Colony Cove Properties, LLC v. City of Carson

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

COLONY COVE PROPERTIES, LLC, a 

Delaware limited liability

company,

Plaintiff-Appellant, No. 09-57039

v. D.C. No.

CITY OF CARSON, a municipal  2:08-cv-07065-PA-

corporation; CITY OF CARSON JWJ

MOBILEHOME PARK RENTAL REVIEW OPINION

BOARD, a public administrative

body,

Defendants-Appellees.



Appeal from the United States District Court

for the Central District of California

Percy Anderson, District Judge, Presiding

Argued and Submitted

February 14, 2011—Pasadena, California

Filed March 28, 2011

Before: Arthur L. Alarcón, Pamela Ann Rymer, and

Jay S. Bybee, Circuit Judges.

Opinion by Judge Alarcón

4159

COLONY COVE PROPERTIES v. CITY OF CARSON 4163

COUNSEL

Matthew W. Close, O’Melveny & Myers LLP, Los Angeles,

California for the plaintiff-appellant.

William W. Wynder, Aleshire & Wynder, LLP, Irvine, Cali-

fornia for the defendants-appellees.

OPINION

ALARCÓN, Circuit Judge:

Colony Cove Properties, LLC (“Colony Cove”) appeals

from the district court’s dismissal of its federal claims filed

pursuant to 42 U.S.C. § 1983, and its state law claim seeking

a writ of administrative mandate pursuant to Cal. Civ. Pro.

Code § 1094.5. Colony Cove contends that the City of Car-

son’s 1979 mobilehome rent control ordinance, and its imple-

menting guidelines as they stood after the adoption of a 2006

amendment, deprive mobilehome park owners of the value of

4164 COLONY COVE PROPERTIES v. CITY OF CARSON

their property and transfer it to park residents, who are able

to sell their mobilehomes at a premium because they are

located on rent-controlled spaces. Colony Cove asserts facial

and as applied challenges to the ordinance and amended

guidelines as violative of the Fifth Amendment’s Takings

Clause and the Fourteenth Amendment’s Due Process Clause.

The district court dismissed Colony Cove’s facial takings

claim as time-barred, its as applied takings claim as unripe,

and its as applied due process claim for failure to state a

claim; the district court declined to exercise supplemental

jurisdiction over Colony Cove’s related state law claim. After

reviewing the briefs and the record, we are persuaded that the

district court did not err in dismissing this action.

I

A

In 1979, the City of Carson (“the City”), adopted a rent

control ordinance applicable to mobilehome parks: the

Mobilehome Space Rent Control Ordinance (the “1979 Ordi-

nance”), Carson, Cal. Mun. Code art. IV, ch. 7 (1979). The

City also adopted “Guidelines for Implementation of the

Mobilehome Space Rent Control Ordinance” (the “Guide-

lines”). In 1998, the Guidelines were revised in order to make

them consistent with the recent amendments to the Ordinance.

Under the 1979 Ordinance, the City’s Mobilehome Park

Rental Review Board (“Board”) hears and determines rent

adjustment applications. The Board is authorized to “grant

such rent increases as it determines to be fair, just and reason-

able.” Carson, Cal. Mun. Code § 4704(g). “A rent increase is

fair, just and reasonable if it protects Homeowners from

excessive rent increases and allows a fair return on investment

to the Park Owner.” Id. The 1979 Ordinance states that, in

making its determinations, the Board:

shall consider the following [11 enumerated] factors

and any Guidelines adopted by the City Council, as

COLONY COVE PROPERTIES v. CITY OF CARSON 4165

well as any other relevant factors, in making its

determination and no one (1) factor shall be determi-

native.

Id. The 11 factors the Board must consider, pursuant to the

1979 Ordinance, include changes in the Consumer Price

Index (“CPI”), the rent for comparable mobilehome spaces in

the City of Carson, “[t]he completion of any capital improve-

ments related to the mobilehome space or spaces in the rent

increase application[,]” changes in reasonable operating and

maintenance expenses, and the “amount and quality of ser-

vices provided by the applicant to the affected tenant.” Id.

§ 4704(g)(1)-(11).

Pursuant to a portion of the Guidelines that has not changed

since 1998, in light of the assumption that rents set prior to

the adoption of the Ordinance provided a fair return when the

first park owner made the first application for a rent increase,

“each rent increase application after the first application is

evaluated only on the basis of changes in income, expenses,

profit, the CPI, maintenance, amenities and services that have

occurred since the date of the last increase approved by the

Board.” Since 1998, the Guidelines have also provided that

“[d]ebt service incurred prior to the adoption of the Ordinance

to purchase or operate the park is generally an allowable oper-

ating expense.” In contrast, Subsection II.A.2 of the Guide-

lines provides in part:

f. Debt service incurred after adoption of the Ordi-

nance to purchase a park may be an allowable oper-

ating expense if the purchase price paid was

reasonable in light of the rents allowed under the

Ordinance and involved prudent and customary

financing practices. . . . When it is determined that

some increase in debt service was reasonably neces-

sary to acquire the park, but that the amount incurred

was not reasonable in light of the Ordinance and cus-

tomary and prudent financing practices, then only

4166 COLONY COVE PROPERTIES v. CITY OF CARSON

the appropriate portion of the debt service incurred

may be allowed as an operating expense. The reason

for these general rules is that passing on increased

debt service due to purchases at prices above those

that can be justified by the income earned by the

park under rent control or incurred by unusual

financing methods, such as 100% financing, would

defeat the purpose of rent control.

