Equity Lifestyle v. County of San Luis Obispo ( 2007 )


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  •                   FOR PUBLICATION
    UNITED STATES COURT OF APPEALS
    FOR THE NINTH CIRCUIT
    EQUITY LIFESTYLE PROPERTIES, INC.,     
    f/k/a MANUFACTURED HOME
    COMMUNITIES, INC., d/b/a SEA OAKS
    MANUFACTURED HOME COMMUNITY,
    Plaintiff-Appellant,
    v.
    COUNTY OF SAN LUIS OBISPO;
    COUNTY OF SAN LUIS OBISPO RENT              No. 05-55406
    REVIEW BOARD; SAN LUIS OBISPO
    BOARD OF SUPERVISORS,                        D.C. No.
    CV-03-00037-TJH
    Defendants-Appellees,
    OPINION
    and
    ELIZABETH CISNEROS; MARY JANE
    TATE; FRANK GRECO; IDA GRECO;
    ROBERT MEYER; MARGARET MEYER;
    ANNE MEYER; LOUISE MCMANUS;
    LAVERNE JONES; WILLIAM SPURRIER;
    JUNE SPURRIER,
    Real Parties in Interest.
    
    Appeal from the United States District Court
    for the Central District of California
    Terry J. Hatter, Chief District Judge, Presiding
    Argued February 7, 2007
    Submission Deferred February 12, 2007
    Submitted August 17, 2007
    Pasadena, California
    Filed September 17, 2007
    12437
    12438      EQUITY LIFESTYLE v. SAN LUIS OBISPO
    Before: Cynthia Holcomb Hall, Diarmuid F. O’Scannlain,
    and Consuelo M. Callahan, Circuit Judges.
    Opinion by Judge O’Scannlain
    EQUITY LIFESTYLE v. SAN LUIS OBISPO         12441
    COUNSEL
    David J. Bradford, Jenner & Block LLP, Chicago, Illinois,
    argued the cause for the petitioner/plaintiff-appellants; Edith
    R. Matthai, Steven S. Fleishman, Robie & Matthai APC, Los
    Angeles, California, and Elliot L. Bien, Bien & Summers
    LLP, Novato, California, were on the briefs.
    Henry E. Heater, Endeman, Lincoln, Turek & Heater LLP,
    argued the cause for the respondents-appellees; Timothy
    McNulty, San Luis Obispo County Counsel, San Luis Obispo,
    California, and Donald R. Lincoln and Linda B. Reich, Ende-
    man, Lincoln, Turek & Heater LLP, San Diego, California,
    were on the briefs.
    OPINION
    O’SCANNLAIN, Circuit Judge:
    We must determine whether a municipal rent control ordi-
    nance survives a due process and equal protection challenge
    or requires payment of compensation as a government taking.
    12442         EQUITY LIFESTYLE v. SAN LUIS OBISPO
    I
    A
    On June 5, 1984, the County of San Luis Obispo adopted
    a Mobilehome Rent Stabilization Ordinance (“Ordinance”)
    pursuant to a voter initiative.
    [The Ordinance sought] to protect the owners and
    occupiers of mobilehomes from unreasonable rent
    increases, while at the same time recognizing the
    need of park owners to receive a suitable profit on
    their property with rental income sufficient to cover
    increases in the costs of repair, insurance, mainte-
    nance, utilities, employee services, additional ameni-
    ties, and other costs of operation, and to receive a
    fair return on their property.
    County of San Luis Obispo, Cal., Code § 25.01.010(c). The
    Ordinance exempted “[t]enancies covered by leases or con-
    tracts which provide for more than a month-to-month tenancy,
    but only for the duration of such lease or contract.” Id.
    § 25.03.010. The Ordinance established a Mobilehome Rent
    Review Board (“Board”) consisting of members “not con-
    nected with the mobilehome rental housing industry for their
    personal gain.” Id. § 25.04.010. The Board’s powers and
    duties included the right “[t]o increase or decrease maximum
    rents upon completion of its hearings and investigations.” Id.
    § 25.05.010. The Ordinance prescribed a base rent at “the
    monthly space rent as of December 31, 1982,” allowed a
    “maximum monthly space rent [to] be increased no more than
    once a year by an increase over the then existing space rent
    equal to sixty percent of the cost of living increase,” and for-
    bade owners to “demand, accept or retain a rent . . . in excess
    of the maximum permitted by this chapter.” Id.
    §§ 25.06.010(a)(1), (b), (d). Upon a transfer of mobilehome
    ownership, the Ordinance allowed a rent increase of up to
    10% of the prior monthly rent. Id. § 25.06.011. In addition,
    EQUITY LIFESTYLE v. SAN LUIS OBISPO                   12443
    the Ordinance included a “hardship exception” so that the
    Board could approve rent increases above the normal maxi-
    mum in the case of extraordinary expenditures and costs that
    would preclude “a just and reasonable return on [the] proper-
    ty.” Id. § 25.07.010.
    B
    Manufactured Home Communities, Inc. (“MHC”), now
    known as Equity Lifestyle Properties, Inc., is a public com-
    pany. MHC created an Operating Limited Partnership
    (“OLP”), which has acquired several mobilehome communi-
    ties and resorts from original owners in exchange for limited
    partnership assets. The partners of OLP, including MHC and
    its limited partners, receive revenue from these assets.1
    In 1997, acting on behalf of OLP, MHC purchased the Sea
    Oaks Manufactured Home Community in Los Osos, Califor-
    nia (“the Park”). OLP maintains title ownership. MHC subse-
    quently sought to impose rent increases on nine of the 126
    mobilehome lots in the Park.2
    On March 26, 2002, MHC (holding itself out as the park-
    owner) gave notice to the Park tenants that rent in the nine
    lots would increase by an average 185%. The tenants pro-
    tested that the Ordinance barred such rent increases, but MHC
    noted that they had signed standard-form 12-month rental
    agreements and stated that the Ordinance did not apply to
    such leases. See County of San Luis Obispo, Cal., Code
    § 25.03.010 (exempting “[t]enancies covered by leases or
    contracts which provide for more than a month-to-month ten-
    ancy . . . for the duration of such lease or contract”).
    To settle the dispute over the 185% rent increases, MHC
    wrote the Board on March 29, 2002, asking for verification
    1
    MHC is also the OLP’s general partner.
    2
    The tenants of the nine lots are the “Real Parties in Interest.”
    12444           EQUITY LIFESTYLE v. SAN LUIS OBISPO
    that the Ordinance did not apply to the nine lots at issue. On
    May 22, 2002, the tenants in turn requested a hearing as to
    whether the increases violated the Ordinance. They explained
    that the previous Park owner had informed them that the
    leases would be subject to the Ordinance and they relied on
    that information in renewing their leases.
    The Board accepted MHC’s representation that it was the
    Park owner and gave notice of hearings, which it conducted
    on June 3, July 15, and August 23, 2002. At the hearings, the
    Board allowed both sides to present witnesses and to submit
    limitless materials, but barred any cross-examination. The
    Board concluded that MHC’s “twelve-month” agreements
    were in fact month-to-month agreements covered by the rent
    control Ordinance, for they included an undefined rent term
    and permitted rent increases anytime upon a 90-day notice.3
    MHC appealed to the San Luis Obispo County Board of
    Supervisors on September 5, 2002, which affirmed the
    Board’s decision on October 8, 2002.
    C
    On January 3, 2003, MHC filed a Petition for Writ of
    Administrative Mandamus in the Central District of Califor-
    nia, based on federal question and diversity jurisdiction. See
    
