Opposition Brief — Santa Monica Beach, Ltd. v. Superior Court of California

Bupreme Court, U.S.

FILED

' APK 20 1999

os F

fs In The

Supreme Court of the United States

October Term, 1998

a

SANTA MONICA BEACH, LTD.,

Petitioner,

Vv.

THE SUPERIOR COURT OF LOS ANGELES COUNTY,

Respondent.

SANTA MONICA RENT CONTROL BOARD,

Real Party in Interest.

¢

On Petition For Writ Of Certiorari

To The California Supreme Court

S

REAL PARTY IN INTEREST’S BRIEF IN OPPOSITION

+

Doris M. GANGA *Kart M. MANHEMm

Joe, M. Levy 919 S. Albany Street

Santa Monica Rent Los Angeles, California

Control Board 90015

1685 Main Street (213) 736-1106

Santa Monica, California el af Record

90401 Ounsel OF NeCOrE

(310) 458-8781

Counsel for Real Party in Interest

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

ia gE TE

APE ETL tt aE Oe

Real Party’s Restatement of the Question Presented

Whether the “essential nexus” and “rough propor-

tionality” standards established by this Court in Nollan vy.

California Coastal Comm’n, 483 U.S. 825 (1987), and

Dolan y. City of Tigard, 512 U.S. 374 (1994), in the context

of property exactions, should be extended generally to

regulatory takings cases whenever a claimant challenges

the policy or effectiveness of legislation affecting a broad

class?

List of Parties

The Petition does not state the parties to the proceed-

ing below. They are Petitioner Santa Monica Beach, Ltd., a

limited partnership, Respondent Superior Court of Los

Angeles County, and Real Party in Interest Santa Monica

Rent Control Board.

The First Amended Complaint in the Superior Court

named as real parties in interest the following tenants:

Dennis Power, David Cooper, Dennis Sevier, Robert

Grossbard, Dorothy Constantine, Margarete Hell, Igor

Medzhibovsky, Daniel Wax, Michael Hammerschmidt, Hai

Vu, Christopher Cuse, Nadine Cuse, and Timothy Block.

TABLE OF CONTENTS

Page

Real Party’s Restatement of the Question Presented... . . i

Re OE UN Cr irs bos Sk vic eleeek bs esa eReecc ives ii

NE RUN Cf he gts Sk ek AN aL keys ill

IEEE, cin’ orn PoAeS OV ok eed va bales 02 2% V

NN SRN i's eres bein ob Pao k pee ee oe ewes l

Constitutional and Statutory Provisions at Issue..... l

nen As ce PU LS fe 6 o's cis o's vel wp s eee |

PROM IIEY E OE? OR UEES CCAS 6 wise cis c cies cadvccens 3

REASONS FOR DENYING THE WRIT............ 6

I. THERE IS NO FINAL JUDGMENT .......... 6

A. A Takings Claim Remains Unadjudicated in

Na aed sph dead x6 o> 6

B. None of the Exceptions to the Final Judg-

| ee POET aT eee Lee’ 9

If. PETITIONER’S INVERSE CONDEMNATION

RckaPOAOe See RAED SOPRIRIREODD oc cic caog cc snvvees’s 1]

Il. THE STANDARD FOR REVIEW OF PRICE

CONTROL REGULATIONS (INCLUDING

RENT CONTROL) IS WELL SETTLED;

THERE [S NO NEED FOR FURTHER GUID-

PuSWases WGI BEER ROU ocak cccccesccerss 12

A. The Petition Rejects the Central Inquiry in

Regulatory Takings Cases — The Challenged

LoW © ECOMOINCG IMDACE 26 ice eee es 13

SR ne ee aT eee ene mer ee Te

et ee ee ye

atiaies

iV

TABLE OF CONTENTS — Continued

Page

B. Petitioner Seeks to Introduce Substantive

Due Process Elements Into the Takings

Clause, Thereby Undoing this Court’s

Efforts to Maintain Conceptual Distance

Botween tie Ciauee8: 3 oe eae oes 14

C. This Case Does Not Fall into The Narrow

Category of Unconstitutional Conditions

Which Require an “Essential Nexus” and

“Rougn FPropornomanty.” x5 i ne ba cokes 16

D. The Demurrer Was Properly Sustained Irre-

spective of the Standard of Review On Peti-

tioner’s Inverse Condemnation Claim ..... 19

E. The Decision Below Does Not Conflict With

The Cases Cited by Petitioner............ 21

CAPR ESOC EEA 50'S 5 Bk ARERR RARER TNR VR ca ee: 22

TABLE OF AUTHORITIES

Page

Cases

Agins v. City of Tiburon, 447 U.S. 255 (1980)

cde db OES She ew Rae Tas LRA Ce eee Id, 16, 19, 20

Babb v. Superior Court, 3 Cal. 3d 841, 479 P.2d

PEF RROT AT cd uno be ib ws baa ee ah ae eee hic kh te 7

DiOCK. %. BCR, D0 US. FSS 2 Sk ev ae 15, 19

Bowles vy. Willingham, 321 U.S. 503 (1944) ......... 19

Chastleton v. Sinclair, 264 U.S. 543 (1924)......... 15

Chicago, Burlington & Quincy R.R. Co. v. Chicago,

500 Sli eee MEO ET ba ck bk os klk ae ears Cea kckes 15

Connolly v. Pension Benefit Guaranty Corp., 475

Seo ER SE TOE he ee CRE ee POR DC RE Tae keel 16

Cox Broadcasting Corp. v. Cohn, 420 U.S. 469

A ED PaaS ORR Pe oe CARI L Ue PE) ict ange 7 gaa ery 9, 10

Dolan v. City of Tigard, 512 U.S. 374 (1994)