Regarding the Board’s evaluation of an application to

increase a park’s rental rates, the Guidelines provide that, in

addition to the 11 factors enumerated in the 1979 Ordinance,

the Board “may consider” a Gross Profit Maintenance

(“GPM”) analysis, which “is intended to provide an estimate

of whether a park is earning the profit estimated to provide a

fair return, as established by the immediately prior rent

increase, with some adjustment to reflect any increase in the

CPI.” The Guidelines also state that the GPM analysis “is an

aid to assist the Board in applying the factors in the Ordi-

nance” and “is not intended to create any entitlement to any

particular rent increase.”

On or about April 4, 2006, Colony Cove purchased the

mobilehome park now known as Colony Cove Mobile Estates

(“the Park”) in the City of Carson for $23,050,060. Colony

Cove obtained financing for approximately $18 million of the

purchase price, which resulted in debt service payments

exceeding $1.3 million per year.

On October 31, 2006, the City of Carson’s city council

amended the Guidelines for the implementation of the 1979

Ordinance “so as to better assure that residents of mobile-

home parks are protected from excessive rent increases that

could reduce the supply of affordable housing in the commu-

nity.” The stated purpose of the 2006 amendment of the

Guidelines (the “2006 Amendment”) was to “provide addi-

tional analytical tools to evaluate pending applications for rent

increase, and that such analytical tools will also help to assure

COLONY COVE PROPERTIES v. CITY OF CARSON 4167

that the mobilehome park owners within the City receive a

constitutional fair return on their investments.” The relevant

portion of the 2006 Amendment provides that the Guidelines

were “amended to add a new Section II.C., to read, in its

entirety, as follows”:

C. Maintenance of Net Operating Income (MNOI)

Analysis. In addition to the analysis set forth in Sub-

Section II.B., above, the Board may also consider, a

“maintenance of net operating income analysis,”

which compares the net operating income (NOI)

level expected from the last rent increase granted to

a park owner and prior to any pending rent increase

application (the so-called “target NOI”) to the NOI

demonstrated in any pending rent increase applica-

tion.

1. Where relevant to any pending rent increase

application, a[n] MNOI analysis shall be included in

the staff report to the Board, along with the analysis

set forth in Sub-Section II.B., above, and in addition

to the analysis considering and evaluating the eleven

(11) factors set forth in Municipal Code § 4704(g),

and where there is sufficient data submitted by the

applicant to permit such an analysis.

2. An MNOI analysis is intended to provide

another method to estimate whether any applicant

for a rent increase is earning a constitutional fair

return, as established by the immediately prior rent

increase, with appropriate adjustment(s) to reflect

changes in the CPI, and is a methodology approved

by the courts in which changes in debt service

expenses are not to be considered in the analysis

(unlike a gross profits maintenance analysis, where

such changes may be considered). The analysis is

another aid to assist the Board in applying the factors

in the Ordinance, as is to be considered in company

4168 COLONY COVE PROPERTIES v. CITY OF CARSON

with the factors in Municipal Code § 4704(g), and all

other relevant evidence presented and the statutory

purposes of the mobilehome space rent control ordi-

nance. An MNOI analysis is not intended to create

any entitlement to any particular rent increase.

2006 Amendment (emphases added).

On August 6, 2008, the Board issued its decision (“2008

Board Decision”) on Colony Cove’s October 1, 2007 applica-

tion for a general rent increase for the Park. Colony Cove had

requested an average rent increase of $618.05 per rental space

in the Park that would have raised the average monthly rental

rate from $414.25 to $1,032.30 per space. In its application,

Colony Cove claimed it was entitled to a monthly rate

increase ranging from $208.22 to $618.05 (a 136% to 179%

increase) per space based on “the following alternative meth-

odologies and theories:” return on cash investment ($618.05

increase), return on total investment ($365.93 increase), gross

profits maintenance (“GPM”) analysis ($388.85 increase), and

maintenance of net operating income (“MNOI”) methodology

($208.22 increase).

The Board’s written decision set out the factors it is

required to consider under the 1979 Ordinance.1 The Board

also discussed its evaluation of the evidence submitted by

Colony Cove and the City of Carson in light of the “various

methodologies to be considered in complying with its statu-

tory obligation to assure the Park Owner [a] fair return while

at the same time protecting these Park residents from exces-

sive rent increases.” The Board stated that it considered Col-

ony Cove’s argument that it had a vested right in a rent

increase to cover the debt service it incurred in purchasing the

Park. The Board explained that “when the Park Owner pur-

chased the property, the ordinance and guidelines both stated

that there was no entitlement to a rent increase pursuant to

1

Carson, Cal. Mun. Code § 4704(g)(1)-(11).

