Lawsuit could let landlords seek money from state over COVID eviction moratorium

Demonstrators march during the "Cancel Rent and Mortgages" rally
Demonstrators march in the street during the "Cancel Rent and Mortgages" rally on June 30, 2020 in Minneapolis. The rally was organized to demand the temporary cancellation of rents and mortgages as COVID-19 continues to adversely effect the economy.
Brandon Bell | Getty Images

Update: April 21, 8:45 a.m. | Posted: April 20, 2:30 p.m.

A federal appeals court has revived a lawsuit challenging the eviction moratorium that Minnesota Gov. Tim Walz put in place at the start of the COVID-19 pandemic. Walz’s executive orders have long since expired. But the decision this month from a three-judge panel in St. Paul could eventually allow landlords to seek financial damages from the state.

Two landlords filed this suit in September 2020, six months after Walz signed the first of several executive orders mandating a moratorium on residential evictions. It was aimed at preventing renters from becoming homeless as many businesses shut down and people couldn’t work.

Under the order, landlords could only kick out tenants if they seriously endangered the safety of other residents or engaged in illegal activity.

Heights Apartments and Walnut Trails — two property management companies — are the plaintiffs, but only Heights is part of the appeal. They argue that the order was an unconstitutional interference in their leases with tenants. The landlords also argue that the state appropriated their property in violation of the Fifth and Fourteenth Amendments by forcing them to continue renting to people they wanted to evict.

At the end of 2020, Judge Nancy Brasel sided with Walz and dismissed the lawsuit. Among other things, she said the executive order was a “merely temporary” incursion on one of the landlords’ property rights; they still owned the buildings and could continue to operate them as they saw fit.

This was one of many lawsuits challenging various executive orders in Minnesota, and one of many to be dismissed. But the plaintiffs appealed, and the appellate court ordered it back to the district court.

Michael Kemp, the landlords’ attorney, said the lawsuit is not political and does not challenge the governor’s authority to issue executive orders. Kemp said Walz showed extraordinary leadership during the pandemic, but got the eviction moratorium wrong.

If his clients prevail through the rest of the appeals process, they may be able to seek financial damages from the state, and it’s possible other businesses could too.

“Potentially this could open the door for what is essentially a recalculation of the cost of the COVID pandemic on businesses, whether it’s restaurants, landlords or any other,” Kemp said.

The Minnesota Attorney General’s Office, which is defending the governor against the lawsuit, said in a release Thursday morning that the decision represents a major departure from how federal courts have analyzed eviction orders so far.

“No other appellate court has said there are plausible claims of takings or contracts-clause violations,” Attorney General Keith Ellison said in the release. “I believe the analysis is mistaken: it conflicts with Supreme Court precedent as well as other circuit court decisions.”

Ellison added that 33 other governors around the country took a similar approach to pausing economic evictions, and the state Legislature set aside $500 million to help renters keep up with their rent.

In October, assistant attorney general Michael Goodwin told the three-judge panel that the landlords’ arguments have been litigated before.

“What the appellant is asking this court to do is ignore the precedent, and ignore the conclusions of federal courts around the country that have considered and rejected these very claims,” Goodwin said at the time.

John Pollock, with the Baltimore-based National Coalition for a Civil Right to Counsel, helps low-income tenants involved in civil suits — particularly evictions.

Pollock said the opinion from the Eighth Circuit panel in St. Paul is an outlier.

“We’ve been tracking dozens of these lawsuits around the country, and none of them have succeeded. And the courts uniformly have rejected the kinds of arguments that the Eighth Circuit made in its ruling. So we’re baffled,” Pollock said.

Pollock also points out that the federal government pumped a lot of money into rental assistance programs during the pandemic; that money ultimately benefited landlords, so he says it could make their claims for financial damages difficult to prove.

Pollock stressed that it’s still very early in the appeals process.

The state attorney general’s office indicated in a filing last week that they plan to ask for a re-hearing, which likely means that all 11 judges on the Eighth Circuit Court of Appeals would decide the case.