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COVID May Reshape How Courts Consider the Government’s Excuses

If you sue the government because it is preventing you from earning an honest living, you face an uphill battle. And that gets that much harder if the government is stopping you because there’s a deadly virus running amok. But maybe, after courts have been considering pandemic related closures for a year and a half, they might rethink cases where someone’s economic liberty has been taken for no good reason at all. 

For instance, before the pandemic, Texas courts determined that breweries have to give away their distribution rights for free, even though the distributors can turn around and resell those very rights for a hefty profit. Take, for example, Chip McElroy, who founded Live Oak Brewing in Austin, Texas. Under state law he must choose a distributor for his beer one time, and one time only. That makes his one-time choice very valuable. Before 2013, Texas breweries sold distribution rights to distributors for hundreds of thousands of dollars. But then, before his young brewery had sold its rights, the Legislature mandated that breweries give those rights away for free.  

What’s the reason for this? Simply, the distributors had a really good lobbyist. And when Chip challenged the law in court, the judges just about admitted as much, explaining it’s just a “commonplace compromise among various stakeholders that takes place as part of the legislative process.” In other words, instead of providing meaningful judicial protection for economic liberty rights as required by the Texas Constitution, the court in Chip’s case invoked the kind of legislative graft that the courts usually don’t question when economic liberty cases are brought under the U.S. Constitution in federal court. 

But more recently courts, both federal and state, have grappled with widespread shutdowns of ordinary human interaction that seriously affected whether businesses were open or closed. After the pandemic, examples like Chip’s will pale in comparison to COVID-19 shutdowns, where, instead of a shady payoff to a special interest with no serious public benefit, you have, yes, a massive imposition on basic liberties but balanced against a massive danger of a deadly disease. Paradoxically, the perspective of COVID-19 may lead to courts taking liberty more seriously when the stakes for the state aren’t as high.  

How Things Were in the Courts P.C., Pre-COVID 

Although you continually see headlines decrying “activist courts,” in fact very few laws are ever found unconstitutional. For example, the Supreme Court finds fewer than one percent of federal laws and regulations to be unconstitutional. Yes, it happens sometimes when it comes to speech or religion, abortion, racial discrimination, or the occasional Congressional act under an obscure corner of the Constitution, such as the Appointments Clause. But the headlines announcing these rulings sell papers and drive clicks, as opposed to the routine judicial shrug that comprises most constitutional rulings.  

Most of the time, whatever words in the Constitution are technically at issue, judges apply the same thing, a standard called the “rational basis test.” That can mean slightly different things depending on the case, but generally it demands that judges bend over backwards to conclude a law is constitutional. Judges can speculate about what legislators might have believed when the law was passed. And some courts have even held they can make up “facts” if the facts sound at all plausible.  

Although the rational-basis test applies to lots of rights in lots of areas, its most famous application is with economic liberty. The right to earn a living has a lot of enemies, many of them senseless licenses like Texas’ distribution-selling ban or Louisiana’s florist license (yes, you read that right—you need a special license, for which you need to pass an exam, to sell cut flowers in Louisiana). Many laws, whether they’re good policy or not, are enacted with good intentions to address a perceived threat to public health or safety. But some are nothing more than anticompetitive graft. Pushing for these laws is commonly called “rent seeking.” Many occupations are engulfed by rent seeking, resulting in higher prices for consumers and fewer jobs for workers. Yet, when it comes to the courts, judges have long said it’s not their place to protect economic liberty ahead of the choices of the legislature.  

Thus, if you’re an entrepreneur in America and the law stands in your way, there’s often not a lot of hope for you. The legislature is generally not interested in fixing things and the courts even less.  

Well, that was the view of the courts before COVID-19. 

A Viral Rational Basis 

Many rent seeking measures directly affect only a few people. Not that many try to enter the floral industry or sell beer-distribution rights. Louisianans may not realize that their neighbors in Texas pay less for floral arrangements and Texans might not know that breweries can create more jobs elsewhere.

But sometimes the public does notice. That happened in March 2020.  

There’s no need to summarize it here. Anyone reading this in 2021 lived viscerally though it. The sudden orders didn’t narrow who could practice an occupation or require meaningless exams or education requirements. They much more plainly and obviously shut businesses down. For many entrepreneurs and workers their ability to earn a living was completely—though just temporarily—eliminated.  