COLONY COVE PROPERTIES v. CITY OF CARSON 4169

any particular standard or formula.” Based on its review, the

Board granted a $36.74 (or 8.10% to 10.62%) increase per

space, per month.

B

Colony Cove did not institute litigation in a California state

court to challenge the Board’s decision. Rather, on October

27, 2008, Colony Cove filed suit in the United States District

Court for the Central District of California, seeking to have

what Colony Cove termed the City’s “rent control scheme,”

comprising the 1979 Ordinance and the Guidelines as

amended by the 2006 Amendment (“Amended Guidelines”),

declared unconstitutional.

In its Complaint, Colony Cove asserts both facial and as

applied challenges to the City’s rent control scheme as viola-

tive of the Fourteenth Amendment’s Due Process Clause and

the Fifth Amendment’s Takings Clause (Claims 1-4); a facial

challenge under the Fourteenth Amendment’s Equal Protec-

tion Clause (Claim 5); a declaratory relief claim (Claim 6);

and a claim seeking a writ of administrative mandate pursuant

to state law, Cal. Civ. Pro. C. § 1094.5 (Claim 7). Colony

Cove alleges that the City’s 1979 Ordinance and the

Amended Guidelines hold rents well below market rates,

which “deprives Colony Cove of over $30 million of property

value” and transfers that value to park residents “who on aver-

age have been receiving more than $118,000 for their mobile-

homes that on average have an appraised value of

approximately $33,000.” As a result, Colony Cove alleges,

the rent control Ordinance and Amended Guidelines “effec-

tively take[ ] property value from park owners and give[ ] it

to park residents.”

In its Complaint, Colony Cove alleges as follows:

The Board has no discretion with respect to the

Guidelines. Although styled as “Guidelines,” these

4170 COLONY COVE PROPERTIES v. CITY OF CARSON

provisions of the City rent control law are mandatory

and must be followed by the Board. The Guidelines

have had the same de facto and de jure force and

effect as actual amendments to the Ordinance, and

the Board and City staff treat[ ] them as such.

Colony Cove also alleges in its Complaint that “[u]nder the

City’s Rent Control Scheme as it existed at the time Colony

Cove purchased the Park in April 2006, Colony Cove was

entitled to, and reasonably expected to, have its debt service

expenses included as an allowable operating expense.”

On December 5, 2008, the City moved to dismiss for lack

of subject matter jurisdiction and for failure to state a claim,

pursuant to Federal Rules of Civil Procedure 12(b)(1) and

12(b)(6), respectively. In its briefing on the motion, Colony

Cove conceded that its facial equal protection claim (Claim 5)

was foreclosed by controlling precedent. On November 24,

2009, the district court issued an order dismissing with preju-

dice all of Colony Cove’s remaining constitutional claims

(Claims 1-4) and the associated parts of its declaratory relief

claim (Claim 6), and declining to exercise supplemental juris-

diction over the request for a writ of administrative manda-

mus under state law (Claim 7). Colony Cove timely appealed,

challenging the district court’s ruling as to all but two of its

claims.2

C

After the City filed its motion to dismiss and before the dis-

trict court ruled on that motion, on October 20, 2009, the City

of Carson’s city council passed a resolution to approve the

conversion of the Park to subdivided resident ownership.3 On

2

In its briefing on appeal, Colony Cove concedes that its facial due pro-

cess (Claim 1) and equal protection (Claim 5) claims are foreclosed by

current precedent. Appellant’s Opening Br. at 59-60.

3

The City filed a Request for Judicial Notice (“RJN”) with its answering

brief on July 23, 2010. The City asks the court to take judicial notice of

COLONY COVE PROPERTIES v. CITY OF CARSON 4171

December 23, 2009, shortly after the district court ruled on

the City’s motion to dismiss, Colony Cove filed suit in Los

Angeles Superior Court, petitioning for a writ of administra-

tive mandate pursuant to California Code of Civil Procedure

§ 1094.5. In its state court complaint, Colony Cove alleged

that the City’s decisions on its rent increase applications

deprived it of a fair return on its investment, and Colony Cove

asked the state court to compel the City to permit a rent

increase of $200 per month per space, rather than the $36.74

increase previously granted by the City.

II

This court has jurisdiction over this appeal from a final

order of the district court. 28 U.S.C. § 1291. The court

reviews de novo a district court’s decision to grant a motion

to dismiss for failure to state a claim pursuant to Fed. R. Civ.

P. 12(b)(6), or for lack of subject matter jurisdiction pursuant

to Fed. R. Civ. P. 12(b)(1). Manzarek v. St. Paul Fire &

Marine Ins. Co., 519 F.3d 1025, 1030 (9th Cir. 2008); Fed.

