Photo Credit: Link (last visited November 1, 2020).
Written By: Caroline Jane Smith
Executive Editor, American Journal of Trial Advocacy
I. Background and Current State of the Performing Arts during the COVID-19 Pandemic
In April of 2020, live music venues, performing artists, employees of the arts industry, and other performance spaces across the United States joined together to form the National Independent Venue Association (NIVA).[i] As the COVID-19 pandemic raged throughout the United States, performance spaces were among the first to close and due to social distancing restrictions, will likely be among the last to reopen. According to its website, “NIVA’s mission is to preserve and nurture the ecosystem of independent venues and promoters throughout the United States.”[ii] NIVA’s mission statement continues stating entertainment venues are crucial to the vitality of local economies.[iii] Large performance spaces generate financial gain not only for the venue, artists, and employees, but also restaurants, hotels, and retail stores in proximity to the venue.[iv]
Audrey Fix Schaefer, the communications director of NIVA, has equated the closing of entertainment venues to the governmental practice of eminent domain.[v] Schaefer stated, “If you’re going to say, ‘We’re taking your business from you, you may not open,’ then the government has a responsibility to provide financial assistance . . . [s]o that they don’t extinguish an industry.”[vi] In a recent interview, Ms. Schaefer explained further:
[T]his is an instance in which, for the greater good, they have taken our property effectively by shutting us down for health and safety reasons—which we totally understand. But they’re leaving us hanging out to dry, as though there’s some type of miracle that will happen to our bottom line that makes us not have to pay rent and mortgage and utilities and taxes and insurance. But we do and the overhead is phenomenal.[vii]
As of September 15, 2020, NIVA’s membership includes more that 2800 performance venues and promoters in all fifty states and garners the support of many famous musicians, comedians, and other celebrities.[viii] Without federal assistance other than that provided by PPP loans, approximately ninety percent of independent performance spaces will close permanently.[ix] On October 1, 2020, The House of Representatives passed the Heroes Act, which included the NIVA supported Save Our Stages Act.[x] Section 619 of the Heroes Act includes:
1. Authoriz[ation] [of] $10 Billion for the SBA to make grants to eligible live venue operators, producers, promoters, or talent representatives to address the economic effects of the COVID-19 pandemic on certain live venues. 2. The SBA may make an initial grant of up to $12 million dollars to an eligible operator, promoter, producer, or talent representative; and a supplemental grant that is equal to 50% of the initial grant. 3. Such grants shall be used for specified expenses such as payroll costs, rent, utilities, and personal protective equipment.[xi]
While the passage of the Heroes Act in the House of Representatives is an initial win for venues, performing artists, and employees of the entertainment industry, disagreement along party lines increases the likelihood of a delayed vote in the Senate, or worse, may potentially quash the Act entirely.[xii] The Arts and Cultural Production Satellite Account reported in 2017 the arts sector contributed to approximately 4.5 percent of the nation’s GDP—more than agriculture, transportation, or construction.[xiii]
II. If Legislation Fails, is an Eminent Domain Claim Feasible?
Eminent domain is defined as “the inherent power of a governmental entity to take privately owned property, esp. land, and convert it to public use, subject to reasonable compensation for the taking.”[xiv] The Fifth Amendment’s Takings Clause states private property cannot be taken for public use without just compensation.[xv] However, as with mask mandates and social distancing guidelines, are the venue closings simply an exercise of the government’s police power in the face of a global pandemic?[xvi] As the Takings Clause holds a requirement of public use not “no use at all”, perhaps performance space closings are simply an example of “the state tak[ing] property by eminent domain because it is useful to the public, and under the police power because it is harmful.”[xvii]
The states have great authority in exercising the police powers granted under the Tenth Amendment in regard to public safety and welfare.[xviii] However, courts occasionally find government regulation may rise to the level of a taking.[xix] “The point at which a ‘reasonable’ exercise of police power becomes confiscatory is a subtle one.”[xx] In Penn Central Transportation Co. v. New York City,[xxi] the Court established a three-part test to decide when a regulation rises to a taking: (1) the economic impact of the regulation; (2) the degree of the obstruction of investment expectations; and (3) the character of the government action.[xxii] The performing arts industry experienced and continues to experience drastic economic repercussions from the shutdowns associated with the COVID-19 pandemic. However, the nature of the government action benefits the welfare and safety of the citizens of the states—exactly what the police powers granted by the Tenth Amendment are designed to do.
