Chong Yim v. City of Seattle

yFTPEv
IN CLERKS OFFICE X This opinion was
8UPRBE COURT,SHOE OF Va%SHH Taking
right to possess, to legitimate state interest?
exclude others, or to
dispose of property)? Yes

No Is the state interest
outweighed by economic
burden on the owner in
Does the regulation seek
Yes light of the Penn Central
less to prevent a harm than
factors (economic impact, Yes
to require an affirmative Taking
interference with
public benefit?
investment-backed
expectations, and
character of the
No goveimment action)?

NoI
No taking No taking

Margola, 121 Wn.2d at 643-46; Guimont, 121 Wn.2d at 598-604; see also

Robinson, 119 Wn.2d 34; Sintra, 119 Wn.2d 1; Presbytery, 114 Wn.2d 320; Orion

Corp., 109 Wn.2d 621.

By the time we settled on this framework in 1993, it had been suggested that

our test was "undermined by language in Lucas questioning harm versus benefit

15
Yim et al. v. City ofSeattle, No. 95813-1

analysis." Guimont, 121 Wn.2d at 603 n.5. However, we declined to address that

issue because "it would be premature to begin dismantling our takings framework,

carefully crafted in Presbytery, Sintra, and Robinson, without more definitive

guidance on this issue from the United States Supreme Court." Id.

While we continued to await more definitive guidance, this court decided

Manufactured Housing, which forms the basis of the plaintiffs' regulatory takings

claim in this case.

b. Manufactured Housing did not define regulatory takings based
on independent state law

Manufactured Housing's lead opinion cited only Presbytery to support its

holding that a regulation is "subject to a categorical 'facial' taking challenge"

when it "destroys one or more of the fundamental attributes of ownership (the right

to possess, exclude others and to dispose of property)."^ Mfd. Hous., 142 Wn.2d at

355. The plaintiffs and allied amici contend that this category of per se regulatory

takings is based on independent state law and therefore cannot be disavowed

unless it is shown to be both incorrect and harmful. We clarify that this category

of per se regulatory takings is not based on independent state law.

^ The dissents challenged this holding as an incorrect application ofPresbytery. Mfd.
Hous., 142 Wn.2d at 388 (Johnson, J., dissenting), 407-08 (Talmadge, J., dissenting). However,
because we hold that Manufactured Housing's legal underpinnings have disappeared, we assume
without deciding that it correctly applied Presbytery. We also assume without deciding that
Manufactured Housing's lead opinion was joined by a majority of the court on the issues
relevant to this case and that the facts of Manufactured Housing are not materially
distinguishable from the facts presented here.

16
Yim et al. v. City ofSeattle, No. 95813-1

Presbytery unambiguously applied 'fhe 'taking' analysis used by the United

States Supreme Court and by this court," drawing no distinction between the two.

114 Wn.2d at 333 (emphasis added). Presbytery's approach was entirely

consistent with our prior explicit holding that"we will apply the federal analysis to

review all regulatory takings claims." Orion Corp., 109 Wn.2d at 658; see also

Margola Assocs., 121 Wn.2d at 642 n.6; Guimont, 121 Wn.2d at 604. Thus, by

relying solely on Presbytery to define a per se regulatory taking. Manufactured

Housing necessarily relied on federal law.

Furthermore, when applying its definition to the facts presented.

Manufactured Housing's lead opinion cited Presbytery again, along with other

Washington cases, federal cases, and cases from other states. Mfd. Hous., 142

Wn.2d at 364-68. Thus, it is clear from the range of authorities cited in

Manufactured Housing's lead opinion that its definition of a per se regulatory

taking was not based on independent state law but on an attempt to apply federal

law and, perhaps, to discern a national consensus.

It may appear that Manufactured Housing was applying a Washington-

specific definition of regulatory takings because the lead opinion included a

GunwalP analysis. Id. at 356-61. However, the Gunwall analysis was unrelated to

the definition of regulatory takings. Instead,"[wjhat is key is article I, section 16's

State V. Gunwall, 106 Wn.2d 54, 61-62, 720 P.2d 808 (1986).

17
Yim et al. v. City ofSeattle, No. 95813-1

absolute prohibition against taking private property for private use." Id. at 357.

