Courts Continue to Examine the Constitutionality of PPP Loan Restrictions, “Stay at Home” Orders, Gathering Restrictions

As we reviewed in our prior updates, courts around the country still are showing divergent views and reasoning when examining the constitutionality of PPP loan restrictions, “stay at home” orders, and other COVID-19 promulgations.

PPP Loans

We previously discussed a Wisconsin federal court enjoining restrictions that barred strip clubs from obtaining PPP loans under the CARES Act. The Seventh Circuit Court of Appeals temporarily stayed that order, but ultimately vacated its stay and rejected the government’s request for a new stay pending appeal.[1] A similar decision by a Michigan federal court, which we which previously wrote about, is pending before the Sixth Circuit Court of Appeals. It also declined to enter a stay pending appeal, citing the strip clubs’ likelihood of success on the merits.[2]

“Stay at Home” Orders

Individuals and businesses affected by “stay at home” orders are mounting constitutional challenges across the country. In New York City, an individual challenged the mayor’s directive, contending that it infringed upon her First Amendment rights by preventing her from “leading a gathering of individuals on City streets to protest the executive orders . . . .”[3] A Manhattan federal court rejected this argument, finding that “[g]iven the severity of the public health crisis, the City has taken measures that are reasonable and narrowly tailored in temporarily prohibiting public gatherings. While [such] a measure . . . may not likely be found narrowly tailored in ordinary times, these times are extraordinary.”[4] The court agreed with the city that “the declining rates of infection and death among New Yorkers is evidence not that the gatherings ban is overly broad, but rather that it is effective.”[5]

Federal courts in Pennsylvania,[6] Oregon,[7] Connecticut,[8] Florida,[9] and Maryland,[10] and a state court in Michigan,[11] all reached similar conclusions. For example, the Florida court agreed that the governor’s actions in that state were “reasonable and measured, based on data and science, and rationally related to a legitimate end. In other words, Petitioner is subject to a pause in her life, as authorized by law, in exchange for and in an effort to maintain the majestic freedoms enjoyed in America prior to, during, and after this pandemic. As painful as this moment is for her and millions of other Floridians, her constitutional rights are not implicated.”[12]

The Maryland court rejected an argument that the closure of “non-essential businesses” violates the Commerce Clause because it prevents those businesses from engaging in interstate commerce.[13] State laws are not invalid merely because they have “any effect on interstate commerce”; instead, state laws “may pose an incidental burden on interstate commerce as long as the burden is not ‘clearly excessive in relation to the putative local benefits.’”[14]

Businesses affected by targeted COVID-19 restrictions received different results, however, before the Michigan Court of Appeals, which enjoined enforcement of Michigan orders temporarily restricting the sale of e-cigarettes and other “vaping” products.[15] State officials “are entitled to due deference . . . but not complete capitulation,” and the orders restricting these specific products went too far even under the governor’s emergency powers.[16]

Gathering Restrictions

Some litigants have successfully challenged restrictions on religious gatherings. A North Carolina federal court enjoined enforcement of that state’s restriction on in-person religious gatherings.[17] Crucial to the court’s decision was the fact that the restrictions prohibited religious services from going on indoors, even with social distancing, if it was not “impossible” for the gathering to take place outdoors.[18] The court found it “remarkable . . . in light of the [1^st Amendment’s] Free Exercise Clause”[19] that it would be up to “a sheriff or other local law enforcement officer [to] decide whether the religious entity or individual was correct in deciding whether it was ‘impossible’ to worship outside.”[20]

The court also found, as have some other courts, that the effect of the rule was to allow certain secular entities, like grocery stores, to have indoor “gatherings,” while barring religious groups from doing the same.[21] The court concluded that it did “not doubt that the Governor is acting in good faith to prevent the spread of COVID-19 and to protect North Carolinians. But restrictions inexplicably applied to one group and exempted from another do little to further these goals and do much to burden religious freedom.”[22]

But, notably, other courts upheld restrictions affecting religious gatherings. A Louisiana federal court joined other courts in holding that religious services are not similarly situated to “big box retailers, groceries and hardware stores,” which were allowed to have individuals indoors over spaced out times and with appropriate social distancing.[23] Religious gatherings are similar to “aquariums, museums, arcades, theaters, bars, gymnasiums” and other “densely packed” secular environments, which, like religious gatherings, were also not allowed to have people gather indoors even with social distancing.[24] A Maryland federal court reached the same conclusion.[25]

Conclusion

Courts continue to reach different conclusions about the constitutionality of restrictions imposed by state and local governments in response to COVID-19, including with respect to restrictions on religious gatherings. Whatever the outcome, courts are taking the constitutional arguments seriously and are scrutinizing the government restrictions. Courts will likely continue to address these issues, even as the country

[1] Case No. 20-1729, Dkt. No. 17.

[2] Case No. 20-1437, Dkt. No. 11.

[3] 2020 WL 2520711, at *2 (S.D.N.Y. May 18, 2020).

[4] Id. at *4.

[5] Id.

[6] 2020 U.S. Dist. LEXIS 89425 (M.D. Pa. May 21, 2020).

[7] 2020 U.S. Dist. LEXIS 87942 (D. Ore. May 19, 2020).

[8] 2020 U.S. Dist. LEXIS 87758 (D. Conn. May 19, 2020)

[9] 2020 WL 2479447 (S.D. Fla. May 14, 2020).

[10] 2020 U.S. Dist. LEXIS 88883 (D. Md. May 20, 2020).

[11] See https://www.scribd.com/document/462488304/MI-Court-of-Claims-ruling; https://www.michigan.gov/ag/0,4534,7-359-92297_99936-529927--,00.html.

[12] 2020 WL 2479447, at *8 (S.D. Fla. May 14, 2020).

[13] 2020 U.S. Dist. LEXIS 88883, at *45-53.

[14] Id. at *53 (quoting 397 U.S. 137, 142 (1970)).

[15] http://publicdocs.courts.mi.gov/OPINIONS/FINAL/COA/20200521_C351211_104_351211.OPN.PDF.

[16] Id.

[17] 2020 U.S. Dist. LEXIS 86310 (E.D.N.C. May 16, 2020).

[18] Id. at *17.

[19] Id. at *18.

[20] Id. at *17-18.

[21] Id. at *19-23.

[22] Id. at *23 (internal quotation marks omitted).

[23] 2020 U.S. Dist. LEXIS 85909, at *8-9 (M.D. La. May 15, 2020).

[24] Id. at *9.

[25] 2020 U.S. Dist. LEXIS 88883, at *26-30.