As the first federal court of appeals to address a challenge to the constitutionality of a COVID-19-related eviction moratorium under the Contracts Clause of the United States Constitution, the Ninth Circuit Court of Appeals rejected that challenge in the recent case Apartment Association of Los Angeles, Inc. v. City of Los Angeles. In doing so, it joined several lower district courts across the country who have similarly rejected constitutional challenges to COVID-19-related eviction moratoriums.
Facts of Apartment Association v. City of Los Angeles
Like many cities and counties, following the outbreak of COVID-19 in early 2020 the City of Los Angeles imposed an eviction moratorium with the stated purposes of ensuring housing security and promoting public health during the pandemic. In gist, the moratorium bars most evictions of residential tenants, delays tenants’ rent payment obligations (for up to 12 months after expiration of the open-ended “Local Emergency Period”), and prohibits landlords from charging late fees and interest. As a result of the moratorium, tenants cannot be evicted for non-payment of rent stemming from any financial impact of COVID-19 (for example, loss of income or increased childcare expenses) or for the presence of unauthorized occupants or pets related to COVID-19. Adding additional teeth to the moratorium, the law also allows for a private right of action by residential tenants who believe their landlords have violated the moratorium, including the possibility of injunctive relief, money damages, civil penalties, and reimbursement of attorney’s fees and costs.
Apartment Association of Los Angeles County, Inc. (“Association”) is a trade association of Los Angeles landlords. The Association sued the City of Los Angeles seeking an injunction invalidating the law, “viewing it as laying on their shoulders the burdens of maintaining affordable housing during the pandemic.” At the heart of the case, the Association alleged that the eviction moratorium violated several provisions of the United States Constitution, in particular the Contracts Clause. In support of their case, the Association submitted declarations from several property owners detailing the harms caused to them by the moratorium, including loss of rental income and being forced to use retirement savings to cover expenses on the properties.
The district court denied the Association’s request for an injunction and found that the Association could not show that the moratorium was not “reasonable” and “appropriate” under the deferential standard in Contracts Clause cases. Furthermore, the district court found that the Association had not shown a likelihood of irreparable harm or that the balance of the equities and the public interest favored granting the injunction. The Association appealed the decision to the Ninth Circuit Court of Appeals.
The appellate court affirmed the district court’s decision against the Association.
Beginning its analysis, the court explained that the Contracts Clause prohibits the government from passing any law impairing the obligation of contracts. In determining whether the Contracts Clause is violated, the court conducts a two-part analysis. First, the court looks at whether “the state law has operated as a substantial impairment of a contractual relationship.” Assuming it has, second, the court looks at whether the law is drawn in an “appropriate” and “reasonable” way to advance a significant and legitimate public purpose.
As part of its analysis, the Ninth Circuit assumed that the Los Angeles eviction moratorium was a substantial impairment of contractual relations but still upheld the district court’s decision based on the conclusion that the law was appropriate and reasonable for the legitimate public purpose of advancing public health.
The Association argued several historical cases where moratoria were upheld only where the law allowed for fair rental compensation contemporaneous with the extended occupation during the moratorium at issue. However, in defending its conclusion, the Ninth Circuit explained that these historical cases did not create a bright line rule that requires contemporaneous rental compensation and further explained that modern Contract Clause cases have routinely upheld various laws that may have affected private contracts out of deference to experts and local officials. The Ninth Circuit also noted that several district courts across the country have confronted, and ultimately rejected, constitutional challenges to similar moratoria.
One of the difficult questions raised by the pandemic is who would bear the financial brunt of housing struggles—landlords or tenants. At virtually all levels, the legislature seemingly answered that question in favor of tenants by passing eviction moratoria of varying degrees and lengths of time. Court challenges to these laws were inevitable, and the courts appear to be giving deference to the legislative efforts in favor of tenants. Although the Ninth Circuit may have been the first appellate court to the address the question, district courts have largely been upholding pro-tenant legislation. Expect additional courts of appeal to follow suit.