The court therefore concluded that the Washington State Constitution is more

protective than the federal constitution on the basis "that 'private use' under

amended article I, section 16 is defined more literally than under the Fifth

Amendment, and that Washington's interpretation of'public use' has been more

restrictive," Id. at 361. Nevertheless, the conclusion that article I, section 16

defines public and private use more protectively than the federal constitution does

not also establish that article I, section 16 has a more protective definition of

regulatory takings. Those are two separate questions implicating two different

parts of the regulatory takings analysis.

Regulatory takings cases involve a "remedial question of how compensation

is measured once a regulatory taking is established" and "the quite different and

logically prior question whether the . . . regulation at issue had in fact constituted a

taking." Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg'I Planning Agency, 535

U.S. 302, 328, 122 S. Ct. 1465, 152 L. Ed. 2d 517(2002). The definition of a

regulatory taking goes only to the initial determination of whether "'property' has

actually been taken." Mfd. Hous., 142 Wn.2d at 363-64. Meanwhile, the

public/private use distinction goes only to the appropriate remedy once a taking

has been established—compensation or invalidation. See id. at 362.

18
Yim et al. v. City ofSeattle, No. 95813-1

Thus, none of our cases, including Manufactured Housing, defined

regulatory takings based on independent state law. Instead, we have always tried

to ascertain and apply a definition that is consistent with federal law. Our

regulatory takings cases appear state-specific only because, for many years, the

federal definition was difficult to understand. The United States Supreme Court

has since provided definitive guidance on that issue, which "[a]n overwhelming

majority of states" have followed. Phillips v. Montgomery County, 442 S.W.3d

233, 240(Term. 2014). We now do the same.

2. The legal underpinnings of our definition of regulatory takings have
disappeared

Because our prior definition of regulatory takings was not based on

independent state law, we need not decide whether it is incorrect and harmful.

Instead,"we can reconsider our precedent not only when it has been shown to be

incorrect and harmful but also when the legal underpinnings of our precedent have

changed or disappeared altogether." W.G. Clark, 180 Wn.2d at 66. We do so now

because two United States Supreme Court cases decided after Manufactured

Housing establish that the federal legal underpinnings of our precedent have

disappeared, and it has not been shown that there is a principled basis on which to

depart from federal law at this time.

First, in 2002, the United States Supreme Court held that categorical rules

are rarely appropriate in regulatory takings cases. Tahoe-Sierra, 535 U.S. 302.

19
Yim et al. v. City ofSeattle, No. 95813-1

The regulations at issue in Tahoe-Sierra were two temporary development

moratoria "that, while in effect, denie[d] a property owner all viable economic use

of her property." Id. at 320(emphasis added). A number of property owners

brought a facial takings claim, arguing that the regulations "g[ave] rise to an

unqualified constitutional obligation to compensate [them] for the value of its use

during that period." Id.

The United States Supreme Court rejected their claim, cautioning that"we

still resist the temptation to adopt per se rules in our cases involving partial

regulatory takings." Id. at 326. Instead, categorical rules for regulatory takings

claims are appropriate only in an "'extraordinary circumstance,'" such as when a

permanent regulation provides that '''no productive or economically beneficial use

of land is permitted.'" Id. at 330(quoting Twcaj', 505 U.S. at 1017).

In such extraordinary circumstances, there is no need for a case-specific

inquiry because the regulation will "always force individuals to bear a special

burden that should be shared by the public as a whole." Id. at 341 (emphasis

added). However, absent extraordinary circumstances,"the default rule remains

that, in the regulatory taking context, we require a more fact specific inquiry." Id.

at 332. To determine whether there were extraordinary circumstances requiring a

categorical rule, Tahoe-Sierra considered "the concepts of'fairness and justice'

20
Yim et al. v. City ofSeattle, No. 95813-1

that underlie the Takings Clause" and held that the temporary moratoria at issue

could not be deemed per se regulatory takings. Id. at 334.

Tahoe-Sierra thus deeply undermines Manufactured Housing''s view that a

categorical rule is appropriate whenever a property owner is deprived of any part

of"the 'bundle of sticks' representing the valuable incidents of ownership." Mfd.

Hous., 142 Wn.2d at 366. Instead, according to Tahoe-Sierra, categorical rules for

regulatory takings claims are appropriate only in extraordinary circumstances.

It is unlikely that Tahoe-Sierra would recognize extraordinary circumstances

are present whenever a regulation limits "the right to choose to whom one will rent

their property." Resp'ts' Br. at 1. If that were so, every antidiscrimination law that

prohibits a landlord from rejecting a tenant based on protected characteristics

would be a per se regulatory taking requiring either compensation or invalidation.