He RE RS We EUW A SARACEN ORS ORI 2 aoa

Duquesne Light Co. v. Barasch, 488 U.S. 299

CEOS os Cate 6 8b eee aon te Rs Ee oes 15,22

Eastern Enterprises v. Apfel, 118 S. Ct. 2131

CE Pikes ok nce ee aoe sai hs 0 dpi ECE 14

FCC v. Florida Power Corp., 480 U.S. 245 (1987).... 14

Fisher v. District Court, 424 U.S. 382 (1976) ......... 7

First English Evangelical Lutheran Church of

Glendale v. County of Los Angeles, 482 U.S. 304

GEER 5 kis Kad SAE EPS OEE TEe Woe hae 8

Sr Oe eR

ee

vi

TABLE OF AUTHORITIES — Continued

Page

Golden Gate Hotel Ass'n v. San Francisco, 18 F.3d |

COGS CUR reas SOT abo 5 OMe eek Seek es cee 11

Hensler vy. City of Glendale, 8 Cal. 4th 1, 876 P.2d

SES FES Fa ten i pag Maan OT CAE PRE 8

Hodel v. Irving, 481 U.S. 704 (1987)............... 13

In re Matthews C., 6 Cal. 4th 386, 862 P.2d 765

Le) BERD a ce pater rp Si cer sh Se cote ip he ar 7

Jefferson v. City of Tarrant, 522 U.S. 75 (1997)

Ch be xe PEM SaEREL Oise cadens enka 6, 9, 10, 23

Kaiser-Aetna v. United States, 444 U.S. 164 (1979).... 13

Keystone Bituminous Coal Ass'n v. De Benedictis,

GO 83 AOE ROPEE) oe ocean erer kia bec eaene 12

Lochner v. New York, 198 U.S. 45 (1905)........ 16, 22

Loretto v. Teleprompter Manhattan CATV Corp.,

GIES. SNS LUGE i 000 ear Aiolnta pid Chea 13, 14

Manocherian v. Lennox Hill Hospital, 84 N.Y.2d

385, 643 N.E.2d 479 (1994), cert. denied, 514

See 8 Re CRORE LARS 0:5 0 atin see eee eee 21

Moore v. Regents of the University of California,

i AO. oe B20. Foe bee STs tie eo 19

Morehart v. County of Santa Barbara, 7 Cal. 4th

FGDs BEd, Ee RD CEPR: oh ce a Lea 7

Nectow v. Cambridge, 277 U.S. 183 (1928) ...... 15, 16

;

r

vil

TABLE OF AUTHORITIES — Continued

Page

Nollan v. California Coastal Comm'n, 483 U.S.

to FSS srg SAR Ia pen cr eR IR pen en passim

Penn Central Transp. Co. v. New York City, 438

Ss I ROTO Chace eee SINR HOSEA Ts WR TRS eS 13, 15

Pennell v. City of San Jose, 485 U.S. 1 (1988)

IR a ar eee SOROS UE REE MY ENS =) APE Gm ke 12, 14, 15, 19

Pennsylvania Coal Co. v. Mahon, 260 U.S. 393

Be 8 EG oe Ey gee Se RL IP ree Lee 16

Richardson v. City and County of Honolulu, 124

F.3d 1150 (9th Cir. 1997), cert. denied, __U.S.

eo 2 Ey Gale Se CRED ae Cin eho Sieiee Wr a e & iw a's 21

San Diego Gas & Electric v. City of San Diego, 450

Se ae. ey Sb ee Re ye eee eee 8, 9, I!

Seawall Associates v. City of New York, 74 N.Y.2d

92, 542 N.E.2d 1059 (1989), cert. denied, 514

Ce ee Cras he Ro GRU rahe Chew he PORK ees 21

Taylor v. Stille, 24 Cal. 3d 890, 598 P.2d 854

PEER GAT Gk ae Aiea he DARE ERLE BEE Oe Eee 7

Wilson & Garela, 471 °2S. 26! CESS) oc cic Sie ee 1]

Yee v. City of Escondido, 503 U.S. 519 (1992) ...... 14

Unitrep States CONSTITUTION

Pree Da Ss a os i alae aatace Bae hate kw 11, 18

POMTCOC FLUOMOIOORS Co ke heb ueak no waes tee ts 15, 18

CALIFORNIA CONSTITUTION

Vo et aD Bob Sere are es earner Cora care ee 1]

Vill

rABLE OF AUTHORITIES « Continued

Page

STATUTES AND RULES

28 U.S.C. § 1257(a). ae Fa A ty ea eee oF

42 U.S.C. § 1983 Wa a Se Comet ote aaa ks )

Federal Rules of Evidence pit ep} pe 5 prea toy ee

Cal ‘Cads Cie Proc, 6 TOSS . sx ass cesAkenwangeecan my

Cat. Code Civ; Proce 4. 1096S ccs cs cs bak ds Veta inne s 4

Cal. Code Civ. Proc. § 1094.6 ; “4? Pe Ce oe

Code Civ. Proc. § 1095 a he Ne a aera er ue a ea a ei 8

MISCELLANEOUS

MS. McUsic. Looking Inside Out: Institutional

Analysis and the Problem of Takings, 92 Nw.U.L.

Raw SOP CPE) ooo clecwe be wk Os 06 ae Ua eke ee 20

RS. Radford, Regulatory Takings Law in the

1090's: The Death of Rent Control, 21 Sw. U.L.

Rev. 1019 (1992) . LIEN A OE eae eT ee 22

REAL PARTY IN INTEREST’S

BRIEF IN OPPOSITION

Real Party in Interest, Santa Monica Rent Control

Board (“Board”), respectfully requests that this Court deny

the Petition for Writ of Certiorari filed by Santa Monica

Beach, Ltd. (“Petitioner”).

JURISDICTION

Petitioner claims jurisdiction under 28 U.S.C.

§ 1257(a). Real Party in Interest Gisputes this basis for

jurisdiction on the ground that no “final judgment” has

been rendered by the state courts.

