The Law in flux: legal challenges to the cdc’s residential eviction moratorium

The COVID-19 pandemic has had a significant impact on the ability of landlords to collect delinquent rent. One of the main obstacles for landlords that desire to collect delinquent rent has been the CDC residential eviction moratorium. Since the CDC residential eviction moratorium was put into place on September 4, 2020, attorneys have questioned whether the CDC had the legal authority to impose the eviction moratorium and litigants in several cases have challenged the Centers for Disease Control and Prevention’s (the “CDC’s”) September 1, 2020 Order (the “Order”). While various cases around the country regarding the enforceability of the CDC residential eviction moratorium remaining pending, two cases out of the Fifth Circuit—one from the Eastern District of Texas, the other from the Western District of Louisiana, have reached differing conclusions regarding the constitutionally of the CDC’s Order.  Accordingly, this article will discuss the analysis in each case and potential arguments that landlords could make to challenge the viability of the CDC eviction moratorium.

Background

On March 27, 2020, the President signed the Coronavirus Aid, Relief, and Economic Security Act(the “CARES Act”). The CARES Act prohibited the initiation of eviction proceedings for “covered properties”—those participating in one of several specified federal programs, or those with specified federally backed loans. The prohibition was to extend 120 days, and expired on July 27, 2020.

On September 1, 2020, the CDC issued an Order, temporarily halting residential evictions “to prevent the further spread of COVID-19”. The Order provides that “a landlord, owner of a residential property, or other person with a legal right to pursue eviction or possessory action, shall not evict any covered person from any residential property” but does not “relieve any individual of any obligation to pay rent, make a housing payment, or comply with any other obligation that the individual may have under a tenancy, lease, or similar contract.” Importantly, the Order only applies to “covered persons,” which is defined as those who:

1) The individual has used best efforts to obtain all available government assistance for rent or housing;

2) The individual either (i) expects to earn no more than $99,000 in annual income for Calendar Year [2021] (or no more than $198,000 if filing a joint return), (ii) was not required to report any income in [2020] to the U.S. Internal Revenue Service, or (iii) received an Economic Impact Payment (stimulus check) pursuant to Section 2201 of the CARES Act;

3) The individual is unable to pay the full rent or make a full housing payment due to substantial loss of household income, loss of compensable hours of work or wages, a layoff, or extraordinary out-of-pocket medical expenses;

4) The individual is using best efforts to make timely partial payments that are as close to the full payment as the individual’s circumstances may permit, taking into account other nondiscretionary expenses; and

5) Eviction would likely render the individual homeless—or force the individual to move into and live in close quarters in a new congregate or shared living setting— because the individual has no other available housing options.

Further, the Order does not apply to

evictions based on a tenant, lessee, or resident: (1) Engaging in criminal activity while on the premises; (2) threatening the health or safety of other residents; (3) damaging or posing an immediate and significant risk of damage to property; (4) violating any applicable building code, health ordinance, or similar regulation relating to health and safety; or (5) violating any other contractual obligation, other than the timely payment of rent or similar housing-related payment (including non-payment or late payment of fees, penalties, or interest.

The Order was originally effective until December 21, 2020, but was extended twice thereafter—first through the Consolidated Appropriations Act, 2021, and then via a January 29, 2021 CDC Order (the “Current Order”). The Current Order is set to expire on March 31, 2021, and contains some modifications, though none to the sections detailed above.

Michigan’s Adoption of the Order

            On June 9, 2020, the Michigan Supreme Court, pursuant to its constitutional authority conferred in 1963 Const, Article VI, § 4, providing for the Supreme Court’s general superintending control over state courts, adopted Administrative Order 2020-17. That Administrative Order directed trial courts to process landlord/tenant cases using a prioritization approach. That Administrative Order was amended several times, and, in relevant part, the October 22, 2020 Amendment of Administrative Order 2020-17 suspended the statutory rules entitling property owners to recover their premises from tenants through summary proceedings in court, relying on the CDC’s September 1, 2020 Order.[1]

After the Consolidated Appropriations Act, 2021 extended the CDC’s Order, on December 29, 2020, the Court too extended Administrative Order 2020-17.[2] Finally, on January 30, 2021, the Court again, in response to the CDC’s Current Order, extended Administrative Order 2020-17.[3]

Challenges to the Order

In Terkel et al. v. Ctr. for Disease Control and Prevention et al., No 6:20-cv-00564 (E.D. Tex.), Judge Campbell Barker, noted that “while the States have broad authority to enact legislation for the public good—what we have often called a police power—the Federal Government, by contrast, has no such authority.” (cleaned up). The Court further explained that the eviction moratorium reflects a significant expansion of federal power:

The federal government cannot say that it has ever before invoked its power over interstate commerce to impose a residential eviction moratorium. It did not do so during the deadly Spanish Flu pandemic. Nor did it invoke such a power during the exigencies of the Great Depression. The federal government has not claimed any such a power at any point during our Nation’s history until last year. (cleaned up).