E.g., RCW 49.60.222(l)(f); SMC 14.08.040(A). Tahoe-Sierra would likely not

allow such a holding because it "would render routine government processes

prohibitively expensive," if not impossible. 535 U.S. at 335.

Although Tahoe-Sierra cautioned that categorical rules are rarely

appropriate in regulatory takings cases, it left open the question of when

regulations present such extraordinary circumstances that categorical rules are

appropriate. That question was resolved in 2005, when Chevron U.S.A.

definitively held that there are only "two relatively narrow categories" of

21
Yim et al. v. City ofSeattle, No. 95813-1

"regulatory action that generally will be deemed per se takings for Fifth

Amendment purposes." 544 U.S. at 538.

One per se category applies "where government requires an owner to suffer

a permanent physical invasion of her property." Id. The other "applies to

regulations that completely deprive an owner of'all economically beneficial us[e]'

of her property." Id. (alteration in original)(quoting 505 U.S. at 1019).

Any other alleged regulatory taking must be analyzed on a case-by-case basis

according to the Penn Central factors. Id. at 538-39. The United States Supreme

Court has since consistently applied these standards when defining regulatory

takings, such that Chevron U.S.A. is clearly the Court's final, definitive statement

on this issue at this time. See Murr v. Wisconsin, 582 U.S. , 137 S. Ct. 1933,

1942-43, 198 L. Ed. 2d 497(2017); Home v. Dep't ofAgric., 576 U.S. , 135

S. Ct. 2419, 2429, 192 L. Ed. 2d 388 (2015); Ark. Game & Fish Comm 'n v. United

States, 568 U.S. 23, 31-32, 133 S. Ct. 511, 184 L. Ed. 2d 417(2012); Stop the

Beach Renourishment, Inc. v. Fla. Dep't ofEnvtl. Prot., 560 U.S. 702, 713, 130

S. Ct. 2592, 111 L. Ed. 2d 184(2010)(partial plurality opinion).

Chevron U.S.A. nan"owly defines per se regulatory takings that trigger

categorical rules. By contrast. Manufactured Housing''s, definition of per se

regulatory takings broadly applies a categorical rule to any regulation that destroys

any fundamental attribute of ownership. Tahoe-Sierra strongly indicates such a

22
Yim et al. v. City ofSeattle, No. 95813-1

categorical rule would be rejected by the United States Supreme Court and

Chevron U.S.A. confirms it. Therefore, Manufactured Housing's definition of per

se regulatory takings is no longer a valid application of the federal law on which it

was based. And because it has not been shown that we should now depart from the

federal definition of regulatory takings as a matter of independent state law, we

disavow Manufactured Housing's definition."^

In addition. Chevron U.S.A. clarified the Penn Central factors for evaluating

partial regulatory takings claims that do not fit within either per se category. Those

factors are intended to shed light on "the magnitude or character ofthe burden a

particular regulation imposes upon private property rights" and to provide

"information about how any regulatory burden is distributed among property

owners." Id. at 542. The factors explicitly do not ask "whether a regulation of

private property is effective in achieving some legitimate public purpose." Id.

By contrast, our prior regulatory takings cases allow a regulation to be

"insulated from a 'takings' challenge" if it "protects the public from harm" and

require courts to consider whether the challenged "regulation substantially

Some amici appear to contend that we should now adopt Manufactured Housing'?,
definition of per se regulatory takings as a matter of independent state law. However, amici's
arguments are all based on Washington's more protective definitions of public and private uses,
which, as discussed above, are relevant only to the appropriate remedy once a taking has been
established. No party or amicus performs a Gunwall analysis or provides any other principled
basis on which to define regulatory takings broadly as a matter of independent state law. See
Gunwall, 106 Wn.2d 54. We therefore decline to do so.

23
Yim et al. v. City ofSeattle, No. 95813-1

advances legitimate state interests." Presbytery, 114 Wn.2d at 330, 333; see also

Margola Assocs., 121 Wn.2d at 645-46; Guimont, 121 Wn.2d at 603-04; Robinson,

119 Wn.2d at 49-50; Sintra, 119 Wn.2d at 14-17; Orion Corp., 109 Wn.2d at 658.

That precedent can no longer be valid because it may provide less protection for

private property rights than the federal constitution does. See Orion Corp., 109

Wn.2d at 652, 657-58.

