Two Federal Judges Declare CDC COVID-19 Eviction Moratorium Unenforceable – Real Estate

Highlights

• Federal judges in Texas and Ohio declared unenforceable a
  September 2020 order issued by the U.S. Centers for Disease Control
  and Prevention (CDC) that prohibits certain residential evictions
  because of COVID-19 through March 2021.
• The U.S. District Court for the Eastern District of Texas found
  that while there may have been a public health benefit, the
  residential eviction moratorium was not economic in nature, was too
  attenuated from interstate commerce and was an unprecedented
  exercise of federal government authority in an area well within the
  scope of the states’ traditional police power.
• The U.S. District Court for the Northern District of Ohio found
  that the CDC’s order exceeded the agency’s statutory
  authority to make and enforce regulations to stop the spread of
  communicable diseases between states because that authority was
  limited to actions to address infected animals, objects or
  properties.

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In Terkel v. Centers for Disease Control and
Prevention, No. 6:20-cv-00564 (E.D. Tex. Feb. 25, 2021)
and Skyworks, Ltd. v. Centers for Disease Control
and Prevention, No. 5:20-cv-2407 (N.D. Ohio Mar. 10,
2021), groups of landlords, property owners and property managers,
and a trade association challenged an order issued by the U.S. Centers
for Disease Control and Prevention (CDC) – a major operating
component of the U.S. Department of Health and Human Services (HHS)
– that prohibited them from evicting certain tenants for
nonpayment of rent. These recent decisions come on the heels of
earlier orders out of Georgia, Louisiana and Tennessee refusing to
enjoin the CDC’s order.

The CDC Order

The order criminalizes residential eviction of any “covered
person,” which (with limited exceptions) includes any resident
who provides the landlord with a declaration certifying, among
other things, that the resident falls below certain income levels,
has used best efforts to obtain available government assistance and
make partial payments but is unable to pay full rent due to job or
income loss, or illness, and has no other affordable, non-communal
housing option. The moratorium does not relieve residents of rent
obligations or contractual fees, penalties or interest for untimely
payments, or prevent a property owner from commencing eviction
proceedings; it only pauses evictions themselves.

The CDC order originally expired on Dec. 31, 2020, but it was
extended multiple times and presently lasts through March 2021. The
challenged CDC moratorium differs from a prior eviction moratorium
in the Coronavirus Aid, Relief, and Economic Security Act (CARES)
Act, which expired in July 2020 and applied only to dwellings that
received federal funding.

Summary of the Texas Terkel Decision

The government argued that the CDC order was within the
legislative powers granted to Congress in Article I of the
Constitution under the Commerce Clause and the Necessary and Proper
Clause. However, Judge J. Campbell Barker of the U.S. District
Court for the Eastern District of Texas rejected the
government’s arguments and granted summary judgment in favor of
the plaintiff landlords and property managers.

Specifically, the court concluded that the CDC’s eviction
moratorium does not have a substantial effect on interstate
commerce. Instead, it seeks to regulate real estate, which is
“inherently local” and “do[es] not move across state
lines.” The court also rejected the government’s reliance
on the HHS Secretary’s statutory authority to enact regulations
to prevent the spread of communicable diseases across state lines.
Rejecting the government’s public health benefits argument, the
court noted that public health is “a quintessential concern of
the police power” relegated to states, not the federal
government.

In addition, the court concluded that the relationship between
interstate commerce and the evictions covered by the order is too
attenuated. For example, the order is not targeted at stopping the
spread of COVID among the states because it applies irrespective to
whether a tenant has been exposed to COVID-19 or would move out of
the state if evicted. Finally, the court repeatedly emphasized that
the “lawsuit does not question that the States may regulate
residential evictions and foreclosures, as they have long
done.” Id. at 1.

In performing its constitutional analysis, the court was
particularly troubled by the absence of any historical precedent in
the history of the United States of the federal government having
exercised its commerce clause power to impose a residential
eviction moratorium. By contrast, there was precedent for
state-imposed moratoriums, including during the Great Depression.
The court observed that the absence of prior federal residential
eviction moratoriums was “unsurprising[]” because
remedies to protect property rights are a traditional area of state
concern and part of the states’ police power. Id. at
17.

The Texas court’s conclusions stand in stark contrast to
those of the U.S. District Court for the Western District of
Louisiana, which rejected a similar constitutional challenge to the
CDC’s order because “rental of real estate” is
“‘unquestionably’ an activity that substantially
affects interstate commerce” and “the federal government
had a long history of regulating the rental housing market.”
See Chambless Enterprises LLC v.
Redfield, No. 3:20-cv-01455 (Dec. 22, 2020).

While it granted summary judgment in favor of the plaintiffs and
declared the CDC order unconstitutional, the Texas court stopped
short of issuing an injunction because the court anticipated that
the government would respect the declaratory judgment.

Summary of the Ohio Skyworks Decision

On March 10, 2021, Judge Philip Calabrese of the U.S. District
Court for the Northern District of Ohio declared the CDC order
invalid because the eviction moratorium exceeded the agency’s
statutory authority provided in Section 361 of the Public Health
Service Act, 42 U.S.C. § 264(a) (PHSA).

The plaintiffs argued that the CDC order violated the
Administrative Procedure Act (APA) and Article I, Section I of the
U.S. Constitution. The government responded that the order was
within the Secretary of HHS’ authorization of the CDC to
“make and enforce such regulations as in his judgment are
necessary to prevent the introduction, transmission or spread of
communicable diseases” between the states, under Section 361
of the PHSA. That statute goes on to list examples of the types of
actions authorized, all of which involve exercising power over
specific, tangible things, like animals or articles, or
identifiable properties. The court concluded that natural and
logical reading of the statute does not extend the CDC’s power
to stopping a subset of evictions (those for nonpayment of rent).
The court also determined that Congress’ extension of the
CDC’s eviction moratorium when Congress passed the
Appropriations Act did not amount to a ratification of the
CDC’s order because it was only a temporary extension meant to
preserve the status quo until the new Biden Administration took
over.

In reaching its conclusions, the Ohio court acknowledged but
rejected the earlier decisions, including Chambless and
the U.S. District Court for the Northern District of Georgia
decision Brown v. Azar, No. 1:20-cv-03702-JPB
(Oct. 29, 2020), both of which rejected the statutory arguments
proffered by the Ohio plaintiffs.

Because the Ohio court declared the CDC order invalid under the
APA, it did not reach the plaintiffs’ constitutional
arguments. Further, the court denied the injunctive relief
sought because money damages could address the plaintiffs’
injuries.

Pending Lawsuits Challenging State and Local Eviction
Moratoriums

Other lawsuits also have begun to pop up challenging state and
local eviction moratoriums. For example, on March 4, 2021, an
organization purporting to represent the interests of more than
4,200 building owners, managers and landlords in Pittsburg and
other surrounding locales, filed suit in the Court of Common Pleas
for Allegheny County, Pennsylvania, challenging the validity of a
recently passed municipal moratorium on evictions during the
pandemic. The plaintiff argues that the ordinance forces landlords
to stay in or renew contracts in violation of the state
constitution and the U.S. Constitution, and that the ordinance is
an improper extension of the federal moratorium from the CDC. The
plaintiff seeks a declaration that the ordinance is illegal and
unconstitutional, and an injunction barring its enforcement or
implementation.

Similarly, five landlords filed suit in the U.S. District Court
for the Eastern District of New York in late February 2021,
requesting…