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

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Buprems Court,

FILED

MAY 3 1999

OFFICE OF THE CLERK

No. 98-1512

In the

Supreme Court of the United States

October Term, 1998

_— =

SANTA MONICA BEACH, LTD.,

Petitioner,

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

PETITIONER’S REPLY

TO BRIEF IN OPPOSITION

R.S. RADFORD

Counsel of Record

Pacific Legal Foundation

10360 Old Placerville Road,

Suite 100

Sacramento, California 95827

Telephone: (916) 362-2833

Facsimile: (916) 362-2932

Counsel for Petitioner

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TABLE OF CONTENTS

RARE GP AT ROR te a so ok os ksh owes ili

Il. THIS IS NOT A FACIAL CHALLENGE TO

THE VALIDITY OF RENT CONTROL IN

GENERAL OR TO THE VALIDITY OF

SANTA MONICA’S RENT CONTROLLAW .... 1

Il. THE RENT BOARD’S CLAIM THAT THIS

ACTION IS TIME BARRED IS FRIVOLOUS ..... 2

Il. THE DECISION BELOW COMPLETELY

DISPOSES OF SMB’S FEDERAL CLAIM

AND IS RIPE FOR REVIEW BY THIS

MINER Kev ANNA Pes PERT weed a eho i cc 4

A. California Courts Recognize That an

Administrative Mandamus Hearing Is a

Constitutionally Inadequate Forum to

Adjudicate a Regulatory Takings Claim ....... 3

B. The Constitutionally Mandated Remedy of

Just Compensation for a Taking Is Not

Available in a Mandamus Hearing, Which

Offers Only the Prospect of a Remand to

OE MI NE 2s 85 Schone Sie ek eek: 6

C. The Decision Below Is a Definitive Ruling

by the State’s Highest Court on SMB’s

Regulatory Taking Theory ................. 7

[V. THE RENT BOARD DISTORTS THE

HOLDING OF SEAWALL ASSOCIATES IN

ORDER TO EVADE THE CLEAR CONFLICT

BETWEEN THE HIGHEST STATE COURTS

OF NEW YORK AND CALIFORNIA ........... 9

CAMEO REN ese ho Mae eed ee eee oes 10

TABLE OF AUTHORITIES

Page

Cases

Atlantic Richfield Oil Corp. v. State Board,

328 US. COC) oc s cucere ya whee Bentea kes aes 5

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

COSTS 5 vce cela rad PEAS ee eae anes ees S

First English Evangelical Lutheran Church of

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

SOR TSET ss cain ves bee Re ee 5-6

Healing v. California Coastal Commission,

Ze Cal, Ape: 4 TIDE II4) 5 oan knee eae eewnns 6, 8

Hensler v. City of Glendale, 8 Cal. 4th 1 (1994) ..... 3-5, 7

Kavanau v. Santa Monica Rent Control Board,

ig PRS. . 2 2 amen rire Rg gmt a ee ye 6-8

Manocherian v. Lenox Hill Hospital, 643 N.E.2d

SIV UNLT, FOOO cae Pk po nes ae eb nae eens eee 10

Mola Development Corp. v. City of Seal Beach,

S7 Cok Agim: Gi B05 02997) ix 0k Sc Peek che eee 8

Richardson v. City and County of Honolulu,

yD A Beh Te, ES AR) 3 Bergman cer aeper eaitn reas 10

Seawall Associates v. City of New York,

S02 NE De Ae ev vik hank cw os ee eee )

Federal and State Statutes, Rule

BUSS, § TESA si oss hatte ees ee eee eee 4-5

We Ss GEE 0 ac cd ve tnnvea bees Seweeee eens ees 2

TABLE OF AUTHORITIES—Continued

Page

ae See On Gav. Pre. 6 TUES i cee, 6

EE ee PR CUE as Us to's vd o bk kas wwldns s 3

NY Set I BO oop in pve kk nx cee vsbvedcus ]

Miscellaneous

Sharon L. Browne, Administrative Mandamus as a

Prerequisite to Inverse Condemnation:

“Healing” California’s Confused Takings Law,

22 Pepperdine L. Rev. 99 (1994) ................;. 6

]

Pursuant to Supreme Court Rule 15.6, Petitioner Santa

Monica Beach, Lid. (SMB), hereby replies to the Real Party in

Interest’s Brief in Opposition (Opp.) filed by the Santa Monica

Rent Control Board (Rent Board) on April 20, 1999,

The petition for certiorari asks this Court to decide

whether, in view of the ends-means nexus test of Nollan vy.