Deposit Ins. Corp. v. Nichols, 885 F.2d 633, 635 (9th Cir.

1989). “When ruling on a motion to dismiss, we may ‘gener-

ally consider only allegations contained in the pleadings,

exhibits attached to the complaint, and matters properly sub-

the facts established in and by the following documents: (1) the City

Council of the City of Carson’s October 20, 2009 adoption of Resolution

No. 09-108 Approving Tentative Parcel Map No. 067049 for Mobilehome

Resident Ownership Conversion of Colony Cove Mobilehome Park; (2)

Petition for Writ of Administrative Mandate filed by Colony Cove on

December 23, 2009, in Los Angeles Superior Court; (3) Colony Cove’s

motion for writ of administrative mandate in that state court action; and

(4) a June 30, 2010 minute order issued by the state court denying Colony

Cove’s petition for writ of administrative mandate. RJN at 1-2, Exs. A, B,

C, and D. Colony Cove opposed the RJN on August 5, 2010, and the City

filed a response thereto on August 11, 2010. Neither the contents of the

City Council of the City of Carson’s Resolution nor the existence of the

state court proceedings is in dispute. Accordingly, we grant the request in

a separate order. Fed. R. Evid. 201(b)-(d).

4172 COLONY COVE PROPERTIES v. CITY OF CARSON

ject to judicial notice.’ ”4 Outdoor Media Grp., Inc. v. City of

Beaumont, 506 F.3d 895, 899-900 (9th Cir. 2007) (quoting

Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007)).

The court accepts factual allegations in the complaint as true

and construes the pleadings in the light most favorable to the

nonmoving party. Outdoor Media, 506 F.3d at 900. However,

this court need not accept as true conclusory allegations that

are contradicted by documents referred to in the complaint.

Ashcroft v. Iqbal, ___ U.S. ___, 129 S. Ct. 1937, 1950 (2009)

(“[A] court considering a motion to dismiss can choose to

begin by identifying pleadings that, because they are no more

than conclusions, are not entitled to the assumption of truth.

While legal conclusions can provide the framework of a com-

plaint, they must be supported by factual allegations.”); see

also Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136,

1139 (9th Cir. 2003) (“[W]e are not required to accept as true

conclusory allegations which are contradicted by documents

referred to in the complaint, and we do not necessarily assume

the truth of legal conclusions merely because they are cast in

the form of factual allegations.” (internal quotation marks,

citations, and alterations omitted)).

III

Colony Cove advances a number of arguments in connec-

tion with the viability of its facial takings claim (Claim 3), as

applied takings claim (Claim 4), and as applied substantive

due process claim (Claim 2). We address each in turn.

A

Colony Cove’s facial takings claim (Claim 3) advances the-

ories that the 1979 Ordinance and Amended Guidelines work

a regulatory taking under Penn Central Transp. Co. v. City of

4

The district court took judicial notice of a number of copies of the

Ordinance, Guidelines, the 2006 Amendments, and a number of other rele-

vant documents.

COLONY COVE PROPERTIES v. CITY OF CARSON 4173

New York, 438 U.S. 104 (1978); a physical taking; and a pri-

vate taking. The district court dismissed Claim 3 as time-

barred. Colony Cove argues that the claim is not time-barred

because the 2006 Amendment created a new injury from

which a new limitations period began to run. Additionally,

Colony Cove contends that its economic injury under the rent

control scheme is sufficient to confer standing to pursue the

claims. It also asserts regarding the merits of each of its theo-

ries (regulatory, physical, private) that a taking has occurred.

Because the timeliness of any facial takings claim is disposi-

tive, and this court’s recent decision in Guggenheim v. City of

Goleta, No. 06-56306, ___ F.3d. ___, 2010 WL 5174984 (9th

Cir. Dec. 22, 2010) confirms that dismissal was appropriate,

the court does not reach the merits of Colony Cove’s facial

takings claim.

[1] California’s statute of limitations for personal injury

actions governs claims brought pursuant to 42 U.S.C. § 1983.

Taylor v. Regents of Univ. of Cal., 993 F.2d 710, 711 (9th Cir.

1993) (citing Wilson v. Garcia, 471 U.S. 261, 275 (1985)

(holding that state personal injury limitation statute governs

§ 1983 claims)); Del Percio v. Thornsley, 877 F.2d 785, 786

(9th Cir. 1989). In California, personal injury claims that

accrued after January 1, 2003, are subject to a two-year statute

of limitations. See Cal. Code Civ. Proc. § 335.1; Canatella v.

Van De Kamp, 486 F.3d 1128, 1132-33 (9th Cir. 2007).

[2] This court recently confirmed that the statute of limita-

tions for facial challenges to an ordinance runs from the time

of adoption:

As we held in Levald, Inc. v. City of Palm Desert,

“[i]n the takings context, the basis of a facial chal-

lenge is that the very enactment of the statute has

reduced the value of the property or has effected a

transfer of a property interest. This is a single harm,

measurable and compensable when the statute is

passed.”

