No ‘taking’ of beach house during COVID lockdown

A public health restriction that prevented non-resident property owners from entering a county during the early days of the COVID-19 pandemic wasn’t a governmental taking, according to a ruling from the 4th U.S. Circuit Court of Appeals.

A Virginia couple who owned a beach house on North Carolina’s Outer Banks claimed the county’s 45-day entry prohibition violated their Fifth Amendment rights.

The Fourth Circuit disagreed.

“The ban did not physically appropriate the [owners’] beach house,” Judge Julius N. Richardson pointed out. “And though it restricted their ability to use the house, compensation is not required under the ad hoc balancing test that determines the constitutionality of most use restrictions.”

Judges G. Steven Agee and Allison Jones Rushing joined Richardson’s decision in Blackburn v. Dare County, et al. (VLW 023-2-025).

COVID lockdown

Joseph Blackburn Jr. and Linda Blackburn live in Virginia and own a beach house in Dare County, North Carolina. In the early days of the COVID-19 pandemic, Dare County issued several public health restrictions and implemented them over three phases.

The third phase banned non-resident property owners from entering the county and took effect four days after the restrictions were announced. Essentially, non-resident property owners had a short window to travel to Dare County.

The Blackburns didn’t make it to the beach house before the county’s third phase restriction began. When the county partially lifted the restriction 45 days later, the couple was able to visit their beach house again.

The Blackburns sued Dare County, alleging that their property was taken without compensation in violation of the Fifth Amendment’s Takings Clause. They demanded damages for themselves as well as a putative class of other non-resident property owners.

The U.S. District Court for the

Eastern District of North Carolina dismissed the suit for failure to state a claim.

Multiple theories

According to the Blackburns, the county’s order was a physical appropriation of their beach house. The use restriction, they claimed, was a per se taking under the U.S. Supreme Court’s 1922 decision in Lucas v. South Carolina Coastal Council. They also posited that the restriction was a taking under the flexible balancing test outlined by the Supreme Court in 1978’s Penn Central Transportation Co. v. City of New York.

Although the Takings Clause was originally thought only to reach physical appropriations of property, Richardson noted that “a physical appropriation due to a government regulation is ‘no less a taking.’”

“For the past century, the Supreme Court has also recognized that the Takings Clause protects against restrictions on an owner’s ability to use his property that ‘go[] too far,’” he wrote. “If a use restriction denies the owner all economically beneficial use of the land, then the restriction has gone too far and … the government has made a per se taking.”

The judge, however, said such restrictions are rare and that most use restrictions are assessed using a “flexible” balancing test to establish if compensation is necessary.

Richardson rejected the couple’s claim that Dare County’s order barring non-resident property owners from entering Dare County met each of the Supreme Court’s takings tests, saying “they have failed to state a claim under any approach.”

Physical appropriation

According to Richardson, Dare County’s order didn’t authorize government officials or third parties to physically occupy or possess the Blackburns’ vacation home.

Richardson was unpersuaded by the couple’s argument that the order eliminated their own right to exclude.

“Indeed, the Supreme Court has stressed that, when asking if a physical appropriation has occurred, the ‘essential question’ is ‘whether the government has physically taken property for itself or someone else — by whatever means — or has instead restricted a property owner’s ability to use his own property,’” he pointed out. “By excluding the Blackburns from their property, the order has ‘restricted [their] ability to use [their] own property.’ But the order has not ‘physically taken’ the property for the government or a third party.”

‘Temporary prohibition’

Since Dare County’s order didn’t deprive the couple’s property of all economic value, Richardson said Lucas’s per se rule wasn’t applicable.

“Despite promulgating the order on March 16 and implementing the non-resident visitor ban a day later, Dare County delayed implementing this order until March 20 to give homeowners like the Blackburns a chance to travel to the County. This is a far cry from an ouster.”

— Judge Julius N. Richardson

“This ‘temporary prohibition’ could not have rendered the Blackburns’ property valueless,” he wrote. “Moreover, the Blackburns could have lived in their house so long as they arrived before the ban took effect. And even during the forty-five days that the ban lasted, they were still able to rent their property to someone within the County or certain adjoining counties.”

‘Ad hoc’ balancing

The Blackburns’ remaining lifeline — Penn Central’s “ad hoc” balancing test — met a similar fate.

The three factors of special significance for courts are to consider include “the economic impact of the regulation” on a claimant, “the extent to which the regulation has interfered with distinct investment-backed expectations” and “the character of the governmental action.”

Richardson said the first factor favored the county because the couple “pled no facts establishing a diminution in value, let alone a substantial one.”

The Blackburns also had a pre-existing property right, but the judge found that the county order didn’t deny them the use of their beach house.

“It simply required them to be at their home by March 20, 2020, if they wanted to use it personally,” Richardson wrote. “And the Blackburns remained free to rent the house to those within the county, or to sell it.”

Finally, the judge said the third Penn Central factor favored the county.

“Exactly what this factor refers to is, admittedly, a little fuzzy,” Richardson noted.

Instead of pinpointing clear character traits, this has been treated as an “open-ended inquiry into whatever considerations” courts think are most relevant in each particular case.

“Combine an ad hoc balancing test with an open-ended factor and you’re left with doctrine that is a ‘veritable mess,’” he wrote.

Instead, Richardson said the court “should seek to ‘identify regulatory actions that are functionally equivalent to the classic taking in which the government directly appropriates private property or ousts the owner from his domain.’”

The judge then found that Dare County’s order wasn’t “functionally equivalent” to a government appropriation or an ouster because the Blackburns weren’t dispossessed of their beach house or forced to leave the county.

“Despite promulgating the order on March 16 and implementing the non-resident visitor ban a day later, Dare County delayed implementing this order until March 20 to give homeowners like the Blackburns a chance to travel to the County,” Richardson wrote. “This is a far cry from an ouster.”

As for an examination of the distributional impact of the order, the judge said it did little to advance the couple’s cause. Their bringing a putative class action demonstrated that the order was distributed broadly, not narrowly targeted.

“[N]ot every restriction is a taking,” Richardson concluded, affirming the district court’s ruling. “And, properly viewed, Dare County’s order is neither a physical appropriation, a use restriction that renders the property valueless, nor a taking under Penn Central.”