CONSTITUTIONAL AND STATUTORY

PROVISIONS AT ISSUE

In addition to those stated in the Petition, the follow-

ing statute is involved:

Title 28, United States Code, Section 1257(a) states in

pertinent part: “Final judgments or decrees rendered by the

highest court of a State in which a decision could be had,

may be reviewed by the Supreme Court by writ of cer-

tiorari . . . where the validity of a statute of any State is

drawn in question on the ground of its being repugnant to

the Constitution, treaties, or laws of the United States...”

INTRODUCTION

This is a facial attack to a rent control law premised on

the theory that the law fails to “substantially advance

legitimate state interests.” Rent control laws have come

before this Court several times in recent years and have

been upheld on each occasion. Accordingly, the Petition for

Certiorari attempts to carve out a new legal theory for

attack. This theory, however, would disturb decades of

en ee ee

—

settled takings jurisprudence and improperly subject every

species of economic regulation to searching and constant

judicial inquiry.

Petitioner asks this Court to adopt the following rule:

the takings clause, unlike the due process clause, requires a

close nexus between legislative means and ends for all

economic regulation. While a related standard has been

adopted in a narrow category of cases involving land use

exactions, Petitioner now asks the Court to generalize it.

Heightened judicial scrutiny in land use exaction cases

makes sense, because government conditions a discretion-

ary permit on an applicant’s concession of a possessory use

of his property by strangers. This sort of “regulatory

leveraging” invites abuses of the police power unless a

close nexus between the permit and concession is shown.

No similar justification for heightened scrutiny applies

to economic regulation in general, whether it is zoning,

business regulation, or price control. The case law in this

area recognizes that state and local legislatures make hun-

dreds of policy decisions every day respecting social objec-

tives and regulatory means. The “rational basis test”

employed in such cases responds to the separation of

powers concerns that would arise if courts routinely exam-

ined those policy choices for proof of their efficacy.

Petitioner rejects this precedent. It believes that “a

decade of reinvigorated takings jurisprudence,” Pet. at 14,

makes its legal theory ripe for adoption by this Court.

However, Petitioner has misread this jurisprudence and its

significance outside the context of land use exactions. It

has similarly misread cases from other courts to construct a

conflict, one which disappears on close examination, leav-

ing only the well established rule that rejects heightened

scrutiny for general land use and price controls. There is no

need to revisit takings clause doctrine that has been settled

for the past sixty years.

Even if further clarification of takings doctrine were

necessary, this case would not be an appropriate vehicle for

doing so. The case comes to this Court by way of an

interlocutory appeal from partial dismissal of a multi-count

complaint. While interlocutory review may have been

appropriate in California courts, it is not in this Court since

there is no final judgment. An “inextricably related” claim

remains pending in the trial court through which Petitioner

can obtain all the relief it seeks in the case.

Finally, the case is time barred. Although the Califor-

nia Supreme Court declined to reach the question, App.

A-8, the law on this point is clear. Petitioner’s claim was

filed more than sixteen years after enactment of the chal-

lenged law. Even if this facial case accrued some years

later, based on changed circumstances, the last such fact

alleged in the complaint occurred five years before filing.

In either event, this case is barred.

STATEMENT OF THE CASE

The Rent Control Law challenged in this case was

adopted by the voters of Santa Monica in April, 1979.

Twelve years later, Petitioner acquired a 12-unit apartment

building in Santa Monica.' In addition to receiving auto-

matic annual rent increases applicable throughout the City,

Petitioner filed two applications for supplemental rent

increases with the Board. The first, in 1992, is not before

1 Petitioner never alleged the date of its property acquisition. It is a

matter of public record, however, and easily accessible through the Lexis

database CA Deed Transfers, Tax Assessor Records and Mortgage Records.

Real Party in Interest requests this Court take judicial notice of the date of

acquisition, Dec. 17, 1991, pursuant to Fed. R. Evid. 20i(b)(2).

the Court.? In March, 1993, Petitioner filed a second appli-

cation for rent increase which was granted in substantial

part.

In addition to requesting a rent increase, Petitioner’s

1993 application claimed that the 1979 Rent Control Law

effected a regulatory taking of property. That claim was

denied. Petitioner then sought judicial review of the

Board’s decision by way of Petition for Writ of Administra-

tive Mandamus under California Code of Civil Procedure

§ 1094.5.

In its First Amended Complaint, filed on May 15,

1995, Petitioner added a claim for Inverse Condemnation to

its mandamus action. App. E-1. Both claims alleged that

the 1979 law failed to “substantially advance a legitimate

government interest” under Nollan v. California Coastal

Comm'n, 483 U.S. 825 (1987), and therefore caused a

“regulatory taking.” App. E-7, E-10.

Petitioner alleged, inter alia, that rent control had

caused gentrification in Santa Monica, with an attendant

loss of low-income households. App. E-4. It further alleged

that if rents had been unregulated (i.e., higher), more low-

income renters would remain in the City. App. E-8.

Accordingly, under this theory, the Rent Control Law failed

to achieve one of its stated purposes — to protect “the poor,

minorities, students, young families, and senior citizens.”

App. F-1. Such a failure, Petitioner alleged, constitutes a

regulatory taking, for which the Board must pay just com-

pensation. App. E-9.

The Board demurred to the inverse condemnation

claim, asserting that the heightened relational standard of

2 Petitioner apparently abandoned its first application on appeal. See

App. E-5-6. In any event, allegations relating to the March, 1992 rent

increase application are irrelevant to the present controversy.

Nollan and Dolan vy. City of Tigard, 512 U.S. 374 (1994),

was inapplicable to normal regulatory action. App. A-6.

The Superior Court granted the demurrer without leave to

amend on Oct. 20, 1995. App. C-1 The court ruled that the

“rational basis test” applied, App. D-4, since Petitioner had

not alleged substantial economic injury or an exaction of

property.

Rather than proceeding to trial on its administrative

mandamus claim, Petitioner filed a Petition for Writ of

Mandate in the California Court of Appeal, as a means of

obtaining interlocutory review of the dismissed claim. The

court issued its decision on March 20, 1996, holding that

the heightened scrutiny standard of Nollan applies in all

regulatory takings cases. App. B-13. The court vacated the

demurrer granted by the trial court and remanded the

inverse condemnation claim for trial. App. B-18.