As bad as the various rent-seeking pre-pandemic regulations were, the COVID-19 measures were unarguably more extreme. Yet, in the ensuing court challenges they generally survived rational-basis attacks not only because of the rational-basis test itself, but the reality of a deadly superspreading virus.  

During the pandemic dozens of federal lawsuits challenged various public health measures, claiming they violated the rational-basis test. Almost all failed. You’ve undoubtedly heard about the Supreme Court’s reversal of some restrictions on houses of worship, but those were possible because of the higher standard of protection for religious liberty. When it came to the rational basis test, though, the case law from the last year is littered with failure after failure of gyms, bars, restaurants, summer camps and countless other mom-and-pop employers trying to use the U.S. Constitution to fight the sometimes understandable and sometimes nonsensical shutdown measures. 

COVID Irrationality 

Yet, as the pandemic continued, some federal judges grew restless. There weren’t many examples, but a handful of federal district court judges declared state shut-down orders so arbitrary that they violated the rational-basis test. First, in June 2020 a federal trial court in Michigan found the continuing shutdown of gyms—and only gyms—was likely unconstitutional. The judge stated the government could not come up with any reason to keep gyms closed other than that they’re “dangerous,” with no accompanying facts. The case was quickly put on hold—and essentially reversed—but it did sound a warning that not every order was going to hold up just by claiming “COVID-19.”  

Two months later, two New York couples challenged a limit of 50 guests at their upcoming indoor wedding receptions. That limit, in itself, would undoubtably have stood as constitutional, but New York State was allowing more than that number of diners in restaurants. For the judge, the difference between a restaurant of 51 strangers and a wedding hall of 51 well-wishers didn’t hold rational-basis water. 

Finally, in September 2020 a Pennsylvania federal judge assessed the governor’s extensive closing orders. Perhaps because at this point we were six months into the pandemic, the judge paid particular attention to the orders’ indefinite nature and their capacity to return. Seeming to loom over the opinion was the question of whether a well-meaning governor could simply close businesses indefinitely. What if the orders just lasted years and years? Would that be rational? The judge concluded—in striking language you rarely see in economic liberty cases—that the orders simply went too far. This ruling soon became moot, but the judge’s language—including citations to cases long overruled by the modern rational-basis-endorsing Supreme Court—sent shockwaves around the legal intelligentsia.  

Funny Perspectives 

Although the Delta variant of COVID-19 is still very much with us, the “shutdown strategies” of 2020 are mostly past and it seems like that phase of the pandemic has passed us. Nevertheless, the experience of those titanic struggles of massive death vs. massive shutdowns will make a lot of government interests in constitutional litigation look pretty puny. Further, even with those real dangers, sometimes the government actually lost. The contrast between COVID-19 and the more standard legislative rent seeking may portend a bit more judicial engagement when it comes to reviewing restrictions on economic liberty. 

Before and after the pandemic there were and are the same laws that make it hard, if not impossible, to run a particular business. And a lot of them actually make sense. A regulation prohibiting new copper smelters next to schools seemed pretty sensible in 2019 and will continue seeming so into the future. But a lot of other laws were senseless before the pandemic, like beer distribution give-aways and florist licenses. Although perhaps not as severe as shutting a business down, their real-world impact hasn’t changed. But what may change are the courts’ perception of them when they apply the rational-basis test.  

In the pandemic, public health authorities justified any restriction with literal life-and-death. Yet, Texas’ barrier to selling beer distribution rights wasn’t life-and-death before and isn’t now. In any new challenge to the law, the state will have its same weaselly arguments. However, those arguments look even more pathetic since we’ve gone through a year of constitutional battles with much more at stake. All kinds of pieces of civil society, profit and non-profit, were shut down for incredibly serious reasons (even if it turns out those tools sometimes didn’t make any difference). And now we’re supposed to be equally impressed by speculations about how the graft is shared in making alcohol regulations? Or how we need a license to protect us from flowers? 

Almost no living Americans went through the Spanish flu epidemic. But we know that many who did experience it had a different outlook on contagious disease that lasted the rest of their lives. It might be still too early to tell, but hopefully courts will let the experience of judging serious questions about economic liberty shape their outlook going forward.  

Anthony Sanders is the director of IJ’s Center for Judicial Engagement.

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