In sum,today we continue our long-standing practice of following federal

law in defining regulatory takings and explicitly adopt the definition set forth in

Chevron U.S.A. Pursuant to Chevron U.S.A., there are only two categories of per

se regulatory takings:(1)"where government requires an owner to suffer a

permanent physical invasion of her property" and (2)"regulations that completely

deprive an owner of'all economically beneficial us[e]' of her property." 544 U.S.

at 538 (alteration in original)(quoting Lucas, 505 U.S. at 1019). If an alleged

regulatory taking does not fit into either category, it must be considered on a case-

by-case basis in accordance with the Penn Central factors. Id. at 538-39.

3. The plaintiffs do not show that the FIT rule facially effects a
regulatory taking

The plaintiffs do not argue that the FIT rule fits into either of the per se

categories set forth in Chevron U.S.A., and it clearly does not. On its face, the FIT

rule does not require any property owners to suffer any permanent physical

invasion of their properties, and the plaintiffs do not contend that the FIT rule

24
Yim et al. v. City ofSeattle, No. 95813-1

deprives them of any economically beneficial uses of their properties, let alone

every economically beneficial use. The plaintiffs also do not contend that the FIT

rule is a regulatory taking pursuant to the Penn Central factors.^ We therefore

reverse the trial court and hold that the plaintiffs have not shown the FIT rule

facially effects a regulatory taking of their property.

B. Because the plaintiffs have not shown that the FIT rule effects a taking, we
do not reach the issue of whether it is for private use

The plaintiffs contend that the regulatory taking effected by the FIT rule is

for private use, rather than public use, and is therefore invalid. Because we hold

that the plaintiffs do not show the FIT rule effects a taking at all, we decline to

consider the public/private use distinction. As discussed above, that distinction is

relevant only to the appropriate remedy where a taking has been shown, and no

taking has been shown here.

C. The FIT rule does not facially violate substantive due process

The plaintiffs next claim that the FIT rule facially violates their article I,

section 3 right to substantive due process, contending that the FIT rule is subject to

heightened scrutiny because it regulates a fundamental attribute of property

ownership. We hold that the applicable standard is rational basis review, which the

FIT rule survives.

^ We express no opinion on whether application of the Penn Central factors would show
that the FIT rule effects a regulatory taking as applied to any particular property.

25
Yim et al. v. City ofSeattle, No. 95813-1

1. The FIT rule is subject to rational basis review

As discussed in more detail in our opinion in Yim II, we have never held that

independent state law requires a heightened standard of review for substantive due

process challenges to laws regulating the use of property. Instead, we have always

looked to federal law to discern the appropriate standard of review, and it has not

been shown that we should adopt a heightened standard now as a matter of

independent state law. We therefore hold that the plaintiffs' article I, section 3

substantive due process claim is subject to the same standard that would apply if

their claims were based on the due process clauses of the Fifth and Fourteenth

Amendments. That standard is rational basis review.

We recognize that some United States Supreme Court precedent might

suggest heightened scrutiny is required by stating that laws regulating the use of

property must not be '"unduly oppressive'" on the property owner, or must have a

'"substantial relation'" to a legitimate government purpose. Goldblatt, 369 U.S. at

595 (quoting Lawton, 152 U.S. at 137); Nectow v. City of Cambridge, 211 U.S.

183, 187, 48 S. Ct. 447, 72 L. Ed. 842(1928)(quoting Village ofEuclid v. Ambler

Realty Co., 272 U.S. 365, 395, 47 S. Ct. 114, 71 L. Ed. 303 (1926)). However,the

United States Supreme Court does not interpret this language as requiring

heightened scrutiny. Instead, the "unduly oppressive" test has been interpreted as

"applying a deferential 'reasonableness' standard." Chevron U.S.A., 544 U.S. at

26
Yim et al. v. City ofSeattle, No. 95813-1

541 (internal quotation marks omitted)(citing and quoting Goldblatt, 369 U.S. at

594-95; Lawton, 152 U.S. at 137). Likewise, it has long been acknowledged that

"the use of property and the making of contracts are normally matters of private

and not of public concern," but "[ejqually fundamental with the private right is that

of the public to regulate it in the common interest." Nebbia v. New York, 291 U.S.

502, 523, 54 S. Ct. 505, 78 L. Ed. 940 (1934).

