Michigan businesses ask court to make state pay for COVID-19 losses

• Two cases before the Michigan Supreme Court seek compensation from state for COVID-19 profit losses
• State argues stay-at-home order, other restrictions were legal and necessary 
• Both sides made their case during Michigan Supreme Court oral arguments Wednesday

Michigan's highest court is considering whether the state should be financially liable for the losses business took during mandatory COVID-19 closures.

Businesses suing the state in two separate cases before the Michigan Supreme Court argue that the Michigan government is liable for the profits they lost due to restrictions ordered by Gov. Gretchen Whitmer and her administration at the height of the pandemic.

The businesses directly involved include The Gym 24/7 Fitness, a franchise with locations in 17 Michigan counties, Mount Clemens Recreational Bowl, K.M.I. Inc. and Mirage Catering in Clinton Township.  

During Michigan's stay-at-home order, which lasted longer than most other states, the state’s jobless rates soared as industries reliant on in-person activity buckled under pressure. 

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The initial order lasted 73 days, but restrictions on in-person capacity and requirements for masking and social distancing lasted well into 2021. Between the start of the pandemic and April 2021, an estimated 3,000 restaurants closed in Michigan.

Attorneys for the businesses argue that the government, not individual businesses, should have borne the financial burden.

“The government can take, but if they're going to take, they have to pay,” Philip Ellison, an attorney representing The Gym 24/7 Fitness, told the Michigan Supreme Court during a Wednesday hearing. “Ownership itself should not be the basis of who has to carry this burden forward.”

Solicitor General Ann Sherman argued the state was within its rights to assert its power during “one of the most threatening” public health crises in modern times, telling the court that business owners’ property rights don't give them carte blanche to operate.

State law “doesn’t guarantee property owners an economic profit from the use of land,” Sherman told the court. “It’s important to remember that this was a temporary cessation.”

Sherman also noted businesses impacted by the pandemic had other means of relief outside the court system to help make up for lost profits.

Many Michigan businesses were eligible for federal Paycheck Protection Program, or PPP, loans, as well as state grants aimed at keeping small businesses and out-of-work employees afloat. 

Some justices on Wednesday questioned whether businesses were harder hit than other industries during the pandemic. Justice Elizabeth Welch remarked that the argument that businesses carried the biggest burden “feels like a stretch to me.”

Others acknowledged that it was harder for some businesses to keep operating than others.

Justice Richard Bernstein noted that for gyms, bars and in-person dining establishments without capacity for takeout, the government restrictions meant “you can't operate your business, you can't allow your business to function, your entire model has to change, period.”

The state Court of Appeals had previously sided in the state’s favor in both cases. Should the court rule in favor of the businesses, it could have wide-ranging implications and open the state up to liability for a slew of businesses impacted by COVID-19 restrictions.