4174 COLONY COVE PROPERTIES v. CITY OF CARSON

Guggenheim, 2010 WL 5174984 at *4 (quoting Levald, Inc.

v. City of Palm Desert, 998 F.2d 680, 688 (9th Cir. 1993)).

The rent control ordinance at issue in Guggenheim was

enacted by Santa Barbara County in 1979, and amended in

1987. Id. at *1. The Guggenheims purchased a mobilehome

park in 1997. In 2002, the City of Goleta incorporated terri-

tory that included the land on which the mobilehome park was

located, and it adopted, in toto, the rent control ordinance “so

the county rent control ordinance for mobile home parks

became the city rent control ordinance on the first day of the

City’s existence.” Id. The Guggenheims brought a facial chal-

lenge to the rent ordinance on the theory that “by locking in

a rent below market rents, and allowing tenants to sell their

mobile homes to buyers who will still enjoy the benefits of

the controlled rent (albeit subject to upward adjustment), the

ordinance shifts much of the value of ownership of the land

from the landlord to the tenant.” Id. (footnote omitted). After

a rehearing en banc, this court affirmed the district court’s

grant of summary judgment in favor of the City of Goleta. Id.

at *2.

The timeliness of the action the Guggenheims filed in 2002

was not at issue because their facial challenge was made with

respect to the 2002 ordinance. Id. at *3 (“The Guggenheims

challenge only the 2002 City of Goleta ordinance, not the

1979 or 1987 County of Santa Barbara ordinances.”). This

court’s observation that a facial challenge to any earlier ver-

sion of Santa Barbara County’s ordinance was time-barred

was not a holding; rather, it reflected that the litigants and the

courts all recognized that the limitations period ran from the

time the ordinance was adopted. Id. at *4.

[3] Here, the limitations period for any facial challenge to

the 1979 Ordinance has long since run. Colony Cove’s facial

challenge to the City’s “rent control scheme” proceeds from

the premise that the 2006 Amendment of the Guidelines was

“imbued with the force of law[,]” so that changes to the

Guidelines had the same legal effect as would an amendment

COLONY COVE PROPERTIES v. CITY OF CARSON 4175

to the 1979 Ordinance itself. As an initial matter, the court

need not, and does not, accord an assumption of truthfulness

to legal conclusions that are not supported by factual allega-

tions in the Complaint or that are contradicted by documents

referred to in the Complaint. Iqbal, 129 S.Ct. at 1950; Fox

Family Worldwide, 328 F.3d at 1139.

[4] Although this court has observed that “substantive

amendments to a takings statute will give rise to a new cause

of action . . . if those amendments ‘alter the effect of the ordi-

nance upon the plaintiffs[,]’ ” Action Apartment Ass’n, Inc. v.

Santa Monica Rent Control Bd., 509 F.3d 1020, 1027 (9th

Cir. 2007) (citation omitted), the 2006 Amendment did not

alter the 1979 Ordinance itself. Rather, the 2006 Amendment

only added a new methodology, the MNOI methodolgy, to the

Guidelines. The 1979 Ordinance itself directs only that the

Board “shall consider” the 11 statutory factors, the Guide-

lines, “as well as any other relevant factors.” Carson, Cal.

Mun. Code § 4704(g) (emphasis added). In the same sentence,

the 1979 Ordinance states that “no one (1) factor shall be

determinative.” Id.

[5] Although the Guidelines set out requirements for park

owners making an application, and for the Board in consider-

ing applications, by their terms, they “are intended to assist

the Board in implementing the Ordinance.” The purpose and

provisions of the 1979 Ordinance remain controlling. The

allegations in Colony Cove’s Complaint are not sufficient to

support a determination that the 2006 Amendment to the

Guidelines has the force and effect of law. Cf. River Runners

for Wilderness v. Martin, 593 F.3d 1064, 1071 (9th Cir. 2010)

(concluding that National Park Service’s management poli-

cies, which were “written in mandatory language, were men-

tioned in the Federal Register, and ha[d] been found binding

[in a district court decision][,]” did not have the force and

effect of law because they “do not purport to prescribe sub-

stantive rules” and their text “makes clear that they are

intended only to provide guidance within the Park Service,

4176 COLONY COVE PROPERTIES v. CITY OF CARSON

not to establish rights in the public generally”); United States

v. Fifty-Three (53) Eclectus Parrots, 685 F.2d 1131, 1136

(9th Cir. 1982) (concluding that the procedure set out in the

Customs Manual did not have the “force and effect of law”

to be enforceable against an agency because it was not a “sub-

stantive rule,” which can be contrasted with “interpretive

rules, general statements of policy or rules of agency organi-

zation, procedure or practice”).