The Government defended the Order in Terkel by stating that it is an appropriate use of Congress’s “legislative Powers” granted to Congress in Article I of the Constitution—powers which can be delegated to a federal agency (like the CDC). Specifically, the Government argued that the Order is a proper use of the power conferred under the Commerce Clause, or, in the alternative, the Necessary and Proper Clause.

The Court, therefore, engaged in an analysis of Congress’s power under the Commerce Clause, and the Necessary and Proper Clause, and eventually concluded that the Order exceeded the Government’s authority. In relevant part, the Court concluded that the decision to evict a tenant is not an “economic” act within Congress’s power to regulate under the Commerce Clause.

The Court, however denied to issue an injunction, which would have immediately halted the Order, and therefore limited its rulings to the specific case it had before it. The Court indicated, however, that should the Government continue enforcing the Order, Plaintiffs can seek an injunction at a later date.

The Government has announced that it has appealed this decision to the Fifth Circuit.[4]

Conversely, in Chambless Enterprises, LLC, et al. v. Redfield et al., No 3:20-cv-01455 (W. D. La.),[5] Judge Terry Doughty noted that, due to the COVID-19 pandemic, “Federal, State, and local governments have taken unprecedented or exceedingly rare actions, including boarder closures, restrictions on travel, stay-at-home orders, mask requirements, and eviction moratoria.” (cleaned up). The Court spent considerable time detailing the delegation of Congress’s decision (and ability) to delegate power to the CDC. In turn, the Court explained that, “the CDC’s determination that a temporary halt in evictions is a reasonably necessary measure . . . to prevent the further spread of COVID-19 throughout the United States.” (cleaned up).

In relevant part, the Court summarily dismissed the argument that the Order falls outside the scope of the Commerce Clause:

[I]t is well established that, under the Commerce Clause, the federal government may regulate activity that has a substantial effect on interstate commerce. And the Supreme Court has explicitly held that the commercial activity regulated here—rental of real estate—is unquestionably an activity that substantially affects interstate commerce. Russell v United States, 471 U 858, 862 (1985). (cleaned up).

The Chambless decision was not appealed, though if it had, it would have also been heard by the Fifth Circuit.

Conclusion

We now have several Federal Courts who have weighed in on the constitutionality of the CDC’s Order and there remains an active debate regarding the validity of the CDC’s Order. At least two cases have been appealed to higher courts—the Fifth (Terkel), and the Eleventh (Brown, in footnote 5). It is also likely, depending on how long the CDC’s order is extended, the Federal Supreme Court may also have the ability to decide this issue. Therefore, the determination of whether this Order is constitutionally permissible will not be resolved for some time.

Due to the Michigan Supreme Court’s adoption of the Order in Administrative Order 2020-17, however, it is clear that, at least for now, tenants in Michigan cannot be evicted from residential housing of they fall under the protection of the CDC’s eviction moratorium. Should a federal court find the Order unconstitutional, and issue a nation-wide injunction, then the Michigan Supreme Court would likely revisit and possibly terminate Administrative Order 2020-17.

Given the penalties for violating the Order[6] and the ever-evolving state of the law, landlords and tenants should retain experienced real estate attorneys when tackling eviction-related questions.

UPDATE March 17, 2021:

On March 10, 2021, a Court in the Northern District of Ohio (like Terkel), held that the CDC’s Order exceeded its statutory authority—the Court did not undertake a constitutional analysis, and instead focused on the language of the Public Health Services Act (“PHSA”).

In Skyworks Ltd v Centers for Disease Control and Prevention, No 5:20-cv-2407 (N.D. Ohio), Judge J. Phillip Calabrese noted that other Courts have reached the opposite conclusion (citing specifically Brown, in footnote 5, and Chambless). The Court noted that “the Brown and Chambless. . . decisions have the feel of adopting strained or forced reading of the statute, stretching to rationalize the governmental policy at issue.” The Court ruled that the plain language of the PHSA, which “permits the Secretary of the Department of Health and Human Services to authorize the CDC to ‘make and enforce such regulations as in his judgment are necessary to prevent the introduction, transmission, or spread of communicable diseases’ from foreign countries into the United States or between States” does not permit the CDC to prohibit eviction as a public health measure.