The California Supreme Court granted review on May

29, 1996, and issued its decision on January 4, 1999. The

court reversed the judgment of the Court of Appeal and

reinstated the judgment of the trial court. The court held

that “Petitioner remains free to proceed with its administra-

tive mandamus action alleging that the Board exceeded its

legal authority under the [Rent Control Law] and that the

Board’s rulings deprived Petitioner of a fair return.” App.

A-27.

The court read the decisions in Nollan and Dolan as

establishing “essential nexus” and “rough proportionality”

tests under the takings clause to “government requirements

that property owners dedicate land as a condition of receiv-

ing a development permit.” App. A-14. The court noted

that the higher relational standards of Nollan and Dolan

“cannot be readily transplanted outside the context of exac-

tions,” id., and further noted that this Court has consis-

tently declined to do so. App. A-16-18.

Petitioner’s administrative mandamus claim remains

dormant in the trial court five years after filing. The princi-

pal allegation contained therein is that the Rent Control

Law is “invalid as a regulatory taking of private property.”

App. E-10. This claim is unaffected by the decision of the

California Supreme Court except inscfar as it relies on the

substantially advancing prong of Nollan and Dolan. In

other words, the decision below precludes one of Peti-

tioner’s theories, but does not finally adjudge the case.

REASONS FOR DENYING THE WRIT

I

THERE IS NO FINAL JUDGMENT

This Court has jurisdiction to review “final judgments

or decrees rendered by the highest court of a State in which

a decision could be had.” 28 U.S.C. § 1257(a).

“This provision establishes a firm final judgment

rule. To be reviewable by this Court, a state-court

judgment must be final ‘in two senses: it must be

subject to no further review or correction in any

other state tribunal; it must also be final as an

effective determination of the litigation and not of

merely interlocutory or intermediate steps

therein. It must be the final word of a final

court.’ ”

Jefferson v. City of Tarrant, 522 U.S. 75, 118 S. Ct. 481,

486 (1997) (citation omitted).

A. A Takings Claim Remains Unadjudicated in the

Trial Court

The Petition seeks a writ of certiorari directed to the a

California Supreme Court to review its decision upholding

en

a demurrer to one claim of a two-claim complaint. The

matter reached the state appellate courts by way of Petition

for Writ of Mandate under Cal. Code Civ. Proc. § 1085, er

seq. This is a customary mechanism in California to review

interim orders that are not otherwise appealable because

not final judgments. See Morehart v. County of Santa

Barbara, 7 Cal. 4th 725, 743 (1994) (interlocutory judg-

ment resolving fewer than all of plaintiff's causes of action

is not appealable); In re Matthews C., 6 Cal. 4th 386, 393

(1993). Review by writ is discretionary, especially at the

pleading stage of a lawsuit. Taylor v. Stille, 24 Cal. 3d 890,

893 (1979). Review is appropriate where an interim order

presents “significant legal” issues. Babb v. Superior Court,

3 Cal. 3d 841, 851 (1971). Yet, it is still an interlocutory

review of a case which is “not final,” Morehart, 7 Cal. 4th

at 764, either under California procedure or for purposes of

28 U.S.C. § 1257(a).3

Because of the California Supreme Court’s disposition

of Petitioner’s inverse condemnation claim, that decision is

not subject to “further review or correction in any other

state tribunal,” and is therefore final within the first mean-

ing of § 1257. But, it is not a final “determination of the

litigation” as required by the second meaning of the statute.

Both the dismissed and remaining claims allege a

regulatory taking. App. E-7, E-10. They rely on the same

factual allegations, App. E-7, E-9, and seek similar relief —

3 Although the writ of mandate proceeding initiated in the California

Court of Appeal is nominally a separate case, it is not the type that this

Court has found sufficient under Section 1257. Compare Fisher v. District

Court, 424 U.S. 382, 385, n.7 (1976) (“The writ of supervisory control

issued by the Montana Supreme Court is a final judgment within our

jurisdiction [because that] original proceeding . . . is not equivalent to an

appeal .. . the only issue decided concerns the jurisdiction of a lower state

court’) (citations omitted).

compensation and invalidation of the law. App. E-13.

Indeed, “[dJamages for the “taking” may be sought in an

administrative mandamus action (Code Civ. Proc.. |

§ 1095).” Hensler v. City of Glendale, 8 Cal. 4th 1, 14 |

(1994).* Petitioner’s two claims are therefore related, App. |

B-8, differing only in their underlying theories.

Accordingly, Petitioner’s takings case is not over. The

decision below merely dismisses one avenue of recovery

because it was predicated on a novel theory of law not

adopted by this Court or California courts. The traditional

elements of Petitioner’s taking claim remain pending in the

trial court. Cf. id. at 15 (“the trial court is able to resolve

the taking claim in the mandate proceeding”).

This case is similar to and controlled by San Diego

Gas & Electric v. City of San Diego, 450 U.S. 621 (1981).

There, the California Court of Appeal (upon direction of

the state Supreme Court) ruled that damages were unavail-

able for a regulatory taking of property and that the sole

remedy was invalidation through mandaraus or declaratory

relief. This Court expressed doubt at the time regarding the

correctness of this ruling, id. at 633, and has subsequently

rejected it, First English Evangelical Lutheran Church of

Glendale v. County of Los Angeles, 482 U.S. 304 (1987).

Nonetheless, the Court held the issue was not ripe for

review.

