Case 2:20-cv-03300-CMR Document 37 Filed 08/28/20 Page 1 of 34
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF PENNSYLVANIA
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`HAPCO,
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`Plaintiff,
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`v.
`CITY OF PHILADEPHIA and
`THE HONORABLE JAMES KENNEY,
`Defendants,
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` and
`TENANT UNION REPRESENTATIVE
`NETWORK AND PHILADELPHIA
`UNEMPLOYMENT PROJECT
` Defendant-Intervenors.
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`CIVIL ACTION NO. 20-3300
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`MEMORANDUM OPINION
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`August 27, 2020
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`Plaintiff HAPCO, a 501(c)(4) corporation that is an association of Philadelphia
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`Rufe, J.
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`residential investment and rental property owners and managers, seeks to preliminarily enjoin
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`Defendants City of Philadelphia and the Honorable James Kenney from implementing or
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`enforcing several temporary emergency bills passed by the Philadelphia City Council in response
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`to the COVID-19 pandemic. After considering the parties’ briefing and after a hearing, for the
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`following reasons, HAPCO’s motion will be denied.
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`I.
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`BACKGROUND
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`The world is in the midst of an unprecedented public health crisis. The deadliest
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`pandemic in over a century has swept across the globe and has upended the lives of the
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`American people in previously unimaginable ways. Over 5.7 million Americans have contracted
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`the novel coronavirus, COVID-19, and, tragically, more than 177,000 Americans have died.1 In
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`1 Cases of Coronavirus Disease (COVID-19) in the U.S., CENTERS FOR DISEASE CONTROL AND PREVENTION,
`https://www.cdc.gov/coronavirus/2019-ncov/cases-updates/cases-in-us html (last visited August 27, 2020).
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`Case 2:20-cv-03300-CMR Document 37 Filed 08/28/20 Page 2 of 34
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`Philadelphia, more than 33,000 people have tested positive for COVID-19 and the death toll has
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`exceeded 1,700.2
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`Because “COVID-19 spreads mainly among people who are in close contact,” and social
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`distancing “is the best way to reduce the spread,”3 government officials have imposed severe
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`measures to counter the disease. On March 6, 2020, Governor Wolf issued a Proclamation of
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`Disaster Emergency.4 On March 13, 2020, the Governor closed schools across the
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`Commonwealth.5 On March 17, 2020, recognizing that “COVID-19 is easily transmitted,
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`especially in group settings, including by people with no symptoms or mild symptoms,” Mayor
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`James Kenney and the City of Philadelphia Commissioner of Public Health issued a joint order
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`prohibiting the “operation of non-essential businesses in Philadelphia.”6 On March 23, 2020,
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`Governor Wolf issued an Order For Individuals to Stay at Home which required Philadelphians,
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`among others, to “stay at home except as needed to access, support, or provide life sustaining
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`business, emergency, or government services.”7
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`On May 7, 2020, recognizing that “the movement and/or displacement of individuals
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`residing in Pennsylvania from their homes or residences during the current stage of the disaster
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`emergency constitutes a public health danger to the Commonwealth in the form of unnecessary
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`movement that increases the risk of community spread of COVID-19,” Governor Wolf imposed
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`2 Coronavirus Disease 2019 (COVID-19), CITY OF PHILADELPHIA, https://www.phila.gov/programs/coronavirus-
`disease-2019-covid-19/ (last visited August 27, 2020).
`3 Social Distancing, CENTERS FOR DISEASE CONTROL AND PREVENTION, https://www.cdc.gov/coronavirus/2019-
`ncov/prevent-getting-sick/social-distancing.html (last visited August 27, 2020).
`4 Ex. 1.A, City of Philadelphia’s Response in Opposition [Doc. No. 28-2].
`5 Ex. 1.C, City of Philadelphia’s Response in Opposition [Doc. No. 28-2].
`6 Ex. 1.E, City of Philadelphia’s Response in Opposition [Doc. No. 28-2].