The decision has not yet been appealed, though if it is, it will be heard by the Sixth Circuit.

UPDATE March 30, 2021:

The Michigan Supreme Court, in an Order dated March 22, 2021 has instituted a new procedure for landlord-tenant cases. The Order provides that if a landlord seeks eviction (via a summary proceeding to recover the possession of premises) based on nonpayment of rent, the “court must stay further proceedings after the pretrial hearing is conducted and not proceed to judgment if a defendant applies for COVID Emergency Rental Assistance (CERA) and notifies the court of the application” subject to some conditions.

Justice Zahra dissented from this Order, arguing that the automatic stay for all defendants who apply for CERA relief is an abuse of the Supreme Court’s authority to exercise general superintending control over state courts. Justice Zahra noted that “there is no guarantee that every tenant who applies for CARA relief will obtain in” and argues that the automatic stay “shelters tenants, many of whom ultimately will not qualify for these funds, at the expense of all landlords.”

Chief Justice Pro Tem Viviano also dissented from the Order, noting that the Legislature established varying notice requirements—based on the reason the landlord is seeking to recover possession of the premises—and that the automatic stay required by the Order does not respect those Legislative choices. Further, Justice Viviano echoed Justice Zahra’s concern, that the Supreme Court has overstepped its authority in exercising general superintending control over state courts and explained that the Supreme Court should “return our trial courts to regular order and stop micromanaging them to coerce participation in governmental programs and directives that are of questionable constitutional authority.”

Finally, the CDC extended the Current Order, which was set to expire on March 31, 2021. The March 28, 2021 Order does not materially change the terms of the eviction moratorium, but sets the new expiration date of June 30, 2021.

Katherine R. Hopkins is an attorney with Hirzel Law, PLC and focuses her practice in the areas of appellate law, community association law, and civil litigation. Ms. Hopkins received her Bachelor of Arts degree in English (with a minor in Psychology), and a Teaching Certificate from Michigan State University. Prior to attending law school, Ms. Hopkins was a high school English teacher in Metro-Detroit. Ms. Hopkins obtained her Juris Doctor degree from The University of Michigan Law School, where she was a note editor for the Journal of Law Reform. Prior to joining Hirzel Law, PLC, Ms. Hopkins clerked for Chief Justice Pro Tem David Viviano on the Michigan Supreme Court for two terms and was an Attorney in the Research Division of the Michigan Court of Appeals. She can be reached at (248) 480-8704 or khopkins@hirzellaw.com.

[1] Chief Justice Pro Tem Viviano dissented to the October 22, 2020 Amendment, arguing that the Court’s reliance on the CDC Order is inappropriate as it “rests on a shaky legal foundation.”

[2] Chief Justice Pro Tem Viviano concurred with the December 29, 2020 Amendment, noting that because the Consolidated Appropriations Act, 2021—a statute passed by Congress and signed by the President—references and extends the CDC Order, the legal foundation upon which the Court’s Administrative Order rests was “more substantial.”

[3] Chief Justice Pro Tem Viviano dissented with the January 30, 2021 Amendment, noting that, like the Court’s October 22, 2020 Amendment, the Amendment relied solely on the Current Order, and noted the “reasons stated in [his] initial dissent” remain at issue.

[4] See Department of Justice Issues Statement Announcing Decision to Appeal Terkel v. CDC | OPA | Department of Justice; See also, Notice of Appeal (filed in Terkel) and Defendants’ Response to Plaintiffs’ Notice of Supplemental Authority in Alabama Ass’n of Realtors v DHHS, et al., No 20-cv-3377-DLF (D.C) (for the Government’s articualation about the limits of the Terkel decision).

[5] At least one other Court has also reached the same conclusion as the Chambles Court: Brown v Azar, No 1:20-CV003702-JPB (N.D. GA.) (decision by Judge J.P Boulee). This decision has been appealed to the Eleventh Circuit.

[6] The Order states that “a person violating this Order may be subject to a fine of no more than $100,000 if the violation does not result in a death or one year in jail, or both, or a fine of no more than $250,000 if the violation results in a death or one year in jail, or both, or as otherwise provided by law. An organization violating this Order may be subject to a fine of no more than $200,000 per event if the violation does not result in a death or $500,000 per event if the violation results in a death or as otherwise provided by law.”).