SS

“The Court of Appeal has decided that monetary

compensation is not an appropriate remedy for

* California Code of Civil Procedure § 1095 states in relevant part:

“If judgment be given for the applicant, the applicant may recover the

damages which the applicant has sustained, as found by the jury, or as may

be determined by the court or referee, upon a reference to be ordered,

together with costs; and a peremptory mandate must also be awarded

without delay. Damages and costs may be enforced in the manner provided

for money judgments generally.”

any taking of appellant’s property that may have

occurred, but it has not decided whether any other

remedy is available because it has not decided

whether any taking in fact has occurred. Thus,

however we might rule with respect to the Court

of Appeal’s decision that appellant is not entitled

to a monetary remedy — and we are frank to say

that the federal constitutional aspects of that issue

are not to be cast aside lightly — further proceed-

ings are necessary to resolve the federal question

whether there has been a taking at all. The court’s

decision, therefore, is not final, and we are with-

out jurisdiction to review it.”

450 U.S. at 633.

This case is also factually similar to Jefferson vy. City

of Tarrant. There, the Alabama Supreme Court sustained an

objection to a Section 1983 claim, and thereafter remanded

the case to the trial court for further proceedings.

“Far from terminating the litigation, the [Alabama

Supreme] court answered a single certified ques-

tion that affected only two of the four counts in

petitioners’ complaint. The court then remanded

the case for further proceedings. Absent settlement

or further dispositive motions, the proceedings on

remand will include a trial on the merits of the

state-law claims.”

118 S. Ct. at 483.

B. None of the Exceptions to the Final Judgment Rule

Applies

This is not a case in which “the federal issue, finally

decided by the highest court in the State, will survive and

require decision regardless of the outcome of future state-

court proceedings.” Cox Broadcasting Corp. v. Cohn, 420

10

U.S. 469, 480 (1975). As in Jefferson, “[rlesolution of the

state-law claims could effectively moot the federal-law

question raised here.” 118 S. Ct. at 483. If Petitioner

prevails on its state mandamus claim, because either the

Rent Control Law constitutes a regulatory taking (under

settled standards), or_the Board exceeded its statutory

authority, App. E-10-12, it will obtain full relief.

Nor is this an instance “where the federal claim has

been finally decided, with further proceedings on the

merits in the state courts to come, but in which later review

of the federal issue cannot be had, whatever the ultimate

outcome of the case.” Cox, 420 U.S. at 481. Admittedly,

trial of the regulatory taking allegation in Petitioner’s man-

damus claim will proceed, if at all, using traditional Fifth

Amendment standards. And, presumably, that will be “law

of the case” on appeal in the California state courts. None-

theless, ultimate review could still be had in this Court, as

the state courts’ “determination will in no way limit [this

Court’s] ability to review the issue on final judgment.”

Jefferson, 118 S. Ct. at 483.

The third exception under Cox — “the federal issue is

conclusive or the outcome of further proceedings preor-

dained,” 420 U.S. at 478 — likewise does not arise here.

Petitioner will be required to go to trial on his complaint no

matter how the “substantially advancing” issue is resolved.

For the same reason, the fourth exception fails. That occurs

where “reversal of the state court on the federal issue

would be preclusive of any further litigation on the relevant

cause of action.” Jd. at 482-83.

Common to all the exceptions under Cox is that “addi-

tional proceedings would not require the decision of other

federal questions that might also require review by the

Court at a later date.” 420 U.S. at 477-78. Yet, in this case,

either party if unsuccessful can bring the takings issue

before this Court at a later and more appropriate time. See

1]

San Diego Gas & Electric, 450 U.S. at 636 (Rehnquist, J.

concurring).

PETITIONER’S INVERSE CONDEMNATION

CLAIM IS TIME BARRED

Petitioner’s inverse condemnation claim alleges a viola-

tion of the Fifth Amendment.* App. E-7. Because it is a

federal claim, it is governed by the applicable federal statute

. of limitations. Here, however, the federal right does not

provide a statute of limitations. In such situations, federal

courts generally adopt the analogous state statute of limita-

tions. See Wilson v. Garcia, 471 U.S. 261, 266-67 (1985).

Petitioner filed its inverse condemnation claim on May

15, 1995, sixteen years after the Rent Control Law was

enacted. Assuming that Petitioner’s cause of action may

have accrued sometime thereafter, because of changed cir-

cumstances, the events complained of occurred sometime

“between 1980 and 1990.” App. E-3-4. Since California’s

statute of limitations for facial claims for inverse condem-

nation is five years, App. A-7, the complaint is time barred

no matter when the cause of action accrued. Indeed, recent

Ninth Circuit authority sets the California limitations

period at one year. See Golden Gate Hotel Ass'n v. San

Francisco, 18 F.3d 1482, 1486 (9th Cir. 1994) (one year

limitation applies to facial taking claim which accrued

when ordinance was enacted).

Petitioner attempts to evade this fatal defect by charac-

terizing its case as an as-applied challenge. Pet. at i, 3.

However, none of the allegations forming the basis for

> It also alleges a violation of a comparable provision in the

California Constitution, Art. 1. § 19, which is not before this Court.

12

Petitioner’s claim allege any impact on its own property.

Rather, the complaint compares certain City-wide demo-

graphics between the 1980 census and the 1990 census

which, Petitioner contends, prove the Rent Control Law is

ineffective in meeting its goals.

In order to make an as-applied taking claim, a party

must allege facts showing “the particular impact of govern-

ment action on a specific piece of property requires the

payment of just compensation.” Keystone Bituminous Coal

Ass'n v. De Benedictis, 480 U.S. 470, 494 (1987). By

contrast, the issue in a facial challenge is the effect of the

statute itself. Jd. See also Pennell v. City of San Jose, 485

U.S. 1, 18 (1988) (Scalia, J., concurring and dissenting)

(analysis of whether a law substantially advances a legiti-

mate state interest is iacial in nature). Petitioner’s allega-

tions are a classic example of a facial attack, since they

purport to describe the effect of the law itself and not any

particularized impact on its property.®

Petitioner’s administrative mandamus claim, still

pending below, was timely filed. See Cal. Code Civ. Proc.

§ 1094.6. But the claim it brings to this Court was not.

Il.

