Barrientos v. 1801-1825 Morton LLC, 07-56697.

• Decision Date: 09 October 2009
• Docket Number: No. 07-56697.,07-56697.
• Citation: 583 F.3d 1197
• Parties: Debora BARRIENTOS; Armando Briseno; Bertha Cardenas; Marta Chajon; Manuel Cuevas; Francisco A. Del Cid; Miguel Gonzalez; Jeong Soon Hwang; Bong Cha Kim; Jae Ok Kim; Leanna Kim; Nong-Soon Kim; Young Suk Kim; Maria Landaverde; Jane Lee; Jeong Lee; Susan Lee; Young Hean Lee; Jin M. Park; Norma Angelica Pena; Maria Rodriguez; Helen H. Yu, Plaintiffs-Appellees, v. 1801-1825 MORTON LLC, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

583 F.3d 1197

Debora BARRIENTOS; Armando Briseno; Bertha Cardenas; Marta Chajon; Manuel Cuevas; Francisco A. Del Cid; Miguel Gonzalez; Jeong Soon Hwang; Bong Cha Kim; Jae Ok Kim; Leanna Kim; Nong-Soon Kim; Young Suk Kim; Maria Landaverde; Jane Lee; Jeong Lee; Susan Lee; Young Hean Lee; Jin M. Park; Norma Angelica Pena; Maria Rodriguez; Helen H. Yu, Plaintiffs-Appellees, v. 1801-1825 MORTON LLC, Defendant-Appellant.

No. 07-56697.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 2, 2009.

Filed October 9, 2009.

Chris J. Evans, Kimball, Tirey & St. John, LLP, Irvine, CA, for appellant, 1801-1825 Morton LLC.

Michael E. Soloff, Munger, Tolles & Olson, LLP, A. Christian Abasto, Legal Aid Foundation of Los Angeles, Los Angeles, CA, and James R. Grow, National Housing Law Project, Oakland, CA, for appellees, Debora Barrientos, et al.

Rockard J. Delgadillo and Gerald M. Sato, City Attorney's Office, Los Angeles, CA, Julie Nepveu, AARP Foundation Litigation, Washington, DC, Helen R. Kanovsky, Nancy D. Christopher, Doris S. Finnerman, William C. Lane, and David M. Reizes, Office of the General Counsel Department of Housing & Urban Development, and Tony West, Thomas P. O'Brien, Michael S. Raab, and Christine H. Kohl, Office of the Attorney General of the United States, Washington, DC, as amici curiae supporting affirmance.

Karen K. McCay and Stephen D. Pahl, Pahl & McCay, San Jose, CA, as Amicus Curiae supporting reversal.

Appeal from the United States District Court for the Central District of California, Audrey B. Collins, Chief District Judge, Presiding. D.C. No. CV-06-06437-ABC-FMO.

Before DIARMUID F. O'SCANNLAIN, PAMELA ANN RYMER, and KIM McLANE WARDLAW, Circuit Judges.

WARDLAW, Circuit Judge:

1801-1825 Morton LLC ("Morton"), a landlord subject to the Los Angeles Rent Stabilization Ordinance ("LARSO"), Los Angeles Municipal Code §§ 151.01 et seq., served notices of eviction upon tenants whose rent is subsidized by the federal government, because it desired to raise the rent on the apartment units. Though LARSO prohibits eviction for that purpose, Morton asserts that a U.S. Department of Housing and Urban Development ("HUD") regulation permits the eviction of an assisted tenant during the lease term for "good cause" grounds, which "may include [the] desire to lease the unit at a higher rental." 24 C.F.R. § 982.310(d)(1)(iv). We must decide whether HUD's "good cause" regulation preempts the operation of the City of Los Angeles's eviction control ordinance. We hold that it does not. We affirm the district court's grant of summary judgment in favor of the tenants, permanent injunctive relief, and award of attorney's fees.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. The Federal Assisted Housing Program

The federal government provides rental assistance for low and moderate income families, the elderly, and the disabled through what is known as "the section 8 program." Congress added the section 8 program to the United States Housing Act of 1937 in 1974 by enacting the Housing and Community Development Act of 1974, Pub.L. No. 93-383, § 201(a), 88 Stat. 633, 662-66 (1974) (codified as amended at 42 U.S.C. § 1437f). The express congressional "purpose" of the section 8 program is "aiding low-income families in obtaining a decent place to live and ... promoting economically mixed housing." 42 U.S.C. § 1437f(a). The program is managed federally by HUD, and administered locally by public housing authorities ("PHA"). Section 8 tenants must sign a lease and pay a portion of their income toward rent. The remainder of the rent charge is paid by PHA pursuant to a housing assistance payment ("HAP") contract between PHA and the owner, which mandates that a lease "shall be for a term of not less than [one] year," id. § 1437f(o)(7)(A), shall "contain terms and conditions that ... are consistent with State and local law," id. § 1437f(o)(7)(B)(ii)(I), and "shall provide that during the term of the lease, the owner shall not terminate the tenancy except for serious or repeated violation of the terms and conditions of the lease, for violation of applicable Federal, State, or local law, or for other good cause," id. § 1437f(o)(7)(C).