`7 Ex. 1.F, City of Philadelphia’s Response in Opposition [Doc. No. 28-2].
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`Case 2:20-cv-03300-CMR Document 37 Filed 08/28/20 Page 3 of 34
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`a 60-day moratorium on both evictions and foreclosures.8 As the Governor’s order explained,
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`evictions are particularly harmful during the COVID-19 pandemic. Although limited contact
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`with others has been recognized as necessary to counter the pandemic, this is often impossible
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`for people who are evicted. “When a person is unable to find housing to rent on their own, they
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`often ‘double-up’ by moving in with family or friends.”9 Dr. Michael Z. Levy, an epidemiologist
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`at the University of Pennsylvania, modeled the effect of resuming evictions on the spread of
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`COVID-19 and concluded that, as a result of doubling-up, “[b]y May 1st of 2021 a median
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`additional 1.30% of the population becomes infected in the scenario with evictions.”10
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`The public health danger that evictions pose during the COVID-19 pandemic is
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`particularly pronounced in Philadelphia. Even before the COVID-19 emergency began,
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`Philadelphia was “facing an eviction crisis.”11 Philadelphia has a poverty rate of 24.5%,12 and
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`renters account for approximately 46% of all households in Philadelphia.13 Over 51% of
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`Philadelphia renters pay more than 30% of their income on rent and 30.5% of renters pay more
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`8 Ex. 5.H, City of Philadelphia’s Response in Opposition [Doc. No. 28-6]. The Governor’s order was triggered by
`the imminent expiration of earlier orders from the Supreme Court of Pennsylvania preventing evictions.
`Pennsylvania Supreme Court Closes Courts to the Public Statewide, THE UNIFIED JUDICIAL SYSTEM OF
`PENNSYLVANIA, (March 18, 2020), http://www.pacourts.us/news-and-statistics/news/?Article=1018 (last accessed
`August 27, 2020).
`9 Decl. of Liz Hersh, Ex. 2, City of Philadelphia’s Response in Opposition [Doc. No. 28-3] at ¶ 13. The City of
`Philadelphia’s Office of Homeless Services has represented that, while it is currently able to adhere to social
`distancing norms in its facilities, it “would not be prepared to handle a large influx if eviction proceedings were to
`resume all at once and result in increased homelessness” and, therefore, “[b]ecause of the slowdown in the local
`economy due to the pandemic, eviction protections are necessary beyond the immediate emergency to provide time
`for tenants who have been financially impacted to recover and become current on their existing rent obligations.” Id.
`at ¶ 29.
`10 Ex. 4, City of Philadelphia’s Response in Opposition [Doc. No. 28-5] at ¶ 15. As Philadelphia has an estimated
`2019 population of 1,584,064, the additional 1.3% of the population becoming infected represents approximately
`20,592 people. See QuickFacts, Philadelphia city, Pennsylvania, UNITED STATES CENSUS BUREAU,
`https://www.census.gov/quickfacts/philadelphiacitypennsylvania (last visited August 27, 2020).
`11 Ex. 2.A, City of Philadelphia’s Response in Opposition [Doc. No. 28-3] at 6.
`12 Ex. 5.O, City of Philadelphia’s Response in Opposition [Doc. No. 28-6] at 5.
`13 Ex. 2.C, City of Philadelphia’s Response in Opposition [Doc. No. 28-3] at 1.