California Coastal Commission, a regulatory takings plaintiff

may be barred from presenting evidence that the application of

a rent control ordinance fails to substantially advance its legiti-

mate police power objectives. Petition for Writ of Certiorari

(Pet.) at i. This reply brief is filed to respond to new points

raised in the Rent Board’s Opposition.

THIS IS NOT A FACIAL CHALLENGE TO

THE VALIDITY OF RENT CONTROL IN

GENERAL OR TO THE VALIDITY OF

SANTA MONICA’S RENT CONTROL LAW

The tone of the opposition brief is established in the first

sentence of its introductory paragraph:

This is a facial attack to a rent control law premised

on the theory that the law fails to “substantially

advance legitimate state interests.”

Opp. at 1. The Rent Board is well aware that no facial attack is

involved in this litigation, but it intends to build on this initial

claim to support further distortions throughout its brief. It is

therefore important at the outset to ensure that the Court is not

lured into error on this point.

As was stated in the petition for certiorari, “[t]he facial

validity of the Rent Ordinance is not at issue in this litigation,

nor does Petitioner question that providing assistance to the

‘This claim and variations on it are repeated throughout the

opposition brief. See, e.g, Opp. at 13 (“Petitioner seeks review of the

constitutionality vel non of rent contro].”).

poor, minorities, students, young families, and senior citizens is

a legitimate interest of government.” Pet. at 3. This statement

is borne out by an examination of SMB’s first amended com-

plaint, which was submitted as Appendix E to the petition. See

App. E-2 (“[SMB] respectfully seeks an order from this Court

declaring that the Santa Monica Rent Control Charter

Amendment effects an uncompensated regulatory taking of

property as applied to plaintiff’); App. E-7 (“the Charter

Amendment as applied to plaintiff violates plaintiff's federal

and state constitutional rights”); App. E-8 (“The Charter

Amendment as applied to the Property has deprived plaintiff of

essential attributes of ownership”); App. E-9 (“Plaintiff has

received no compensation for the damages inflicted by defen-

dant’s application of the Charter Amendment to the Property,”

“the Rent Board’s application of the Charter Amendment to

the Property comprises a regulatory taking of plaintiff’s

Property”); App. E-13 (“for an order declaring that the Santa

Monica Rent Control Charter Amendment, as applied to

plaintiff, comprises a regulatory taking of property”) (emphasis

added).

In short, the Rent Board’s characterization of this case as

a facial challenge to the constitutionality of rent control has no

basis in the reality of this litigation.

Once the Rent Board’s initial mischaracterization of this

case as a facial challenge is rectified, many of its subsequent

assertions collapse. For example, the Board claims,

[p]etitioner 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.

Opp. at 2. In view of the fact that this case challenges only the

application of a specific ordinance to a specific property, such

baseless hyperbole on the part of the Rent Board merits no

further response.

THE RENT BOARD’S CLAIM THAT THIS

ACTION IS TIME BARRED IS FRIVOLOUS

One of the Rent Board’s objectives in mischaracterizing

the nature of SMB’s complaint is to enable it to make what

would otherwise be seen as a patently frivolous argument: that

the claim is time barred. Opp. at 3, 11-12. Both the trial court

and the court of appeal ignored this claim, and the California

Supreme Court declined to deal with it. App. A-8. Having seen

that the Rent Board’s characterization of this case as a “facial”

challenge is spurious, this Court should not be distracted by such

diversionary statements as:

Petitioner’s claim was filed more than 16 years after

enactment of the challenged law. Even if this facial

case accrued some years later, . . . this case is barred.

Opp. at 3 (emphasis added).

Chasing its own red herring, the Rent Board engages in a

lengthy and pointless disquisition on the statute of limitations for

facial claims. Opp. at 11-12. Taking care not to cast its net too

narrowly, the Board even cites to the statute of limitations for

bringing facial challenges under 42 U.S.C. § 1983 in federal

court (Opp. at 11), even though this is not a facial challenge, was

not brought under Section 1983, and is not in federal court.