    28 U.S.C. §§ 1331
    , 1332, 1343(a)(3). The petition asserted
    federal claims under 
    42 U.S.C. § 1983
     as well as California
    law claims “within the pendent and/or supplemental jurisdic-
    tion of th[e] court.” See 
    28 U.S.C. § 1367
    . The petition chal-
    lenged the administrative ruling, and the Respondents’ failure
    “to declare their own ordinance unconstitutional under the
    Fifth and Fourteenth Amendments.”
    MHC subsequently filed a First Amended Complaint for:
    3
    The Board noted the fact that the prior and current resident managers
    of the nine lots had treated the 12-month agreements as being subject to
    the Ordinance.
    EQUITY LIFESTYLE v. SAN LUIS OBISPO                    12445
    (1)    Petition for Writ of Administrative Mandamus4
    (2)    Violation of the Fifth Amendment of the
    United States Constitution (Takings Claim)5
    (3)    Violation of the Fourteenth Amendment of the
    United States Constitution (Substantive Due Pro-
    cess)6
    (4)    Violation of the Fourteenth Amendment to the
    United States Constitution (Equal Protection)7
    (5)    Declaratory Relief8
    MHC sought damages and equitable relief from application of
    the Ordinance.
    On November 9, 2004, the County moved to dismiss the
    MHC’s First Amended Complaint under Fed. R. Civ. P.
    12(b)(1) (lack of subject matter jurisdiction) and 12(b)(6)
    (failure to state a claim upon which relief can be granted). The
    motion contended that MHC lacked standing, that its as-
    applied takings claims and due process claims were unripe,
    4
    MHC sought the writ under Cal. Code Civ. P. § 1094.5, challenging
    the Board for acting in excess of its jurisdiction, failing to give a fair hear-
    ing due to lack of adequate notice, harboring bias, failing to follow formal
    rules of evidence, and lacking evidentiary support for its ruling.
    5
    This claim attacked the Board’s decision and the Ordinance for depriv-
    ing MHC of the fair market value of its land without reasonable relation
    to a legitimate public purpose.
    6
    MHC asserted substantive due process as an alternative ground for dis-
    cerning a constitutional violation.
    7
    MHC asserted that it had been singled out for regulation.
    8
    The fifth claim sought declaratory relief for the reasons stated in the
    prior four claims, alleging that the Ordinance constituted a regulatory tak-
    ing without substantially advancing any legitimate public purpose,
    effected a private taking, violated MHC’s substantive due process rights,
    and denied MHC equal protection.
    12446         EQUITY LIFESTYLE v. SAN LUIS OBISPO
    that its facial claims were barred by the statute of limitations,
    and that its other constitutional claims offered no basis for
    relief. In the alternative, the motion urged the court to “exer-
    cise Younger or Pullman abstention.” The district court
    responded with the following order: “The Court has consid-
    ered Defendant’s motion to dismiss the first amended com-
    plaint, together with the moving and opposition papers. It is
    ordered that the motion be, and hereby is, granted. Date: Feb-
    ruary 22, 2005.” MHC now timely appeals this order.
    D
    Because abstention has been raised as an issue in this case,
    we recount related developments in state court. Three days
    after filing its petition in the federal district court, MHC filed
    a Petition for Writ of Administrative Mandamus in the Cali-
    fornia Superior Court, asserting nearly identical claims as in
    federal court. On November 5, 2004, the County— which had
    not been served with the petition until October 7—filed a
    demurrer arguing that MHC lacked standing. On January 4,
    2005, MHC filed a First Amended Petition, containing the
    same allegations as before, but explaining that MHC “controls
    the actions” of OLP and “has a direct, pecuniary interest in
    the amount of rent that can be charged at the property it has
    an interest in, including the Sea Oaks park.” On October 19,
    2005, the court overruled the demurrer.
    On December 7, 2005, MHC filed a Second Amended and
    Supplemental Complaint in the state trial court, which mir-
    rored the claims in its First Amended Complaint previously
    filed in the federal district court. The state trial court held that
    MHC had standing and bifurcated the action as to the writ and
    non-writ claims. The court denied the writ on July 26, 2006,
    granted judgment on the pleadings for the County on the non-
    writ claims on November 8, 2006, and entered judgment for
    the County on December 8, 2006. MHC filed a state court
    notice of appeal on January 23, 2007. The state trial court
    judgment and appeal thus occurred after MHC had appealed
    EQUITY LIFESTYLE v. SAN LUIS OBISPO                12447
    the district court’s order granting the County’s motion to dis-
    miss.
    II
    [1] The dismissal of a federal complaint requires de novo
    review.9 We begin with the jurisdictional issue. MHC claims
    standing based on its financial interest as a partner of OLP. In
    considering this claim, we must accept as true its assertion
    that MHC lost revenue when the Board forbade OLP from
    increasing rents by an average 185%. See Pennell v. City of
    San Jose, 
    485 U.S. 1
    , 7 (1988) (“[W]hen standing is chal-
    lenged on the basis of the pleadings, we ‘accept as true all
    material allegations of the complaint, and . . . construe the
    complaint in favor of the complaining party.’ ” (quoting
    Warth v. Seldin, 
    422 U.S. 490
    , 501 (1975)).
    [2] The government disputes MHC’s standing because OLP
    —not MHC—retains title ownership of the Park. But that
    argument is too rigid: the application of standing requirements
