Two Federal Judges Declare CDC COVID-19 Eviction Moratorium Unenforceable

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 that the court bar enforcement of Part A of the New York COVID-19 Emergency Eviction and Foreclosure Prevention Act of 2020. The state law, in part, provides a stay based upon an application of hardship that could extend eviction cases until at least May 1, 2021.

Whether the shift established by Judge Barker in Texas and Judge Calabrese in Ohio will continue to trend in 2021 as the fates of state and local eviction moratoriums across the country are decided remains to be seen. Holland & Knight continues to monitor this changing landscape. For additional questions regarding the implications of Terkel, Skyworks and related pandemic-related contractual rights and obligations, please contact the authors.

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