Sylvia Landfield Trust v. City of L.A.

• Decision Date: 09 September 2013
• Docket Number: No. 11–55904.,11–55904.
• Citation: 729 F.3d 1189
• Parties: 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.
• Court: U.S. Court of Appeals — Ninth Circuit

729 F.3d 1189

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.

Submitted Feb. 7, 2013.^*

Filed Sept. 9, 2013.

Lee Grant, Law Office of Lee Grant, Encino, CA, for Plaintiffs–Appellants.

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

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

Before: HARRY PREGERSON, WILLIAM A. FLETCHER, and JACQUELINE H. NGUYEN, Circuit Judges.

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. 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

“[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 (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 (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 “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 strengthen the program's enforcement powers. Id. (citations and internal quotation marks omitted). REAP continues to enforce fire safety regulations. In 2004, City inspectors cited one of the plaintiff-landlords in this case for “inoperable or missing smoke detectors.”

Currently, the City places property into REAP when the landlord fails to correct health, safety, or habitability violations on the rented property. LAMC § 162.03–.04; RACR §§ 1200.01(N), 1200.03–.04. Landlords may challenge the placement of their property into REAP through a hearing and appeals process. LAMC § 162.06; RACR §§ 1200.07–1200.11. Property is released from REAP once it is repaired and passes inspection. LAMC § 162.08; RACR § 1200.14.

By allowing tenants to pay a reduced rent into an escrow account to be used to repair their landlord's uninhabitable property, REAP addresses the health and safety problems created by substandard housing and encourages landlords to prevent those problems. See LAMC § 162.07; RACR § 1200.13. These are legitimate goals.

REAP is one of numerous tools that the City employs to enforce its housing code. Other tools include criminal prosecutions and referrals to the State Franchise Tax Board. In the past, the City criminally prosecuted one of the plaintiff-landlords in this case for owning unpermitted and uninspected units. That prosecution resulted in a fine, probation, and house arrest. Nonetheless, the housing code violations persisted, and the City referred the plaintiff's case to the State Franchise Tax Board. The Tax Board prohibits income tax deductions for interest, taxes, amortization, or depreciation on property that does not comply with the local or state housing code. SeeCalifornia Revenue...