There are two relevant variations of assisted housing tenant-based voucher subsidies. Under the standard housing choice voucher program, the voucher is portable. The tenant may choose to live in any property if the landlord agrees to accept the voucher and comply with the applicable regulations. The government subsidy is limited to the difference between the amount the family is required to contribute and the payment standard established by PHA based on fair market rents for the area. Id. § 1437f(o)(1)(B), (o)(2)(A)-(B).

The second program is called the enhanced voucher program, a recent legislative creation aimed at keeping tenants in their homes despite changing market conditions. Beginning in the 1960s, the federal government subsidized and insured mortgage loans for the construction of housing for assisted tenants ("section 236 program"). See Housing and Urban Development Act of 1968, Pub.L. No. 90-448, §§ 201(a), 236(a)-(g), 82 Stat. 476, 498-503 (codified as amended at 12 U.S.C. § 1715z-1 (2000)). Owners of the housing were allowed to prepay their loans after twenty years, at which time they could exit the assisted housing program. 24 C.F.R. § 221.524(a)(ii) (1970). In the 1980s, Congress became concerned that a large proportion of assisted housing would disappear from the market when owners prepaid their section 236 loans. To prevent massive relocation and an inadequate supply of assisted housing, Congress passed a number of laws aimed at restricting the prepayment option. See Low Income Housing Preservation and Resident Homeownership Act of 1990, Pub.L. No. 101-625, § 601(a), 104 Stat. 4079, 4249 (1990); Emergency Low Income Housing Preservation Act of 1987, Pub.L. No. 100-242, Title II, 101 Stat. 1815, 1877-91 (1988). In 1999, however, Congress decided to take a different approach. It allowed landlords to prepay their mortgages but increased the available subsidy to fair market value so as to allow the subsidized tenants to remain in the same apartment after prepayment. See Pub.L. No. 106-74, § 538, 113 Stat. 1047, 1122-24 (1999) (currently codified as amended at § 1437f(t)).¹ Thus, the enhanced voucher authority provides that "the assisted family may elect to remain in the same project in which the family was residing on the date" the loan was prepaid, and that the government will pay the difference between "rent for the dwelling unit" and the tenant's required contribution "during any period the family makes such an election and continues to so reside" even as "rent may be increased from time-to-time." 42 U.S.C. § 1437f(t)(1)(B).

As evidenced by the congressional statement of purpose, Congress and HUD have been perennially concerned about making assisted housing available and affordable, and a key means to that end is the creation of incentives for private owners to participate in the section 8 program. In legislation enacted in 1974, Congress protected tenants from arbitrary eviction by giving the local PHA the "sole right to give notice to vacate" and to evict the tenant. Housing and Community Development Act of 1974, Pub.L. No. 93-383, § 201(a), 88 Stat. 633, 664 (1974); see also Swann v. Gastonia Hous.Auth., 675 F.2d 1342, 1345 n. 2 (4th Cir.1982). In response to owner complaints about this additional burden, HUD proposed in 1978 that Congress harmonize the private and assisted markets by eliminating PHA approval where "State or local law governing evictions affords adequate tenant protection." Hearings Before the Subcomm. on Hous. & Cmty. Dev. of the Comm. on Banking, Fin. & Urban Affairs, 95th Cong. 66-67 (1978) (statement of Patricia Harris, HUD Sec'y). Congress refused, noting that "adoption of the proposal would leave section 8 tenants to rely on state and municipal laws for protection, and the committee does not feel that HUD has provided ample information on the extent to which this protection would be sufficient." S.Rep. No. 95-871, at 15 (1978), reprinted in 1978 U.S.C.C.A.N. 4773, 4788. To ameliorate the burden on owners within the bounds of existing law, HUD issued a proposed regulation that required PHA to proceed with issuance of the eviction notice in accordance with State and local law as long as grounds to do so existed. 45 Fed.Reg. 72,697, 72,697-99 (Nov. 30, 1980).

In 1981, HUD again proposed that Congress remove the PHA approval requirement and legislate that state and local law govern assisted tenants' procedural and substantive rights. Hearings Before the Subcomm. on Hous. & Cmty. Dev. of the Comm. on Banking, Fin. & Urban Affairs, 97th Cong. 459 (1981). While the Senate agreed to eliminate the PHA requirement and make "procedural and substantive rights of the assisted tenant[s] ... the same as those applicable to non-subsidized tenants" in order to "encourage more owners to participate," S.Rep. No. 97-139 (1981), reprinted in 1981 U.S.C.C.A.N. 396, 552, the House—apparently unsure that state and local law would provide sufficient protection—did not. Congress reached a compromise later that year by eliminating the PHA approval requirement but explicitly amending the Senate's version to add that "the owner shall not terminate the tenancy except for serious or repeated violation of the terms and conditions of the lease, applicable State, local or Federal law, or for other good cause." H.R.Rep. No. 97-208, at 694-95 (1981) (Conf.Rep.), reprinted in 1981 U.S.C.C.A.N. 1010, 1053 (codified as amended at 42 U.S.C. § 1437f(d)(1)(B)(ii)). This new condition barring owners from evicting a tenant mid-lease or from refusing to renew a lease without cause became known as the "endless lease" requirement.

HUD issued an interim implementing rule in 1982, withdrawing its earlier regulation permitting termination on thirty days' notice, and specifying...