Everest Foods Inc. v. Andrew M. Cuomo

Background

The plaintiffs were Everest Foods Inc., Punchgini, Inc., A Spice Route Inc., Impeccable Kitchen Bronx Corp., Junoon NYC LLC, Paisley Restaurant, LLC, Paprika II LLC, Payam Inc., Sabharwal Hospitality Group LLC, Surya Hells Kitchen Inc., Sharma & Singh Restaurant Group Inc., and Shree Laxmi Restaurant Inc. They operated food businesses in New York City and alleged that their businesses permanently closed or lost business because of executive orders issued by former New York Governor Andrew M. Cuomo and New York City Mayor Bill de Blasio during the COVID-19 pandemic.

The challenged orders limited or suspended indoor dining, restricted restaurant capacity, limited in-person workforces, and classified some businesses as essential while allowing them to continue operating. Restaurants could continue offering take-out and delivery, and later some could offer outdoor dining or reopen with capacity limits. The plaintiffs alleged that other businesses were allowed to operate under less restrictive rules and that they did not have access to locations suitable for the city’s outdoor dining program.

The plaintiffs sued Cuomo and de Blasio in their individual capacities for damages under 42 U.S.C. § 1983. They alleged five categories of constitutional violations: procedural due process, substantive due process, equal protection, a taking of property under the Fifth Amendment, and impairment of contracts under the Contracts Clause. The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), arguing that the complaint did not plausibly allege a constitutional violation and, alternatively, that qualified immunity protected them from personal liability.

Court’s Analysis

A Rule 12(b)(6) motion tests whether a complaint contains enough factual allegations to state a legally plausible claim. The court generally accepts factual allegations as true at this stage but does not accept unsupported legal conclusions as true.

The court noted that the defendants had acted in their official roles when issuing and enforcing the orders, but the lawsuit sought personal damages from them. It therefore considered personal immunity defenses rather than dismissing the case based on state sovereign immunity or municipal-liability principles.

The court explained that qualified immunity generally protects government employees from civil liability unless their discretionary conduct violated a constitutional right that was clearly established at the time. The court decided the first question—whether the plaintiffs plausibly alleged a constitutional violation—and held that they had not. Because of that conclusion, the court did not need to decide whether the alleged rights were clearly established.

COVID-19 Public-Health Framework

The court considered both the deferential approach associated with Jacobson v. Massachusetts and ordinary constitutional analysis. Under the Jacobson approach described by the court, public-health restrictions would be invalid only if they had no real or substantial relationship to public health or were plainly and palpably an invasion of protected rights.

The court held that the restrictions on indoor dining were related to limiting COVID-19 transmission. It emphasized that restaurant customers generally had to remove their masks to eat and that restaurants brought together people from different households. The court also held that the distinctions between restaurants and other businesses were not so unreasonable that the plaintiffs had plausibly alleged a constitutional violation. It stated that the plaintiffs’ claims failed under both the Jacobson approach and traditional constitutional analysis.

Procedural Due Process

Procedural due process generally requires notice and an opportunity to be heard before the government takes away certain property interests. The court distinguished adjudicative actions, which resolve facts in individual cases, from legislative actions, which apply generally and prospectively.

The court held that the executive orders were legislative because they applied generally to restaurants and other businesses and were prospective. The plaintiffs did not allege that they were targeted by individual enforcement actions or singled out for special treatment. Because the orders were legislative, the plaintiffs were not entitled to individual notice or a hearing before the restrictions took effect. The court dismissed the procedural due process claim.

Substantive Due Process

The plaintiffs argued that the orders violated their substantive due process right to pursue a livelihood. The court explained that substantive due process protects against government conduct that either shocks the conscience or violates a fundamental right.

The court held that the orders did not shock the conscience. At most, the plaintiffs alleged that the defendants chose policies they considered unwise, such as allowing some businesses to operate while restricting indoor dining. The court also held that the plaintiffs did not allege a complete prohibition on working or operating their businesses because take-out and delivery remained permitted. Reduced profitability or business losses alone did not establish a substantive due process violation.

The court further held that the right to pursue a particular occupation is subject to reasonable regulation and that the plaintiffs had not alleged a complete prohibition of that right. The restrictions were reasonably related to the legitimate governmental objective of containing COVID-19. The fact that other businesses were treated differently did not, by itself, make the restrictions arbitrary or unconstitutional.

Equal Protection

The plaintiffs claimed that restaurants were treated less favorably than other indoor businesses and than restaurants outside New York City. Because they did not allege discrimination involving a protected class or fundamental right, they had to identify similarly situated comparators and show that the different treatment lacked a rational relationship to a legitimate government objective.

The court held that the proposed comparators—including gyms, stores, museums, movie theaters, casinos, bowling alleys, and construction businesses—were not similarly situated because indoor dining presented different transmission risks. Restaurant customers had to remain unmasked while eating and generally stayed together for longer periods. The court also held that New York City restaurants were not necessarily similarly situated to restaurants elsewhere in the state because the city’s population density could increase the spread of an outbreak.

Even assuming the plaintiffs had identified similarly situated comparators, the court held that the restrictions were rationally related to preventing COVID-19 transmission. The court therefore dismissed the equal protection claim.

Takings Clause

The plaintiffs alleged both categorical and non-categorical regulatory takings. A categorical taking generally involves government action that eliminates all economically beneficial use of property. A non-categorical taking is evaluated under factors including the economic impact of the regulation, interference with reasonable investment-backed expectations, and the character of the government action.

The court held that the plaintiffs had not alleged a categorical taking. The government did not take possession of or use their property, and the orders allowed them to continue using their businesses for take-out and delivery. The fact that four plaintiffs closed did not change the analysis because the orders did not require them to close.

The court also held that the plaintiffs had not plausibly alleged a non-categorical taking. The restrictions were temporary and prospective, did not eliminate all economic use, and allowed continued operation. The court found it implausible that new health regulations would have been wholly unexpected in the heavily regulated restaurant industry. Finally, the restrictions were negative limits on business activity, not a physical invasion or appropriation of property, and were adopted to protect public health. The court dismissed the Takings Clause claims.

Contracts Clause

The plaintiffs alleged that the orders impaired their contracts with landlords, vendors, creditors, workers, and employees. The court considered the extent to which the orders undermined the contractual bargain, interfered with reasonable expectations, and prevented the plaintiffs from protecting or restoring their contractual rights.

The court held that the plaintiffs had not plausibly alleged substantial impairment. They were not prohibited from operating or earning income through take-out and delivery, and the orders did not prevent them from meeting their contractual obligations in the manner required for a Contracts Clause claim. The court also found that operators in a heavily regulated industry could reasonably anticipate future health-related regulations. Because later orders rolled back restrictions, the plaintiffs were not prevented from restoring their contractual rights. The court dismissed the Contracts Clause claims.

Disposition

The court granted both defendants’ motions to dismiss. The Clerk was directed to terminate the motions, enter judgment in the defendants’ favor, and dismiss the case against them. The oral argument scheduled for February 15, 2022 was canceled.