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`than 50% of their income on rent.14 In 2017, over 24,000 eviction filings were recorded, and
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`illegal evictions also occur on a regular basis.15 As the Mayor’s Taskforce on Eviction
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`Prevention summarized in its 2018 report and recommendation:
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`Research shows that eviction is not only a symptom of poverty, but also a root
`cause. It disproportionately affects women of color with children, and results in
`great economic burdens on both landlords and tenants. It breaks up communities,
`hurts prospects for future employment and housing, and increases the need for
`homeless services. In short, eviction negatively affects everyone involved in the
`process.16
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`The pandemic has only exacerbated this crisis. The measures taken to slow the spread of
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`the virus have disrupted the global economy and left millions of Americans jobless. In
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`Pennsylvania alone, during the current crisis, over two million people have filed for
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`unemployment.17
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`Against this backdrop, and upon finding that “[t]he number of Philadelphians struggling
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`to pay rent has undoubtedly increased since the onset of the COVID-19 pandemic,” the
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`Philadelphia City Council considered and enacted five separate bills temporarily amending
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`Chapter 9-800 of the Philadelphia Code, collectively known as the Emergency Housing
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`Protection Act (“EHPA”).18 The legislative findings for the EHPA also explain that “[t]he
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`COVID-19 pandemic’s negative impact on the lives and incomes of Philadelphians, and City
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`14 Daniel McCue, The Burden of High Housing Costs, FEDERAL RESERVE BANK OF PHILADELPHIA (2015),
`https://www.philadelphiafed.org/community-development/publications/cascade/86/01 burden-of-high-housing-
`costs (last visited August 27, 2020).
`15 Ex. 2.A, City of Philadelphia’s Response in Opposition [Doc. No. 28-3] at 3, 12.
`16 Id. at 3.
`17 Unemployment Compensation Claim Statistics & COVID-19, OFFICE OF UNEMPLOYMENT COMPENSATION,
`https://www.uc.pa.gov/COVID-19/Pages/UC-Claim-Statistics.aspx (last visited August 27, 2020).
`18 Ex. A, Am. Compl. [Doc. No. 21-1] at 2. In its Motion for Preliminary Injunction, HAPCO only challenged four
`of the five bills. Although referenced in the Amended Complaint, HAPCO’s motion does not discuss Bill No.
`200304, which creates a private right of action for tenants who have been illegally locked out by their landlords
`during the COVID-19 emergency period to recover damages caused by the lockout.
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`Case 2:20-cv-03300-CMR Document 37 Filed 08/28/20 Page 5 of 34
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`revenues, has exacerbated the pre-existing housing crisis and created a housing emergency in the
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`City of Philadelphia” and that the Act is “necessary to ensure residents are able to remain in their
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`homes, and small businesses are able to stay in business.”19 On July 1, 2020, Mayor Kenney
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`signed the Act.
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`Bill No. 200294 authorizes Philadelphia’s Fair Housing Commission to establish a
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`“residential eviction diversion program,” to run through December 31, 2020.20 The program,
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`which is not yet in effect, would require renters who have experienced a COVID-19 financial
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`hardship to participate in a mediation process with their landlords, designed to help resolve
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`issues before they lead to formal evictions.21 A housing counselor would engage with the tenant
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`to “educate and discuss available resources” before the tenant and landlord are joined by a
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`designated mediator in a “conciliation conference.”22 Once the program is implemented, the bill
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`provides that “no landlord shall take steps in furtherance of recovering possession of a residential
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`property occupied by a tenant who has suffered a COVID-19 financial hardship” without
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`participating in a conciliation conference.23 There are a few exceptions recognized under the Act:
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`if eviction is necessary to “cease or prevent an imminent threat of harm by the person being
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`evicted, including physical harm or harassment,” or if the landlord has provided the affected
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`19 Id. at 2–3.
`20 Id. at 5; see also Council Committee Advances Five Bills in Emergency Housing Protection Act, PHILADELPHIA
`CITY COUNCIL (June 5, 2020), http://phlcouncil.com/council-committee-advances-five-bills-in-emergency-housing-
`protection-act/ (last visited August 27, 2020).
`21 Ex. A, Am. Compl. [Doc. No. 21-1] at 5. A COVID-19 financial hardship is defined in the Act as the loss of
`income between March 1, 2020 and August 31, 2020, due to one of ten listed COVID19 related conditions,
`including a COVID-19 diagnosis, the need to quarantine, or the inability to work because of the shutdown. See id. at
`3–4.
