On August 7th, 2024, the U.S. Court of Appeals for the Federal Circuit overturned the U.S. Court of Federal Claims’ dismissal of Darby Development Company, Inc. v. United States in a 2-1 decision. The critical case seeks to determine whether the U.S. Centers for Disease Control and Prevention’s (CDC) federal moratorium is an illegal taking under the Fifth Amendment of the U.S. Constitution. If the CDC’s action is ruled to be a taking, compensation must be paid to those damaged by the government action.
Background
In 2021, housing providers sued the federal government in the U.S. Court of Federal Claims, claiming that the CDC’s order constituted a physical taking of their property for public use – thus requiring just compensation under the Fifth Amendment’s Takings Clause.
In 2022, the Court of Federal Claims granted the federal government’s motion to dismiss the housing providers’ complaint for failing to state a claim upon which relief could be granted.
What’s Next
In their ruling, the Court of Appeals concluded that the housing providers’ complaint stated a claim for physical taking requiring just compensation, reversing the dismissal and sending the case back to the lower court for further proceedings. After much analysis, the Court of Appeals determined that the CDC's moratorium was “authorized” in the way takings law contemplates. They concluded that the CDC was acting within the normal scope of its duties when it issued the order, and that the CDC did not contravene any explicit prohibition or positively expressed congressional intent in doing so. The Court of Appeals also stated that the housing providers’ complaint stated a claim sharing significant similarities with what was described and held in Cedar Point to constitute a physical taking.
The Court of Appeals also addressed the government’s argument that “if [the housing providers’] claim can proceed, any law that prevents a property owner from immediately effecting an eviction will constitute a physical taking, since it will have temporarily interfer[ed] with the purported ‘right to exclude.” Taking the government’s point into consideration, the Court responded by stating the governments concern was misplaced, and that “what we have here is hardly a run-of-the-mill law implicating the landlord-tenant relationship. Instead, it is a highly unusual—and, so far as the parties have shown, unprecedented—Order that outright prevented evictions for nonpayment of rent.”
The National Apartment Association (NAA) and Dorsey & Whitney LLP would like to thank the following amici for their support throughout this case: the National Association of Home Builders, the National Association of Realtors and the New Civil Liberties Alliance. NAA would also like to thank John McDermott for his counsel and assistance throughout these legal proceedings.
NAA will continue to digest the Court’s ruling and update the industry on the case’s next steps.
Deeper Dive: Read more about the appeal and hear oral arguments.