Therefore, a law regulating the use of property violates substantive due

process only if it "fails to serve any legitimate governmental objective," making it

"arbitrary or irrational." Chevron U.S.A., 544 U.S. at 542; see also Kentner v. City

ofSanibel, 750 F.3d 1274, 1280-81 (11th Cir. 2014), cert, denied, 135 S. Ct. 950

(2015); Samson v. City ofBainbridge Island, 683 F.3d 1051, 1058 (9th dr.), cert,

denied, 568 U.S. 1041 (2012). This test con-esponds to rational basis review,

which requires only that "the challenged law must be rationally related to a

legitimate state interest." Amunrud, 158 Wn.2d at 222. We therefore apply

rational basis review to the plaintiffs' substantive due process challenge to the FIT

rule.^

® Appended to our opinion in Yim II is a nonexclusive list of this court's precedent that
can no longer be interpreted as requiring heightened scrutiny in substantive due process
challenges to laws regulating the use of property.

27
Yim et al. v. City ofSeattle, No. 95813-1

2. The FIT rule survives rational basis review on its face

Rational basis review requires that "the challenged law must be rationally

related to a legitimate state interest." Id. Rational basis review is highly

deferential because "a court may assume the existence of any necessary state of

facts which it can reasonably conceive in determining whether a rational

relationship exists between the challenged law and a legitimate state interest." Id.

The purpose of the FIT rule is to mitigate the impact of implicit bias in

tenancy decisions. The plaintiffs appear to suggest this is not a legitimate

government interest because "implicit bias can be both positive and negative."

Resp'ts' Br. at 41. However, the fact that implicit bias may work to some people's

advantage some of the time does not mean that mitigating its impact is an

illegitimate purpose. Indeed, this court has recognized the importance of

mitigating implicit bias in the context ofjury selection with the enactment of GR

37. The plaintiffs do not show that implicit bias must be allowed to continue in the

rental housing context.

The FIT rule's requirements are also rationally related to achieving its

purpose. A rational person could believe that implicit bias will be mitigated by

requiring landlords to offer tenancy to the first qualified applicant, rather than

giving landlords discretion to reject an otherwise-qualified applicant based on a

"gut check." Verbatim Report of Proceedings (Feb. 23, 2018) at 36. It is precisely

28
Yim et al. v. City ofSeattle, No. 95813-1

in such gut-check decisions where implicit bias is most likely to have influence

because bias is "often unintentional, institutional, or unconscious." State v.

Saintcalle, 178 Wn.2d 34, 36, 309 P.3d 326(2013)(plurality opinion), abrogated

on other grounds by City ofSeattle v. Erickson, 188 Wn.2d 721, 398 P.3d 1124

(2017).

Indeed, the FIT rule's requirements are based on best practices

recommended by industry associations, who advise that "[ujsing a set criteria also

helps show that you are screening all applicants alike and can help avoid claims of

discrimination by applicants not granted tenancy." CP at 315. Landlords are

therefore advised to offer tenancy to the first qualified applicant "as a best practice

when confronted with multiple, equally valid applications as a 'tie breaker.'" Br.

of Amicus Curiae Rental Hons. Ass'n of Wash, at 3. Appearing as amici, several

rental housing associations emphatically state that they do not support the FIT rule.

Nevertheless, the procedures required by the FIT rule are consistent with industry-

recommended best practices. Amici object only to making those practices

mandatory, contending that doing so is unwise and will prove ineffective.

Rational basis review does not invite a demanding inquiry by this court into

whether the FIT rule is good policy. Instead, our task is limited to deciding

whether mandating industry-recommended best practices for avoiding

29
Yim et al. v. City ofSeattle, No. 95813-1

discrimination in tenancy decisions is rationally related to reducing the influence of

implicit bias in tenancy decisions. The answer is clearly yes.

The plaintiffs further suggest that the FIT rule fails rational basis review

because it is overbroad, given that "non-legal approaches" could be used instead

and the FIT rule applies "even where a protected class is not among the landlords'

applicant pool." Resp'ts' Br. at 41. However,"[t]he overbreadth doctrine may not

be employed unless First Amendment activities are within the scope ofthe

challenged enactment." City ofSeattle v. Montana, 129 Wn.2d 583, 598, 919 P.2d

1218 (1996)(plurality opinion); U.S. Const, amend. I. Thus, any assertion of

overbreadth is irrelevant to the plaintiffs' facial substantive due process claim. The

plaintiffs' free speech claim is addressed separately below.