`22 Id.
`23 Id.
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`tenant with notice of their rights and attempted to schedule a conciliation conference, but the
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`program is unable to offer a date within thirty days.24
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`Bill No. 200295 enacts both a blanket residential eviction moratorium and an eviction
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`moratorium for small businesses (defined as any business that employs fewer than 100 total
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`employees) that provide their landlord with a certification of hardship.25 Both moratoria expire
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`August 31, 2020 (the end of the COVID-19 emergency period as defined in the Act) and, while
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`they are in effect, the only legal basis for an eviction is an imminent threat of harm.26
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`Bill No. 200302 makes it temporarily unlawful for landlords to charge or accept late fees
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`on rent, interest on back rent, or similar charges as a result of delinquent payment of rent for
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`residential tenants who have experienced a COVID-19 financial hardship.27 Residential tenants
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`may establish a rebuttable presumption that they have suffered a COVID-19 financial hardship
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`by submitting a certification of hardship to their landlord. This provision is effective from March
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`1, 2020 (the beginning of the retroactive emergency period as defined in the Act) through May
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`24 Id. at 5–6.
`25 Ex. B, Am. Compl. [Doc. No. 21-2] at 4–5. A certification of hardship is:
`A signed written statement, which may be signed by use of a typed electronic signature and
`provided electronically or may be provided in hard copy, that is subject to the provisions of
`Section 1-108 of the Code (Certification), and is submitted by an individual with personal
`knowledge of the facts set forth therein stating, at minimum, as follows, provided that any initial
`statements may be further supplemented with additional explanation, facts, or support at any time:
`(i) In the case of a residential tenant, that a residential tenant has lost income due to the pandemic
`and setting forth facts that provide an explanation of the COVID-19 financial hardship suffered.
`(ii) In the case of a commercial tenant, that a small business has suffered a small business financial
`hardship and setting forth facts supporting such financial hardship.
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`Id. at 3.
`26 See id. at 5.
`27 Ex. C, Am. Compl. [Doc. No. 21-3] at 5.
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`31, 2020.28 Any such fees or similar charges that have been submitted by a tenant since March 1,
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`2020, must be credited against future rent or any other financial obligations.29
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`Bill No. 200305 allows renters who have suffered a COVID-19 financial hardship and
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`who failed to timely pay rent between March 1, 2020 and August 31, 2020, to pay back rent over
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`a nine-month period, beginning August 31, 2020, without being evicted for nonpayment.30 To
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`qualify, renters must provide a certification of hardship as well as “[d]ocumentary evidence of
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`the loss of income or increases in expenses the tenant has incurred during the retroactive
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`emergency period or the COVID-19 emergency period as a result of such tenant’s COVID-19
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`financial hardship . . .”31 These tenants are considered to be in full compliance with their
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`payment obligations and can only be evicted if they fail to pay the amount of rent normally due
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`after the conclusion of the COVID-19 emergency period or if they are four or more months
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`behind on the payments owed under the hardship repayment agreement.32 The bill also requires
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`landlords to provide advance notice to tenants of their rights before seeking to evict them.33 If the
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`landlord and tenant have not already entered into a hardship repayment agreement, the landlord
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`must provide the tenant with written notice of the right to a repayment agreement at least 30 days
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`before initiating eviction proceedings.
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`28 Id.
`29 Id.
`30 Ex. E, Am. Compl. [Doc. No. 21-5] at 5–7.
`31 Id. at 5. “[I]f such documentation cannot be reasonably provided, a further certification explaining why such
`documentation is not available which may be signed by use of a typed electronic signature and provided
`electronically or may be provided in hard copy, that is subject to the provisions of Section 1-108 of the Code
`(Certification)” can be used instead. Id. at 5–6.
`32 Id. at 7
`33 See id. at 6–7.
