution. One such limitation, the Takings Clause of the Fifth Amendment, states that
“private property [shall not] be taken for public use, without just compensation.” By its terms, the Takings
Clause applies to the federal government. The Supreme Court has held that the same limitations extend to
state governments under the Fourteenth Amendment. Thus, the Constitution sets a single legal standard on
takings that applies to both federal and state governments. That said, states may provide, by state
constitution or state statute, more robust protections for private property than the federal Constitution
does.
The Takings Clause “does not prohibit the taking of private property.” The federal government may, under
its enumerated powers, deprive an individual of private property for a public use, and the same is true for
a state exercising its police power. For example, the federal and state governments may use their eminent
domain authority to seize a privately owned home that sits in the route of a planned public highway. All
that the Takings Clause requires is that “just compensation” accompany the deprivation.
The starting point of any Takings Clause analysis is to decide whether government action affects “private
property.” The Constitution does not create property rights. Other sources of law, such as state statutes or
common law, create property rights. Looking to these sources, the Supreme Court has held that the
Takings Clause protects interests in real property (e.g., one’s home or parcel of land) as well as in
personal property (e.g., one’s car or other possessions). The Clause also protects at least some intangible
property interests, such as a business’s trade secrets. But the Court has held that there is no property
“right” to a set amount of public-benefit payments, such as food-stamp payments.
Assuming that the object of the government action is “private property,” the next step is to determine
whether the government action is a taking. The Court’s cases distinguish between two types of takings,
analyzed under different standards.
In physical takings cases, the government assumes a “categorical duty to compensate the former owner”
when the government “physically takes” the property. This categorical duty exists even if the seizure is
only partial or (in many cases) temporary, and regardless of the reason for the seizure.
In regulatory takings cases, the government does not directly appropriate private property but regulates its
use, such as through zoning statutes. The central question for regulatory takings is whether the regulation
is “so burdensome as to become a taking.”
As relevant here, the Supreme Court has developed two regulatory takings tests to answer this question. A
regulation may result in a taking under the categorical test if it eliminates “all economically beneficial
uses” of property. More often, a regulation will impair use of property or affect its value, without leaving
it economically useless. In this situation, under the ad hoc test as framed by existing precedent, a court
examines three aspects of a regulation to decide whether the regulation creates a taking requiring just
compensation. First, a court considers the regulation’s “economic impact,” framed as a fraction whose
numerator is the value taken from the property and whose denominator is the value of the property
unburdened by the regulation. In this fraction the denominator is key; courts define it according to the
whole of the property interest at issue and not just the portion burdened by the regulation (i.e., the entire
parcel of land on which a person’s home sits and not just the portion of the parcel that a setback ordinance
does not allow to be developed). Second, a court examines the extent to which a regulation interferes with

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reasonable “investment-backed expectations” of how a person may expect to use her property. Thus, for
example, a business that submits trade-secret data to a regulatory agency, knowing that the agency may
publicly disclose that data, has no reasonable expectation that the data will remain secret. Third, a court
scrutinizes the “character” of the regulation. A regulation that “amounts” to a physical invasion of
property is more likely to be a taking than one that burdens property as a result of a legislative scheme
that “adjust[s] the benefits and burdens of economic life to promote the common good.” The Supreme
Court has repeatedly stressed that this analysis is tailored to the facts of a given case, and is not amenable
to “definitive rules” that distinguish regulations that result in a taking from those that do not.
The Rule of Necessity
The typical Takings Clause case involves common functions of government, such as land use regulation
intended to prevent overdevelopment. And when such functions include physical intrusion on property
rights, or a regulation that goes “too far,” just compensation is usually owed. In describing the COVID-19
response, some have drawn an analogy to war efforts. Tapping deep common-law roots that predate the
Constitution, the Supreme Court has recognized that exigent circumstances, such as war, can require
“strict regulation of nearly all resources” to prevent imminent loss to life or property. Under this “rule of
necessity,” for example, if a state creates a firebreak by destroying a person’s house to save the homes of
others, the state need not compensate the party whose property was sacrificed. The Court has
characterized the rule of necessity as a “limitation” that “inheres” in a party’s title to property as part of
the “background principles” of property law that inform Takings Clause analysis. Put differently,
whatever else title to property may entail, it does not, under this analysis, include a right to be free from
certain losses caused by actions necessary to prevent imminent loss of life or property in emergency
situations.
As with the Court’s regulatory takings case law, rule-of-necessity cases lack “rigid rules [that] can be laid
down to distinguish compensable losses from noncompensable losses.” In its more recent cases on the
subject, both centering on actions taken during World War II, the Court denied compensation for property
destroyed or otherwise impaired to meet exigent circumstances. (A later Supreme Court case, involving
property damage during riots in the Panama Canal Zone, applied the rule of necessity but in ways inapt to
COVID-19 response efforts.) In United States v. Caltex, Inc., the Court refused compensation to oil
companies when the U.S. Army destroyed oil terminals in danger of capture by the Imperial Japanese
Army. The Court explained that “[t]he destruction or injury of private property in battle . . . had to be
borne by the sufferers alone as one of its consequences.” The Court rejected another takings claim in
United States v. Central Eureka Mining, Co. There, the War Production Board—an entity that coordinated
authorities under the DPA’s predecessor statutes—had sought to free skilled labor for work in copper
mines, considered critical to the war effort, by closing the privately owned gold mines that employed “the
only [remaining] reservoir of skilled mining labor.” While noting that regulations of private property
could create a taking, the Court explained that “[i]n the context of war, we have been reluctant to find that
degree of regulation.” Temporary wartime restrictions “are insignificant when compared to the
widespread uncompensated loss of life and freedom of action which war traditionally demands.”
The Court’s cases do not uniformly deny compensation for action deemed essential in emergencies. In
Mitchell v. Harmony, the Court held that the military could “impress private property into the public
service or take it for the public use” where danger is “immediate and impending” but “[u]nquestionably
. . . is bound to make full compensation to the owner.” Thus, a trader had a claim when the Army used his
wagons and mules during the Mexican-American War. Similarly, in United States v. Russell, the Court
recognized that “a taking of private property by the government” would “everywhere [be] regarded as
justified, if the necessity for the use of the property is imperative and immediate,” but the government still
“must make full restitution for the sacrifice.” Thus, the federal government owed a steamboat owner
whom the Army ordered to ship freight.