    must not be turned into a “mechanical exercise.” Allen v.
    Wright, 
    468 U.S. 737
    , 751 (1984). Title ownership is not the
    only form of interest that can support standing. We have
    stated more broadly that “[p]ecuniary injury is a sufficient
    basis for standing.” Fair v. EPA, 
    795 F.2d 851
    , 853 (9th Cir.
    1986); see also Warth v. Seldin, 
    422 U.S. 490
    , 507 (1975)
    (stating that standing exists where “unless relief from
    assertedly illegal actions [i]s forthcoming, the plaintiff’s
    immediate and personal interests would be harmed”). MHC’s
    9
    See Carson Harbor Village, Ltd. v. City of Carson, 
    353 F.3d 824
    , 826
    (9th Cir. 2004) (reviewing dismissal under Fed. R. Civ. P. 12(b)(1)); Mil-
    ler v. Yokohama Tire Corp., 
    358 F.3d 616
    , 619 (9th Cir. 2004) (reviewing
    dismissal under Fed. R. Civ. P. 12(b)(6)); Ross v. Alaska, 
    189 F.3d 1107
    ,
    1114 (9th Cir. 1999) (reviewing dismissal for want of ripeness); Santa
    Maria v. Pac. Bell, 
    202 F.3d 1170
    , 1175 (9th Cir. 2000) (reviewing dis-
    missal based on statute of limitations). In doing so, we assume the facts
    alleged in the complaint to be true. See Carson Harbor Village, 
    353 F.3d at 826
    .
    12448           EQUITY LIFESTYLE v. SAN LUIS OBISPO
    pecuniary interest in the Park is sufficient for standing and we
    proceed to the merits.10
    III
    MHC asserts two forms of takings challenges: a facial chal-
    lenge to the Ordinance itself, and an as-applied challenge to
    the Board’s implementation of the Ordinance to the nine lots
    in question. The County contends that MHC, even if treated
    as the current owner, may not bring a facial challenge,
    because MHC acquired its interest in the property after the
    Ordinance was enacted. The Supreme Court’s decision in
    Palazzolo v. Rhode Island, 
    533 U.S. 606
     (2001), rejects this
    view. The Court expressly stated that a regulatory takings
    claim “is not barred by the mere fact that title was acquired
    after the effective date of the state-imposed restriction.” 
    Id. at 630
    .
    [3] However, a takings claim must still comply with timeli-
    ness requirements. It must be filed neither too early (unripe)
    nor too late (barred by a statute of limitations). In Williamson
    County Regional Planning Commission v. Hamilton Bank of
    Johnson City, 
    473 U.S. 172
     (1984), the Court articulated a
    two-step analysis to determine whether a regulatory takings
    claim is ripe: (1) the underlying “administrative action must
    be final before it is judicially reviewable”11 and (2) the claim-
    ant must have “unsuccessfully attempted to obtain just com-
    pensation through the procedures provided by the State.”12 
    Id. at 192, 195
    .
    10
    The jurisdictional question of standing precedes, and does not require,
    analysis of the merits. Standing “in no way depends on the merits of the
    [ ] contention that particular conduct is illegal.” Warth, 
    422 U.S. at 500
    .
    11
    This requirement applies only to as-applied challenges. Hacienda Val-
    ley Mobile v. Morgan Hill, 
    353 F.3d 651
    , 655 (9th Cir. 2003) (“Facial
    challenges are exempt from the first prong of the Williamson ripeness
    analysis because a facial challenge by its nature does not involve a deci-
    sion applying the statute or regulation.”).
    12
    This requirement must be satisfied in order to bring either an as-
    applied or a facial challenge.
    EQUITY LIFESTYLE v. SAN LUIS OBISPO         12449
    A
    [4] MHC’s as-applied challenge satisfies the first prong of
    the Williamson test based upon its first having sought a deci-
    sion of the Mobilehome Rent Review Board and the subse-
    quent affirmance by the Board of Supervisors. See
    Manufactured Home Cmtys v. City of San Jose, 
    420 F.3d 1022
    , 1035 (9th Cir. 2005) (stating that the claimant “pursued
    its general rate increase claims through the administrative pro-
    cess provided by the Ordinance” and thus “fulfill[ed] the first
    prong of the Williamson County test for MHC’s takings
    claims related to a general rate increase”).
    [5] However, MHC has not satisfied the second require-
    ment of the Williamson test, because it has not attempted to
    obtain relief through the state procedure designed to provide
    compensation for rent control losses. In a 1997 decision, the
    California Supreme Court established a procedure by which
    a party injured by a government taking could seek compensa-
    tion. See Kavanau v. Santa Monica Rent Control Bd., 
    941 P.2d 851
     (Cal. 1997). The procedure required “[a]n adjust-
    ment of future rents that takes into consideration past confis-
    catory rents,” 
    id. at 866
    , giving homeowners harmed by
    regulatory takings a means to obtain “just compensation
    through the procedures provided by the State,” Williamson,
    473 U.S. at 195.
    [6] Unless a complainant has sought relief through a
    Kavanau adjustment, he cannot file a federal complaint
    objecting to an uncompensated taking by the state. See Manu-
    factured Home Cmtys, 
    420 F.3d at 1035-36
     (dismissing as
    unripe a complaint filed without first seeking a Kavanau
    adjustment); see also Carson Harbor Village, 
    353 F.3d at 830
    (O’Scannlain, J., concurring specially) (dismissing a com-
    plaint because the injured party had made “no effort to seek
    compensation for an alleged taking through a writ of manda-
    mus and a Kavanau adjustment”).
    12450         EQUITY LIFESTYLE v. SAN LUIS OBISPO
    [7] MHC then seeks to avoid the rule that “a plaintiff can-
    not bring a section 1983 action in federal court until the state
