Before we go further into the Ninth Circuit's opinion in Ballinger v. City of Oakland, No. 19-16-550 (Feb. 2, 2022), this disclosure: this is a case in which our law firm represents the property owners. So take that into account as you read our take on the case.
The Ballingers own a home in Oakland, California, and were called away for a year while on active duty with the military. They rented their home with a one-year lease. Oakland makes property owners who want to move back into their own homes at the expiration of a lease to pay tenants a "relocation fee." The Ballingers paid $6.5k to the tenant for the relocation fee, and sued the city for, inter alia, a physical taking of their money, and for an unconstitutional exaction of their home. The district court dismissed for failure to state a claim because the relocation fee is a requirement sourced in the city's ordinances (legislation), and not the result of some kind of property-specific administrative determination or quasi-judicial adjudication.
The Ninth Circuit panel affirmed, but applied a much different analysis.
First, the court concluded that this was not a physical taking of the Ballingers' money. No, the panel concluded, this was merely a regulation of the landlord-tenant relationship, "not an unconstitutional taking of a specific and identifiable property interest." Slip op. at 6. The court viewed this as a "transaction cost to terminate a lease agreement," something that the city may do in its "broad power" to regulate housing conditions and the landlord-tenant relationship. Slip op. at 7, 8. Relying on Yee v. City of Escondido, 503 U.S. 519 (1992), the panel concluded that the city has the power to adopt rent ceilings, and force the landlord to accept tenants she does not like. The relocation fee imposed by the city is just another one of those regulations on things the landlord can do (here, recover possession of property at the natural end of a lease):
We see little difference between lawful regulations, like rent control, and the Ordinance's regulation of the landlord-tenant relationship here. Thus, the relocation fee is not an unconstitutional physical taking--it "merely regulate[s] [the Ballingers'] use of their land by regulating the relationship between landlord and tenant."
Slip op. at 9 (quoting Yee, 503 U.S. at 528) (footnote omitted).
Yes, the panel concluded, the city cannot condition an owner's right to rent her property on surrendering the right to compensation for a taking, but here, the Ballingers voluntarily surrendered their liberty or property, because they "chose to rent their property causing them to pay the relocation fee when they caused the tenants to relocate." Slip op. at 9. Your fault, Ballingers; the city has done nothing: "the State has not deprived the person of a constitutionally protected interest." Slip op. at 9 (quoting L.L. Nelson Enters., Inc. v. County of St. Louis, 673 F.3d 199, 806 (98th Cir. 2012)).
You can check out [of the rental market] any time you like, but you can never leave.
Here, the Ballingers voluntarily chose to lease their property and to “evict” under the Ordinance—conduct that required them to pay the relocation fee, which they would not be compelled to pay if they continued to rent their property. See Yee, 503 U.S. at 527. “A different case would be presented were the statute, on its face or as applied, to compel a landowner over objection to rent his property or to refrain in perpetuity from terminating a tenancy.” Id. at 528. Here, the Ordinance “is a regulation of [the Ballingers’] use of their property, and thus does not amount to a per se taking.” Id. at 532.
Slip op. at 9-10. In short, this wasn't the government grabbing specific funds (or raisins). No, this was the city merely imposing a monetary obligation on one party when something happens, which also just "happens to be related to a real property interest." Slip op. at 10.
And now for the small silver linings. The panel held that "we hold, as other circuits have, that in certain circumstances not argued here, money can be the subject of a taking." Slip op. at 13. To make that argument, the court concluded, the plaintiff must also identify a "specific fund of money." Remember that, complaint drafters.
The court seemed to find a difference between the situation in Koontz v. St. Johns River Water Mgmt. Dist., 570 U.S. 595 (2013) (where the Supreme Court held that the demand for money in return for development permissions on a specific piece of property was a taking), and the Ballingers' case:
Here, the Ballingers’ rely on Koontz to argue that the relocation fee is an unconstitutional taking. But Koontz cuts against them. The exaction in Koontz operated on “the direct link between the government’s demand and a specific parcel of real property,” 570 U.S. at 614. The Ballingers claim that a direct link exists between the government’s demand for their money and their real property. We cannot deny that the relocation fee here is linked to real property, but no more so than property and estate taxes. Rather than a mere obligation to pay in relation to the use of one’s property, the government in Koontz demanded and specifically identified that it wanted Koontz’s payment of money in exchange for granting a benefit to either Koontz’s parcel of land or another identified parcel of land. Id. at 613 (“[U]nlike Eastern Enterprises, the monetary obligation burdened petitioner’s ownership of a specific parcel of land.”). So the demand for payment in Koontz was “functionally equivalent to other types of land use exactions” and amounted to a taking of an interest in the real property itself. Id. at 612–13 (“In that sense, this case bears resemblance to our cases holding that the government must pay just compensation when it takes a lien—a right to receive money that is secured by a particular piece of property.”).Instead, the relocation fee required by the Ordinance is a monetary obligation triggered by a property owner’s actions with respect to the use of their property, not a burden on the property owner’s interest in the property. It is more akin to the obligations to pay money that other circuits have held were not takings[.]
Slip op. at 15-16.
Based on the same logical foundation, the panel concluded that the relocation fee requirement was not an unconstitutional condition. If the Ballingers were not entitled to just compensation for a taking for the requirement to pay the relocation fee, then the city wasn't acting unconstitutionally when it required them to pay the fee as a condition of renting their property. Slip op. at 17.
Nor does the ordinance does not require property owners to apply for some kind of city permit. Slip op. at 21 ("Here, the Ordinance does not conditionally grant or regulate the grant of a government benefit, such as a permit, and therefore does not fall under the unconstitutional-conditions umbrella."). In short, the Ballingers had no rights that the city coerced them into surrendering (remember, this is all the Balllingers' fault for choosing to rent their home). To us, that seems to overlook the fact that the city has conditioned participation in the rental market on property owners either surrendering their dough, or forever be locked into the rental market. Yeah, that's not a permit for some government "benefit" as the panel characterized it. But it seems much worse - the requirement burdens a fundamental right and a core use of private property.
But despite the bad news, there was, like above, a small silver lining in the panel's conclusion. Check out pages 19 and onward for the court's rejection of the legislative/adjudicative distinction in exactions analysis.
Here, the Ballingers claim that the City’s Ordinance (a legislatively imposed condition) is an unconstitutional exaction. The district court rejected their exaction claim as based on a generally applicable legislative condition when a properly pled exaction claim can only arise from administrative, not legislative, conditions.In light of Pakdel, 141 S. Ct. at 2229 n.1, and Cedar Point Nursery, 141 S. Ct. at 2072, 2079, we agree with the Ballingers that “[w]hat matters for purposes of Nollan and Dolan is not who imposes an exaction, but what the exaction does,” and the fact “[t]hat the payment requirement comes from a [c]ity ordinance is irrelevant.”
Slip op. at 20-21. Yes, the legislative/adjudicative distinction is done in the Ninth Circuit.
Finally, the court rejected the owners' third claim: that the tenants seized the Ballinger property without a warrant. The court rejected the claim because there wasn't sufficient "state action" and the tenants were private actors.
So there it is. No taking, no unconstitutional condition or exaction. But a confirmation that money can be "private property" as that term is used in the Fifth Amendment, and (finally) a recognition that legislative exactions -- when they qualify as "exactions" -- are subject to the same Nollan/Dolan/Koontz analysis as are administrative and adjudicative exactions.
Stay tuned.
Ballinger v. City of Oakland, No. 19-16550 (9th Cir. Feb. 2, 2022)
