Do State Shut-Down Orders Effect a Taking for Which the State Must Pay Just Compensation?

Governors across the country have issued executive orders mandating the closure of businesses they deem non-essential in an effort to slow the spread of COVID-19. Slowing the spread of COVID-19, in turn, benefits all the state's residents. Thus, the owner of the closed business is made to sacrifice the use of his or her property for the good of the general public. Has the state thereby effected a taking under the Fifth and Fourteenth Amendments for which it must compensate the business owner?

There are good arguments for getting to yes. Because the orders would be characterized to effect an alleged regulatory (rather than physical) taking, a fact-intensive, multi-factor analysis applies. While public health and safety justifications would be given substantial weight by the courts, the unprecedented nature of the crisis and sweeping closure orders leave room to develop arguments that the orders effect a taking by barring a select group of property owners from using their property for the good of everyone in the state.

The Takings Clause

The Fifth Amendment's Takings Clause, made applicable to the states through the Fourteenth Amendment, states: "nor shall private property be taken for public use, without just compensation." "The Takings Clause is designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole." Ark. Game & Fish Comm'n v. United States, 568 U.S. 23, 31 (2012) (internal quotation marks omitted).

Framework for Analyzing Regulatory Takings

The U.S. Supreme Court has long recognized that a taking may be effected not only by the government's physical occupation or appropriation of private property, but also by regulation that "'goes too far.'" Tahoe-Sierra Pres. Council v. Tahoe Reg'l Planning Agency, 535 U.S. 302, 326 (2002) (quoting Justice Holmes' opinion in Penn. Coal Co. v. Mahon, 260 U.S. 393, 415 (1922)). Since the COVID-19 shut-down orders do not involve the states in physically occupying or appropriating property, the question of whether the orders effect a taking is analyzed under the court's regulatory takings jurisprudence.

Regulatory takings, in turn, come in two varieties. First, there are categorical takings such as "where regulation denies all economically beneficial or productive use of land." Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1015 (1992). The court has cautioned that this kind of regulatory taking is likely to be "rare," id. at 1018, because it requires a complete and permanent elimination of value. See also Tahoe Sierra Pres. Council, 535 U.S. at 332 ("Lucas was carved out for the 'extraordinary case' in which a regulation permanently deprives property of all value."). Enactments that fall outside this limited category are analyzed under the fact-specific standard established in Penn Central Transp. Co. v. City of New York, 438 U.S. 104 (1978), a case that arose from New York City's denial of a permit to build an office tower above Grand Central Terminal based on the train station's designation as a historic landmark.