    denies just compensation,” Levald, Inc. v. City of Palm
    Desert, 
    998 F.2d 680
    , 687 (9th Cir. 1993), by arguing that a
    Kavanau adjustment procedure could not offer adequate com-
    pensation. Here MHC relies on a narrow exception to the sec-
    ond prong of the Williamson test, which allows a claimant to
    bypass state procedures if such procedures are shown to be
    “unavailable or inadequate.” 473 U.S. at 197. This exception
    applies only if a party has already “utilized” state procedures
    and has shown pursuit of such remedies would be futile.
    [8] MHC contends that the exception should apply to the
    Kavanau adjustment procedure, because Kavanau adjust-
    ments only provide for an increase in future rents, and do not
    require landowners to be compensated for rent lost prior to or
    during the course of the litigation. Although MHC admits that
    the Kavanau court addressed this concern by pointing out in
    dicta that a landlord could “seek[ ] a stay of that regulation
    during litigation,” Kavanau, 941 P.2d at 866, MHC contends
    that California courts never grant such stays. To prove this
    point, MHC offers only the declaration of Anthony Rodri-
    guez, “an experienced mobilehome park attorney,” who
    believes that seeking a stay would be futile given his “per-
    sonal knowledge” of “at least four cases” in which California
    courts denied such stay requests.
    [9] We are not impressed by this single declaration and
    have considered the state decisions on the issue more closely.
    “The futility exception is narrow, and mere uncertainty does
    not establish futility.” Manufactured Home Cmtys, 
    420 F.3d at 1035
    . “Although the facts alleged by a plaintiff are
    assumed true under a motion to dismiss, this court need not
    accept baseless allegations as proof of futility. . . . MHC’s [ ]
    allegations, at best, produce uncertainty and uncertainty does
    not equal futility.” 
    Id.
    [10] California law requires that Kavanau adjustments
    include losses incurred during the review process. The Cali-
    EQUITY LIFESTYLE v. SAN LUIS OBISPO         12451
    fornia Supreme Court explained this requirement four years
    after Kavanau, expressly clarifying that “the substantial legal
    and administrative costs attributable to the rent review process
    . . . should be properly included as expenses when calculating
    the proper rent readjustment [under Kavanau].” Galland v.
    City of Clovis, 
    16 P.3d 130
    , 147 (2001). The Galland decision
    ensures that state authorities apply Kavanau in a manner that
    provides compensation for losses occurring during litigation.
    For that reason, the California Supreme Court rejected the
    argument now made by MHC— that a Kavanau adjustment
    would not provide adequate compensation and therefore that
    a party need not seek such remedy before filing a federal
    complaint. See 
    id. at 148
     (reversing the court of appeals,
    which had held that a party need not pursue a Kavanau adjust-
    ment prior to filing a § 1983 claim and that a Kavanau adjust-
    ment anyway would have been inadequate). Under California
    law, a Kavanau adjustment “may not arbitrarily exclude the
    reasonable expenses of seeking legitimate rent increases.” Id.
    at 147.
    California rent control authorities tasked with making
    Kavanau adjustments have applied the rulings of the Califor-
    nia Supreme Court to address potential revenue lost during lit-
    igation. Although we have found no published case in which
    a California court granted a stay pending a Kavanau adjust-
    ment, rent control authorities have used alternative means to
    ensure that Kavanau adjustments allow property owners to
    recoup compensable losses incurred during litigation. For
    example, in one ruling, a city council applying Kavanau over-
    turned a rent control board decision that denied a rent
    increase; the city council then ordered that the rents be
    adjusted not only to avoid future losses but to compensate for
    revenue opportunities lost during the review process. See City
    Council of the City of Concord Mobilehome Rent Review
    Board, Res. No. 05-56, at 7 (Aug. 2, 2005). In another deci-
    sion, a local rent stabilization board granted rent increases to
    compensate for losses incurred due to the application of a rent
    decision that was later overturned. See Carpinteria Mobile
    12452           EQUITY LIFESTYLE v. SAN LUIS OBISPO
    Home Park Rent Stabilization Board, Res. No. 5031, at 5
    (Dec. 6, 2006).
    These alternative approaches enable parties to seek ade-
    quate compensation from the state. We reject MHC’s argu-
    ment that “a Kavanau adjustment is not an effective remedy
    unless the park owner successfully stays enforcement of the
    applicable rent control ordinance pending the outcome of the
    litigation.”13 Although a stay might be useful to avoid losses,
    retrospective compensation also ensures that a property owner
    does not suffer from unwarranted revenue losses incurred dur-
    ing litigation. We will not second-guess the specific proce-
    dures California has chosen to use, so long as the methods
    provide just compensation.
    [11] We thus conclude that California’s creation and imple-
    mentation of the Kavanau adjustment process provides “an
    adequate procedure for seeking just compensation, [and] the
    property owner cannot claim a violation of the Just Compen-
    sation Clause until it has used the procedure and been denied
    just compensation.” Williamson, 473 U.S. at 195. Because
    MHC did not seek such compensation, its as-applied chal-
    lenge to the Board’s decision was unripe and the district court
    properly dismissed that aspect of the claim.
    13
