Pac. Shores Props., LLC v. City of Newport Beach, Mun. Corp.

• Decision Date: 20 September 2013
• Docket Number: Nos. 11–55460,11–55461.,s. 11–55460
• Citation: 730 F.3d 1142
• Parties: PACIFIC SHORES PROPERTIES, LLC, a California limited liability company; Alice Conner; Sean Wiseman; Terri Bridgeman, Plaintiffs–Appellants, Andrew Blair, Plaintiff, v. CITY OF NEWPORT BEACH, a California municipal corporation, Defendant–Appellee. Newport Coast Recovery LLC, a California Limited Liability Company; Yellowstone Women's First Step House, Inc., Plaintiffs–Appellants, v. City of Newport Beach, a California municipal corporation, Defendant–Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

730 F.3d 1142

PACIFIC SHORES PROPERTIES, LLC, a California limited liability company; Alice Conner; Sean Wiseman; Terri Bridgeman, Plaintiffs–Appellants,

Andrew Blair, Plaintiff,

v.CITY OF NEWPORT BEACH, a California municipal corporation, Defendant–Appellee.

Newport Coast Recovery LLC, a California Limited Liability Company; Yellowstone Women's First Step House, Inc., Plaintiffs–Appellants,

v.City of Newport Beach, a California municipal corporation, Defendant–Appellee.

Nos. 11–55460, 11–55461.

United States Court of Appeals,

Ninth Circuit.

Argued and Submitted Nov. 6, 2012.

Filed Sept. 20, 2013.

Elizabeth Brancart (argued) and Christopher Brancart, Brancart & Brancart, Pescadero, CA; and Steven G. Polin, Law Offices of Steven G. Polin, Washington, D.C.; for Plaintiffs–Appellants.

T. Peter Pierce (argued), Saskia T. Asamura, and Toussaint S. Bailey, Richards Watson & Gershon, P.C., Los Angeles, CA; and Aaron Harp, City Attorney of Newport Beach, Newport Beach, CA; for Defendant–Appellee.

Thomas E. Perez, Assistant Attorney General, Dennis J. Dimsey, Teresa Kwong (argued), United States Department of Justice, Civil Rights Division, Appellate Section, Washington, D.C., for Amicus Curiae United States.

Chris M. Amantea and Alexandrea H. Young, Hunton & Williams LLP, Los Angeles, CA; and Paula D. Pearlman, Shawna L. Parks, and Umbreen Bhatti, Disability Rights Legal Center, Los Angeles, CA, for Amici Curiae Disability Rights Legal Center, Disability Rights California, Western Center on Law and Poverty, and Disability Rights Education & Defense Fund.

Kira L. Klatchko and Jeffrey V. Dunn, Best Best & Krieger LLP, Indian Wells, CA, for Amicus Curiae League of California Cities.

Appeal from the United States District Court for the Central District of California, James V. Selna, District Judge, Presiding.D.C. Nos. 8:08–cv–00457–JVS–RNB and 8:09–cv–00701–JVS–RNB.

Before: ALEX KOZINSKI, Chief Judge, STEPHEN REINHARDT, and SIDNEY R. THOMAS, Circuit Judges.

OPINION

REINHARDT, Circuit Judge:

Prior to 2008, “group homes”—i.e., homes in which recovering alcoholics and drug users live communally and mutually support each other's recovery—were generally permitted to locate in residential zones in the City of Newport Beach (“the City”) and they did so freely.¹ By 2008, a number of residents of the City launched a campaign to restrict or eliminate group homes in their neighborhoods. After enacting several moratoria, the City enacted an Ordinance (“the Ordinance”) which had the practical effect of prohibiting new group homes from opening in most residential zones. Even in the few areas where they were permitted to open, new group homes were required to submit to a permit process. Existing group homes also had to undergo the same permit process in order to continue their operations. Among the factors to be considered when granting or denying a permit to any group home was the number of other such facilities in the neighborhood.

On its face, the Ordinance did not single out group homes; persons recovering from addiction are protected from housing discrimination under state and federal anti-discrimination laws. Instead, the Ordinance facially imposed restrictions on some other types of group living arrangements as well. At the same time, the City did not impose similar regulations on properties rented by homeowners to vacationing tourists, despite the fact that such rental properties may cause similar social problems as group homes. On advice of counsel, the City had initially planned to regulate such rental properties in order to avoid the appearance of discriminating against group homes, but it backed down from doing so in the face of opposition from a number of City residents.

