301, 712, 2103 & 3151 LLC v. City of Minneapolis

• Citation: 27 F.4th 1377
• Decision Date: 14 March 2022
• Docket Number: No. 20-3493,20-3493
• Parties: 301, 712, 2103 AND 3151 LLC; 12 Twenty-Second and 1827 LaSalle LLC; 137 East Seventeenth Street LLC; 1522 LaSalle Avenue LLC; 1728 Second Avenue and 1801 Third Avenue LLC; 1806 and 1810 Third Avenue LLC; 1816, 1820 and 1830 Stevens Avenue LLC; 1817 Second Avenue LLC; 1900 and 1906 Clinton Avenue LLC; 1924 Stevens Avenue LLC ; 2020 Nicollet Avenue LLC; 2101 Third Avenue LLC; 2323 and 2401 Clinton Avenue LLC; 2417, 2423 and 2439 Blaisdell Avenue LLC; 2427 Blaisdell and 2432 First Avenue LLC; 25 Twenty-Fifth Street LLC; 2535 Clinton Avenue LLC; 2545 Blaisdell Avenue LLC; 2609 Hennepin Avenue LLC; 2633 Pleasant Avenue LLC; 2720 Pillsbury Avenue LLC; 2738 and 2750 Pillsbury Avenue LLC; 2809 Pleasant Avenue LLC; 600 Franklin Avenue LLC; Amy Smith; Blaisdell 3322, LLC; Bloomington 4035, LLC; Bryant Avenue Properties LLC; Colfax Apartments LLC; Dupont Properties LLC; Fletcher Properties, Inc.; Franklin Villa Partnership, L.L.P.; Fremont Apartments, LLC; Fremont Terrace Apartments, L.L.C.; Garfield Court Partnership, L.L.P.; Gasparre New Boston Square, LLC; Gateway Real Estate, L.L.C.; JEC Properties, LLC; Lagoon Apartments, LLC; LL LLC ; Northern Gopher Enterprises, Inc. ; Patricia L. Fletcher, Inc.; Ray Peterson, Plaintiffs - Appellants v. CITY OF MINNEAPOLIS, Defendant - Appellee National Apartment Association; Pacific Legal Foundation, Amici on Behalf of Appellant(s) Home Line ; Housing Justice Center; Lawyers' Committee for Civil Rights Under Law; Mid-Minnesota Legal Aid; Minnesota Collaborative Justice Initiative; Violence Free Minnesota, Amici on Behalf of Appellee(s)
• Court: U.S. Court of Appeals — Eighth Circuit

27 F.4th 1377

301, 712, 2103 AND 3151 LLC; 12 Twenty-Second and 1827 LaSalle LLC; 137 East Seventeenth Street LLC; 1522 LaSalle Avenue LLC; 1728 Second Avenue and 1801 Third Avenue LLC; 1806 and 1810 Third Avenue LLC; 1816, 1820 and 1830 Stevens Avenue LLC; 1817 Second Avenue LLC; 1900 and 1906 Clinton Avenue LLC; 1924 Stevens Avenue LLC ; 2020 Nicollet Avenue LLC; 2101 Third Avenue LLC; 2323 and 2401 Clinton Avenue LLC; 2417, 2423 and 2439 Blaisdell Avenue LLC; 2427 Blaisdell and 2432 First Avenue LLC; 25 Twenty-Fifth Street LLC; 2535 Clinton Avenue LLC; 2545 Blaisdell Avenue LLC; 2609 Hennepin Avenue LLC; 2633 Pleasant Avenue LLC; 2720 Pillsbury Avenue LLC; 2738 and 2750 Pillsbury Avenue LLC; 2809 Pleasant Avenue LLC; 600 Franklin Avenue LLC; Amy Smith; Blaisdell 3322, LLC; Bloomington 4035, LLC; Bryant Avenue Properties LLC; Colfax Apartments LLC; Dupont Properties LLC; Fletcher Properties, Inc.; Franklin Villa Partnership, L.L.P.; Fremont Apartments, LLC; Fremont Terrace Apartments, L.L.C.; Garfield Court Partnership, L.L.P.; Gasparre New Boston Square, LLC; Gateway Real Estate, L.L.C.; JEC Properties, LLC; Lagoon Apartments, LLC; LL LLC ; Northern Gopher Enterprises, Inc. ; Patricia L. Fletcher, Inc.; Ray Peterson, Plaintiffs - Appellants

v.CITY OF MINNEAPOLIS, Defendant - Appellee

National Apartment Association; Pacific Legal Foundation, Amici on Behalf of Appellant(s)

Home Line ; Housing Justice Center; Lawyers' Committee for Civil Rights Under Law; Mid-Minnesota Legal Aid; Minnesota Collaborative Justice Initiative; Violence Free Minnesota, Amici on Behalf of Appellee(s)

No. 20-3493

United States Court of Appeals, Eighth Circuit.

