Yesterday, the other shoe dropped. In this order the U.S. Supreme Court denied review to a case that we've long been following, which challenged aspects of New York's draconian rent control laws as a taking, 74 Pinehurst v. New York.
We say the "other shoe" because ever since the Court denied review months ago to other challenges to rent control (yet kept relisting Pinehurst, which was always among the two strongest of the multiple challenges), it appeared this round of petitions was doomed, and the Court was holding off denying review, to allow one or more Justices to write something. To us, it was unlikely that the Court would deny some of the petitions outright, while at the same time agreeing to take up the issue in another case. Grant-and-hold seemed the most likely scenario there. Absent that, we didn't expect these last two to be granted.
So count us as not surprised. But as some have noted, there might be a silver lining in this last disappointment. Justice Thomas, while agreeing with the Court to deny review in Pinehurst, wrote a short statement in which he offered his thoughts. It isn't long, and you should read it:
Here's the entire thing:
Petitioners are owners of small and midsize apartment buildings who challenge New York City’s rent stabilization laws. Among other things, they argue that New York City’s regulations grant tenants and their successors an indefinite, infinitely renewable lease terminable only for reasons outside of the landlord’s control. Petitioners argue that they have suffered a per se taking as a result. The constitutionality of regimes like New York City’s is an important and pressing question. There are roughly one million rental apartments affected in New York City alone. See Pet. for Cert. in No. 22–1130, p. 1; Brief in Opposition for City of New York et al. in No. 22–1130, p. 4. And, the Courts of Appeals have taken different approaches: The Second Circuit rejected petitioners’ takings claims at the pleading stage, but at least one other Court of Appeals has accepted similar claims. Compare 59 F. 4th 557 (CA2 2023) (case below), with Heights Apartments, LLC v. Walz, 30 F. 4th 720 (CA8 2022).
The pleadings in these petitioners’ cases, however, would complicate our review. The petitioners’ complaints primarily contain generalized allegations about their circumstances and injuries. But, to evaluate their as-applied challenges, we must consider whether specific New York City regulations prevent petitioners from evicting actual tenants for particular reasons. Similarly, petitioners’ facial challenges require a clear understanding of how New York City regulations coordinate to completely bar landlords from evicting tenants. The pleadings do not facilitate such an understanding. However, in an appropriate future case,we should grant certiorari to address this important question.
So what to make of this. A roadmap for a future case as some have suggested? The holding out of false hope and an invitation to more failed challenges to New York's scheme, and a way of slow-walking the continued validity of rent and vacancy controls as others have claimed? Or maybe a clue to stop focusing on New York for takings and other challenges to rent control because it is too complex and too ingrained in the social fabric?
We're not entirely sure. Probably could never be sure, unless we could arrange a meeting with Justice Thomas and ask him a few questions, and that ain't likely to happen.
But here's how we're taking it.
First, we are taking it at face value. Justice Thomas said that it's a good issue, teed up and ready, and there's even a lower court split. That's usually the promised land for SCOTUS review. But, he noted, the way this case was pleaded made it an unworthy vehicle. Get that, lawyers: the way the complaint was pleaded. Pleaded! It it just us, or are property rights cases fertile grounds for Field Code special pleading, giving us a sense of what medieval writ practice must have been like? It seems we need to plead these claims with a specificity not required in other matters, well beyond the notice pleading our Civil Procedure professors told us was the standard.
Well, with that rant out of the way, let's assume that Justice Thomas is right, and there's a way to draft a complaint to actually, you know, state a claim that a rent or vacancy control is a taking. His as-applied scenario suggests a case that has gone through the eviction-court wringer. Get ready to exhaust, property owners! This sounds like Justice Thomas is suggesting that before a takings claim would be ready, the complaint must plead facts to show who, how, and why the lessor has tried to get a tenant out, but the rent/vacancy control regulations have prevented that. The "particular reasons" he notes seem like the big ones: failure to pay rent, being a danger to other occupants, destroying the property. We often hear lessors say "going through the eviction process is futile, and a waste of time and money, when all I want it to either get the rent flowing again, or the premises returned to me so I can fix it back up and re-rent it." Maybe so, but apparently Justice Thomas believes that a legal challenge to tenant regulations is not going to be ready unless and until you go through the process and come up empty.
Second, we thought the Pinehurst complaint did a pretty good job of cutting through the complex fog that is New York's rent regulations, if that is even possible given its byzantine structure and requirements. But apparently not enough for a "clear understanding of how New York City regulations coordinate to completely bar landlords from evicting tenants." If those pleadings were not enough, what could be? Maybe here, Justice Thomas is suggesting that we look outside of New York for the case. New York may have the most well-known and (in)famous scheme, but it isn't by far the only such scheme in the nation. Identify the relevant issues (physical occupations, re-writing of the lessor/lessee contracts, and turning private rental stock into what is effectively public housing), and look beyond the Hudson for cases.
So what to make of all this? On one hand, the Court's denial is not all that surprising since the weight of statistics is never favorable, and from a practical standpoint, the Court might be reluctant to wade into an issue that would certainly draw political fire, however it ruled. Rent control is so woven into the fabric of New York, it often seems politically impossible to unweave it. On the other hand, the entire notion of rent and vacancy controls -- which started as a temporary emergency measure designed to deal with the flood of returning doughboys from the battlefields of WWI Europe, but has morphed over the past century into a private subsidy that insulates certain protected occupants from market forces -- is ripe for a recoking. Subsidizing tenants may be a public benefit, but if so, shouldn't the entire public bear the freight?
In today's parlance, this is not "sustainable," and someone is going to be left standing when the music eventually stops. The Court will have to face it, one day. Just not today.
That being said, the final word is this: we're ready to follow Justice Thomas's roadmap. If you may have a case, give us a call.
Statement of Justice Thomas respecting the denials of certiorari, 74 Pinehurst, LLC v. New York, No. 23-113...
