FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
MHC FINANCING LIMITED No. 07-15982
PARTNERSHIP, an Illinois limited
partnership; GRAPELAND VISTAS, D.C. No.
INC., a California corporation, CV-04-03325-
Plaintiffs-Appellants, VRW
v.
CITY OF SAN RAFAEL, a municipal
corporation; CONTEMPO MARIN
HOMEOWNERS ASSOCIATION , a
California corporation,
Defendants-Appellees.
MHC FINANCING LIMITED No. 09-16447
PARTNERSHIP, an Illinois limited
partnership; GRAPELAND VISTA , D.C. No.
INC., an Illinois corporation, 3:00-cv-03785-
Plaintiffs-Appellees, VRW
v.
CITY OF SAN RAFAEL,
Defendant-Appellant,
and
2 MHC LIMITED FINANCING V . CITY OF SAN RAFAEL
CONTEMPO MARIN HOMEOWNERS
ASSOCIATION ,
Defendant-Intervenor.
MHC FINANCING LIMITED No. 09-16451
PARTNERSHIP, an Illinois limited
partnership; GRAPELAND VISTA , D.C. No.
INC., an Illinois corporation, 3:00-cv-03785-
Plaintiffs-Appellees, VRW
v.
CITY OF SAN RAFAEL,
Defendant-Appellant,
CONTEMPO MARIN HOMEOWNERS
ASSOCIATION ,
Defendant-Intervenor-Appellee.
MHC FINANCING LIMITED No. 09-16612
PARTNERSHIP, an Illinois limited
partnership; GRAPELAND VISTA , D.C. No.
INC., an Illinois corporation, 3:00-cv-03785-
Plaintiffs-Appellees, VRW
v.
CITY OF SAN RAFAEL,
Defendant,
MHC LIMITED FINANCING V . CITY OF SAN RAFAEL 3
and
CONTEMPO MARIN HOMEOWNERS
ASSOCIATION ,
Defendant-Intervenor-Appellant.
MHC FINANCING LIMITED No. 09-16613
PARTNERSHIP, an Illinois limited
partnership; GRAPELAND VISTA , D.C. No.
INC., an Illinois corporation, 3:00-cv-03785-
Plaintiffs-Appellees VRW
Cross-Appellants,
v. OPINION
CITY OF SAN RAFAEL,
Defendant-Appellant
Cross-Appellee,
CONTEMPO MARIN HOMEOWNERS
ASSOCIATION ,
Defendant-Intervenor-
Appellant Cross-Appellee.
Appeal from the United States District Court
for the Northern District of California
Vaughn R. Walker, District Judge, Presiding
Argued and Submitted
February 13, 2013—San Francisco, California
4 MHC LIMITED FINANCING V . CITY OF SAN RAFAEL
Filed April 17, 2013
Before: Jerome Farris, Sidney R. Thomas,
and N. Randy Smith, Circuit Judges.
Opinion by Judge Thomas
SUMMARY*
Civil Rights
The panel affirmed in part and reversed in part the district
court’s bench trial judgment and held that the City of San
Rafael’s mobilehome rent regulation passed constitutional
muster.
The panel held that the district court properly rejected the
City’s arguments that plaintiff’s claims were barred by the
statute of limitations and precluded by res judicata, and that
the district court did not abuse its discretion in allowing
plaintiff to amend its complaint.
Reversing the district court, the panel held that the
economic impact, investment-backed expectations, and
character of San Rafael’s Mobilehome Rent Stabilization
Ordinance all lead to the conclusion that the Ordinance, as
amended in 1999, did not constitute a Penn Central taking.
The panel further held that because the Ordinance was
rationally related to a conceivable public purpose, the
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
MHC LIMITED FINANCING V . CITY OF SAN RAFAEL 5
Ordinance did not amount to a private taking, nor did it run
afoul of substantive due process.
The panel held that the district court did not err in
submitting plaintiff’s breach of settlement agreement claims
to the jury, denying the motion for a directed verdict on that
question, denying the motion for a new trial, or awarding
attorneys’ fees to the City for its victory on the settlement
claims. Finally, the panel affirmed the district court’s
dismissal of plaintiff’s second subsequent suit against the
City which was filed while the original lawsuit was pending.
The panel determined that the claims in both suits were the
same and plaintiff had agreed to waive its damage claims in
the first lawsuit.
COUNSEL
David J. Bradford (argued), Barry Levenstam, Lisa T.
Scruggs, and Bradley M. Yusim, Jenner & Block LLP,
Chicago, Illinois, for Plaintiffs-Appellees-Cross-Appellants-
Appellants.
Michael von Loewenfeldt (argued) and James M. Wagstaffe,
Kerr & Wagstaffe LLP, San Francisco, California; Robert F.
