A&B ABstract: Landlords in Tennessee have challenged the order of the Centers for Disease Control and Prevention (“CDC”) that imposed a nationwide moratorium on certain residential evictions. If sustained, the challenge could have a major impact on the scope of federal power during the pandemic.

Background of the Eviction Moratorium

The CARES Act imposed a 120-day moratorium on certain residential evictions that elapsed on August 25, 2020. With this date impending, on August 8, President Trump directed executive agencies to “take all lawful measures to prevent residential evictions and foreclosures resulting from financial hardships caused by COVID-19.” He also ordered the CDC and the Department of Health and Human Services (“HHS”) to consider whether any measures “temporarily halting residential evictions” are “reasonably necessary to prevent further spread of COVID-19” between states.

The CDC Emergency Order

In response, on September 4, the CDC issued an emergency order imposing a nationwide moratorium on certain residential evictions through December 31, 2020 (“CDC Order”). In doing so, the CDC coordinated with HHS and the Department of Housing and Urban Development (“HUD”). The CDC Order prevents the eviction of any tenant who certifies that he or she: (1) is “using best efforts to obtain all governmental assistance for housing”; (2) earns no more than $99,000 per year in income; (3) cannot pay rent in full due to a substantial loss in income or extraordinary medical expenses; (4) is “using best efforts to make timely partial payments”; and (5) would likely become homeless, or be forced to live in a shared living setting, if evicted.

Significantly, the CDC Order does not provide any compensation for landlords or property owners who are prevented from evicting non-paying tenants, nor does it establish any hearing process for challenges to a tenant’s Declaration. Conversely, the Order also does not exempt tenants from their legal obligation to pay outstanding rent they accumulate. It further provides that the moratorium can also be extended beyond December 31.

The Constitutional Challenge

On September 16, a group of seven landlords – which together own and manage over 5,000 residential rental units in western Tennessee – filed a lawsuit in federal court that challenges the constitutionality of the CDC Order.

In Tiger Lily LLC et al. v. Dep’t of Housing & Urban Devel. et al., No. 2:20-2692 (W.D. Tenn.), the plaintiffs assert seven causes of action – spanning the Takings clause, to due process, to the improper displacement of state law – that all rest on the contention that the CDC Order was not authorized by law and exceeds federal authority. Plaintiffs seek an injunction against enforcement of the CDC Order, but not monetary damages.

The Claims

Plaintiffs’ key substantive contention is that the CDC Order is not authorized by the statute or regulations upon which it relies, rendering it unconstitutional. The Complaint’s specific claims in this respect appear questionable. For example, the Order is rooted in Section 361 of the Public Health Services Act, which Plaintiffs say gives the Surgeon General only limited authority to issue orders addressing specific incidents of contamination. But Section 361 empowers the Surgeon General to “make and enforce such regulations as in his judgment are necessary to prevent the introduction, transmission, or spread of communicable diseases.” 42 U.S.C. § 264(a) (emphasis added). After listing several categories, Section 361 then repeats that the Surgeon General may enact “other measures, as in his judgment may be necessary.” Id.

The Complaint makes a similar argument about a federal CDC regulation the Order relies on, but it too vests the CDC Director with power to “take such measures to prevent [disease spread] as he/she deems reasonably necessary.” 42 C.F.R. § 70.2 (emphasis added). Plaintiffs also cite a “savings” clause in the Public Health Services Act, which provides that it cannot supersede state law. But there is an exception for state laws that “conflict” with an exercise of federal authority under the Act. 42 U.S.C. § 264(e). Such a conflict appears to be present here. In addition, “regulatory” Takings of the sort asserted by Plaintiffs are notoriously difficult to establish. A New York federal judge recently rejected such a claim made against that state’s eviction moratorium. Elmsford Apartment Assocs. LLC et al. v. Andrew Cuomo, No. 1:20-cv-04062 (S.D.N.Y. June 29, 2020).

The Deeper Roots of the Challenge

Given these issues, the constitutional challenge may instead turn on the general question of whether the scope of the CDC Order is consistent with past practice and the intent underlying Section 361. The CDC’s broad interpretation of its power would arguably give the Executive the power to restrict almost any type of activity, as applied to any “communicable” disease.

Further, the eviction moratorium is very different than exemplary public health measures listed in the statute, perhaps exceeding its intended scope. The moratorium also applies to purely intrastate evictions, which may not threaten interstate spread of COVID-19, as required for federal action. Further, if the court were to conclude that the broad CDC Order is not “necessary” (42 U.S.C. § 264(a)) or “reasonably necessary” (42 C.F.R. § 70.2) to prevent the interstate spread of COVID-19, the Order could be invalidated. This appears to be a matter of first impression, although statewide moratoriums have a long history and have been upheld by courts. E.g., Home Bldg. and Loan Assn. v. Blaisdell, 290 U.S. 398 (1934) (upholding Minnesota foreclosure moratorium).

Takeaways

The Tiger Lily case may be significant regardless of its outcome. As a procedural matter, it could spawn future lawsuits challenging the CDC Order in other courts, and potentially in the form of a nationwide class action. Litigation over the CDC Order could eventually rival the onslaught of lawsuits involving the CARES Act, such as the Paycheck Protection Program “agent fee” litigation.

Further, if successful, Tiger Lily would also result not just in restoration the ability for the plaintiff landlords to evict non-paying tenants, but it could yield important clarifications and limits on the regulatory power of the federal government in connection with the pandemic. Particularly if it is appealed to the Sixth Circuit (if not the U.S. Supreme Court), the Tiger Lily case could have meaningful ramifications for all future federal regulations related to COVID-19.

Moreover, if the CDC Order is struck down, this could spur Congress to consider addressing residential evictions directly again. For example, Congress could enact its own broad moratorium by statute or provide more stimulus payments to struggling renters, enabling them to pay rent on time – which, in turn, would help landlords, albeit at taxpayer expense. For these reasons, Tiger Lily and any subsequent related cases will be worth watching as they move through the courts.

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