The month of January will bring not just eventual winter weather but also arguments to the Michigan Supreme Court regarding COVID-19 pandemic orders and their effects on businesses in the state. In a recap of the pandemic orders for our readers, restrictions on Michigan businesses began March 23, 2020 and continued into 2021.
Oral arguments are scheduled in cases brought by a fitness center company, a catering business and a bowling alley regarding restrictions and shutdown orders coming from Democratic Governor Gretchen Whitmer during the pandemic. Her executive orders were later deemed to be unconstitutional by the Michigan Supreme Court however, the plaintiff in the lawsuit below does not contest the legitimacy of the governor’s orders.
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On January 10th at 10 a.m. in the new year, the Michigan Supreme Court will hear a case involving Gym 24/7 Fitness, LLC vs. the State of Michigan. The business is asking for compensation after Gov. Whitmer’s six-month shut down of businesses during the COVID-19 pandemic in 2020.
The court documents name the state of Michigan as the defendant. In addition to the gym being the plaintiff, it also lists “all those similarly situated in Oscoda, Alcona, Ogemaw, Iosco, Gladwin, Arenac, Midland, Bay, Saginaw, Tuscola, Sanilac, Huron, Gratiot, Clinton, Shiawassee, Eaton and Ingham Counties.”
In the introduction of their court filing, the plaintiff’s attorneys claim, “The Takings Clause protections of the federal and Michigan Constitutions mandate an important principle – the government must pay for what it takes. Here, the government took much from Michigan’s gyms and fitness centers despite none having ever been found to carry COVID-19 or had patrons actually infected with COVID-19. Instead, the government preemptively ended the business operations of countless gyms to combat a common enemy – which is unquestionably a public purpose. When the government wants or needs private property for a public purpose, it can – undisputedly – take it by either occupation or regulation…However, it must also pay for it in an amount equal to “‘just compensation’.”
In addition to asking for compensation from the state of Michigan under state and federal “takings” claims, the plaintiff is also citing the “inverse condemnation theory” which is a remedy for property owners when a government takes or damages a property for public use without having brought an eminent domain proceeding.
The defendant had filed a motion for summary disposition but the Court of Claims denied the motion, finding that there was a genuine issue of material fact as to whether the closure was reasonable and not arbitrary. The Court of Appeals, in a published opinion, reversed and remanded for entry of judgment in favor of the defendant, holding that, as a matter of law, the plaintiff did not establish a physical or regulatory “taking.”
Now the case is headed to the Michigan Supreme Court where oral arguments will occur. The High Court will be looking at whether the Court of Appeals erred in deciding the defendant was entitled to summary disposition – and the judges are also interested in two other issues. The first is whether the temporary impairment of business operations can be a categorical regulatory “taking” if there are no
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reasonable alternative uses of the business property during the period in which its intended and normal use is prohibited.
The second issue involves whether the Court of Appeals properly weighed factors from a 1978 case in addressing the plaintiff’s claims involving a temporary prohibition of its normal business operations. The court is interested in the “character of the governmental action” i.e. if it amounted to a “physical invasion” or only affects property interests through “some public program adjusting the benefits and burdens of economic life to promote the common good.” In the summary of the court documents, it says this issue may be relevant in discerning whether a “taking” has occurred.
The state argues, through Democratic Attorney General Dana Nessel, her office and their attorneys, that the COVID-19 pandemic presented a crisis that required measures that were equally applied to all businesses that served the public. They contend in their argument to the court that the party (gym) didn’t suffer a “unique” injury and that the government didn’t abuse their powers.
Also, on January 10th, a similar court case, Mount Clemens Recreational Bowl v DHHS Director, will heard as well. This case involves pandemic orders of the closing of bars, restaurants and banquet halls – and orders for them to maintain limited occupancy rates in certain situations.
The plaintiffs, Mount Clemens Recreational Bowl Inc., K.M.I. Inc. and Mirage Catering (and other similarly situated) allege a regulatory takings claim and claims of tortious interference with a contract and a business expectancy. This suit is backed by the Macomb County Bar, Restaurant and Banquet Association and alleges an illegal “taking” of their business by state officials. The defendants are Gov. Whitmer, Elizabeth Hertel (director of the state Dept. of Health and Human Services) and Chair of the state Liquor Control Commission.
In the Macomb case above, six additional organizations have filed legal briefs including the Michigan Association of Counties, the Michigan Township Association, Real Property Law Section of the State Bar of Michigan, Michigan Municipal League, Institute for Justice and Pacific Legal Foundation.
The state Court of Appeals dismissed the lawsuit last year, ruling in November 2022 that the plaintiffs didn’t have standing to sue. However, the high court has decided to hear the case. The Michigan Supreme Court will decide if the case should have been transferred back to Macomb for a potential jury trial and also decide if the Court of Appeals properly weighed factors of a previous case in their opinion. They will also look at some of the same issues as the gym case about whether a “taking” had occurred.
Final decisions from the court regarding these cases will likely come in the upcoming months after the oral arguments are heard.