[6] Accordingly, setting aside Colony Cove’s conclusory

allegations that the Guidelines are imbued with the force of

law, the facial takings claim is time-barred because the 2006

Amendment to the Guidelines cannot be reasonably read as a

substantive amendment of the 1979 Ordinance that alters its

effect on mobilehome park owners.

B

[7] The district court dismissed Colony Cove’s as applied

takings claim (Claim 4) as unripe. Colony Cove maintains

that it may pursue that claim in federal court, even though it

has not sought compensation through state procedures as

required by Williamson Cnty. Reg’l Planning Comm’n v.

Hamilton Bank of Johnson City, 473 U.S. 172 (1985), both

because the California procedure for compensating takings

plaintiffs through prospective rent increases is inadequate on

the facts of this case, given the magnitude of the taking, and

because the requirement that state procedures should be

invoked is merely prudential.

The Fifth Amendment does not “require that just compen-

sation for a taking be paid in advance of, or contemporane-

ously with, the taking; all that is required is that a reasonable,

certain and adequate provision for obtaining compensation

exist at the time of the taking.” Williamson, 473 U.S. at 194

(citation and internal quotation marks omitted). “[T]here is no

constitutional injury until the plaintiff has availed himself of

the state’s procedures for obtaining compensation for the

COLONY COVE PROPERTIES v. CITY OF CARSON 4177

injury, and been denied compensation.” San Remo Hotel v.

City and Cnty. of San Francisco, 145 F.3d 1095, 1102 (9th

Cir. 1998). An as applied takings claim must satisfy both

prongs of the test set out in Williamson. Id. at 1101-02. First,

a plaintiff must demonstrate that “the government entity

charged with implementing the regulations has reached a final

decision regarding the application of the regulations to the

property at issue.” Williamson, 473 U.S. at 186. Second, the

plaintiff must have sought, and been denied, “compensation

through the procedures the State has provided for doing so.”

Id. at 194.

[8] The state procedure a plaintiff asserting an as applied

challenge to a rent control ordinance must pursue includes a

“Kavanau adjustment,” which involves filing a writ of man-

damus in state court and, if the writ is granted, seeking an

adjustment of future rents from the local rent control board.

Kavanau v. Santa Monica Rent Control Bd., 16 Cal. 4th 761

(1997). This court recently concluded that “California’s cre-

ation and implementation of the Kavanau adjustment process

provides ‘an adequate procedure for seeking just compensa-

tion, [and] the property owner cannot claim a violation of the

Just Compensation Clause until it has used the procedure and

been denied just compensation.’ ” Equity Lifestyle Props., Inc.

v. Cnty. of San Luis Obispo, 548 F.3d 1184, 1192 (9th Cir.

2008) (quoting Williamson, 473 U.S. at 195).

[9] Here, it is undisputed that Colony Cove did not pursue

a Kavanau adjustment prior to filing suit in federal court. Col-

ony Cove’s conclusory allegations of futility are not factual

allegations that must be accorded a presumption of truthful-

ness. Fox Family Worldwide, 328 F.3d at 1139. Additionally,

as the district court pointed out, this court has considered and

rejected futility arguments on theories of undue delay, the

futility of returning to the same rent control board if a writ is

granted by the state court, and the failure to provide compen-

sation for losses incurred while Kavanau proceedings are

pending. Dist. Ct. Nov. 24, 2009 Order at 9 (citing Equity

4178 COLONY COVE PROPERTIES v. CITY OF CARSON

Lifestyle, 548 F.3d at 1191-92; Mfg’d Home Cmties. v. City of

San Jose, 420 F.3d 1022, 1035-36 (9th Cir. 2005); Carson

Harbor Vill., Ltd. v. City of Carson, 353 F.3d 824, 830 (9th

Cir. 2004); Hacienda Valley Mobile Estate v. City of Morgan

Hill, 353 F.3d 651, 658-60 (9th Cir. 2003)). Accordingly,

because Colony Cove did not utilize the Kavanau adjustment

process prior to filing suit in federal court, and this circuit’s

case law does not support the conclusion that use of the state

procedures would be futile, dismissal for failure to satisfy

Williamson’s “state procedures” requirement was appropriate.

[10] Colony Cove maintains that the magnitude of the

alleged taking at issue here, coupled with the loss of the addi-

tional rents while a Kavanau adjustment process that likely

will be unsuccessful winds its way through the state courts,

compels the conclusion that the Kavanau procedure is inade-

quate in this case. However, this court’s decision in Equity

Lifestyle forecloses a determination that Colony Cove’s as-

applied takings claim is ripe. Equity Lifestyle, 548 F.3d at

1192. In Equity Lifestyle, which concerned a challenge to the

constitutionality of a mobilehome rent control ordinance, the

court rejected arguments similar to those advanced by Colony

Cove regarding the ripeness of an as applied takings claim,

explaining:

We reject MHC’s argument that “a Kavanau adjust-

ment is not an effective remedy unless the park

owner successfully stays enforcement of the applica-

ble rent control ordinance pending the outcome of

the litigation.” 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 during litiga-

tion. We will not second-guess the specific proce-

dures California has chosen to use, so long as the

methods provide just compensation.