THE STANDARD FOR REVIEW OF PRICE

CONTROL REGULATIONS (INCLUDING

RENT CONTROL) IS WELL SETTLED;

THERE IS NO NEED FOR FURTHER

GUIDANCE FROM THIS COURT

The Petition for Certiorari paints a picture of disarray

in the lower courts concerning the standard of review

© Because Petitioner has mounted a facial challenge to a law in

existence at the time it acquired the property, it may lack standing in this

case. See Pennell, 458 U.S. at 8, n.4.

13

applicable under the takings clause to economic regulation.

Any uncertainty, however, is more illusory than real. As we

show below, this Court’s pronouncements have been clear,

and were correctly applied by the California Supreme

Court in its decision.

A. The Petition Rejects the Central Inquiry in Regula-

tory Takings Cases - The Challenged Law’s Eco-

nomic Impact

This Court has identified three factors of “particular

significance” in its takings cases - “the economic impact

of the regulation, its interference with reasonable invest-

ment backed expectations, and the character of the govern-

mental action.” Kaiser-Aetna v. United States, 444 U.S.

164, 175 (1979).

Most takings decisions are based on these factors. The

firs (wo are essentially economic inquiries and form the

basis for analysis in regulatory takings cases. The third —

the character of governmental action — speaks to the special

case of “physical invasion by government,” Penn Central

Transp. Co. v. New York City, 438 U.S. 104, 124 (1978), or

comparable destruction of critical property rights. See

Hodel v. Irving, 481 U.S. 704, 715-16 (1987): Loretto v.

Teleprompter Manhattan CATV Corp., 458 U.S. 419, 426

(1982).

Petitioner, however, invoked none of these factors,

either in the lower courts or here. Instead, Petitioner seeks

review of the constitutionality vel non of rent control. It

does so by relying on abstract principles rather than the

specific tests carefully crafted by this Court. Its ostensible

justification is that “[rjent control differs from and cannot

be equated to other forms of price control . . . . [Therefore,]

decisions upholding other forms of price control are [not]

authority for rejecting a takings clause challenge to a rent

14

control ordinance.” Pet. at 9-10 (quoting App. A-56-57

(Baxter, J., dissenting)).

The constitutionality of rent control is not an open

question after 78 years of decisions, given its affirmance by

this Court no fewer than a half-dozen times since Block v.

Hirsch, 256 U.S. 135, 156 (1921). Indeed, the Court has

been quite clear — “statutes regulating the economic rela-

tions of landlords and tenants are not per se takings.” FCC

v. Florida Power Corp., 480 U.S. 245, 252 (1987). See also

Loretto, 458 U.S. at 440 (“[t]his Court has consistently

affirmed that States have broad power to regulate housing

conditions in general and the landlord-tenant relationship

in particular without paying compensation for all economic

injuries that such regulation entails”); Pennell, 485 U.S. at

12, n.6 (“we see no need to reconsider the constitutionality

of-rent control per se’).

Should the constitutionality of rent control be revisited

by this Court, this is not a suitable case for doing so, since

it is not premised on economic injury or other factor that

distinguishes the Petition from the myriad other cases chal-

lenging the policy justification for rent control.?

B. Petitioner Seeks to Introduce Substantive Due Pro-

cess Elements Into the Takings Clause, Thereby

Undoing this Court’s Efforts to Maintain Concep-

tual Distance Between the Clauses.

Rent control is a form of price control which, like

other economic regulation, can be analyzed under either the

takings or due process clauses. See, e.g., Yee v. City of

Escondido, 503 U.S. 519, 532 (1992). The two clauses

” Nor does this case present the type of severe retroactive exactions

found in Eastern Enterprises v. Apfel, 118 S. Ct. 2131 (1998).

15

serve different purposes and employ different standards.

See Pennell, 485 U.S. at 15 (Scalia, J., concurring and

dissenting); Nollan, 483 U.S. at 835, n.3.

The distinction between the two clauses has not always

been clear. Early in the century, this Court’s opinions often

used the clauses interchangeably, or failed to indicate

which was involved in its analysis. See Chastleton vy. Sin-

clair, 264 U.S. 543 (1924) (no clause identified); Block v.

Hirsch, 256 U.S. at 156 (intermingling of takings and due

process clauses). To some extent, the interplay between the

clauses was unavoidable. The takings clause, after all, is

made applicable to the states by way of incorporation

through the Fourteenth Amendment’s due process clause.

Chicago, Burlington & Quincy R.R. Co. v. Chicago, 166

U.S. 226, 239 (1897).

For the last sixty years, however, this Court has

endeavored to distinguish between the clauses and has

generally rested its review of land use regulations and price

control on the takings clause. See Duquesne Light Co. v.

Barasch, 488 U.S. 299 (1988). Where both clauses are

invoked by a complaining party, the Court has expressly

declined to treat them as interchangeable. See, e.g., Pen-

nell, 485 U.S. at 13; Yee, 503 U.S. at 532.

In Agins v. City of Tiburon, 447 U.S. 255 (1980), the

Court stated:

“The application of a general zoning law to par-

ticular property effects a taking if the ordinance

does not substantially advance legitimate state

interests, see Nectow v. Cambridge, 277 U.S. 183,

188 (1928), or denies an owner economically

viable use of his land, see Penn Central Transp.

Co. v. New York City, 438 U.S. 104, 138, n. 36

(1978).”

447 U.S. at 260 (emphasis added).

Benn ERO CTE SEAS EER TE Oa gS es en

16

The “substantially advancing” component is, of

course, a means-ends inquiry. Its due process pedigree is

apparent from Agins’ reference to Nectow, a substantive

due process case. As a result, some read Agins as merging

the due process and takings clauses, with the “substantially

advancing” prong as potent a limitation on economic regu-

lation as the requirement of viable economic use.

hin A ea tei

But that has not proven to be the case. Rather, this

Court’s decisions have focused almost entirely on eco-

nomic impact when reviewing regulatory takings. This is as

it should be. The entire premise of regulatory takings

theory, according to Justice Holmes, is to guard against

police power enactments which extinguish property; /.e.,

those that have “very nearly the same effect for constitu-

tional purposes as appropriating or destroying it.” Pennsyl-

vania Coal Co. v. Mahon, 260 U.S. 393, 414 (1922).