It may well be that the FIT rule will prove ineffective or unwise as a matter

of policy. However,the plaintiffs do not carry their "'heavy burden'" of showing

that it facially violates substantive due process as a matter of law. Amunrud, 158

Wn.2d at 215 (quoting Larson v. Seattle Popular Monorail Auth., 156 Wn.2d 752,

757, 131 P.3d 892(2006)). We therefore reverse the trial court and hold that the

FIT rule survives rational basis review on its face.

D. The FIT rule does not facially violate free speech rights

Finally, the plaintiffs claim that the FIT rule facially violates their article I,

section 5 right to free speech. It is undisputed that the speech at issue here

30
Yim et al. v. City ofSeattle, No. 95813-1

(advertisements for vacant tenancies) is "commercial speech," that is,'"speech

proposing a commercial transaction.'" Zauderer v. Office ofDisciplinary Counsel,

471 U.S. 626, 637, 105 S. Ct. 2265, 85 L. Ed. 2d 652(1985)(quoting Ohralikv.

Ohio State Bar Ass'n, 436 U.S. 447, 455-56, 98 S. Ct. 1912, 56 L.Ed. 2d 444

(1978)). It is also undisputed that article I, section 5 and the First Amendment

provide identical protections for commercial speech. Bradburn v. N. Cent. Reg'I

Library Dist., 168 Wn.2d 789, 800, 231 P.3d 166 (2010).

The main focus of the parties' dispute is the level of scrutiny that we must

apply to the FIT rule. The trial court agreed with the plaintiffs that the FIT rule is

subject to intermediate scrutiny and "cannot survive." CP at 520. We reverse.

The FIT rule is subject to, and survives, deferential scrutiny.

1. The FIT rule is subject to deferential scrutiny

"'[Cjommercial speech' is entitled to the protection of the First Amendment,

albeit to protection somewhat less extensive than that afforded 'noncommercial

speech.'" Zauderer, 471 U.S. at 637. The level of scrutiny applied to laws

governing commercial speech depends on whether the law at issue actually

restricts commercial speech or merely requires commercial speakers to include

factual disclosures. Id. at 650.

Where a law restricts truthful commercial speech proposing a lawful

transaction, the law is subject to intermediate scrutiny. Cent. Hudson Gas & Elec.

31
Yim et al. v. City ofSeattle, No. 95813-1

Corp. V. Pub. Serv. Comm 'n, 447 U.S. 557, 564, 100 S. Ct. 2343, 65 L. Ed. 2d 341

(1980). Meanwhile, if the law merely requires factual disclosures by commercial

speakers, review is deferential because a person's "constitutionally protected

interest in not providing any particular factual information in his advertising is

minimal." Zauderer, 471 U.S. at 651. Therefore,"an advertiser's rights are

adequately protected as long as disclosure requirements are reasonably related to

the State's interest in preventing deception of consumers." Id. The government

has the burden of proving its disclosure requirements are "neither unjustified nor

unduly burdensome." Nat'llnst. ofFamily & Life Advocates v. Becerra, 585 U.S.

, 138 S. Ct. 2361, 2377, 201 L. Ed. 2d 835 (2018)(NIFLA).

The plaintiffs contend that the FIT rule is a restriction on their commercial

speech because the FIT rule provides that "[IJandlords cannot decline to

communicate a minimum threshold or communicate a flexible standard and then

weigh the credit history against other positive or negative factors in the

application." Resp'ts' Br. at 43. Nothing in the text of the FIT rule supports the

plaintiffs' contention.

Washington law already provides that "[pjrior to obtaining any information

about a prospective tenant, the prospective landlord shall first notify the

prospective tenant" of the "types of information [that] will be accessed to conduct

the tenant screening" and "[wjhat criteria may result in denial of the application."

32
Yim et al. v. City ofSeattle, No. 95813-1

RCW 59.18.257(1)(a)(i)-(ii). The validity of that statute is not challenged here.

The FIT rule merely provides that if property owners have additional rental criteria

beyond what may result in a denial, they must "at the same time" give prospective

tenants notice of what those criteria are and how they may be met. SMC

14.08.050(A)(1).