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`In sum, the EHPA provides that: 1) through August 31, 2020, landlords cannot evict
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`residential tenants and cannot evict small businesses that can provide a certification of hardship
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`due to COVID-19;34 2) landlords must allow tenants who did not timely pay rent between March
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`1 and August 31, and who can prove that they suffered a COVID-19 financial hardship, to pay
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`past due rent on a set plan through May 31, 2021; 3) through December 31, 2020, before taking
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`steps to evict residential tenants who have suffered a COVID-19 financial hardship, landlords
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`must attend mediation;35 and 4) through May 31, 2020, landlords are barred from charging late
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`fees and interest to residential tenants who have experienced a COVID-19 financial hardship.
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`Five days after Mayor Kenney signed the Act, on July 6, 2020, Plaintiff HAPCO initiated
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`this action and filed a motion for temporary restraining order. On July 8, 2020, the Tenant Union
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`Representative Network and the Philadelphia Unemployment Project filed a motion to intervene
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`as defendants, which was granted as unopposed.36 The Court held a video hearing on July 9,
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`2020.37 At the hearing, Plaintiff explained that Governor Wolf was likely to extend the statewide
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`eviction moratorium and that its motion for a temporary restraining order would be mooted by
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`such an action. The next day, after the Governor extended the statewide eviction and foreclosure
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`moratoria until August 31, 2020, the Court dismissed HAPCO’s motion for a temporary
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`restraining order as moot.38
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`34 As the Philadelphia Municipal Court has announced that landlord-tenant actions filed on or after July 10, 2020,
`will not be listed for trial until November 16, 2020, at the earliest, even without the bill, landlords would be unable
`to evict tenants during this time. See Ex. 5.S, City of Philadelphia’s Response in Opposition [Doc. No. 28-6].
`35 The Court notes that mediation is already an established part of the eviction procedure that resolves 36% of cases
`through a judgment by agreement. Ex. 2.A, City of Philadelphia’s Response in Opposition [Doc. No. 28-3] at 16.
`36 Doc. Nos. 13, 17.
`37 The public hearings in this matter were held by video because of the Court’s restrictions on courtroom availability
`due to the COVID-19 pandemic. Therefore, the Court provided access to the public and to the media through both
`video and audio participation. See Doc. Nos. 12 & 35.
`38 Doc. No. 19.
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`On July 16, 2020, Plaintiff filed an Amended Complaint and a Motion for a Preliminary
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`Injunction. After the parties fully briefed the motion, the Court held a hearing on August 19,
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`2020.39 Having considered the parties’ arguments in their papers and at the hearing, the Court
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`will deny HAPCO’s motion.
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`II.
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`LEGAL STANDARD
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`“[A]n injunction is ‘an extraordinary remedy, which should be granted only in limited
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`circumstances.’”40 “The moving party must establish four factors to get a preliminary injunction:
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`(1) the likelihood that the plaintiff will prevail on the merits at final hearing; (2) the extent to
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`which the plaintiff is being irreparably harmed by the conduct complained of; (3) the extent to
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`which the defendant will suffer irreparable harm if the preliminary injunction is issued; and (4)
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`that the public interest weighs in favor of granting the injunction.”41 “[A] movant for preliminary
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`equitable relief must meet the threshold for the first two ‘most critical’ factors: it must
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`demonstrate that it can win on the merits (which requires a showing significantly better than
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`negligible but not necessarily more likely than not) and that it is more likely than not to suffer
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`irreparable harm in the absence of preliminary relief.”42 “If these gateway factors are met, a court
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`then considers the remaining two factors and determines in its sound discretion if all four factors,
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`taken together, balance in favor of granting the requested preliminary relief.”43
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`39 At the hearing, the parties agreed that no additional evidence or live testimony would be presented.
`40 Novartis Consumer Health, Inc. v. Johnson & Johnson-Merck Consumer Pharm. Co., 290 F.3d 578, 586 (3d Cir.
`2002) (quoting Instant Air Freight Co. v. C.F. Air Freight, Inc., 882 F.2d 797, 800 (3d Cir. 1989)).
