State Use of Private Property Under COVID-19-Based Emergency Orders
We have heard concerns from many of our clients regarding the state’s ability to take private medical equipment or facilities for public use during an emergency. As part our series on the impact of COVID-19 on businesses, the article below discusses the ability of states to take such action and what it means for the property owners.
Most states have the power to commandeer private property during an emergency if that property will be used to aid the state in dealing with the disaster. The extent to which a state uses this power is largely up to the governor of the state, but this power is not unchecked. If a state commandeers private property, the state generally must compensate the property’s owner for the use. The specifics on commandeering vary from state to state. Below are examples of how this state power works in New York, Texas, and California.
Public use of private equipment and facilities is of particular focus in New York, where Governor Cuomo issued an executive order on Friday, April 3 mobilizing the National Guard to pick up and distribute unused ventilators (and other medical resource used in combating COVID-19) to areas of greater need. The focus of the executive order is unused hospital equipment and it is not meant to impact still-functioning health care facilities or smaller facilities for the time being.
New York’s law on commandeering not clear, but it appears that Governor Cuomo is functioning under the state’s eminent domain procedures. New York’s Public Lands Law (PBL) allows acquire private property for public use where there is a public benefit or purpose for the property. The PBL allows the governor to forgo the normal procedural requirements for eminent domain where because of an emergency situation the public interest will be endangered by any delay caused by complying with the public hearing requirement. The PBL also requires that any owner whose property is used or taken under this law is “justly compensated” for such use or taking. Under the PBL, just compensation is initially determined through negotiation and agreement, and if agreement fails, through a suit under the procedural rules governing eminent domain.
In discussing his executive order, Governor Cuomo has said that owners will have their equipment returned or the owner would be reimbursed for the equipment. Under the law, it appears even if the equipment is returned, New York may still need to compensate the owners.
In Texas, the Texas Health and Human Services Commission (“HHSC”) issued the Health Facility Licensing Guidance Letter GL 20-2012 (“Guidance Letter”) on March 27, 2020. The Guidance Letter allowed licensed ASCs to expand their scope of services offered and keep patients for longer than 23 hours without the need to report to the HHSC. However, the Guidance Letter also required licensed ASCs to report to the HHSC the number of functioning ventilators and other respiratory support equipment they have, as well as any other information required by the HHSC.
Many clients are concerned that by reporting this information the HHSC can seize their property with this information. Under the Texas Government Code, the governor may commandeer the use of any private property the governor finds necessary to cope with a disaster, subject to certain compensation requirements. The Government Code further explains that if property is commandeered or otherwise used in coping with a disaster and its use or destruction was ordered by the governor or a member of the disaster forces of this state, then the state may pay compensation for such property. In order for an owner of commandeered property to be compensated under the Government Code, he or she must file a claim for compensation with the Texas Division of Emergency Management in the form and manner required by the Division. When determining the amount of compensation for commandeered property, if the state and the owner of the property cannot agree on a price, the amount of compensation is computed in the same manner as compensation due for taking of property under the condemnation laws of Texas.
Two areas of concern with Texas’s compensation laws are that they are permissive (note, it’s that the state may pay compensation for the commandeered property) and the onus for seeking compensation is on the party whose property was commandeered.
The concern about California’s ability to commandeer private property jumped to the forefront of people’s minds upon Governor Newsome’s issuance of Executive Order N-25-20 in response COVID-19’s impact on California, which allowed for the state to purchase FEMA trailers and begin leasing certain hotels and motels to use for emergency shelter. Like Texas, California’s Government Code allows the governor to commandeer or utilize any private property or personnel deemed by him necessary in carrying out the responsibilities of a state of emergency response. The Code requires that state pay the “reasonable value” of any property or personnel, but the Code does not specify what reasonable value is or whether it is the same concept as “just compensation,” which would require payment of the highest price that would be agreed to in an open-market transaction. The Government Code requires persons whose property has been taken or services have been compelled to present a claim to the Department of General Services to obtain their reasonable value compensation.
While California’s laws on compensation for property commandeered under emergency orders at least require payment for the property, the amount to be paid is amorphous, at best, and again, the responsibility for seeking compensation is placed on the party whose property has been commandeered.
As the COVID-19 virus continues to impact states and tax healthcare systems, individual state responses may change. If you have questions about a state other than New York, Texas or California or have further questions on any of the information above, please reach out to ByrdAdatto at firstname.lastname@example.org or (214) 291-3200.