    However, we express some concern that the state’s procedure may
    place an unjust burden upon future tenants in order to ensure the just com-
    pensation of the landlord, by shifting the financial responsibilities of ear-
    lier tenants to later ones. See Carson Harbor Village, 
    353 F.3d at 830
    (O’Scannlain, J., concurring specially) (“I write separately to express my
    concern that California’s procedures may not provide ‘just compensation’
    because the burden of compensation falls not on the government as the
    representative of the benefitting general public, but on a select group of
    future tenants.”). But because this concern does not affect a property
    owner’s claim of adequate compensation, it need not be addressed further
    in this appeal.
    EQUITY LIFESTYLE v. SAN LUIS OBISPO                 12453
    B
    [12] The futility analysis differs with respect to MHC’s
    facial takings claim. In 1984, at the time the Ordinance was
    enacted, California had no damages remedy for regulatory
    takings. See Schnuck v. City of Santa Monica, 
    935 F.2d 171
    ,
    173 (9th Cir. 1991) (“Prior to the Supreme Court’s decision
    in First English Evangelical Lutheran Church [
    482 U.S. 304
    (1987)] we . . . excused such failures in California because
    California provided no remedy in damages for a taking by a
    regulatory ordinance, but gave only injunctive or declaratory
    relief.”). It was not until 1987, when the Supreme Court “held
    California’s denial of a damages remedy unconstitutional,”
    that California courts began to provide damages remedies for
    regulatory takings. 
    Id.
     Because no adequate state remedy was
    available in 1984, when the ordinance was enacted, MHC
    need not fulfill the second prong of Williamson in order for
    its facial challenge to be ripe.
    [13] However, MHC’s facial takings claim fails because it
    was filed outside the statute of limitations. While 
    42 U.S.C. § 1983
     does not specify a statute of limitations, the Supreme
    Court has instructed federal courts addressing § 1983 personal
    injury claims to follow the statute of limitations of the state
    in which the challenged action occurred. See Wilson v. Gar-
    cia, 
    471 U.S. 261
    , 276 (1985). Here, the applicable rule can
    be found in Cal. Code of Civ. P. § 340(3) as codified in 1984,
    which set forth a one-year statute of limitations.14
    [14] A facial takings claim must be filed within the limita-
    tions period. See Levald, 
    998 F.2d at 687-88
    . MHC’s facial
    takings claim accrued in 1984, when the Ordinance was
    enacted. MHC did not file its facial challenge until 2003. The
    facial takings claim was filed beyond the limitations period.
    14
    This statute governed until January 1, 2003, when the limitations
    period was increased to two years under Cal. Code of Civ. P. § 335.1.
    MHC cites the latter statute, but it does not apply for MHC’s facial claim.
    12454         EQUITY LIFESTYLE v. SAN LUIS OBISPO
    MHC argues that its claim was timely nonetheless, because
    the Supreme Court’s decision in Palazzolo, 
    533 U.S. 606
    ,
    eliminated any statute of limitations requirement from facial
    takings challenges. We disagree in part.
    Palazzolo did not exempt facial challenges from the statute
    of limitations. The decision simply clarified that subsequent
    landowners can bring a claim even though a previous land-
    owner failed to take action to protect against an injury. See 
    id. at 628
     (“It would be illogical, and unfair, to bar a regulatory
    taking claim because of the post-enactment transfer of owner-
    ship where the steps necessary to make the claim ripe were
    not taken, or could not have been taken, by a previous
    owner.”). We read Palazzolo to require equitable tolling to
    protect subsequent landowners who do not receive notice of
    a regulatory taking or who lack standing to object to such tak-
    ing prior to expiration of the limitations period. For such sub-
    sequent landowners, the limitations period must begin at the
    time of their acquisition of property, not at the time the origi-
    nal taking occurred. Thus, under Palazzolo, MHC had one
    year to file its facial takings claim after it acquired the prop-
    erty in 1997. Because MHC filed its claim in 2003, it
    exceeded the statute of limitations by five years.
    Arguing in the alternative, MHC then contends its claim
    was timely under the statute of limitations, because the injuri-
    ous action occurred when the Board interpreted the Ordinance
    to apply to the nine lots in question. In MHC’s view, “the
    administrative ruling below, holding long-term leases subject
    to the County’s rent control scheme, effectively repealed or
    amended an express provision in the ordinance exempting
    such leases from rent control” and thus restarted the limita-
    tions period in 2002. See supra page 12444 (describing the
    administrative decision).
    [15] We cannot accept this claim. The Board and the San
    Luis Obispo County Board of Supervisors, which affirmed the
    Board’s decision, had no legislative power to alter or to
    EQUITY LIFESTYLE v. SAN LUIS OBISPO                  12455
    amend the Ordinance. California election law expressly pro-
    vides that “no ordinance adopted by initiative may be
    repealed or amended except by a vote of the people.” County
    of San Luis Obispo, Cal., Code § 25.01.010 (citing Cal. Elec-
    tion Code § 3719). The statute of limitations began upon
    MHC’s acquisition of the property in 1997, not upon the
    administrative ruling in 2002. MHC’s untimely facial claim
    was properly dismissed.
    IV
    We turn next to the district court’s dismissal of MHC’s due