`41 Greater Phila. Chamber of Commerce v. City of Phila., 949 F.3d 116, 133 (3d Cir. 2020) (cleaned up).
`42 Reilly v. City of Harrisburg, 858 F.3d 173, 179 (3d Cir. 2017) (footnote omitted).
`43 Id.
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`III. DISCUSSION
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`A. Likelihood of Success on the Merits
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`1. Contracts Clause44
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`Plaintiff argues that the EHPA violates the Contracts Clause because it “compel[s
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`landlords] to enter into contractual arrangements [the City has] devised, give up rights
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`[landlords] had negotiated in pre-existing leases, and surrender their right to seek redress in a
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`court of law.”45
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`“The Contract Clause provides that no State shall pass any law ‘impairing the Obligation
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`of Contracts.”’46 “The Clause is not, however, the Draconian provision that its words might seem
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`to imply.”47 “The Contract Clause ‘does not prevent the State from exercising such powers as are
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`vested in it for the promotion of the common weal, or are necessary for the general good of the
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`44 Although older Supreme Court cases refer to the “Contract Clause,” the Supreme Court’s more recent cases refer
`the “Contracts Clause.” Sveen v. Melin, -- U.S. --, 138 S. Ct. 1815 (2018); see also Tennessee Wine & Spirits
`Retailers Ass’n v. Thomas, -- U.S. --, 139 S. Ct. 2449, 2463 (2019).
`45 Pl.’s Omnibus Reply Mem. in Further Supp. of Mot. for Prelim. Inj. [Doc. No. 34] at 3. Although neither party
`raised the issue, there is a circuit split as to whether a private right of action exists for a Contracts Clause violation.
`In 1885, the Supreme Court held that the Contracts Clause “so far as it can be said to confer upon or secure to any
`person any individual rights, does so only indirectly and incidentally.” Carter v. Greenhow, 114 U.S. 317, 322
`(1885). The Sixth and Fourth Circuits have held that a Contracts Clause violation cannot give rise to a cause of
`action under § 1983. See Kaminski v. Coulter, 865 F.3d 339, 347 (6th Cir. 2017); Crosby v. City of Gastonia, 635
`F.3d 634, 641 (4th Cir. 2011). In contrast, the Ninth Circuit has held that the “Supreme Court has explicitly given
`Carter a narrow reading” and held “that Carter can only be read to have ‘held as a matter of pleading that the
`particular cause of action set up in the plaintiff’s pleading was in contract and was not to redress deprivation of the
`right secured to him by that clause of the Constitution [the contract clause], to which he had chosen not to resort.”’
`S. Cal. Gas Co. v. City of Santa Ana, 336 F.3d 885, 887 (9th Cir. 2003) (quoting Dennis v. Higgins, 498 U.S. 439,
`443 n.9 (1991)). At this juncture, and pending further legal argument from the parties, the Court determines that as a
`“broad construction of § 1983 is compelled by the statutory language,” and the Supreme Court has held that § 1983
`is available for suits brought for violations of the Commerce Clause––also an Article I provision––HAPCO has a
`private right of action to bring a Contracts Clause violation claim under § 1983. Dennis, 498 U.S. at 443; see also
`Watters v. Bd. of Sch. Directors of City of Scranton, 400 F. Supp. 3d 117, 128 (M.D. Pa. 2019).
`46 United Steel Paper & Forestry Rubber Mfg. Allied Indus. & Serv. Workers Int’l Union AFL-CIO-CLC v. Gov’t of
`Virgin Islands, 842 F.3d 201, 210 (3d Cir. 2016) (quoting U.S. Const. art. I, § 10). The Contracts Clause “applies
`equally to municipal ordinances.” Alarm Detection Sys., Inc. v. Vill. of Schaumburg, 930 F.3d 812, 822 (7th Cir.
