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A&W Lawyers Win Another Important 9th Circuit Rent Control Appeal

Aleshire & Wynder’s Rent Control and Mobilehome Park Law Team (including Partners Bill Wynder, Sunny Soltani, and Associate Jeff Malawy) were again successful before a three-judge panel of the Ninth Circuit Federal Court of Appeals. In Colony Cove Properties, LLP v. City of Carson (9th Cir., March 28, 2011) ___ F.3d. ___, Case No. 09-57039, 2011 U.S. App. LEXIS 6240, the court unanimously rejected a $34 million claim for regulatory taking, private taking, physical taking, equal protection, and substantive due process violations, both facial and as-applied, filed by the owner of Colony Cove Mobile Estates.

Carson enacted its Mobilehome Space Rent Control Ordinance (“Ordinance”) in 1979.  The City also adopted Guidelines for Implementation of the Mobilehome Space Rent Control Ordinance (“Guidelines”), which the Carson Rent Control Board “considers” in making rent increase determinations.  In October 31, 2006 the City amended these Guidelines to include the “Maintenance of Net Operating Income” (“MNOI”) analysis as a tool in considering rent increase applications.

The plaintiff purchased the Colony Cove Mobile Estates on April 4, 2006.  The plaintiff submitted a rent increase application (“Application”) on September 28, 2007.  The Application requested an outrageous rent increase of $618.15 per space, per month.  Such an increase would have more than doubled the rents being charged in this park, where the average rent at the time of the Application was $414.25.

On August 6, 2008, the City utilized the MNOI methodology to grant Colony Cove a $36.74 per space per month rent increase.  The park owner promptly filed suit in federal district court, arguing that the 2006 amendment to the Guidelines opened up the entire Ordinance to constitutional challenge.  Aleshire & Wynder’s Rent Control and Mobilehome Park Law Team then went to work securing dismissal of this claim in the district court and then before the Ninth Circuit.

On appeal, the Ninth Circuit held that the park owner’s claims were not “ripe” for federal consideration. Relying on Williamson County, 473 U.S. 172, 195 (1985).  The Ninth Circuit further ruled that California’s state courts afford the park owner adequate legal remedies for any wrong claimed to have been inflicted citing Kavanau v. Santa Monica Rent Control Bd., 16 Cal. 4th 761 (1997) and Galland v. City of Clovis, 24 Cal. 4th 1003 (2001.  In the event the Kavanau process proved inadequate, The Ninth Circuit ruled that a state law inverse condemnation action is then available.  Carson Harbor Village, Ltd. v. City of Carson, 353 F.3d 824, 829, 830 n. 5 (9th Cir. 2004) (“CHV II”).  The Ninth Circuit then ruled this park owner could not ignore these state law remedies and simply march into federal court.

Even more important to our client, the Ninth Circuit held the statute of limitations for claims filed under § 1983 is determined by looking to the statute of limitations for state law personal injury suits in the state in which the challenged action occurred.  Wilson v. Garcia, 471 U.S. 261, 276 (1985).  In California, personal injury claims which accrued prior to January 1, 2003 were subject to a one-year statute of limitations.  Equity Lifestyle, 548 F.3d at 1193, fn 15. Claims which accrued after January 1, 2003 are subject to a two-year statute of limitations.  Canatella v. Van De Kamp, 486 F.3d 1128, 1132-1133 (9th Cir. 2007).

A federal claim against an ordinance in California accrues, and the statute of limitations begins to run, at the time the ordinance is enacted.  Equity Lifestyle, 548 F.3d at 1193, fn 15; Action Apartment Ass’n v. Santa Monica Rent Control Opinion Bd., 509 F.3d 1020, 1027 (9th Cir. 2007).  Therefore, the statute of limitations for all of the park owner’s challenges to the Carson Ordinance began to run in 1979 when the Ordinance was enacted.

Therefore all the “facial challenges” to the Carson ordinance were time-barred.  The Ninth Circuit also agreed with our argument that periodic amendments to the Ordinance guidelines do not trigger the start of a new statute of limitations.

Finally, the Ninth Circuit agreed with our argument this park owner lacked “standing” (meaning the legal right) to challenge the Carson Ordinance because he did not own this mobilehome park at the time the Ordinance was adopted.  Equity Lifestyle, 548 F.3d at 1193.  The Court concluded that only the prior owner suffered any injury caused by the Ordinance, and the effect of the regulation was reflected in the purchase price to the new owner.  Thus, the new owner suffered no injury and therefore lacked standing to sue.

This unanimous three-judge ruling “goes a long way keeping mobilehome park rent control issues in state court, where they belong,” commented Bill Wynder, Carson City Attorney. “We are gratified that the Ninth Circuit agreed with our views on this important issue for all California cities with rent stabilization law.”