729 F.3d 1189 (9th Cir. 2013), 11-55904, Sylvia Landfield Trust v. City of Los Angeles

Docket Nº:11-55904
Citation:729 F.3d 1189
Opinion Judge:PREGERSON, Circuit Judge:
Party Name:SYLVIA LANDFIELD TRUST; MARIA A. LANE; JEFF KERN; RAM GILL; KHUSHWANT GILL, Plaintiffs-Appellants, v. CITY OF LOS ANGELES; ANTONIO VILLARAIGOSA, Mayor; ROCKARD J. DELGADILLO, City Attorney, Defendants-Appellees
Attorney:Lee Grant, Law Office of Lee Grant, Encino, California, for Plaintiffs-Appellants. Carmen A. Trutanich, City Attorney, and Claudia McGee Henry, Senior Assistant City Attorney, Los Angeles, California, for Defendants-Appellees.
Judge Panel:Before: Harry Pregerson, William A. Fletcher, and Jacqueline H. Nguyen, Circuit Judges. Opinion by Judge Pregerson.
Case Date:September 09, 2013
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 1189

729 F.3d 1189 (9th Cir. 2013)

SYLVIA LANDFIELD TRUST; MARIA A. LANE; JEFF KERN; RAM GILL; KHUSHWANT GILL, Plaintiffs-Appellants,

v.

CITY OF LOS ANGELES; ANTONIO VILLARAIGOSA, Mayor; ROCKARD J. DELGADILLO, City Attorney, Defendants-Appellees

No. 11-55904

United States Court of Appeals, Ninth Circuit

September 9, 2013

Submitted: February 7, 2013, [*] Pasadena, California

Appeal from the United States District Court for the Central District of California. D.C. No. 2:09-cv-01798-JST-RZ. Josephine Staton Tucker, District Judge, Presiding.

AFFIRMED.

Lee Grant, Law Office of Lee Grant, Encino, California, for Plaintiffs-Appellants.

Carmen A. Trutanich, City Attorney, and Claudia McGee Henry, Senior Assistant City Attorney, Los Angeles, California, for Defendants-Appellees.

Before: Harry Pregerson, William A. Fletcher, and Jacqueline H. Nguyen, Circuit Judges. Opinion by Judge Pregerson.

OPINION

Page 1190

SUMMARY[**]

Civil Rights

The panel affirmed the district court's Fed.R.Civ.P. 12(b)(6) dismissal of plaintiffs' complaint challenging the constitutionality of the City of Los Angeles's Rent Escrow Account Program.

The Los Angeles Rent Escrow Account Program (REAP) is an administrative program codified in the Los Angeles Municipal Code which authorizes the Los Angeles Housing Department to place property into REAP when a landlord fails to repair habitability violations. Plaintiffs, four landlords whose separate apartment buildings were placed into REAP by the City, alleged that REAP, as applied to them, violated their substantive due process rights.

The panel held that: (1) REAP was rationally related to the legitimate governmental interests of repairing and preventing substandard housing; (2) REAP did not violate plaintiffs' substantive due process rights; and (3) plaintiffs' procedural challenges failed to support an as-applied substantive due process claim because none of the allegations plausibly suggested that REAP was arbitrarily and unreasonably applied to any of the plaintiffs, or that the placement of plaintiffs' properties into REAP rose to a level that shocked the conscience.

OPINION

PREGERSON, Circuit Judge:

This case involves a constitutional challenge to the defendant City of Los Angeles's (" City" ) Rent Escrow Account Program (" REAP" ). REAP is an administrative program codified in the Los Angeles Municipal Code (" LAMC" ). The Los Angeles Housing Department (" Housing Department" ) places property into REAP when a landlord fails to repair habitability violations. See Housing Department Rent Adjustment Commission Regulations (" RACR" ) § 1200.04.

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When a property is placed into REAP, tenants pay a reduced rent. RACR § § 1200.05-.06. The Housing Department determines the amount of the reduced rent based on the severity of the habitability violations. RACR § § 1200.05-.06. Tenants may choose to pay their reduced rent to either their landlord or an escrow account maintained by the Housing Department. LAMC § 162.07; RACR § § 1200.05, 1200.13A. If tenants pay into the escrow account, the tenant, landlord, or Housing Department may apply to the escrow account's manager for funds to repair the habitability violations in the tenant's housing. LAMC § 162.07; RACR § 1200.13(B).

Plaintiffs are four landlords whose separate apartment buildings were placed into REAP by the City. Plaintiffs in their complaint allege that REAP, as applied to them, violated their substantive due process rights. The district court dismissed plaintiffs' complaint under Federal Rule of Civil Procedure 12(b)(6) and denied their motion to amend their second amended complaint. We affirm.

Standard of Review

We review de novo the district court's dismissal under Rule 12(b)(6) and review for abuse of discretion the denial of leave to amend. Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1030-31 (9th Cir. 2008). " To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotation marks omitted). " A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.

