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HEIGHTS APARTMENTS, LLC, Appellant Walnut Trails, LLLP v. Tim WALZ, in his individual and his official capacity as Governor of the State of Minnesota, et al., Appellees Minnesota Multi Housing Association and Pacific Legal Foundation, Amici on Behalf of Appellant(s) American Medical Association, et al., Amici on Behalf of Appellee(s)
The petition for rehearing en banc is denied. The petition for panel rehearing is also denied.
Chief Judge Smith, Judges Loken, Colloton, and Kelly would grant the petition for rehearing en banc.
The Governor of Minnesota petitions for rehearing en banc of the panel decision in this case. See Heights Apartments, LLC v. Walz, 30 F.4th 720 (8th Cir. 2022). The petition presents questions of exceptional importance that warrant further review. It seems appropriate to provide an outline of reasons why that is so.
First, the panel decision has broad implications for the authority of chief executives, legislatures, and state judiciaries to act in cases of emergency. More than thirty governors ordered temporary eviction moratoria during the COVID-19 pandemic. The North Dakota Supreme Court likewise suspended evictions. Congress and the President enacted an eviction moratorium in the CARES Act of 2020, and extended another eviction moratorium through January 2021 in subsequent legislation. All of these measures interfered immediately with a landlord's asserted “right to exclude” existing tenants who were otherwise eligible for eviction. On the panel's reasoning, the list of constitutional tortfeasors is long, and includes Governor Reynolds of Iowa, Governor Ricketts of Nebraska, the Justices of the North Dakota Supreme Court, the 116th Congress, and former President Trump, among many others. See Iowa Proclamation of Disaster Emergency, § 2 (Mar. 19, 2020); Neb. Exec. Order No. 20-07 (Mar. 25, 2020); N.D. Sup. Ct. Admin. Order No. 27 (Mar. 26, 2020); Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 116-136, § 4024, 134 Stat. 281, 492-94 (2020); Consolidated Appropriations Act, 2021, Pub. L. 116-260, § 502, 134 Stat. 1182, 2078-79 (2020).
Second, the panel decision on the Takings Clause misreads the most analogous decision of the Supreme Court on the matter of per se takings. The panel thought the objecting landlords in Yee v. City of Escondido, 503 U.S. 519, 112 S.Ct. 1522, 118 L.Ed.2d 153 (1992), sought only “to exclude future or incoming tenants rather than existing tenants.” Heights Apartments, 30 F.4th at 733. The landlords in Yee, however, complained of their inability to evict “tenants of mobilehomes presently in The Park, as well as the successors in interest of such tenants.” 503 U.S. at 525, 112 S.Ct. 1522 (emphasis added). The Supreme Court held that the disputed laws did not effect a per se taking, because the landlords “voluntarily rented their land to mobile home owners,” and a landlord who wished to “change the use of his land” could “evict his tenants, albeit with 6 or 12 months notice.” Id. at 527-28, 112 S.Ct. 1522. Proceeding from a mistaken premise, the panel decision never addressed why the scheme in Yee that allowed a landlord to evict existing tenants only for limited reasons after up to 12 months’ notice did not constitute a per se taking, while a temporary eviction moratorium during a pandemic ostensibly does. See also Pennell v. City of San Jose, 485 U.S. 1, 12 n.6, 108 S.Ct. 849, 99 L.Ed.2d 1 (1988); FCC v. Florida Power Corp., 480 U.S. 245, 252-53, 107 S.Ct. 1107, 94 L.Ed.2d 282 (1987); Block v. Hirsh, 256 U.S. 135, 157, 41 S.Ct. 458, 65 L.Ed. 865 (1921).
Third, the panel decision's analysis of regulatory takings runs counter to governing precedent and the decisions of other federal courts during the pandemic. The panel concluded that a plaintiff need not show “either a diminution in its property value as a whole or a calculation of lost income” to support a takings claim. 30 F.4th at 734. But the “test for regulatory taking requires us to compare the value that has been taken from the property with the value that remains in the property.” Murr v. Wisconsin, ––– U.S. ––––, 137 S. Ct. 1933, 1943, 198 L.Ed.2d 497 (2017) (internal quotation omitted). The plaintiff here did not allege any significant economic impact—i.e., no claim that tenants were relieved of a contractual obligation to pay rent, that the landlord would have sought to evict any tenant but for the moratorium, that there was a ready supply of rent-paying tenants to replace those who might have been evicted during the pandemic, or that the moratorium reduced the value of the properties. In discussing investment-backed expectations, the panel also deemed it “immaterial” that Heights Apartments purchased the properties at issue after the eviction moratorium took effect. 30 F.4th at 734. Yet the Supreme Court has explained that “[a] reasonable restriction that predates a landowner's acquisition ․ can be one of the objective factors that most landowners would reasonably consider in forming fair expectations about their property.” Murr, 137 S. Ct. at 1945. And the panel deviated from the view of other federal courts when it concluded that a suspension of evictions during a pandemic does not benefit the public enough to justify temporary regulation. See Baptiste v. Kennealy, 490 F. Supp. 3d 353, 390 (D. Mass. 2020) (concluding that eviction moratorium protected “members of the public, who elected officials found would be at greater risk of COVID-19 infection if displaced tenants caused or contributed to the overcrowding of other dwellings and homeless shelters, or were required to live on the streets”); Auracle Homes, LLC v. Lamont, 478 F. Supp. 3d 199, 223 (D. Conn. 2020) (concluding that eviction moratorium was “part of a public program adjusting the benefits and burdens of economic life to promote the common good”) (internal quotation omitted); Elmsford Apartment Assocs., LLC v. Cuomo, 469 F. Supp. 3d 148, 168 (S.D.N.Y. 2020) (“[T]he law in this circuit is clear: state governments may, in times of emergency or otherwise, reallocate economic hardships between private parties, including landlords and their tenants, without violating the Takings Clause.”).