    process and equal protection claims.15
    A
    MHC’s First Amended Complaint asserted a violation of
    substantive due process on the grounds that the application of
    the Ordinance to MHC bore no rational relationship to any
    legitimate state purpose and served the sole purpose of trans-
    ferring the value of MHC’s property to a select private group
    of tenants. This argument challenges the foundation of the
    rent control law and would, if accepted, require its invalidation.16
    15
    MHC presented this claim to the district court “solely in the alterna-
    tive, in the event that . . . MHC’s Second Claim for Relief is not cogniza-
    ble as a matter of law under the Fifth Amendment’s Takings Clause.”
    16
    The parties dispute whether takings jurisprudence governs this chal-
    lenge, or whether its merits turn only upon our due process doctrine. The
    Supreme Court’s decision in Lingle v. Chevron U.S.A., Inc., 
    544 U.S. 528
    ,
    537 (2005), answers this question: “[The Takings Clause] ‘is designed not
    to limit the governmental interference with property rights per se, but
    rather to secure compensation in the event of otherwise proper interference
    . . . .’ ” Due process violations cannot be remedied under the Takings
    Clause, because “if a government action is found to be impermissible—for
    instance because it fails to meet the ‘public use’ requirement or is so arbi-
    trary as to violate due process—that is the end of the inquiry. No amount
    of compensation can authorize such action.” 
    Id. at 543
    .
    12456           EQUITY LIFESTYLE v. SAN LUIS OBISPO
    [16] The Supreme Court and this Circuit have upheld rent
    control laws as rationally related to a legitimate public pur-
    pose. In Pennell, 
    485 U.S. 1
    , the Court concluded that a chal-
    lenged ordinance “represents a rational attempt to
    accommodate the conflicting interests of protecting tenants
    from burdensome rent increases while at the same time ensur-
    ing that landlords are guaranteed a fair return on their invest-
    ment,” 
    id. at 13
    , adding that “we have long recognized that a
    legitimate and rational goal of price or rate regulation is the
    protection of consumer welfare.” Id.17
    [17] The Ordinance challenged by MHC includes a para-
    graph describing its purpose, which is to “protect the owners
    and occupiers of mobilehomes from unreasonable rent
    increases, while at the same time recognizing the need of park
    owners to receive a suitable profit.” County of San Luis
    Obispo, Cal., Code § 25.01.010(c). Pennell makes clear that
    such an ordinance is rationally related to a legitimate public
    purpose, a point we underscored in Carson Harbor Village:
    A generally applicable rent-control ordinance will
    survive a substantive due process challenge if it is
    “designed to accomplish an objective within the gov-
    ernment’s police power, and if a rational relationship
    existed between the provisions and the purpose of
    the ordinances.” This deferential inquiry does not
    focus on the ultimate effectiveness of the law, but on
    whether the enacting body could have rationally
    believed at the time of enactment that the law would
    promote its objective.
    17
    More generally, the Supreme Court has upheld regulations that fix the
    prices or rents in certain industries but not others. See, e.g., FCC v. Fla.
    Power Corp., 
    480 U.S. 245
    , 250-54 (1987) (approving limits on rates
    charged to cable companies for access to telephone poles); FPC v. Texaco
    Inc., 
    417 U.S. 380
    , 397-98 (1974) (recognizing that federal regulation of
    the natural gas market was in response to the threat of monopoly pricing).
    EQUITY LIFESTYLE v. SAN LUIS OBISPO                  12457
    Carson Harbor Village Ltd. v. City of Carson, 
    37 F.3d 468
    ,
    472 (9th Cir. 1994), overruled on other grounds by WMX
    Tech. v. Miller, 
    104 F.3d 1133
    , 1136 (9th Cir. 1997) (citations
    omitted). Applying this standard in Carson Harbor Village,
    we upheld an ordinance that set “a maximum ceiling on rent
    levels that can be charged for a space in mobile home parks”
    and established a rent review board “to hear claims for
    increases above the ceiling.” See id. at 471-72. MHC’s sub-
    stantive due process claim lacks merit under governing law.
    The district court properly dismissed it.18
    B
    In its equal protection challenge, MHC claims that the
    Ordinance was created unlawfully to discriminate against a
    class of persons in a manner “unrelated to any legitimate gov-
    ernmental interest.” MHC claims that the Ordinance singled
    out mobilehome owners “from property owners of all other
    types of housing in the San Luis Obispo County to bear the
    burden and expense of providing economic benefits to ten-
    ants” and allowed “[a]ll other property owners . . . to adjust
    rents to market upon a change of tenancy.”
    [18] This equal protection challenge must be considered
    under rational basis review because mobilehome park owners
    are not a suspect class. See Watson v. Maryland, 
    218 U.S. 18
    MHC argues that Lingle entitles it to a remand in order to develop
    other claims that would constitute takings challenges rather than due pro-
    cess ones. For this proposition, it relies upon the Lingle Court’s comment
    that “we reaffirm that a plaintiff seeking to challenge a government regu-
    lation as an uncompensated taking of private property may proceed under
    one of the other theories discussed above—by alleging a ‘physical’ taking,
    a Lucas-type ‘total regulatory taking,’ a Penn Central taking, or a land-use
    exaction violating the standards set forth in Nollan and Dolan.” Lingle,
    