To the extent a means-ends inquiry remains part of

regulatory takings, it is employed using deferential rational

basis review. It would make no sense to do otherwise. No

rationale can explain why a takings clause test borrowed

from economic due process should continue to employ

Lochner era standards (cf. Lochner v. New York, 198 U.S.

45 (1905)), while the due process clause itself has matured

into a minimal restraint on regulatory action. See Connolly

v. Pension Benefit Guaranty Corp., 475 U.S. 211, 223

(1986) (“it would be surprising indeed to discover that [a

law that survived economic due process analysis] effected a

taking”).

C. This Case Does Not Fall into The Narrow Category

of Unconstitutional Conditions Which Require an

“Essential Nexus” and “Rough Proportionality.”

This Court has identified a single exception to ratio-

nality review under the takings clause. That is for land use

17

exactions involving physical occupations. Land use exac-

tions are a special case of “unconstitutional conditions.”

The “substantially advancing” test received its first

full airing from this Court in Nollan. There, the California

Coastal Commission had granted a discretionary develop-

ment permit conditioned on the owner’s surrender of a

piece of his property — a lateral easement across his beach-

front. Standing alone, the condition would have been

unconstitutional. 483 U.S. at 837 (the “permanent grant of

continuous access to the property, would have to be consid-

ered a taking if it were not attached to a development

permit”). Such a condition passes constitutional muster,

however, if it “serves the same governmental purpose” as

the underlying regulation (in Nollan, to preserve view

easements). /d. In other words, if the Commission could

have denied the permit outright, giving the “owner an

alternative to that prohibition which accomplishes the same

purpose is not [unconstitutional].” /d.

Thus, the distinction between a constitutional and

unconstitutional permit condition is whether the condition

tracks the regulatory purpose. As Justice Scalia noted,

absent a close fit between the two, “the building restriction

is not a valid regulation of land use but ‘an out-and-out

plan of extortion.” /d. This, then, is the backdrop and

predicate for close scrutiny under the “substantially

advancing” prong. It is limited to discretionary permits

containing conditions which are otherwise unconstitutional.

The limited use of close scrutiny under the “substan-

tially advancing” prong was confirmed in Dolan. As in

Nollan, the condition imposed — dedication of land — stand-

ing by itself, would have resulted in a taking. 114 S. Ct. at

2316. Because of this feature, the traditional economic

impact analysis used in most land-use cases was not dis-

positive. Chief Justice Rehnquist explained:

18 -

“(Typical] land use regulations .. . differ in

two relevant particulars from the present case.

First, they involved essentially legislative deter-

minations classifying entire areas of the city,

whereas here the city made an adjudicative deci-

sion to condition petitioner’s application for a

building permit on an individual parcel. Second,

the conditions imposed were not simply a limita-

tion on the use petitioner might make of her own

parcel, but a requirement that she deed portions

of the property to the city. In Nollan, supra, we

held that governmental authority to exact such a

condition was circumscribed by the Fifth and

Fourteenth Amendments. Under the well-settled

doctrine of “unconstitutional conditions,” the

government may not require a person to give up a

constitutional right .. . in exchange for a discre-

tionary benefit conferred by the government

where the property sought has little or no rela-

tionship to the benefit.

Id. at 2316-17.

The present case is a far cry from the conditional

permits in Nollan and Dolan, which gave rise to the

requirements of “essential nexus” and “rough propor-

tionality.” There is no dedication or other exaction which is

independently unconstitutional. There is also no permit

involved, which could serve as the basis for improper

“regulatory leveraging.” Cf. Nollan, 483 U.S. at 841.

Finally, application of the Rent Control Law to Petitioner ts

not an individualized discretionary action. See Dolan, 512

U.S. at 385. Petitioner complains that the legislative deci-

sion enacting rent control for the entire City lacks founda-

tion.

Petitioner does not contend that it can prevail on its

claim if the traditional standard is used for determining

19

“substantial advancement.” Its avoidance is well advised,

for this Court has consistently affirmed a legitimate public

purpose for rent control. See Block v. Hirsh, 256 U.S. at

156 (1921) (“all the elements of a public interest” are

present); Bowles v. Willingham, 321 U.S. 503, 513, n.9

(1944) (rent control advances a legitimate public purpose):

Pennell, 485 U.S. at 13.

D. The Demurrer Was Properly Sustained Irrespective

of the Standard of Review On Petitioner’s Inverse

Condemnation Claim.

Petitioner argues that, for purposes of this appeal, the

facts in its complaint “must be deemed proven.” Pet. at 17.

That is true for evidentiary facts, but not for legal conclu-

sions, such as whether the Rent Control Law has a suffi

ciently close nexus to a public purpose.’ Moreover,

Petitioner poses that ultimate question in two distinct ways,

thereby clouding the precise issue before the Court.

To make the case attractive for review, Petitioner

posits the relational (nexus) standard in general terms, and

cites to statements in opinions below asking for guidance

on whether to apply Nollan and Dolan outside of exactions.

Pet. at 8, 17-18. But attempting to avoid the statute of

limitations problem, Petitioner posits this is an as-applied

challenge, not a facial one. App. A-7-8. Accordingly, it

© See Moore v. Regents of the University of California, 51 Cal. 3d

120, 125 (1990) (“in reviewing a ruling on a demurrer . . . we assume that

the complaint’s properly pleaded material allegations are true and give the

complaint a reasonable interpretation by reading it as a whole and all its

parts in their context. We do not, however, assume the truth of contentions.

deductions, or conclusions of fact or law”) (internal citations omitted):

Agins, 447 U.S. at 259, n.6 (California Supreme Court's treatment of

allegations on a demurrer “does not raise a federal question appropriate for

review by this Court”)

20

frames the question for this Court as whether “application i

of the Rent Control Law [to Petitioner] failed to advan- :

ce... the legitimate policy objectives of the law.” Pet. at 4

(emphasis added). See also id. at 1.