We thus conclude that California’s creation and

implementation of the Kavanau adjustment process

COLONY COVE PROPERTIES v. CITY OF CARSON 4179

provides “an adequate procedure for seeking just

compensation, [and] the property owner cannot

claim a violation of the Just Compensation Clause

until it has used the procedure and been denied just

compensation.” Williamson, 473 U.S. at 195, 105 S.

Ct. 3108. Because MHC did not seek such compen-

sation, its as-applied challenge to the Board’s deci-

sion was unripe and the district court properly

dismissed that aspect of the claim.

Id. (footnote omitted). Here, Colony Cove’s argument that

California’s Kavanau adjustment process is inadequate is

foreclosed by the law of this circuit. The City Council of the

City of Carson’s approval of Colony Cove’s application to

convert the Park to a subdivided condominium form of own-

ership does not alter this outcome. As the City of Carson

urged at oral argument, and Colony Cove did not refute, the

effect of the Ordinance on the Park will be extinguished upon

the sale of the first condominium lot. See El Dorado Palm

Springs, Ltd. v. City of Palm Springs, 96 Cal. App. 4th 1153,

1178-79 (2002) (explaining that “[a]t [the] time [that a rental

park is converted to resident ownership], sales begin and the

economic mitigation measures for displaced residents speci-

fied in [California Government Code] section 66427.5,

including preemption of a local rent control ordinance,

become effective”) (emphasis added). It follows, the City of

Carson argued, that the conversion of the Park increases the

certainty of any damages, if any are awarded by the state

court, to which Colony Cove is entitled. To the extent that the

Kavanau adjustment process would be inadequate to address

any adjustment of future rents following the conversion of the

Park, Colony Cove has not demonstrated that resort to a state

inverse condemnation action against the City would not serve

as a reasonable, certain and adequate procedure for obtaining

just compensation, as required by Williamson. See Galland v.

City of Clovis, 24 Cal. 4th 1003, 1025 (2001) (“[W]hen land-

lords seek section 1983 damages from allegedly confiscatory

rent regulation, we hold that they must show (1) that a confis-

4180 COLONY COVE PROPERTIES v. CITY OF CARSON

catory rent ceiling or other rent regulation was imposed and

(2) that relief via a writ of mandate and a Kavanau adjustment

is inadequate.”). Accordingly, the district court did not err in

dismissing Claim 4 as unripe.

C

Regarding its as applied substantive due process claim

(Claim 2), which the district court dismissed as not cogniza-

ble, Colony Cove argues that such claims may be maintained

on the ground that the City’s rent control scheme has deprived

it of a “ ‘fair and reasonable’ return.” In the alternative, Col-

ony Cove argues that the Board’s application of the 1979

Ordinance and Amended Guidelines was arbitrary and unrea-

sonable.

[11] This court’s holding in Armendariz v. Penman, 75

F.3d 1311 (9th Cir. 1996), that all substantive due process

challenges to land regulation are preempted by the Takings

Clause, was subsequently abrogated by the Supreme Court’s

opinion in Lingle v. Chervron U.S.A., Inc., 544 U.S. 528, 542

(2005). See also id. at 543 (contrasting the Takings Clause,

which “presupposes that the government has acted in pursuit

of a valid public purpose[,]” with “government action [that]

is found to be impermissible — for instance because it . . . is

so arbitrary as to violate due process[,]” which “[n]o amount

of compensation can authorize”). In Crown Point Develop-

ment, Inc. v. City of Sun Valley, 506 F.3d 851 (9th Cir. 2007),

this court explained that “the Fifth Amendment w[ill] pre-

clude a due process challenge only if the alleged conduct is

actually covered by the Takings Clause.” Id. at 855; see also

United States v. Lanier, 520 U.S. 259, 272, n.7 (1997)

(explaining that Graham v. Connor, 490 U.S. 109 (1989),

“simply requires that if a constitutional claim is covered by a

specific constitutional provision, . . . the claim must be ana-

lyzed under the standard appropriate to that specific provi-

sion, not under the rubric of substantive due process”).

However, in Crown Point, this court explicitly held “that the

COLONY COVE PROPERTIES v. CITY OF CARSON 4181

Fifth Amendment does not invariably preempt a claim that

land use action lacks any substantial relation to the public

health, safety, or general welfare.” Id. at 856 (emphasis

added); see also id. at 852-53 (stating that, in light of the

Supreme Court’s decision in Lingle, a substantive due process

claim challenging a “wholly illegitimate” land use regulation

is not foreclosed as subsumed by the Takings Clause).

[12] Here, to the extent Colony Cove alleges a due process

violation on the ground that the Board’s application of the

1979 Ordinance and Amended Guidelines to Colony Cove’s

application for a rental rate increase denied it a fair return on

its investment, Claim 2 is subsumed by the Takings Clause.