The correct analysis of this issue is straightforward. Under

California law, as-applied regulatory takings claims must be

brought via a petition for writ of administrative mandamus,

joined with or followed by a complaint for inverse condem-

nation. Hensler v. City of Glendale, 8 Cal. 4th 1, 14 (1994).

This joint claim must be brought within the statute of limitations

for administrative mandamus, which in California is 90 days.

Calif. Code of Civ. Proc. § 1094.6. SMB’s complaint

establishes that the underlying cause of action accrued with the

Rent Board’s delivery of the administrative record on January 6,

1994. App. E-7. SMB’s initial complaint was filed on

March 16, 1994, well within the 90-day limitations period.

Court of Appeal Supplemental Record in Support of Petition for

Writ of Mandate at 2.

The Rent Board admits that SMB’s combined petition and

complaint was timely filed within the 90-day statute of limita-

tions for administrative mandamus as required by Hensler.

Opp. at 12. The Board also admits that the procedurally

required mandamus petition and the interlocking inverse

condemnation claim “rely on the same factual allegations.” Opp.

at 7. No matter what the statute of limitations may be for

inverse condemnation claims, it is not shorter than the 90-day

period within which the complaint in this case was filed. The

Rent Board’s statute of limitations argument is a textbook

example of a frivolous defense, and should be treated as such by

this Court.

Ill

THE DECISION BELOW COMPLETELY

DISPOSES OF SMB’S FEDERAL CLAIM AND IS

RIPE FOR REVIEW BY THIS COURT

The Rent Board asserts that there has not been a final

decision in this case because no hearing has been held on SMB’s

procedurally required administrative mandamus petition. Opp.

at 3, 5, 6-11. However, as the court below recognized, such a

proceeding is wholly unrelated to the final determination of

SMB’s federal takings claim by the decision below. See App.

A-10-11 n.2 (administrative mandamus action addresses only

whether the Board’s decision denied SMB a “fair return.” The

larger constitutional issue that is the subject of this petition is

addressed and finally adjudicated by decision below).

The test for finality for purposes of jurisdiction under

28 U.S.C. § 1257(a) is whether the order of the court below has

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fully adjudicated petitioner’s rights, and that adjudication is not

subject to further review by a state court. Atlantic Richfield Oil

Corp. v. State Board, 329 U.S. 69, 72 (1946). Even though

ancillary state court proceedings may remain unresolved, a

decision by a state’s highest court is final if “the federal issue

would not be mooted or otherwise affected by the proceedings

yet to be had because . . . they are wholly unrelated to the federal

question.” Cox Broadcasting Corp. v. Cohn, 420 U.S. 469, 478

(1975). Here, that requirement has been met because any

further proceedings in a mandamus hearing will not and cannot

affect the federal issue raised by this litigation, which has been

fully and finally adjudicated by the decision below.

Proceeding with a mandamus hearing would force SMB’s

claims to be heard in a constitutionally inadequate forum which

cannot provide the remedy of just compensation for a regulatory

taking, as required by this Court in First English Evangelical

Lutheran Church of Glendale v. County of Los Angeles,

482 U.S. 304, 310-11 (1987). Moreover, facts adjudicated in

this inadequate forum would have preclusive effect if the

decision below is subsequently reversed and SMB is allowed a

full evidentiary trial on its inverse condemnation claim.

Accordingly, the decision below is final for purposes of

jurisdiction by this Court under 28 U.S.C. § 1257(a).

