The wheels of justice may grind slowly, but they do grind. Yesterday, the Ninth Circuit granted a motion we filed back in June 2013, and permitted us to file this amicus brief on behalf of the Western Manufactured Housing Communities Association in a case that is scheduled to be argued in mid-February 2015, Rancho de Calistoga v. City of Calistoga, No. 12-17749.
The case is a federal court challenge to a California wine-country municipality's decision to deny a rent increase for a mobilehome park subject to the city's rent control ordinance. The complaint alleged that the city's failure to allow the ground lease rent to increase to $624 violated the park owner's rights under the takings, due process, and equal protection clauses. The District Court eventually dismissed the complaint for failure to state a claim for relief under Rule 12(b)(6), because, among other things, the park owner did not file an inverse condemnation case in state court (Williamson County).
The park owner appealed the dismissal. The Opening Brief sets out the case in the Summary of Argument:
Under the Fifth and Fourteenth Amendments to the United States Constitution, a local government is prohibited from taking property for a private purpose. Because no amount of compensation can justify a private taking, a property owner is not required to seek compensation in the state courts before bringing such a claim. Lingle v. Chevron U.S.A., Inc., 544 U.S. 528, 543 (2005). Moreover, although an ordinance may survive a facial challenge if it is adopted for a public purpose, a property owner may attempt to demonstrate that the ordinance has been applied to effectuate an impermissible private taking. Armendariz v. Penman, 75 F. 3d 1311, 1321 (9th Cir. 1996).
The Parkowner has alleged that even if it was enacted for a valid public purpose, the hearing officer has applied the rent control ordinance in a manner that results in a private taking of property, because (1) the proposed rent increase is neither excessive, monopolistic nor in violation of any other public purpose, (2) it is not possible for a mobilehome park owner to exploit a tenant unless the rent is above market and (3) each and every tenant at the park has been awarded a significant discount in their monthly rent, regardless of whether they need it or not. Because the Parkowner alleged that the ordinance has been “applied” in a manner that results in a private taking of property, the District Court’s dismissal of that claim at the pleading stage must be reversed.
If this Court determines that it is not possible to allege that a rent control ordinance has been applied in a manner that results in a private taking, the Parkowner asserts that application of the ordinance nevertheless results in a regulatory taking, because it creates a burden which “in all fairness and justice, should be borne by the public as a whole.” Guggenheim v. City of Goleta, 638 F. 3d 1111, 1119-1123 (9th Cir. 2010). Although a property owner must normally exhaust any state court remedies that exist before attempting to establish a regulatory taking in federal court, that rule does not apply if it would be futile to proceed in state court. Manufactured Home Communities, Inc. v. City of San Jose, 420 F. 3d 1022, 1035-1036 (9th Cir. 2005).
In Besaro Mobile Home Park, LLC v. City of Fremont, 204 Cal. App. 4th 345, 356-361 (2012), a California court found that a parkowner could not establish an “as applied” regulatory taking under the California Constitution, even though the parkowner purchased the property prior to the adoption of rent control. By contrast, in Guggenheim v. City of Goleta, 638 F. 3d 1111, 1119-1123 (9th Cir. 2010), the Ninth Circuit left open the possibility of a successful “as applied” challenge, if the park was purchased prior to the adoption of rent control.
Because the Besaro Court found that it is not possible to establish a regulatory taking under the California Constitution even if the park was purchased prior to rent control, the Parkowner is not required to seek relief in the state courts before proceeding in federal court. Because the Parkowner purchased the park long before the City adopted rent control, the Parkowner must be allowed to demonstrate that its property has been taken under the standards established by the Ninth Circuit in Guggenheim.
Finally, as will be demonstrated below, the only legitimate reason for singling out mobilehome park owners for price controls is that an unscrupulous landlord may lure a prospective tenant into renting a space at a below market rate and raise the rent to an above market rate after the tenant has purchased the mobilehome. However, even if it is assumed that prospective tenants will repeatedly fall for such a ploy, that issue does not exist in this case, because the Parkowner does not seek to invalidate the City of Calistoga’s rent control ordinance. To the contrary, the Parkowner readily concedes that once the rent is raised to the non-excessive and non-monopolistic rate of $625 per month, it will not be allowed to increase the rents again, unless authorized by the ordinance to do so. Because all other businesses in the City of Calistoga are allowed to charge non-excessive and non-monopolistic prices for their good and services, the City’s refusal to allow the Parkowner to do the same is arbitrary and results in a violation of the equal protection and due process clauses of the United States Constitution.
Op. Br. at 5-9.
The city naturally doesn't see it that way, and its Answering Brief asserts that "[a]lthough Rancho denies it, its appeal presents simply another iteration of the argument that rent control is unconstitutional because it does not achieve its purpose—an argument that the Supreme Court and this Circuit have repeatedly rejected, whether phrased as a takings, a due process violation or an equal protection violation. See, Kelo v. City of New London, 545 U.S. 469, 488 (2005) (“Kelo”); Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 544 (2005) (“Lingle”); and Guggenheim, 638 F.3d at 1113-14. Ans. Br. at 2-3.
Our amicus brief argues that the labels placed on the park owner's claims are less important than their substance, and "[w]hether phrased as a regulatory taking, a private taking, or a due process violation, Rancho de Calistoga has plainly stated substantial claims for relief under the rationale of the U.S. Supreme Court’s unanimous opinion in Lingle v. Chevron U.S.A., Inc., 544 U.S. 528 (2005)."
Moreover, modern notice pleading does not focus on labels, but on whether the complaint gives the defendant notice of the claims asserted against it. We wrote that "Rancho’s amended pleading alleged that '[r]ent control also violates the due process, takings, and/or equal protection clauses of the United States Constitution if it [sic] ‘arbitrary, discriminatory or demonstrably irrelevant to the policy the Legislature is free to adopt.’' Id. ¶ 82, at 21. If this was not clear enough, Rancho’s legal theory and supporting facts were made plain in paragraph 83 [which asserts that the ordinance 'is being applied arbitrarily and impermissibly in order to provide each and every one of the 184 tenants with a monthly subsidy, whether they need it or not, all at the Petitioner's expense.'"].
Here are the parties' merits briefs:
Here are all of the amicus briefs:
- WMA's amicus brief (supporting the park owner)
- Pacific Legal Foundation's amicus brief (also supporting the park owner)
- California League of Cities amicus brief (supporting the city)
More, after the oral arguments.