April 16, 2020

Pennsylvania Supreme Court Upholds Business-Closure Order, Rules That COVID-19 Is a ‘Natural Disaster’

As the COVID-19 pandemic continues to sweep across the United States, numerous state governments — including Pennsylvania’s — have ordered all “non-essential” or “non-life-sustaining” businesses to close their brick-and-mortar operations in an effort to slow the disease’s spread. The breadth of those orders, and the devastating financial impact they have inflicted on many businesses, has begun to spawn legal challenges at both the macro and micro levels — i.e., whether the orders themselves are ultra vires and whether the closure of a particular business was legally justified and, if not, what the remedy should be.

In a decision released on April 13, 2020, the Pennsylvania Supreme Court addressed a broadside challenge to Pennsylvania Governor Tom Wolf’s business-closure order, which ordered all non-life-sustaining businesses in the Commonwealth to cease their physical operations until further notice. In a 4-3 decision, the Court upheld the order, ruling (among other things) that the COVID-19 pandemic is a “natural disaster” because of its serious threat to human life; that because the closure order is temporary in nature and a necessary exercise of the Commonwealth’s police power, it is not a regulatory taking requiring payment of just compensation under state or federal law; and that the business-closure order and its associated process for seeking a waiver do not violate the due process protections of the Pennsylvania or federal constitutions.

The Facts

On March 19, 2020, Pennsylvania Governor Tom Wolf issued an executive order closing the physical operations of all “non-life-sustaining businesses” that were then operating in the Commonwealth of Pennsylvania (the “Order”). Shortly after Governor Wolf issued the Order, several non-life-sustaining businesses, including the political campaign committee for state legislative hopeful Danny DeVito, filed an emergency petition in the Pennsylvania Supreme Court, asking the Court to strike down the Order on statutory and constitutional grounds.

The Court agreed to hear the petition.

The Decision

In a 4-3 opinion, written by Justice Donohue, the Court rejected both the statutory and constitutional challenges and upheld the Order. The statutory and constitutional challenges are discussed in turn.

The Statutory Challenge

The petitioners first claimed that Governor Wolf lacked the statutory authority to issue the Order because the asserted source of that authority — the Commonwealth’s “Emergency Code” — was triggered only by man-made, war-caused, or natural disasters, and the COVID-19 pandemic did not qualify as such a disaster. In particular, the challengers argued that the COVID-19 pandemic did not qualify as a “natural disaster.”

The Emergency Code defines a “natural disaster” as “[a]ny hurricane, tornado, storm, flood, high water, wind-driven water, tidal wave, earthquake, landslide, mudslide, snowstorm, drought, fire, explosion or other catastrophe which results in substantial damage to property, hardship, suffering or possible loss of life.”

The Court rejected this challenge based on its conclusion that the pandemic fits within the statutory catchall for “other catastrophe[s] which resul[t] in . . . hardship, suffering or possible loss of life,” given, inter alia, the “exponential spread” of COVID-19. Maj. Op. at 21, 23. In so finding, the Court eschewed any reliance on the “substantial damage to property” basis for falling within the catchall, focusing instead on the pandemic’s existing and projected human toll. Id. at 23. (“It is beyond dispute that the COVID-19 pandemic is unquestionably a catastrophe that ‘results in … hardship, suffering or possible loss of life.’”) (quoting the Emergency Code).

In finding that the pandemic qualifies as a “natural disaster,” the Court specifically rejected the argument that the pandemic was too dissimilar from the listed disasters — floods, tornados, droughts, explosions, etc. — to fall within that catchall, reasoning that the enumerated disasters lacked sufficient unifying characteristics to support the exclusion of the pandemic. The Court also concluded that applying a narrow construction of the catchall would frustrate the General Assembly’s apparent intent to broaden the scope of the triggering circumstances by including a catchall.

The Constitutional Challenges

The challengers also raised constitutional arguments in support of their claim that the Order should be vacated, regardless of whether Governor Wolf had statutory authority to issue it. In particular, they contended that the order prohibited them from using their property “at all,” and therefore constituted a taking of private property for public use without the payment of just compensation, in violation of both the U.S. and Pennsylvania Constitutions.

In resolving the petitioners’ takings challenge, the Court principally relied on a U.S. Supreme Court decision, Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, which held that two moratoria (totaling 32 months) on development around the Lake Tahoe basin to allow local authorities to complete a land-use plan for the region were not per se takings of property due to the temporary nature of the deprivations and the moratoria’s clear statement that they would terminate on a specified date. Maj. Op. at 36 (citing 535 U.S. 302, 329 (2002)). Reasoning that Governor Wolf’s order resulted “in only a temporary loss” of the use of the challengers’ businesses, and that his reason for issuing the order, “namely to protect the lives and health of millions of Pennsylvania citizens,” was a “classic example of the police power,” the Court held that a regulatory taking had not occurred. Id.