A. California Courts Recognize That an

Administrative Mandamus Hearing Is a

Constitutionally Inadequate Forum to

Adjudicate a Regulatory Takings Claim

As noted above, as-applied regulatory takings claims in

California state courts must proceed by way of a petition for

administrative mandamus (seeking invalidation of the offending

government action) coupled with a complaint for inverse

condemnation (seeking just compensation). Hensler v. City of

Glendale, 8 Cal. 4th at 14. The Rent Board misleadingly refers

to a hearing on the administrative mandamus petition as a

“trial.” Opp. at 5, 10. However, a mandamus hearing is a

radically different procedure from a full evidentiary trial. Such

a hearing is limited to review, under a highly deferential “abuse

of discretion” standard, of the record compiled by the Rent

Board itself. Calif. Code of Civ. Proc. § 1094.5. This record is

compiled with no regard for the due process rights of the

petitioner. Evidence is inserted in or excluded from the record

at the Board’s discretion; the petitioner has no right to cross

examine witnesses or to require that testimony be presented

under oath. See Sharon L. Browne, Administrative Mandamus

as a Prerequisite to Inverse Condemnation: “Healing”

California’s Confused Takings Law, 22 Pepperdine L. Rev. 99,

104-06, 115-16 (1994). Because of these procedural defects the

California Court of Appeal has recognized that “[a]s a practical

matter, there is no way a landowner can make the appropriate

record for a taking claim at the administrative proceedings,”

Healing v. California Coastal Commission, 22 Cal. App. 4th

1158, 1174 (1994). Accordingly, “administrative mandate is not

a substitute for a trial on the taking issues.” /d.

B. The Constitutionally Mandated Remedy of Just

Compensation for a Taking Is Not Available in a

Mandamus Hearing, Which Offers Only the

Prospect of a Remand to the Rent Board

The Board’s most serious misrepresentation to this Court

is its claim that “Petitioner can obtain all the relief it seeks in this

case” via an administrative mandamus hearing. Opp. at 3. This

Court has established that the constitutionally mandated remedy

for a regulatory taking is just compensation. First English

Evangelical Lutheran Church of Glendale v. County of Los

Angeles, 482 U.S. at 310-11. However, in a recent case in

which the Rent Board was the prevailing party, the California

Supreme Court established that the only remedy available via

mandamus for a claim such as the one at bar is a remand to the

Rent Board itself for further proceedings. Kavanau v. Santa

Monica Rent Control Board, 941 P.2d 851, 865-66 (1997). The

opposition brief fails even to mention Kavanau, but instead

misleadingly quotes from a pre-Kavanau opinion that was

effectively overruled on this point by the latter decision: “*‘[T]he

trial court is able to resolve the taking claim in the mandate

proceeding.” Opp. at 8 (quoting Hensler v. City of Glendale,

8 Cal. 4th at 15). Given the Board’s intimate involvement with

the Kavanau case, it is nothing short of dissembling to state:

If Petitioner prevails on its state mandamus claim .. .

it will obtain full relief.

Opp. at 10 (emphasis added). Thanks to the very arguments the

Rent Board successfully advanced in Kavanau, the word “full”

in the above sentence must be replaced, under current California

law, by “no.” The only issue that will be adjudicated before an

administrative mandamus hearing is whether the Rent Board

deprived SMB of a “fair return.” App. A-10-11 n.2. Under

Kavanau, the only “relief” available on this claim is a remand to

the Rent Board for further proceedings. See Kavanau, 941 P.2d

at 865-66. Thus, both the issues to be considered by and the

remedy available from the mandamus hearing are unrelated to

the federal constitutional question presented by this case.

C. The Decision Below Is a Definitive

Ruling by the State’s Highest Court on

SMB’s Regulatory Taking Theory

The Rent Board asserts that the decision below “precludes

one of Petitioner’s theories, but does not finally adjudge the

case.” Opp. at 6. In fact, however, the California Supreme

Court has definitively ruled on SMB’s sole legal claim

implicating a federal issue: that the application of the Rent

Control Law to SMB’s property effects a taking by failing to

substantially advance legitimate state interests. No other legal

theory or issue exists in this case that is relevant to SMB’s Fifth

Amendment takings claim.

As the Rent Board admits, the only question that can be

addressed in the constitutionally inadequate forum of an admini-

strative mandamus hearing is whether SMB has received a “fair

return” on its property.” Nevertheless, as the Rent Board also

acknowledges, factual findings arrived at in the constitutionally

inadequate mandamus forum would be preclusive as to a

subsequent evidentiary trial on the inverse condemnation claim--

even if SMB ultimately succeeds in obtaining a reversal by this

Court of the decision below! Opp. at 10. See Healing, 22 Cal.