Submitted: October 20, 2021

Filed: March 14, 2022

Robert W. Hayes, Calli Jo Padilla, Cozen & O'Connor, Philadelphia, PA, Cassandra M. Jacobsen, Mark Alan Jacobson, Steven P. Katkov, Cozen & O'Connor, Minneapolis, MN, for Plaintiffs - Appellants.

Brian Scott Carter, City Attorney's Office, Minneapolis, MN, for Defendant - Appellee.

Anthony L. Francois, Briscoe & Ivester, Brian Hodges, San Francisco, CA, Daniel Woislaw, Pacific Legal Foundation, Sacramento, CA, for Amici on Behalf of Appellant(s).

Jon M. Greenbaum, Lawrence Reed McDonough, Lawyers' Committee for Civil Rights Under Law, Washington, DC, Timothy L. Thompson, Housing Preservation Project, Saint Paul, MN, for Amici on Behalf of Appellee(s).

Before SMITH, Chief Judge, WOLLMAN and BENTON, Circuit Judges.

BENTON, Circuit Judge.

The Minneapolis City Council enacted Ordinance No. 244.2030 in 2019. It requires landlords to evaluate applicants for rental housing by either (1) "inclusive screening criteria" or (2) "individualized assessment." Under the first option, applicants may not be rejected due to specifically listed criminal, credit, or rental history. Under the second option, applicants may be rejected for these or other lawful reasons, but the landlord must "accept and consider all supplemental evidence provided with a completed application to explain, justify, or negate the relevance of potentially negative information revealed by screening" and must notify the applicant in writing, specifying the basis for denial and explaining why supplemental evidence "did not adequately compensate for the factors that informed the landlord's decision."

Owners and managers of multi-unit buildings leased for residential use challenged the Ordinance under the Fifth Amendment's Takings Clause and the Fourteenth Amendment's Due Process Clause (and similar provisions of the Minnesota Constitution).¹ The district court² denied the landlords' motion for a preliminary injunction, ruling they had not shown irreparable harm or a likelihood of success on the merits. The landlords appeal. Having jurisdiction under 28 U.S.C. § 1292(a)(1), this court affirms.

I.

The United States and Minnesota constitutions prohibit the taking of private property for public use without just compensation. U.S. Const. amend. V ; Chicago, Burlington & Quincy R.R. v. Chicago , 166 U.S. 226, 241, 17 S.Ct. 581, 41 L.Ed. 979 (1897) (applying the Takings Clause to the states through the Fourteenth Amendment); Minn. Const. art. I, § 13 . The "clearest sort of taking" is when the government physically invades or appropriates private property, whether permanently or temporarily. Cedar Point Nursery v. Hassid , ––– U.S. ––––, 141 S. Ct. 2063, 2071, 2074, 210 L.Ed.2d 369 (2021). A taking may also occur "[w]hen the government, rather than appropriating private property for itself or a third party, instead imposes regulations that restrict an owner's ability to use his own property." Id. at 2071. A use restriction "goes too far" if it fails "the flexible test developed in Penn Central , balancing factors such as the economic impact of the regulation, its interference with reasonable investment-backed expectations, and the character of the government action." Id. at 2072, citing Penn Cent. Transp. Co. v. New York City , 438 U.S. 104, 124, 98 S.Ct. 2646, 57 L.Ed.2d 631 (1978).

The landlords argue that the Ordinance is either a physical-invasion taking or a Penn Central taking. According to the district court, the landlords failed to show a likelihood of success on either claim. This court reviews the district court's material factual findings for clear error, its legal conclusions de novo, and its ultimate decision to grant or deny the injunction for an abuse of discretion. Heartland Acad. Cmty. Church v. Waddle , 335 F.3d 684, 689-90 (8th Cir. 2003).

