On Nov. 13, in the Central District of California, Honorable District Judge Dean D. Pregerson denied a preliminary injunction to the Apartment Association of Los Angeles County (AALAC), which sued the city of Los Angeles to overturn an eviction moratorium during the COVID-19 pandemic. AALAC argued that the moratorium violated the Contract Clause of the Constitution by infringing upon the clause’s mandate that states shall not pass “any law impairing the obligation of contracts.” The district court ruled against the plaintiff, holding that the Contract Clause’s prohibitions are weakest where considerations of public health exist, particularly of the current scale of the ever-present COVID-19 pandemic.
Judge Pregerson explained the pertinent facts as follows: In response to the COVID-19 pandemic, described by the judge as “the gravest public health crisis in over a century,” the defendant passed an eviction moratorium in conjunction with the declaration of a state of emergency for Los Angeles County. The moratorium lasts as long as the state of emergency remains in place, applies to all residential and commercial lessees, and defers (not forgives) rent, with the lessee receiving 12 months from the lifting of the moratorium to repay all unpaid rent. The plaintiff sued the city for a preliminary injunction, arguing that the unavoidable hardship of the eviction bar for landlords combined with the moratorium’s unconstitutional permissiveness under the Contract Clause mandated court-ordered removal.
The court explained that the Contract Clause prevents impairment of contracts by state action but is not absolute. A reviewing tribunal must consider whether the impairment of the contractual obligations by the moratorium was substantial, whether the moratorium was passed in response to a “significant and legitimate public purpose” and whether the parties to the contracts were affected in a way deemed reasonable when balanced against the public purpose underlying the passing of the moratorium. The parties stipulated the “significant and legitimate public purpose” for passing the moratorium as a reduction in the spread of COVID-19 gained by stable, oft-unchanging housing situations.
For the other two factors, the judge found a substantial impairment, as no landlord stood able to reasonably foresee a pandemic of the magnitude of COVID-19 or the public health measures necessary to combat it, including a blanket eviction moratorium. Despite the existence of the substantial impairment, the court ruled that the plaintiff’s request for a preliminary injunction still must fail, as the impairment, while substantial, also was reasonable in proportion to the documented public health impact of the COVID-19 pandemic. The court explained that the moratorium was a reasonable contractual impairment, given that the “moratorium is addressed to protect a basic societal need, is temporary in nature, does not disturb landlords’ ability to obtain a judgment for contract damages, does not absolve tenants of any obligation to pay any amount of rent, does not appear to impact landlords’ ability to obtain housing, and was implemented in the context of a state of emergency. Indeed, the current emergency is arguably more serious than that brought on by the Great Depression, coupling, as it does, the consequences of economic catastrophe with a serious, and worsening, threat to public health.”
AALAC was represented by Rutan and Tucker.