Taken in the light most favorable to the non-moving party, Plaintiffs' evidence shows that the City's purpose in enacting the Ordinance was to exclude group homes from most residential districts and to bring about the closure of existing group homes in those areas. The evidence also shows that the Ordinance regulated other types of group residential arrangements primarily for the purpose of maintaining a veneer of neutrality. Several existing group homes, which, as a result of the Ordinance, were required to apply for a use permit in order to continue operating in residential areas, sued the City, alleging that the Ordinance discriminated against them as facilities that provide housing opportunities for disabled individuals recovering from addiction. The district court acknowledged the evidence that the City acted with a discriminatory motive but found that evidence “irrelevant” because, it stated, the City had not treated group homes any worse than certain other group living arrangements.

We reverse and hold that the district court erred in disregarding the evidence that the City's sole objective in enacting and enforcing its Ordinance was to discriminate against persons deemed to be disabled under state and federal housing discrimination laws. Although plaintiffs in an anti-discrimination lawsuit may survive summary judgment by identifying similarly situated individuals who were treated better than themselves, this is not the only way to demonstrate that intentional discrimination has occurred. Where, as here, there is direct or circumstantial evidence that the defendant has acted with a discriminatory purpose and has caused harm to members of a protected class, such evidence is sufficient to permit the protected individuals to proceed to trial under a disparate treatment theory. This is no less true where, as here, the defendant is willing to harm certain similarly-situated individuals who are not members of the disfavored group in order to accomplish a discriminatory objective, while preserving the appearance of neutrality.

We also hold that the district court erred in concluding that the Plaintiffs failed to create a triable issue of fact as to whether the losses that their businesses suffered were caused by the enactment and enforcement of the Ordinance. The Plaintiffs presented evidence that they experienced a significant decline in business after the Ordinance's enactment, that the publicity surrounding the Ordinance greatly reduced referrals, and that current and prospective residents expressed concern about whether the group home Plaintiffs would close. By requiring the Plaintiffs to prove more, the district court failed to draw all reasonable inferences in their favor, as it was required to do at summary judgment. In addition, we hold that the costs borne by the Plaintiffs to present their permit applications and the costs spent assuring the public that they were still operating despite the City's efforts to close them are compensable. Finally, we hold that the district court erred in dismissing Plaintiff Wiseman's claim for emotional distress, but correctly dismissed Plaintiff Bridgeman's similar claim.

Factual Background

I

Newport Beach (“the City”) is a Southern California beachfront community with about 80,000 residents and is one of the wealthiest cities in the United States.² In the late 1990s “group homes” began opening in increasing numbers in the City, particularly in the beachfront neighborhoods of West Newport and Balboa Park. Group homes are residential facilities in which individuals recovering from drug and alcohol addiction temporarily reside. They provide a communal living environment in which residents help each other to recover from their addictions. In order to preserve a substance-free environment, group homes limit occupancy to persons who are sober; a resident who uses drugs or alcohol is immediately evicted. Because individuals recovering from addiction need to stay for varying lengths of time, they do not typically sign written leases. Typically, group home operators meet with and screen potential residents in advance to ensure that they are serious about pursuing a sober lifestyle.

By April 2007, the City contained 73 group homes, 48 of which were licensed treatment facilities and 25 of which were unlicensed sober houses.³ At that time the City also had 801 outstanding short-term lodging permits, which were issued to owners of properties that were regularly offeredfor rental for short periods of time. These homes are usually rented for profit for a period of 30 days or fewer to tourists who elect Newport Beach as a beach vacation destination. Like group homes, short-term lodgings cater to a revolving clientele that can cause strains on neighborhood resources. In Newport Beach, “short term lodgings” are generally referred to as “vacation homes,” and we use the terms interchangeably.

The three group home Plaintiffs, Pacific Shores Properties LLC (“Pacific Shores”), Newport Coast Recovery LLC (“NCR”), and Yellowstone Women's First Step House, Inc. (“Yellowstone”) (collectively, “the Group Homes”) were part of the influx of group homes into Newport Beach during the mid-to-late 1990s and the early 2000s. The individual Plaintiffs are, respectively, one of the owners and two former residents of Pacific Shores. Pacific Shores and Yellowstone operate unlicensed sober houses, while NCR is a state-licensed facility. Each Group Home spent hundreds of thousands of dollars purchasing and renovating the homes it operates.

The increasing number of group homes in Newport Beach generated escalating hostility on the part of some City residents who, in a series of public meetings, repeatedly described the persons in recovery as “not true handicapped,” “criminals,” “gang members,” and “druggies,” among other derogatory terms.⁴ In response to these concerns, the City passed a series of moratoria in 2007—Ordinances 2007–8, 2007–10, and 2007–16 (collectively, the “Moratoria”)—followed by a new permanent zoning Ordinance 2008–5 (“the Ordinance”). Because the City's intent in passing these measures is central to this appeal, we recount their history in detail.

II

The City's attempts to formally address group homes began at a City...