Yet, none of the facts alleged in the First Amended

Complaint go to the issue of whether the Rent Control Law,

applied to Petitioner’s property, does or does not assist

“the poor, minorities, students, young families and senior

citizens,” or serves any other public purpose. Pet. at 5.

Every fact alleged in the complaint is general to the popu-

lation of Santa Monica as a whole. Nowhere does Peti-

tioner describe the impact of rent control on tenants in its

own building. App. E-3-4. See also Pet. at 4-5.

In other words, if this truly were an as-applied case,

Petitioner would have to show the requisite “close nexus”

is lacking between the regulatory decision below “and any

public harm that might result from plaintiff's unregulated

operation of the Property.” App. E-8. Yet, as Petitioner’s

own authorities recognize, this requires allegations show-

ing “the amount of public harm caused by the owner and

the regulatory burden imposed.” Pet. at 19-20 (citing Molly

S. McUsic, Looking Inside Out: Institutional Analysis and

the Problem of Takings, 92 Nw.U.L. Rev. 591, 602 (1998)).

See also Pet. at 22 (“substantial advancement test ‘requires

a judicial assessment based on the facts of each owner’s

use’ ”’) (citing McUsic). No such allegations appear.

Since not a single fact alleged in the complaint goes to

the particular question presented, the demurrer was prop-

erly sustained quite apart from the correct standard of

review for the “substantially advancing” prong of Agins.?

9 See also App. A-10, n.2 (“Petitioner does not allege with any

particularity in its inverse condemnation claim that the Board’s decisions

denied it a fair return, reserving such allegation for the administrative

mandamus action, which is not before us”).

E. The Decision Below Does Not Conflict With the

Cases Cited by Petitioner

Petitioner cites Seawall Associates v. City of New York,

74 N.Y.2d 92 (1989), cert. denied, 493 U.S. 976 (1989),

and Manocherian v. Lennox Hill Hospital, 84 N.Y.2d 385

(1994), cert. denied, 514 U.S. 1109 (1995), for its conten-

tion that there is a conflict between the courts of California

and New York regarding the standard of review in regula-

tory takings cases. Since these cases are distinguishable

from the decision below, no conflict exists.

Seawall found facially unconstitutional a law which

prohibited demolition or conversion of single room occu-

pancy hotels and required owners to rehabilitate and rent

every unit. 74 N.Y.2d at 99-100. The court found that the

law affected a physical occupation because it denied an

Owner's right to possess and exclude others. The court

distinguished typical rent control laws which do not result

in a physical taking. /d. at 105.

Manocherian is similar. The law there transferred sig-

nificant possessory rights to a small class of corporate

tenants who could select and evict actual occupants of the

premises. 84 N.Y.2d at 394. Again, the court distinguished

typical rent control laws, stating: “by no means does our

ruling affect or diminish the general validity of those

broad, longstanding [rent control] protections and enact-

ments.” Id. at 398-99.

Nor does the decision below conflict with Richardson

v. City and County of Honolulu, 124 F.3d 1150 (9th Cir.

1997), Cert. denied, U.S. 889 S. Gt 1O8. C998).

Richardson involved price caps and tenancy protection for

condominium ground lessees. Because the lease savings

inured to the benefit of owner-occupants who sell their

units, rather than to new tenants, the court found the law

failed to meet its goal of keeping housing affordable. /d. at

22

1163-66. The court distinguished the Hawaii law from

“ordinary rent control ordinances,” which do not produce

such a premium. /d.

In sum, the cases on which Petitioner relies for its

claim that review is needed in this Court are self-limiting. .

Because they distinguish themselves from ordinary eco- r

nomic regulation (including rent control), there is little

likelihood that other courts will confuse them with the

decision below.

CONCLUSION

By subjecting rent control to heightened judicial scru-

tiny, Petitioner seeks to supplant the legislature’s economic ‘

judgments with its own. Thus, if it can convince a court or

jury that rent control fails to serve a salutary public pur-

pose, the law must be unconstitutional. This theory appar-

ently succeeded in the California Court of Appeal. See

App. B-17 (“the political objectives that are furthered by i

rent control are of dubious legitimacy”) (citing R.S. Rad-

ford, Regulatory Takings Law in the 1990's: The Death of i

Rent Control (1992) 21 Sw.U.L.Rev. 1019, 1065)).

This is the stuff of economic substantive due process, ;

whether now couched in the takings clause, or more accu-

rately seen as resurrecting Lochner v. New York. Subjecting

the “economic niceties” of price control, Duquesne, 488

U.S. at 314, to heightened judicial scrutiny would accom-

plish just that. This inquiry is inevitable if, as Petitioner

demands, close judicial scrutiny of means and ends is

required whenever the legislative basis or effectiveness of

economic regulation is challenged under the takings clause.

pon

Indeed, under Petitioner’s theory, mere allegation of

no substantial advancement should be enough to deter

police power enactments. Perhaps this is why Petitioner

believes it is unnecessary to adjudicate its remaining claim

iia ca

aig

23

in the trial court. But, the “finality rule is not one of those

technicalities to be easily scorned. It is an important factor

in the smooth working of our federal system.” Jefferson,

118 S. Ct. at 486 (citations omitted). In this case, it pre-

cludes interlocutory review of Petitioner's takings claim.

For the foregoing reasons, Real Party in Interest

respectfully requests that the Petition be denied.

Dated: April 20, 1999

Respectfully submitted,

Kart M. MANHEIM

(Counsel of Record)

919 S. Albany St.

Los Angeles, California 90015

(213) 736-1106

Doris M. GANGA

Jorn M. Levy

SANTA Monica RENT

ControL, Boarp

1685 Main Street

Santa Monica, California 90401

(310) 458-8781

Counsel for Real Party in Interest.

Santa Monica Rent Control Board