Discussion

I. Placing Plaintiffs' Property into REAP Did Not Violate Plaintiffs' Substantive Due Process Rights

To determine whether REAP violates plaintiffs' substantive due process rights, we ask whether REAP, as applied to plaintiffs, is " rationally related to a legitimate governmental purpose." Richardson v. City and Cnty. of Honolulu, 124 F.3d 1150, 1162 (9th Cir. 1997) (internal quotation marks omitted). We apply rational basis review because landlords are not a protected class, and they have no fundamental right to rent uninhabitable housing. See id . We affirm the district court's dismissal because plaintiffs failed to state a claim that their constitutional rights were violated.

A. Legitimate Goal

Plaintiffs claim that while REAP was originally implemented for legitimate reasons related to public health and safety, its current purpose is illegitimate. To survive plaintiffs' challenge, REAP must have a " reasonable justification in the service of a legitimate governmental objective." Cnty. of Sacramento v. Lewis, 523 U.S. 833, 846, 118 S.Ct. 1708, 140 L.Ed.2d 1043 (1998).

The Los Angeles City Counsel enacted REAP out of concern that " large numbers of owners of rental housing are not meeting the City's minimum code requirements." Zev Yaroslavsky, Los Angeles City Council File 87-1084-s2, Oct. 13, 1987 [hereinafter " Yaroslavsky, 1987" ].1

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" [O]ne of the most important and fundamental duties a city can perform is to protect its residents from unsafe housing conditions." City and Cnty. of San Francisco v. Jen, 135 Cal.App.4th 305, 37 Cal.Rptr.3d 454, 456 (Ct. App. 2005). It is not an easy task for California cities to fulfill this fundamental duty. In 2001, the California legislature found that " one in every eight dwelling units in the state is substandard and that unless health and safety problems are corrected, habitability conditions generally deteriorate until the units become life threatening and uninhabitable and must be removed from the housing stock through closure or demolition." Cal. Health & Safety Code § 17998(a).

The crisis of substandard housing is especially severe in Los Angeles. In 2011, the United States Census Bureau surveyed 1,708,600 renter-occupied units in Los Angeles and Long Beach and found: 449,100 of those units were infested with cockroaches; 35,500 were infested with rats; 46,400 had severe problems with their plumbing, heating, electricity, or upkeep; and 62,300 lacked consistently working toilets. U.S. Census Bureau, American Housing Survey for the Los Angeles-Long Beach Metropolitan Area, 2011.2 Indeed, plaintiffs' own buildings had electrical, plumbing, fire safety, and cockroach problems.

California Civil Code § 1941 requires landlords who rent residential property to maintain the property in habitable condition. Cal. Civ. Code § 1941 et seq . California state law provides limited remedies to tenants who live in uninhabitable housing. But as explained below, these remedies are insufficient to ensure that the habitability requirements of § 1941 are met.

California Civil Code § 1942 permits a tenant who lives in substandard housing to make " repairs" needed to render the housing tenantable, and then " deduct the expenses of such repairs from the rent." Cal. Civ. Code § 1942(a). The repairs, however, cannot exceed the cost of one month's rent. Id. Furthermore, tenants may only employ this remedy twice in any twelve-month period. Id. " These limitations demonstrate that the [California] Legislature framed [§ 1942] only to encompass relatively minor dilapidations in leased premises." Green v. Superior Court, 10 Cal.3d 616, 111 Cal.Rptr. 704, 517 P.2d 1168, 1177-78 (Cal. 1974).

In addition, California courts developed the doctrine of constructive eviction. Id. at 1177. That doctrine allows a tenant to abandon rental housing when the premises become uninhabitable. Id. But constructive eviction " gives little help to the typical low income tenant today because to avail himself of the doctrine a tenant must vacate the premises. In the present housing market many tenants cannot find any alternative housing which they can afford, and thus [constructive eviction] has in reality provided little comfort to most needy tenants." Id. at 1174, n.10 (internal citations omitted).

In response to a growing crisis of substandard housing, in 1988 the City of Los Angeles enacted REAP. Los Angeles City Council Ordinance 164205, amending LAMC chapter 15.3 REAP was introduced as part of the City's " more vigorous stand against landlords of rental housing who allow their buildings to deteriorate to the point where tenants are living in substandard conditions." Yaroslavsky, 1987. Between 1989 and 1993, REAP proved

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" extremely effective in forcing owners of slum dwellings to bring their buildings up to at least minimum standards of habitability." Zev Yaroslavsky, Los Angeles City Council File 93-1850, Sept. 10, 1993.4

In 1993, an apartment fire in the Pico Union neighborhood of Los Angeles killed ten people. Id. The building that burned " was in violation of numerous city fire codes [and] although citations had been issued, the building was never brought up to code." Id. In response to the prevalence of " life-threatening fire safety violations," the City Council amended REAP to...

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