App. 4th at 1178-79 (“If the administrative mandate petition is

heard first, the doctrine of collateral estoppel may bar relitigation

of some of the facts in the subsequent takings trial.”).

SMB cannot avoid this trap by voluntarily dismissing its

mandamus cause of action, since this is a procedural prerequisite

to an as-applied regulatory taking claim in California. Aban-

doning the mandamus petition would automatically cause the

entire complaint to be dismissed by the superior court on

remand, following a reversal of the decision below by this Court.

See, e.g., Mola Development Corp. v. City of Seal Beach,

57 Cal. App. 4th 405, 413-14 (1997).

In short, the mandamus petition cannot be dismissed,

cannot address the federal takings issue already fully adjudicated

by the court below, and cannot grant the relief mandated by this

Court for a regulatory taking, yet factual findings in such a

forum would be preclusive as to any subsequent proceedings in

a full evidentiary trial. Accordingly, the ruling of the California

Supreme Court below must be considered final for purposes of

establishing jurisdiction in this Court.

>The Rent Board coyly refers to the fair return issue as “the

traditional element” of a takings claim, Opp. at 5, to be determined

under “traditional Fifth Amendment standards.” Opp. at 10.

Unfortunately the Rent Board has forgotten that in Kavanau it

persuaded the California Supreme Court to rule that the fair return

issue is not an element of a takings claim at all, but instead constitutes

a due process claim with a due process remedy. Kavanau, 941 P.2d

at 865-66.

THE RENT BOARD DISTORTS THE HOLDING

OF SEAWALL ASSOCIATES IN ORDER TO

EVADE THE CLEAR CONFLICT BETWEEN

THE HIGHEST STATE COURTS OF NEW

YORK AND CALIFORNIA

In its petition, SMB pointed to the conflict between the

decision below and the opinion of the New York Court of

Appeals in Seawall Associates v. City of New York, 542 N.E.2d

1059 (1989). In its opposition the Rent Board distorts the

Seawall decision by stating, “{t]he court found that the law

affected [sic] a physical occupation because it denied an owner’s

right to possess and exclude others.” Opp. at 21. What the Rent

Board does not mention is that the Seawall court found that

New York’s Local Law 9 effected both a physical and a

regulatory taking. The Rent~Board neither addresses the

relevant, conflicting portion of the Seawall opinion, nor

acknowledges to this Court that it has suppressed the relevant

half of the decision.

In fact, the New York high court expressly analyzed the

constitutionality of the rental housing regulations at issue in that

case under the standard this Court set forth in Nollan:

“[ Whether] the burdens imposed substantially advance legiti-

mate State interests.” 542 N.E.2d at 1068 (citation to Nollan

omitted). The court concluded:

The heavy exactions imposed by Local Law

No. 9 must “substantially advance” its putative

purpose of relieving homelessness. No such showing

of this required “close nexus” has been made.

Id. at 1069. Accordingly, the measure was found to be

unconstitutional unless just compensation was provided under

the Takings Clause. /d. at 1070-71.

Contrary to the Rent Board’s assertions, the Seawall

decision plainly conflicts with the opinion below in both its

method of analysis and its ultimate holding. By applying

Nollan’s substantial advancement analysis to residential rent

regulations, and finding such measures unconstitutional if they

fail to substantially advance legitimate state interests, the New

York Court of Appeals has come into direct conflict with the

highest state court of California not once, but twice. See

discussion of Manocherian v. Lenox Hill Hospital, 643 N.E.2d

479, 482 (N.Y. 1994), Pet. at 26-27.

The Rent Board is ultimately reduced to attempting to

distinguish these cases and Richardson v. City and County of

Honolulu, 124 F.3d 1150 (9th Cir. 1997), on their facts--none of

them involved a challenge to Santa Monica’s Rent Control Law.

Opp. at 21-22. However, as fully set forth in the petition for

certiorari, each of them squarely conflicts with the decision

below on the applicability of Nollan’s ends-means analysis to

local regulation of residential rental property.

CONCLUSION

For all the above reasons, and for the reasons stated in the

petition, the petition for a writ of certiorari should be

GRANTED.

DATED: May, 1999.

Respectfully submitted,

R. S. RADFORD