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New Jersey and New York Commandeer Critical Medical Supplies

April 9, 2020
By Damian P. Conforti and Melody M. Lins

Faced with the continuous rise in Coronavirus confirmed cases and escalating death tolls, the Governors of both New York and New Jersey have taken new aggressive measures to expand the capacity of their health care systems and address the critical shortage of medical resources available to hospitals, healthcare facilities and emergency response agencies.

As our Firm previously reported, on April 2, 2020, New Jersey Governor Phil Murphy was the first to sign Executive Order 113, which authorizes the commandeering of property such as medical supplies including Personal Protective Equipment (“PPE”), ventilators, respirators, and anesthesia machines. Although the Executive Order does not go into detail about how compensation will be provided after a governmental taking is effectuated, it points us to the procedures established by the Disaster Control Act, N.J.S.A. App. A:9-51 (the “Act”). Under the Act, compensation for personal services required of any natural person must be paid at the prevailing established rate for services of a like or similar nature. N.J.S.A. App. A:9-51(b). Further, the Act empowers the Governor to establish an Emergency Compensation Board (the “Board”) in each county of the State, which will be composed of three individuals appointed by the Governor. The purpose of the Board will be to adjudicate any claims for just compensation whenever property is taken or used pursuant to the Act. Further, the Act also sets forth the procedure for filing a petition for an award with the Board requesting reasonable compensation. Importantly, any party who deems him or herself aggrieved by the decision of the Board has the right to bring an action for compensation against the State in the Superior Court. Such an action would be governed by the practice and procedures covering condemnation proceedings. See N.J.S.A. App. A:9-51(c)-(d). 

Similarly, on Friday April 3, 2020 New York Governor Andrew Cuomo announced at his daily press conference that he was signing an executive order directing the State to commandeer ventilators and PPE from hospitals and medical institutions with fewer coronavirus cases and excess equipment, in order to redistribute the items to hospitals with the highest need. In turn, the National Guard will transport the medical supplies and equipment to parts of the State like New York City, which have been hit hard by the Coronavirus. The Governor explained that any equipment seized will either be returned eventually to the hospital or the hospital will be reimbursed for the equipment in the future so that new medical supplies can be purchased.

While these executive orders undoubtedly provide a much needed quick fix to healthcare facilities that have or will be running out of ventilators in the next few days, and that expect a new influx of coronavirus patients in the coming weeks, it is clear that the orders fail to address the nation-wide shortage of ventilators and protective equipment, like respirator masks and gowns that protect health care workers from the virus. While President Trump has recently invoked the powers of the Defense Production Act, a Korean War-era law, to compel companies to manufacture items in short supply that would aid in the nation’s response to the coronavirus, it could take a few months for these companies to ramp up production and dramatically increase the production of much needed supplies. As of April 2, 2020, the President has compelled the following companies to increase the emergency supply production of ventilators and the protective gear needed by health professionals: General Motors Company, General Electric Company, Hill-Rom Holdings, Inc., Medtronic Public Limited Company, ResMed Inc., Royal Philips N.V., Vyaire Medical, Inc., and 3M.

The dire state of our nation’s healthcare crisis is further highlighted by a gap in our consumer protection laws which surprisingly do not protect the State and Federal Government from price gouging by sellers of critical supplies. Although President Trump’s Executive Order 13910 of March 23, 2020 delegates to the Secretary of Health the authority to designate any material as a scarce material, whose supply would be threatened by an excess accumulation or resale at prices in excess of prevailing market prices, this Order does nothing to address the issue that State laws against price gouging generally do not apply to government purchases. Therefore, competition among states, cities, hospitals, and federal agencies for medical supplies and equipment in low supply and high demand is contributing to the staggering cost of fighting the Coronavirus pandemic. 

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