Background
A group of residential landlords in California sued the U.S. government, seeking compensation for losses they incurred under the CDC’s 2020 COVID-19 eviction moratorium. The landlords argued that the government order, which prevented them from evicting non-paying tenants, amounted to a physical taking of their property without just compensation in violation of the Fifth Amendment. In the alternative, they claimed the order was an illegal exaction that forced them to bear the costs of housing tenants, a burden the government should have shouldered.
The government filed a motion to dismiss both claims. It argued that the takings claim should fail because the CDC’s order was legally unauthorized, and therefore not an official government action constituting a taking. It also contended that the illegal exaction claim was invalid because the landlords never actually paid money to the government; they only lost potential rental income.
The government acknowledged that its arguments on the takings claim were contrary to recent, binding precedent from the U.S. Court of Appeals for the Federal Circuit in a similar case, Darby Dev. Co. v. United States (Darby II). It made the arguments solely to preserve them for a potential appeal to the Supreme Court.
The Court’s Holding
The Court of Federal Claims denied the government’s motion to dismiss the takings claim but granted its motion to dismiss the illegal exaction claim. For the takings claim, Judge Lerner found the court was bound by the Federal Circuit’s decision in Darby II. That precedent established that the CDC order was “authorized” for takings purposes and that preventing a landlord from evicting a non-paying tenant could constitute a government-authorized physical invasion requiring just compensation. Because the facts were indistinguishable from Darby II, the takings claim was allowed to proceed.
However, the court dismissed the illegal exaction claim. It explained that an illegal exaction occurs when a plaintiff has paid money to the government (either directly or indirectly) due to an unlawful government act. Here, the landlords did not pay any money. Instead, they lost the opportunity to collect rent from tenants. The court stated that the CDC order did not require landlords to waive rent payments, only to delay eviction. The fact that a landlord might be unable to collect back rent from a tenant does not transform that private debt into an improper payment exacted by the government.
Key Takeaways
- Following binding precedent from the Federal Circuit, the CDC’s COVID-19 eviction moratorium can be considered a government-authorized physical occupation, allowing landlords’ Fifth Amendment takings claims to proceed.
- An argument that a government agency’s action was legally “unauthorized” does not automatically defeat a takings claim, as the action may still be considered authorized for constitutional purposes if it was within the agency’s general scope of duties.
- A claim for illegal exaction based on lost rental income due to an eviction ban is not viable, as such a claim requires an actual payment of money by the plaintiff to or at the direction of the government.
Why It Matters
This decision reaffirms the legal path for property owners seeking compensation from the federal government for losses sustained during the CDC’s COVID-19 eviction moratorium. By following the appellate court’s precedent in Darby II, the court confirms that these cases will proceed on a takings theory, at least at the trial court level. It allows landlords to move forward with attempts to prove that being forced to house non-paying tenants was a compensable government taking of their property.
At the same time, the ruling closes off the “illegal exaction” theory as a route for recovery in these cases, narrowing the legal arguments available to plaintiffs. The government has clearly signaled its intent to continue challenging the underlying premise of the takings claim, likely setting the stage for an eventual showdown at the U.S. Supreme Court to resolve the issue for all similar cases nationwide.