    544 U.S. at 548
    . This reaffirmation by the Lingle Court cannot be read as
    a suggestion that a claimant who fails to raise available claims should have
    another chance to do so upon remand. The Lingle Court merely explained
    that it did not bar all existing forms of takings claims. MHC deserves no
    second bite at the complaining apple.
    12458           EQUITY LIFESTYLE v. SAN LUIS OBISPO
    173, 179-80 (1910) (applying the rational basis test to occupa-
    tional classifications). Therefore, “the Equal Protection
    Clause requires only that the classification rationally further
    a legitimate state interest.” Nordlinger v. Hahn, 
    505 U.S. 1
    ,
    10 (1992). “Under rational-basis review, where a group pos-
    sesses distinguishing characteristics relevant to interests the
    State has the authority to implement, a State’s decision to act
    on the basis of those differences does not give rise to a consti-
    tutional violation.” Hotel & Motel Ass’n of Oakland v. City of
    Oakland, 
    344 F.3d 959
    , 971 (9th Cir. 2003) (quoting Bd. of
    Trs. v. Garrett, 
    531 U.S. 356
    , 366-67 (2001)) (internal quota-
    tion marks omitted). Here, the County sought to regulate
    mobilehome park rents because of the “shortage of spaces for
    the location of existing mobilehomes” within the County and
    “the high costs and impracticability of moving mobilehomes
    [and] the potential for damage resulting therefrom,” among
    other reasons. See County of San Luis Obispo, Cal. Code
    § 25.01.010. These reasons appear to constitute “distinguish-
    ing characteristics relevant to interests the State has the
    authority to implement.” Hotel & Motel, 
    344 F.3d at 971
    . The
    district court properly dismissed the equal protection claim as
    well.
    V
    Finally, we address the petition for a writ of administrative
    mandamus filed by MHC in the Central District of California.19
    In its petition, MHC asserted that a writ was warranted under
    Cal. Code Civ. P. § 1094.5 because the Rent Review Board
    and Board of Supervisors acted “in excess of their jurisdic-
    tion” and in violation of MHC’s “due process rights under the
    state and federal constitutions.” MHC specifically challenged
    the adequacy of the Board’s notice of its hearings, its refusal
    to allow cross-examination, and its consideration of hearsay.
    19
    MHC filed this claim first as a petition, and then as one of five causes
    of action in its First Amended Complaint.
    EQUITY LIFESTYLE v. SAN LUIS OBISPO               12459
    MHC contends that federal law required issuance of the
    writ, because the Board provided inadequate notice of its
    administrative proceedings and because the Board considered
    hearsay, depriving MHC of its alleged right to confront the
    witnesses.
    However, the district court’s order did not state whether the
    petition failed to state a ground for relief. See Fed. R. Civ. P.
    12(b)(6) (allowing dismissal for “failure to state a claim upon
    which relief can be granted”). Indeed, the district court did not
    reveal the grounds upon which it based its dismissal. See
    supra page 12445-46. “In the absence of grounds upon which
    the order rests, we are required to affirm it if it may be sus-
    tained upon any ground.” Lemm v. N. Cal. Nat’l Bank, 
    93 F.2d 709
    , 710 (9th Cir. 1937) (citing United States v. One
    Distillery, 
    174 U.S. 149
     (1899)).
    [19] Under Younger v. Harris, 
    401 U.S. 37
     (1971), and its
    progeny, a federal court should abstain from hearing a case
    that would interfere with ongoing state proceedings.20 The
    Supreme Court has explained that the “importance of the state
    interest in the pending state judicial proceedings and in the
    federal case calls Younger abstention into play,” and that “[s]o
    long as the constitutional claims of respondents can be deter-
    mined in the state proceedings and so long as there is no
    showing of bad faith, harassment, or some other extraordinary
    circumstance that would make abstention inappropriate, the
    federal courts should abstain.” Middlesex, 457 U.S. at 435.
    MHC has made “no showing of bad faith, harassment, or
    some other extraordinary circumstance.” Id. However, MHC
    asserts that Younger abstention would not justify dismissal,
    20
    Younger dealt with ongoing state criminal proceedings, but the same
    abstention principle was extended to civil actions in Middlesex County
    Ethics Comm. v. Garden State Bar Ass’n, 
    457 U.S. 423
    , 432 (1982) (“The
    policies underlying Younger are fully applicable to noncriminal judicial
    proceedings when important state interests are involved.”).
    12460             EQUITY LIFESTYLE v. SAN LUIS OBISPO
    because the state action was filed three days after MHC filed
    its district court complaint. We do not accept this argument.
    The Supreme Court has made clear that a filing date is not
    dispositive:
    [No] case in this Court has held that for Younger v.
    Harris to apply, the state criminal proceedings must
    be pending on the day the federal case is filed.
    Indeed, the issue has been left open; and we now
    hold that where state criminal proceedings are begun
    against the federal plaintiffs after the federal com-
    plaint is filed but before any proceedings of sub-
    stance on the merits have taken place in the federal
    court, the principles of Younger v. Harris should
    apply in full force.
    Hicks v. Miranda, 
    422 U.S. 332
    , 349 (1975) (citation omitted
    and emphasis added).21 The facts belie MHC’s claim that the
    state action was filed merely as a defensive precaution and the
    state case lay “dormant.” In fact, the state trial court has com-
    pleted its proceedings and rendered a judgment. See supra
    page 12446.
    [20] The district court dismissed the complaint without dis-
    cussing the merits of MHC’s claims. Where no “proceedings
    of substance on the merits have taken place in the federal
    court, the principles of Younger v. Harris . . . apply in full
    force.” Hicks, 
    422 U.S. at 349
    .22 We conclude that Younger
    21
    This quote refers to criminal proceedings. As noted above, the Court
    has since applied Younger principles to non-criminal judicial proceedings
    as well.
    22
    MHC then argues that even if Younger abstention applies, this pro-
    ceeding should at most be stayed. For this proposition, MHC cites Gilbert-
    son v. Albright, 
    381 F.3d 965
     (9th Cir. 2004) (en banc). In Gilbertson, we
    stated:
    We conclude that Younger principles apply to actions at law as
    well as for injunctive or declaratory relief because a determina-
    EQUITY LIFESTYLE v. SAN LUIS OBISPO                    12461
    abstention justified the district court’s dismissal of the petition
    for a writ of administrative mandamus.23
    VI
    In sum, we conclude that MHC has standing based on its
    financial interest in the Park. However, we affirm the district
    court’s order dismissing its complaint. The complaint con-
    tained no claim upon which relief could be granted, because
    its as-applied takings claim was unripe, its facial claims failed
    to satisfy the applicable statute of limitations, and its due pro-
    cess and equal protection claims lacked merit under the
    United States Constitution. Moreover, the principles of
    abstention justify the district court’s dismissal of the petition
    for a writ of administrative mandamus, and we decline to dis-
    turb the state trial court’s subsequent decision denying the
    writ.
    The district court’s order dismissing MHC’s First Amended
    Complaint is AFFIRMED.
    tion that the federal plaintiff’s constitutional rights have been vio-
    lated would have the same practical effect as a declaration or
    injunction on pending state proceedings. However, federal courts
    should not dismiss actions where damages are at issue; rather,
    damages actions should be stayed until the state proceedings are
    completed.
    