Fourth, the panel decision on the Contracts Clause is an outlier among federal courts: it conflicts with a recent decision of the Ninth Circuit and decisions of every federal district court to consider the issue. See Apartment Ass'n of L.A. Cnty. v. City of Los Angeles, 10 F.4th 905 (9th Cir. 2021), cert. denied, ––– U.S. ––––, 142 S. Ct. 1699, 212 L.Ed.2d 595 (2022); Farhoud v. Brown, No. 3:20-cv-2226-JR, 2022 WL 326092, at *7-9 (D. Ore. Feb. 3, 2022); Jevons v. Inslee, 561 F. Supp. 3d 1082, 1096-1101 (E.D. Wash. 2021); El Papel LLC v. Durkan, No. 2:20-cv-01323-RAJ-JRC, 2021 WL 4272323, at *7-15 (W.D. Wash. Sept. 15, 2021); Baptiste, 490 F. Supp. 3d at 381-87; HAPCO v. City of Philadelphia, 482 F. Supp. 3d 337, 349-56 (E.D. Pa. 2020); Auracle Homes, 478 F. Supp. 3d at 223-26; Elmsford Apartment Assocs., 469 F. Supp. 3d at 168-72. The Ninth Circuit ruled that under prevailing Contracts Clause doctrine, a comparable eviction moratorium passed constitutional muster because it was a reasonable attempt to address a valid public purpose during a pandemic. Apartment Ass'n of L.A. Cnty., 10 F.4th at 913-14; see Sveen v. Melin, ––– U.S. ––––, 138 S. Ct. 1815, 1821-22, 201 L.Ed.2d 180 (2018); Energy Reserves Grp., Inc. v. Kansas Power & Light Co., 459 U.S. 400, 411-12, 103 S.Ct. 697, 74 L.Ed.2d 569 (1983). The panel's attempt to distinguish the Ninth Circuit decision is unconvincing. The decision in Alabama Ass'n of Realtors v. Department of Health & Human Services, ––– U.S. ––––, 141 S. Ct. 2485, 210 L.Ed.2d 856 (2021), said nothing about the Contracts Clause and involved a different analysis (as the Ninth Circuit recognized it would, 10 F.4th at 917 n.5). The difference in procedural posture between a motion to dismiss and motion for preliminary injunction is immaterial because the relevant questions are legal—which presumably explains why Judge Bress's opinion for the Ninth Circuit described its result as consistent with the district court's decision in this case. Id. at 917 (citing Heights Apartments, LLC v. Walz, 510 F. Supp. 3d 789, 808-10 (D. Minn. 2020)).
Fifth, a subsidiary (though potentially dispositive) concern is the panel's treatment of whether there is a cause of action at all under 42 U.S.C. § 1983 for an alleged violation of the Contracts Clause. The panel decision purported to “assume, without deciding,” that there is a cause of action, 30 F.4th at 728, but then ruled that the complaint stated a claim under the Contracts Clause—a result that is possible only if the court decides that a cause of action exists. Cf. Watters v. Bd. of Sch. Dirs. of City of Scranton, 975 F.3d 406, 413 (3d Cir. 2020) (properly assuming without deciding that there is a cause of action under § 1983, because plaintiff failed to state a claim in any event). Courts may not create a cause of action, Alexander v. Sandoval, 532 U.S. 275, 286-87, 121 S.Ct. 1511, 149 L.Ed.2d 517 (2001), and defendants cannot waive one into existence. Bistrian v. Levi, 912 F.3d 79, 88 (3d Cir. 2018) (“To rule otherwise would be to allow new causes of action to spring into existence merely through the dereliction of a party.”); see also Unsuck DC Metro v. Wash. Metro. Area Transit Auth., No. 20-7051, 2022 WL 683403, at *2 (D.C. Cir. Feb. 11, 2022) (per curiam). In light of the Supreme Court's decision in Carter v. Greenhow, 114 U.S. 317, 322-23, 5 S.Ct. 928, 29 L.Ed. 202 (1885), and the decisions of two circuits holding that no cause of action is available, Kaminski v. Coulter, 865 F.3d 339, 347 (6th Cir. 2017); Crosby v. City of Gastonia, 635 F.3d 634, 641 (4th Cir. 2011), this question also deserves attention before any claim is recognized.
Given the broad implications of the panel decision, and the conflicts in authority that the decision has generated, this proceeding involves questions of exceptional importance. No matter how this case is resolved on remand after the governor interposes additional defenses, the panel decision will live on as a circuit precedent at odds with decisions of the Supreme Court and other federal courts. Further review is warranted.
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