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In Caltex, the Court distinguished Mitchell and Russell by explaining that those two cases, which concern
the government’s use of private property in an emergency, do not address the government’s compensation
duty when property is destroyed. Thus, the Court’s military necessity cases establish two general rules: if
the government destroys private property to avoid immediate loss of life or property, no taking occurs and
no compensation is due. However, if the government seizes property for use in responding to an
emergency, compensation is due.
Property Restrictions and the COVID-19 Response
As the response to COVID-19 unfolds, some property owners may volunteer their property to assist in the
response. Other property owners may challenge restrictions on their private property rights, including by
arguing that the government action is a taking that requires just compensation. A court would face several
questions regarding the proper framework for addressing a COVID-19 takings claim.
The first such question could be whether courts would treat pandemic response measures under the rule of
necessity. The Supreme Court does not appear to have considered a takings claim seeking compensation
for restrictions on private property arising from a past pandemic response. Although the Court has not
applied the rule of necessity outside of military necessity, the Court has recognized the rule as part of the
“background principles” of property law and other courts have applied the rule beyond military necessity
to somewhat analogous threats such as crop infestation. Assuming the rule of necessity extends beyond
the military context, a court likely would apply it only to pandemic response measures marked by “an
actual emergency, imminent danger, and . . . actual necessity.” Even then, the rule of necessity would
likely excuse only the destruction of property and not its appropriation, whether on a temporary or
permanent basis, to serve pandemic response efforts.
If a court found the rule of necessity inapplicable, then the usual takings framework would likely apply.
Federal or state action that appropriates private property for government use would likely require
compensation. Thus, it is doubtful that the government could seize private stocks of medical supplies to
serve the pandemic response without paying the property’s owner just compensation. Likewise, federal or
state action that requires a person to make property available for another’s use probably would require
compensation, as the Takings Clause extends to any “government authorize[d]” physical invasion of
property, whether or not the government, itself, uses the property. If the government requires use of
private property for quarantine or COVID-19 testing, it would likely have to pay the owner at some point.
Short of a physical taking, other pandemic response measures would be examined under the Supreme
Court’s regulatory takings test. It is unlikely that a COVID-19 measure would satisfy the Supreme
Court’s categorical test by depriving a property owner of “all” economically beneficial uses of property
because few regulations meet this high standard—in one case, the Supreme Court suggested that a 95
percent decrease in a property’s value was not enough. This may even be true for one of the pandemic
response’s most ubiquitous features, state and local government orders closing private businesses to
facilitate social distancing. A closure order deprives a property owner of the right to operate a business
during the period of closure, but the order likely would not render the property valueless because, as the
Court has observed in examining moratoriums on the use of property, “the property will recover value as
soon as the prohibition is lifted.” When a closure order allows a business to continue operating in part
(e.g., to sell food on a carryout but not on a dine-in basis), such that the property owner retains use of the
property during the temporary closure, a court would be even less likely to find that a regulation
eliminates “all” uses of a property.
But simply because a regulation fails the categorical test does not foreclose a takings claim. Rather, the
Supreme Court’s ad hoc test would most likely apply. Industries that are traditionally subject to extensive
health-and-safety regulations, such as a restaurant or dentist’s office, may not have a reasonable
expectation of continuing to serve clients in the midst of a pandemic. Federal and state governments may

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also lessen the sting of mandates that burden private property with cash payments, which would
“moderate and mitigate” a regulation’s economic impact. For example, businesses that fill orders under
the Defense Production Act must give “priority” rated orders precedence over “unrated” work, which may
be more profitable than rated work, but the federal government would pay for the priority rated order.
Even if a court does apply the rule of necessity, it may draw on the reasoning of such cases to inform
application of the ad hoc test. As in Eureka Mining, a court may be “reluctant to find” that a regulation
goes too far under the ad hoc test, reasoning that a pandemic response requires “demands which otherwise
would be insufferable” and which are “insignificant when compared to” the public health dangers posed
by COVID-19. And of course, a court may decide that the unprecedented nature of the COVID-19
response justifies a different articulation or application of existing Takings Clause standards.

Author Information

Sean M. Stiff

Legislative Attorney

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