    Id. at 968
    . Gilbertson did not require a stay for damages claims that would
    be dismissed as untimely or meritless on the pleadings, such as MHC’s
    takings, due process, and equal protection claims. Nor did Gilbertson
    require a stay with respect to the petition for a writ of administrative man-
    damus, because that did not constitute a “damages action.”
    23
    Having thus concluded that abstention would apply, we do not reach
    the County’s alternative argument that Pullman abstention would apply as
    well.
    

Document Info

Docket Number: 05-55406

Filed Date: 9/17/2007

Precedential Status: Precedential

Modified Date: 3/3/2016

Authorities (30)

wmx-technologies-inc-fka-waste-management-inc-a-delaware , 104 F.3d 1133 ( 1997 )

paul-douglas-gilbertson-v-stuart-h-albright-keith-r-battleson-jack-w , 381 F.3d 965 ( 2004 )

Lena R. Schnuck v. City of Santa Monica , 935 F.2d 171 ( 1991 )

Levald, Inc. v. City of Palm Desert , 998 F.2d 680 ( 1993 )

jewell-fair-howard-mann-ruby-mccoy-sl-mcbride-and-the-southeast-placer , 795 F.2d 851 ( 1986 )

Carson Harbor Village Ltd., a California Limited ... , 37 F.3d 468 ( 1994 )

James F. Santa Maria v. Pacific Bell , 202 F.3d 1170 ( 2000 )

Hacienda Valley Mobile Estates, a California Limited ... , 353 F.3d 651 ( 2003 )

manufactured-home-communities-inc-mhc-operating-limited-partnership-an , 420 F.3d 1022 ( 2005 )

Lemm v. Northern California Nat. Bank , 93 F.2d 709 ( 1937 )

christopher-miller-v-yokohama-tire-corporation-a-california-corporation , 358 F.3d 616 ( 2004 )

No. 98-35720 , 189 F.3d 1107 ( 1999 )

carson-harbor-village-ltd-a-limited-partnership-dba-carson-harbor , 353 F.3d 824 ( 2004 )

hotel-motel-association-of-oakland-balu-k-patel-usha-b-patel-navin , 344 F.3d 959 ( 2003 )

United States v. One Distillery , 19 S. Ct. 624 ( 1899 )

Galland v. City of Clovis , 103 Cal. Rptr. 2d 711 ( 2001 )

Federal Power Commission v. Texaco Inc. , 94 S. Ct. 2315 ( 1974 )

Hicks v. Miranda , 95 S. Ct. 2281 ( 1975 )

Warth v. Seldin , 95 S. Ct. 2197 ( 1975 )

Middlesex County Ethics Committee v. Garden State Bar Ass'n , 102 S. Ct. 2515 ( 1982 )

View All Authorities »