SAN DIEGO (Legal Newsline) - California restaurants and gyms lost their effort to pursue a class action against Gov. Gavin Newsome over his stringent Covid-19 lockdown measures, as a state appeals court rejected arguments the orders violated administrative procedure law or represented an unconstitutional taking of their property.
“While we sympathize with the position some owners find themselves in and the significant financial losses they allege,” the Fourth District Court of Appeal ruled in a May 13 decision, “a mandated-but-temporary business closure to deal with a public health emergency is not sufficiently akin to a governmental appropriation of private property for a public use so as to require compensation.”
Governor Newsom declared a state of emergency in California on March 4, 2020. Two weeks later he issued Executive Order N-33-20, or the “stay-at- home order,” closing gyms and prohibiting restaurants from providing indoor or outdoor dining.
Restaurants and gyms in San Diego County didn’t start to open until May, then after another covid surge in July officials banned indoor dining again in San Diego and 28 other counties. Another executive order in August set up a color-coded alert system to dictate when and how restaurants could offer indoor dining. It was rescinded in June 2021.
In April 2021, 640 Tenth, a San Diego restaurant company, and two fitness gyms filed a proposed class action against Newsome and other officials on behalf of California businesses affected by the lockdown. A trial court dismissed the case, and the Court of Appeals affirmed, in an opinion by Judge William Dato.
Under the Emergency Act, the court ruled, the governor has complete control over all agencies of the state government and can suspend any state law or regulation including the APA. The plaintiffs argued Newsome didn’t explicitly say he was suspending the APA but the appeals court said his executive order effectively did so by giving state public health authorities the power to enact whatever rules they believed necessary. The order went on to say nothing related to those rules would be subject to the APA.
While the APA includes a provision for emergency rulemaking that citizens can challenge, that was superseded by the governor’s declaration of a statewide emergency, the court said.
The plaintiffs’ Fifth Amendment takings arguments suffered a similar fate. First, the plaintiffs faced “a virtual torrent” of California federal district court decisions rejecting similar claims, the court said. Supreme Court decisions also have restricted regulatory takings claims to “significant” economic losses, generally believed to be at least 85% of a business’s value. Here, the plaintiffs could only speculate as to their losses if the lockdown orders remained in place.
Under another approach, the court said, the Supreme Court balances the cost of a regulation against an individual business against the social benefits and possible benefits to the business itself. Fewer patients sick with covid might mean more restaurant customers later, the court said. And temporary shutdowns aren’t typically a taking, the court said, citing a Third Circuit case in which a flea market was ordered closed for five months while it could be cleared of live munitions left over from its previous use as an army base.
Finally, the court rejected “commandeering” arguments, citing similar decisions in courts around the country.