A.

The landlords argue that the Ordinance is a physical-invasion taking. They claim it "authorizes a permanent physical invasion" by "requiring landlords to rent to individuals they would otherwise disqualify." They rely on Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg'l Plan. Agency , 535 U.S. 302, 122 S.Ct. 1465, 152 L.Ed.2d 517 (2002), where owners challenged a multi-year moratoria on property development around Lake Tahoe. The Court acknowledged that "compensation is mandated when a leasehold is taken and the government occupies the property for its own purposes." Tahoe-Sierra , 535 U.S. at 322, 122 S.Ct. 1465. But the Court rejected the dissent's view that "even a temporary, use-prohibiting regulation"—"the functional equivalent of a forced leasehold"—should be governed by physical-taking cases rather than Penn Central . Id. at 324 n.19, 122 S.Ct. 1465, addressing id. at 348-49, 122 S.Ct. 1465 (dissenting opinion of Rehnquist, C.J.). In Cedar Point , the Court reiterated Tahoe-Sierra's distinction between physical appropriations and use restrictions. Cedar Point Nursery , 141 S. Ct. at 2072 ("The essential question .... is whether the government has physically taken property for itself or someone else—by whatever means—or has instead restricted a property owner's ability to use his own property. See Tahoe-Sierra , 535 U.S. at 321–323, 122 S.Ct. 1465.").

The City stresses the case of Yee v. City of Escondido , 503 U.S. 519, 112 S.Ct. 1522, 118 L.Ed.2d 153 (1992). That city's rent-control ordinance (and a state statute) prevented owners of mobile-home rental properties from "decid[ing] who their tenants will be." Yee , 503 U.S. at 526, 112 S.Ct. 1522 (alteration added). The Supreme Court rejected the owners' physical-invasion argument:

This argument, while perhaps within the scope of our regulatory taking cases, cannot be squared easily with our cases on physical takings. The government effects a physical taking only where it requires the landowner to submit to the physical occupation of his land.

....

Petitioners voluntarily rented their land to mobile home owners .... Put bluntly, no government has required any physical invasion of petitioners' property. Petitioners' tenants were invited by petitioners, not forced upon them by the government.

....

[P]etitioners conten[d] that the ordinance amounts to compelled physical occupation because it deprives petitioners of the ability to choose their incoming tenants. Again, this effect may be relevant to a [ Penn Central ] regulatory taking argument .... But it does not convert regulation into the unwanted physical occupation of land. Because they voluntarily open their property to occupation by others, petitioners cannot assert a per se right to compensation based on their inability to exclude particular individuals.

Id. at 527, 527-28, 530-31, 112 S.Ct. 1522 (alterations added). Based on this voluntariness rationale, Yee held: "When a landowner decides to rent his land to tenants, the government may place ceilings on the rents the landowner can charge, or require the landowner to accept tenants he does not like, without automatically having to pay compensation." Id. at 529, 112 S.Ct. 1522 (citations omitted).

The landlords counter by emphasizing cases—decided before and after Yee —indicating that a law may be a physical-invasion taking even if property owners can avoid the law by leaving the regulated industry.

Before Yee , the Court considered a New York statute requiring landlords to install television cables on their residential buildings. Loretto v. Teleprompter Manhattan CATV Corp. , 458 U.S. 419, 421, 102 S.Ct. 3164, 73 L.Ed.2d 868 (1982). The Court held that the statute was a physical-invasion taking, even though the landlords could avoid it by leaving the rental business: "It is true that the landlord could avoid the requirements of § 828 by ceasing to rent the building to tenants. But a landlord's ability to rent his property may not be conditioned on his forfeiting the right to compensation for a physical occupation. Teleprompter's ... argument proves too much." Id. at 439 n.17, 102 S.Ct. 3164, discussed in Yee , 503 U.S. at 531-32, 112 S.Ct. 1522.

After Yee , the Court considered a Department of Agriculture mandate that raisin growers set aside part of their crop to the federal government. Horne v. Dep't of Agric. , 576 U.S. 350, 355, 135 S.Ct. 2419, 192 L.Ed.2d 388 (2015). The Department, relying on Yee , argued that the mandate was not a physical-invasion taking "because raisin...