On its face, the FIT rule does not impose any restrictions on what the

landlord's additional criteria may be or how they must be worded, and, contrary to

the trial court's finding, it does not facially preclude advertisements for vacant

tenancies from including phrases such as '"call to learn how to apply' or 'email me

for further details.'" CP at 518. If the FIT rule is interpreted to impose such

restrictions in the future, a property owner may bring an as-applied challenge that

might be subject to heightened scrutiny. However, on its face, the FIT rule

requires only that landlords disclose factual information about their own rental

criteria. It is therefore subject to deferential scrutiny in accordance with Zanderer.

2. The FIT rule survives deferential scrutiny

The plaintiffs analyze their free speech claim only in accordance with

intermediate scrutiny. However, it is still the City's burden to prove that the FIT

rule survives deferential scrutiny. NIFLA, 138 S. Ct. at 2377. We hold the City

has met its burden because on its face, the FIT rule is a justified disclosure

requirement that does not unduly burden the plaintiffs' free speech rights.

33
Yim et al. v. City ofSeattle, No. 95813-1

To prove that the FIT rule is justified, the City must show that it addresses

"a harm that is 'potentially real not purely hypothetical.'" Id. (quoting Ibanez v.

Fla. Dep'tofBus. & ProfI Regulation, 512 U.S. 136, 146, 114 S. Ct. 2084, 129

L. Ed. 2d 118 (1994)). The City has shown that the problem of implicit bias in

Seattle's rental housing market is (at least) potentially real, based on a 2014 study

that "showed evidence of differential treatment in over 60% of the tests" based on

"race, national origin, sexual orientation and gender identity." City of Seattle's

Opening Br. at 7; CP at 57. This differential treatment included subjecting

different applicants to different rental criteria:

African American and Latino testers were told about criminal
background and credit history checks more frequently than the white
testers. They also were asked more often about their spouses'
employment history (especially with Latino testers). They also were
shown and told about fewer amenities, provided fewer applications
and brochures, were shown fewer vacant units. In some cases, the
prices quoted were higher for the same unit.

Testers for sexual orientation and gender identity were shown fewer
amenities, provided fewer applications and brochures, and were
shown fewer vacant units. In some cases, the prices quoted were
higher for the same unit.

CP at 57. This is sufficient justification for the FIT mle's enactment.

To prove that the FIT rule does not "unduly burden[]protected speech," the

City must show that it does not impose "a government-scripted, speaker-based

disclosure requirement that is wholly disconnected from [the Cityj's informational

interest." NIFLA, 138 S. Ct. at 2377. It clearly does not. The landlords are

34
Yim et al. v. City ofSeattle, No. 95813-1

required to disclose only the rental criteria they set for themselves, so the FIT rule

does not impose any type of script. In addition, requiring landlords to disclose

their rental criteria is directly connected to the City's interest in ensuring that the

same rental criteria are applied to all applicants rather than subjecting some

applicants to more demanding criteria due to the influence of implicit bias.

We therefore reverse the trial court and hold that the FIT rule survives

deferential scrutiny on its face.

CONCLUSION

The FIT rule is unquestionably an experiment. This is clear from the rule

itself, which requires "the City Auditor to conduct an evaluation ofthe impact of

the program described in subsections 14.08.050.A-C to determine if the program

should be maintained, amended, or repealed." SMC 14.08.050(D). There is room

for substantial debate about whether such an experiment is likely to succeed.

However, the plaintiffs' facial challenges ask only whether the FIT rule is an

experiment that Seattle is constitutionally prohibited from conducting. It is not.

We clarify that Washington courts have always attempted to define

regulatory takings consistently with federal law, and we continue to do so now.

Therefore, we adopt the definition of regulatory takings set forth in Chevron U.S.A.

for purposes of article I, section 16 and hold that the plaintiffs have not met their

burden of showing the FIT rule facially meets this definition. We also clarify that

35
Yim et al. v. City ofSeattle, No. 95813-1

rational basis review applies in substantive due process challenges to laws

regulating the use of property and hold that the plaintiffs have not met their burden

of proving that the FIT rule fails rational basis review on its face. Finally, we hold

that on its face, the FIT rule requires only factual disclosures and the City has met

its burden of showing the FIT rule survives deferential scrutiny.

We therefore reverse the trial court and remand with instructions to grant the

City's motion for summary judgment.

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Yim, etal., v. City ofSeattle,Y\o. 95813-1

WE CONCUR:

H2^('e-7

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