Minnesota Landlord Gets Covid Eviction Moratorium Suit Revived

A property owner of rental units in Minnesota will be able to pursue claims that the statewide residential eviction moratorium imposed in 2020 in response to the coronavirus pandemic was an unconstitutional taking and interfered with its contracts, the Eighth Circuit said Tuesday.

Gov. Tim Walz (DFL) signed three executive orders imposing and modifying a moratorium on residential evictions in an effort to alleviate the displacement of families due to the pandemic and its economic disruptions. The orders prohibited landlords from issuing notices of termination, non-renewal, or eviction to residents who failed to pay rent or otherwise violated the terms of their lease, with limited exceptions such as for residents who seriously endangered the safety of others.

Willful violations of the moratorium were treated as a misdemeanor punishable by imprisonment or a fine. The Minnesota Legislature later voided Walz’s orders and enacted a new moratorium giving residential tenants protection from eviction for nonpayment of rent until June 1, 2022, as long as they have pending applications for rental assistance.

Heights Apartments LLC said the moratorium intruded on its ability to manage its private property and interfered with its collection of rents. The company challenged the executive orders as allegedly violating rights protected under the contract clause, the takings clause, the due process clauses, and the First Amendment to the U.S. Constitution as well as state law. A district court granted the governor’s motion to dismiss.

The U.S. Court of Appeals for the Eighth Circuit reversed the dismissal of the contract clause and takings clause claims.

Heights “has plausibly pleaded that the EOs substantially impaired its contractual bargain with its tenants,” and nothing in Minnesota law or U.S. Supreme Court precedent “would have made the extent and reach of the EOs foreseeable to Heights,” the court said.

The government contended that the EOs helped mitigate the spread of Covid, including by temporarily promoting social distancing and keeping affected tenants from congregating in homeless shelters. Although combating the pandemic “is necessarily an important public purpose,” Heights has plausibly alleged that the EOs aren’t reasonably tailored to this purpose, the court said.

Heights alleged material breaches of its rental agreements, such as tenants operating a car and boat shop on the premises, holding raucous parties, and otherwise causing nuisances that drove their neighbors to move. “These behaviors undermined efforts to combat the COVID-19 virus; yet they were encompassed by the eviction moratoria,” the court said.

With respect to the takings claim, the plaintiff adequately alleged the moratorium “deprived Heights of its right to exclude existing tenants without compensation,” the court said. The company also “sufficiently alleged that the EOs may constitute a compensable, non-categorical regulatory taking,” it added.

The court said Heights’ other claims were rightly dismissed.

The opinion was written by Judge Ralph R. Erickson and joined by Judges Raymond W. Gruender and David R. Stras.

Aaron Ferguson Law represents Heights. The state attorney general’s office represents Walz and the other government defendants.

The case is Heights Apartments LLC v. Walz, 8th Cir., No. 21-01278, 4/5/22.