Initially, venue owners need to establish if the government action on their property is a taking or simply a regulation of its use.[xxiii] “[I]mpacts caused by the exercise of police power are usually not compensable, while the exercise of eminent domain power is compensable.”[xxiv] While courts previously addressed the compensability of losses to business earnings in times of war or pandemic, these precedents are not necessarily applicable to the magnitude of the COVID-19 pandemic.[xxv] During the smallpox epidemic, the Supreme Court “upheld the authority of the states to take measures in the interests of public health during an epidemic.”[xxvi]
III. Conclusion: “I Asked Her for Some Happy News, But She Just Smiled and Turned Away.”[xxvii]
On October 6, 2020, President Donald Trump stated on Twitter he “instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business.”[xxviii] As the law does not seem to favor a claim of eminent domain under the Takings Clause, venues need to rely on federal legislation to survive. For now, the music doesn’t play, and the actors have no stage.
[i] Press Release, Nat’l Indep. Venue Ass’n, National Independent Venue Association (NIVA) Created to Fight for Venue Survival Amid Mandated, Extended Shutdowns (April 17, 2020) (on file with author).
[ii] Nat’l Indep. Venue Ass’n, https://www.nivassoc.org/ (last visited Oct. 5, 2020).
[v] Hau Chu, As Indoor Concerts Slowly Return, Music Venues Wonder What the Future Holds, Wash. Post (July 8, 2020), https://www.washingtonpost.com/goingoutguide/music/as-indoor-concerts-slowly-return-music-venues-wonder-what-the-future-holds/2020/07/07/a6765a46-bbe5-11ea-80b9-40ece9a701dc_story.html.
[vii] Doug Rule, Music Venues Nationwide are Pleading for Financial Support. Congress isn’t Listening. Metroweekly, (Oct. 1, 2020), https://www.metroweekly.com/2020/10/music-venues-nationwide-are-pleading-for-financial-support-congress-isnt-listening/.
[viii] Press Release, Nat’l Indep. Venue Ass’n, Fact Sheet and Policy Ask Update (Sept. 15, 2020).
[x] Jem Aswad, House Passes $2.2 Trillion ‘Heroes’ Act, Including ‘Save Our Stages’ Provisions for Indie Venues, Variety, (Oct. 2, 2020), https://variety.com/2020/music/news/house-passes-heroes-act-save-our-stages-venues-1234790328/.
[xii] See generally, Rule, supra note 7 (“The Save Our Stages Act also attracted a whopping 144 co-sponsors from both parties. And yet, all those bills have been held up for months, the result of partisan squabbling over the details of any future COVID-19 relief package.”)
[xiii] During Economic Highs and Lows, the Arts Are Key Segment of U.S. Economy, Nat’l Endowment for the Arts, (Mar. 17, 2020), https://www.arts.gov/news/2020/during-economic-highs-and-lows-arts-are-key-segment-us-economy.
[xiv] Eminent Domain, Black’s Law Dictionary (9th ed. 2009).
[xv] U.S. Const. amend. V.
[xvi] See generally, Paul Kiernan, Covid-19, Eminent Domain and Determining Compensation, Law360 (Apr. 22, 2020), https://plus.lexis.com/api/permalink/a74b3eaf-e401-4fa0-9fd2-de7521b4d8c3/?context=1530671.
[xvii] David B. Fawcett III, Eminent Domain, The Police Power, and The Fifth Amendment: Defining the Domain of the Takings Analysis, 47 U. Pitt. L. Rev. 491, 943 (1986) (quoting E. Freund, The Police Power, 546-47 (1904)).
[xviii] Michael Kent Curtis, et al., Constitutional Law in Context 986 (3rd ed. 2011).
[xix] Id. at 988.
[xxi] 438 U.S. 104 (1978).
[xxii] Penn Cent. Transp. Co. v. New York City, 438 U.S. 104, 124 (1978).
[xxiii] Kienan, supra note 16.
[xxv] See generally, id.
[xxvi] Id. (citing Jacobson v. Massachusetts, 197 U.S. 11 (1905)).
[xxvii] Don McLean, American Pie (United Artists 1971).
[xxviii] Adam S. Minsky, Further Student Loan and Unemployment Relief in Doubt After Trump Stops All Stimulus Negotiations, Forbes, (Oct. 6, 2020 3:33PM), https://www.forbes.com/sites/adamminsky/2020/10/06/further-student-loan-relief-in-doubt-after-trump-stops-all-stimulus-negotiations/#3098072b7204.