See Crown Point, 506 F.3d at 855-56 (“To the extent a prop-

erty owner’s complaint falls within one of the[ ] categories

[“of regulatory action that generally will be deemed a taking

for Fifth Amendment purposes”] the claim must be analyzed

under the Fifth Amendment whether or not it proves success-

ful. . . . ”); see also Duquesne Light Co. v. Barasch, 488 U.S.

299, 308 (1989) (“If the rate does not afford sufficient com-

pensation, the State has taken the use of utility property with-

out paying just compensation and so violated the Fifth and

Fourteenth Amendments.”). Additionally, to the extent Col-

ony Cove alleges a due process violation on the ground that

the Board acted arbitrarily or irrationally in applying the 1979

Ordinance and Amended Guidelines, or that the 1979 Ordi-

nance and Amended Guidelines fail to serve any legitimate

governmental objective, the district court did not err in dis-

missing Claim 2 for the reasons and in the manner set out in

the district court’s November 24, 2009 Order. The Amended

Guidelines state, as they have since 1998, that the “purpose of

the Ordinance is to protect the homeowners who rent spaces

in mobilehome parks in the City from excessive rents and to

allow Park Owners to earn a ‘just and reasonable’ and ‘fair’

return on investment.” The Guidelines also explain that:

Mobilehome owners (“homeowners”) are a

uniquely vulnerable group of tenants due to the

4182 COLONY COVE PROPERTIES v. CITY OF CARSON

investment made in purchasing and maintaining their

homes and the high cost and difficulty involved in

attempting to move a home. Additionally, many of

the homeowners in the City are seniors on fixed

incomes and many have low or moderate incomes.

Unlike apartment tenants, homeowners cannot just

pack their personal belongings and move if rents

increase to a level they cannot afford.

The Guidelines have also specifically provided, since at least

1998, that “[d]ebt service incurred after adoption of the Ordi-

nance to purchase a park may be an allowable operating

expense if the purchase price paid was reasonable in light of

the rents allowed under the Ordinance and involved prudent

and customary financing practices. . . .” Guidelines § II.A.2.f

(emphases added).

[13] Neither the Board’s use of the MNOI methodology

added by the 2006 Amendment, nor its failure or refusal to

perform a separate fair return analysis, represents arbitrary or

irrational action by the Board. Since 1979, the Ordinance has

provided that, in endeavoring both to protect mobilehome

owners from excessive rent increases and to allow park own-

ers a fair return on investment, the Board must consider the

11 statutory factors, the Guidelines, and any other relevant

factors. The 1979 Ordinance requires only that the Board con-

sider all the factors, and it expressly states that no one factor

is determinative. Neither prior nor subsequent to Colony

Cove’s purchase of the Park did the 1979 Ordinance or the

Guidelines require the Board to employ any particular meth-

odology in conducting its review of rental increase applica-

tions. Instead, the Amended Guidelines expressly state that

neither the GPM nor the MNOI analysis is “intended to create

any entitlement to any particular rent increase.”

The Board’s decision to exclude Colony Cove’s debt ser-

vice expenses from its calculation of the approved rent

increase also considered each of the 11 factors set out in the

COLONY COVE PROPERTIES v. CITY OF CARSON 4183

1979 Ordinance, reviewed evidence submitted by Colony

Cove’s and the City’s experts, and extensively discussed the

proper use of the evidence submitted by Colony Cove and the

City in determining how much of a rent increase would be

required to give Colony Cove a fair return on its investment

in the Park.

[14] Finally, as this court recently explained in its discus-

sion of the facial due process challenge advanced in Guggen-

heim:

Whether the City of Goleta’s economic theory for

rent control is sound or not, and whether rent control

will serve the purposes stated in the ordinance of

protecting tenants from housing shortages and abu-

sively high rents or will undermine those purposes,

is not for us to decide. We are a court, not a tenure

committee, and are bound by precedent establishing

that such laws do have a rational basis. Students in

Economics 101 have for many decades learned that

rent control causes the higher rents and scarcity it is

meant to alleviate, but the Due Process Clause does

not empower courts to impose sound economic prin-

ciples on political bodies.

Guggenheim, 2010 WL 5174984 at *7 (footnotes omitted).

Accordingly, in light of the purpose and provisions of the

Ordinance, and the rents allowed under the Ordinance and

Guidelines prior to Colony Cove’s purchase of the Park in

April 2006, dismissal of the as applied due process claim

(Claim 2) is appropriate because the factual allegations in the

Complaint, and the documents referenced therein, do not pro-

vide a sufficient basis for a claim that the Board’s decision on

Colony Cove’s application for a rent increase reflects action

that was arbitrary, irrational, or lacking any reasonable justifi-

cation in the service of a legitimate government interest.

4184 COLONY COVE PROPERTIES v. CITY OF CARSON

IV

The district court’s order granting the City of Carson’s

motion to dismiss Colony Cove’s claims is AFFIRMED.