The challengers also raised four additional constitutional arguments, namely, that (i) the Order violates the separation of powers doctrine; (ii) the challengers were not afforded procedural due process in the compilation of the list of life-sustaining and non-life-sustaining businesses or in the waiver process; (iii) that the Order violates principles of equal protection because it allows incumbent officials to operate their offices but requires DeVito’s campaign to cease operations; and (iv) that the Order interferes with the DeVito Committee’s right of free speech and assembly. Id.

The Court rejected each, holding that (i) there was no violation of separation of powers because the General Assembly, by and through the Emergency Code, authorized the Governor to declare an emergency and impose the restrictions; (ii) there was no due process violation because the pandemic necessitated quick emergency action and the restrictions imposed were temporary, so the (post-deprivation) waiver process afforded sufficient procedural protections to pass constitutional muster; (iii) DeVito failed to state an equal protection violation because campaign offices and legislative offices are not similarly situated (because the one exists for purpose of seeking office and the other exists to discharge the obligations of office and, indeed, is prohibited by law from facilitating campaign activities); and (iv) DeVito failed to state a First Amendment violation because the Order imposed content-neutral time, place and manner restrictions on speech in furtherance of a substantial government interest in containing the pandemic. See generally id. at 30-32, 38-50.

Concurrence and Dissent

Chief Justice Saylor wrote a concurring and dissenting opinion. He concurred that the pandemic constituted an emergency but dissented in two material respects. First, he would have declined to hear the petition in the first instance and would instead have left it to the Commonwealth Court, which could have resolved some of the significant, disputed facts that bore on the petitioners’ challenges. Second, he voiced significant concerns regarding the “alleged inconsistency and arbitrariness in the waiver process” and reiterated his belief that those concerns should have been aired first in a lower court that could have assembled a full factual record for subsequent review by the Court. See Concurring and Dissenting Op. at 3-4. He also emphasized that, in his view, “the majority allocate[d] too much weight to temporariness to defeat developed allegations of a lack of due process.” Id. at 3.

The Upshot

The most immediate impact of the Court’s decision is that the Order stays in effect until further notice, though the Emergency Code limits the Order to 90 days unless renewed.

Looking beyond the decision’s immediate impact, however, it may prove significant that the Court has held that the COVID-19 pandemic is a natural disaster under the Emergency Code — a conclusion that may be cited in other contexts when addressing whether the pandemic qualifies as a “natural disaster,” “catastrophic event,” or “act of God” in other statutory, regulatory, or contractual contexts. Also noteworthy is the fact that the Court based its holding exclusively on the pandemic’s threat to human life and welfare and thus eschewed any holding that it involved damage to property — a question of potential import in many commercial contracts.

On the constitutional side of the ledger, it is all but certain that much more ink will be spilled on both the due process and takings questions the Court grappled with here. On the due process issue, it is unlikely that businesses will accept without further challenge the state government’s denial of individual waiver applications, particularly given the apparent arbitrariness of some of the waiver decisions (for example, as the dissent noted (at 3 n.1), the designation of liquor stores as non-life-sustaining but the designation of “beer distributors” as life-sustaining).

There will be further questions, too, on whether the Order — and similar orders issued by governmental authorities across the country — qualifies as a compensable taking under federal law. For one thing (and even assuming that the Court’s decision correctly applied the rule of Tahoe Sierra), the Supreme Court’s Tahoe Sierra decision addressed only one facet of takings law: whether the development moratoria qualified as per se takings because they deprived the property owners of any beneficial use of their property during the pendency of the moratoria. It did not address, and the Pennsylvania Supreme Court’s opinion likewise does not purport to address, whether the challenged actions qualified as regulatory takings under the fact-intensive, multi-factor balancing test announced in Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978). Such challenges will almost certainly be forthcoming, especially given the fact (emphasized by Chief Justice Saylor’s dissent) that although the closures are described as temporary, an extended closure will almost certainly cause many businesses to shutter forever. The Penn Central test may give those businesses an alternative approach to challenge the Governor’s Order, but it will be some time before there are enough such decisions to gauge how solicitous Pennsylvania’s (and other states’) courts will be to those claims.

As the number of cases around the world grows, Faegre Drinker’s Coronavirus Resource Center is available to help you understand and assess the legal, regulatory and commercial implications of COVID-19.

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