`2019) (citing St. Paul Gaslight Co. v. City of St. Paul, 181 U.S. 142, 148 (1901)).
`47 Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 240 (1978).
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`Case 2:20-cv-03300-CMR Document 37 Filed 08/28/20 Page 11 of 34
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`public,’ even though contracts previously entered into may be affected.”48 “Thus, the Contract
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`Clause ‘does not trump the police power of a state to protect the general welfare of its
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`citizens.”’49
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`The “leading case in the modern era of Contract Clause interpretation,”50 Home Building
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`& Loan Assn. v. Blaisdell,51 is strikingly similar to the instant case. During the Great Depression,
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`states “attempted to address the ever-growing number of foreclosures and the effect they had on
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`the grim residential real estate situation.”52 In 1933, Minnesota passed the Mortgage Moratorium
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`Law, which “was a temporary measure” that extended by 30 days the redemption period for
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`mortgages which were to expire within 30 days of the Act and also allowed for further judicial
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`extension of the time for redemption.53 The Blaisdells, owners of a lot in Minneapolis that had
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`been foreclosed upon and sold to Home Building & Loan Association, applied to the state court
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`for an order extending the period of redemption. “The court found that the time to redeem would
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`expire on May 2, 1933, under the laws of the state as they were in effect when the mortgage was
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`made and when it was foreclosed.”54 However, in accordance with the Act, the court extended
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`the period of redemption until May 1, 1935.55 The Minnesota Supreme Court affirmed.
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`The Association then appealed to the United States Supreme Court asserting that the
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`Minnesota law violated the Contracts Clause because the legislature interfered with its
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`48 United Steel Paper, 842 F.3d at 210 (quoting Spannaus, 438 U.S. at 241).
`49 Id. (quoting Buffalo Teachers Fed’n v. Tobe, 464 F.3d 362, 367 (2d Cir. 2006)).
`50 U.S. Tr. Co. of New York v. New Jersey, 431 U.S. 1, 15 (1977).
`51 290 U.S. 398 (1934).
`52 Fred Wright, The Effect of New Deal Real Estate Residential Finance and Foreclosure Policies Made in Response
`to the Real Estate Conditions of the Great Depression, 57 ALA. L. REV. 231, 240 (2005).
`53 U.S. Tr., 431 U.S. at 15; see also Blaisdell, 290 U.S. at 416.
`54 Blaisdell, 290 U.S. at 419.
`55 See id. at 420.
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`contractual right to take possession of the foreclosed home on May 2, 1933. The Supreme Court
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`rejected this argument, holding that “[a]lthough the legislation conflicted directly with lenders’
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`contractual foreclosure rights,” and “despite the Contract Clause, the States retain residual
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`authority to enact laws ‘to safeguard the vital interests of [their] people.”’56 The Court found five
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`factors significant:
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`First, the state legislature had declared in the Act itself that an emergency need for
`the protection of homeowners existed. Second, the state law was enacted to
`protect a basic societal interest, not a favored group. Third, the relief was
`appropriately tailored to the emergency that it was designed to meet. Fourth, the
`imposed conditions were reasonable. And, finally, the legislation was limited to
`the duration of the emergency.57
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`Later Supreme Court cases developed a two-part test.58 “The threshold issue is whether
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`the state law has ‘operated as a substantial impairment of a contractual relationship.”’59 If it has,
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`then the court asks “whether the state law is drawn in an ‘appropriate’ and ‘reasonable’ way to
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`advance ‘a significant and legitimate public purpose.”’60
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`a. Substantial Impairment
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`To determine if the state law operates as a substantial impairment, courts consider the
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`“extent to which the law undermines the contractual bargain, interferes with a party’s reasonable
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`expectations, and prevents the party from safeguarding or reinstating his rights.”61 “An important
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`factor in determining the substantiality of any contractual impairment is whether the parties were
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`56 Spannaus, 438 U.S. at 242 (quoting Blaisdell, 290 U.S. at 434).
`57 Id. (citations omitted).
