The LLC that owns the Flamingo Mobile Home Park claims its lawsuit shouldn’t have been dismissed simply because the judge didn’t think its purported economic loss was plausible.
By Edvard Pettersson | Source
PASADENA, Calif. (CN) — The owner of a mobile home park in Santa Barbara asked the Ninth Circuit on Monday to reinstate its claim that the city’s 10% cap on rent increases for a lot, when a new owner takes over the home occupying that space, amounts to a regulatory taking in violation of the Fifth Amendment.
Jonathan Houghton, an attorney for 1210 Cacique Street LLC, told the panel in Pasadena that the trial judge who dismissed the takings claim two years ago had used an improper “heightened pleading” standard to conclude the plaintiff hadn’t sufficiently backed up its assertion that the value of the park has dropped 92.5%, or $7 million, after the city passed its vacancy control ordinance in 2021.
“It turns property rights into a disfavored, second-class constitutional right,” Houghton told the panel. “The Supreme Court has said that, even if a court views it as improbable that a property owner will win, so long as the claim is plausibly alleged, then the case moves on.”
The appellate judges, however, appeared unwilling to accept the purported $7 million depreciation of the value of the Flamingo Mobile Park was more than a legal conclusion, which doesn’t get you through the door when bringing a lawsuit, rather than a plausible fact that judges will accept as true when deciding on motions to dismiss.
“How is that calculated?” U.S. Circuit Judge Michelle Friedland, a Barack Obama appointee, asked. “Has there been an appraisal of selling the property? How can we even tell if that is an assertion of fact?”
U.S. Circuit Judge Eric Miller, a Donald Trump appointee, and Senior U.S. District Judge Eric Vitaliano, a George W. Bush appointee from the Eastern District of New York who sat on the panel by designation, likewise noted the complaint seemed to lack mathematical support linking the cap on rent increases to the huge loss of value of the park the owners claim.
For one, Miler noted, the plaintiff is facing a problem of its own making by not divulging the methodology behind its loss claim.
“You have a bunch of numbers that don’t obviously get you to $6.9 million,” the judge said. “So, there’s some calculation that you were doing and some assumptions that you were using, but you didn’t tell anybody what those were. So, part of the problem here is of your creation and how you chose to draft the complaint.”
Houghton retorted the problem was that the district judge who dismissed the takings claim didn’t believe the numbers were true and that the plaintiff would be able to prove them if it got a chance to take its case to trial.
The takings clause of the Fifth Amendment prohibits the federal government, as well as state and local governments, from taking private property for public use without paying just compensation.
The 1978 U.S. Supreme Court Penn Central Transportation Co. v. New York City opinion holds that to analyze regulatory takings claims, courts need to look at, among other things, the property owner’s economic loss and how the government’s regulations go against reasonable investment-backed expectations.
While Houghton argued the investors relied on a 2006 statement from the then-mayor of Santa Barbara that he couldn’t figure out a way to reinstate vacancy control, the panel didn’t seem persuaded by that line of argument, in particular because the legal precedent the mayor was relying on back then had already been overturned.
Santa Barbara passed the ordinance that capped rent increases on leased spaces at mobile home parks in 2021, three years after the new owner had purchased the 69-unit Flamingo Mobile Home Park. News reports at the time cited concern that the new owner would allow residents other than seniors to live there and would buy vacant homes to monetize them as vacation rentals.
Pamela Graham, an attorney for the city, told the panel that the mobile home industry, particularly in California, is a heavily regulated industry where sophisticated investors will be aware of issues such as rent control, which also applies to mobile home parks in Santa Barbara.
“This is a police power of the municipality to be able, at some point, if they choose, to impose some type of rent control,” Graham. “It was something they wanted to pass to promote continued affordable housing, which is an issue for so many cities in California.”
ED. NOTE: GSMOL Chapter 1102 members in Flamingo MHP had a hand in getting vacancy control (the regulation governing how much rent can be raised when a mobilehome changes hands) restored to the city’s Rent Stabilization Ordinance in 2021.