`58 Sveen, 138 S. Ct. at 1821. The Blaisdell limitations “have since been subsumed in the overall determination of
`reasonableness.” U.S. Tr., 431 U.S. at 22 n.19.
`59 Id. at 1821–22 (quoting Spannaus, 438 U.S. at 244).
`60 Id. (quoting Energy Reserves Grp., Inc. v. Kansas Power & Light Co., 459 U.S. 400, 411–12 (1983)).
`61 Id. (citations omitted).
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`operating in a regulated industry.”62 “When a party enters an industry that is regulated in a
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`particular manner, it is entering subject to further legislation in the area, and changes in the
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`regulation that may affect its contractual relationships are foreseeable.”63
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`HAPCO argues that its members entered into lease agreement for the purpose of ensuring
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`prompt payment of rent and, in the case of default, to ensure the ability to repossess the property.
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`Accordingly, Plaintiff asserts that the EHPA constitutes a substantial impairment because of the
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`temporary provisions that prohibit landlords from charging or accepting late fees from some
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`tenants, that limit the bases for evictions until August 31, 2020, that require landlords to enter
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`into hardship repayment agreements with some of their tenants, and that require landlords to
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`participate in an eviction diversion program before seeking to reclaim possession of property
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`from certain tenants who fail to pay rent.64
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`Of course, when landlords entered into leases before the EHPA was passed, they did not
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`expect that these specific regulations would be enacted in response to a global pandemic.
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`However, residential leases have been heavily regulated for many years.65 Pennsylvania’s
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`Landlord-Tenant Act of 1951 imposes requirements regarding the amount of security deposits,66
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`62 Am. Exp. Travel Related Servs., Inc. v. Sidamon-Eristoff, 669 F.3d 359, 369 (3d Cir. 2012) (citing Energy
`Reserves, 459 U.S. at 411).
`63 Id. (citation omitted).
`64 Mem. of Law in Supp. of Pl. HAPCO’s Mot. for a Prelim. Inj. [Doc. No. 22-2] at 18–19. Plaintiff also argues that
`the Act “reliev[es] tenants of their obligation to pay rent through at least August 31, 2020.” Id. at 19. However, none
`of the provisions in the Act forgives rent that is owed. Moreover, as Governor Wolf extended Pennsylvania’s
`eviction moratorium until August 31, 2020, the City’s limitation on evictions until August 31, 2020 do not cause any
`additional impairment of contracts.
`65 See e.g., Elmsford Apartment Associates, LLC v. Cuomo, No. 20-4062, 2020 WL 3498456, at *13 (S.D.N.Y. June
`29, 2020). The Court notes that this is not the first time that Philadelphia has passed temporary rent and eviction
`relief in response to an emergency. See Warren v. City of Phila., 115 A.2d 218, 219 (Pa. 1955). Likewise, as
`mediation is already part of the formal eviction proceedings, the EHPA merely changes when in the process it
`occurs. See Ex. 2.A, City of Philadelphia’s Response in Opposition [Doc. No. 28-3] at 16.
`66 68 Pa. Stat. § 250.511a.
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`the deadline for returning security deposits,67 and interest on security deposits.68 The law also
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`regulates how much notice landlords must give before terminating various tenancies,69 and sets
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`forth the exact procedures for effecting an eviction.70
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`In addition, both state and federal laws govern various aspects of the landlord-tenant
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`relationship. Landlords must disclose all known information on lead-based paint in their
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`dwellings;71 Civil rights laws prohibit landlords from engaging in discriminatory rental
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`practices;72 and Pennsylvania’s Rent Withholding Act “authorizes rent withholding where a local
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`health department certifies a dwelling as unfit for human habitation.”73
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`On the municipal level, the Philadelphia Fair Housing Ordinance prohibits numerous
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`unfair rental practices by landlords against tenants.74 Landlords cannot terminate a lease in
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`retaliation for an incident of domestic violence or sexual assaul