Epstein, Ragghianti Freitas LLP, San Rafael, California, for
Defendant-Appellant-Cross-Appellee-Appellee City of San
Rafael.
Gordon C. Atkinson (argued), Cooley Godward Kronish LLP,
San Francisco, California, for Defendant-Intervenor-
Appellant-Cross-Appellee-Appellee Contempo Marin
Homeowners Association.
6 MHC LIMITED FINANCING V . CITY OF SAN RAFAEL
R.S. Radford, Pacific Legal Foundation Sacramento,
California, for Amicus Curiae Pacific Legal Foundation.
Elliot L. Bien and Amy E. Margolin, Bien & Summers,
Novato, California, for Amicus Curiae Western Manufactured
Housing Association.
Andrew W. Schwartz, Fran M. Layton, Matthew D. Zinn, and
Amanda R. Garcia, Shute, Mihaly & Weinberger LLP, San
Francisco, California, for Amicus Curiae League of
California Cities and California State Association of
Counties.
Bruce E. Stanton, Law Offices of Bruce E. Stanton, San Jose,
California, for Amicus Curiae Golden State Manufactured-
Home Owners’ League, Inc.
OPINION
THOMAS, Circuit Judge:
As Yogi Berra observed, “it’s deja vu all over again” as
we are being “called upon to consider, yet again, a takings
challenge to mobile home rent control laws.” Levald, Inc. v.
City of Palm Desert, 998 F.2d 680, 683 (9th Cir. 1993). In
this appeal, we consider whether San Rafael’s mobilehome
rent regulation violates the park owners’ substantive due
process rights, constitutes a regulatory taking under Penn
Central Transportation Co v. New York City, 438 U.S. 104
(1978), or runs afoul of the ‘public use’ requirement of the
Fifth Amendment under the standards articulated in Kelo v.
City of New London, 545 U.S. 469 (2005). We conclude that
the regulation passes muster against all of these challenges.
MHC LIMITED FINANCING V . CITY OF SAN RAFAEL 7
I.
Contempo Marin is one of two mobilehome parks in San
Rafael, California and is owned by MHC Financing Limited
Partnership (now Equity LifeStyle Properties, Inc.) and
Grapeland Vistas, Inc. (collectively, “MHC”). MHC owns
the pads upon which the mobilehomes sit and pad lessees pay
monthly rent to MHC for use of their respective pads and the
facilities and services that MHC provides. Despite their
name, mobilehomes located in mobile home parks are
actually not very mobile: pad lessees at Contempo Marin, as
elsewhere, who wish to relocate usually sell their
mobilehomes in place to the new resident, and the purchaser
– in addition to acquiring the mobilehome – takes over the
pad leasehold. See Yee v. City of Escondido, 503 U.S. 519,
523 (1992). Mobilehome owners sell their mobilehome and
pad lease rights for one lump sum, so value of the rent
controls is figured into the total purchase price and
“capitalized” into the value of the mobilehome; MHC
receives less revenue because the rent it can charge for the
pad is limited, and it claims that this is an unconstitutional
taking without just compensation under the Fifth Amendment
and violates its substantive due process rights.
A. The Rent Control Regime
In 1989, San Rafael enacted the Mobilehome Rent
Stabilization Ordinance. That Ordinance imposed rent
controls tied to the consumer price index (“CPI”): if the
change in CPI was less than 5%, the park owner could
increase pad rents by a percentage equal to the change;
between 5–10%, pad rents could be increased at 75% of the
CPI, and above 10%, pad rents could be increased at 66% of
8 MHC LIMITED FINANCING V . CITY OF SAN RAFAEL
the CPI change. Under the 1989 Ordinance, park owners
could seek a greater increase through a defined process.
In 1993, the City amended the Ordinance to add “vacancy
control,” which gave any new resident taking over a
mobilehome pad lease the right to rent the pad at the same
rate as the previous tenant. The then-owner of Contempo
Marin sued in state court, alleging that the combination of
pad rent control and vacancy control in the amended
Ordinance was an unconstitutional taking. The superior court
upheld the Ordinance. See De Anza Assets, Inc. v. City of San
Rafael, Case No A063017 (Cal. Dist. Ct. App. Oct. 6, 1994).
While on appeal, MHC purchased Contempo Marin. The
court of appeal concluded that the vacancy control
amendments do not constitute a regulatory taking, but
reversed and remanded on other grounds. Id.
In 1999, the City amended the Ordinance to remove the
sliding scale for pad rent increases and instead limited
increases to a flat 75% of the change in CPI. The
Amendments also altered rent increases related to capital
improvements. As before, the 1999 Amendments to San
Rafael’s mobilehome rent regulation provide an
administrative procedure by which park owners such as MHC
may seek rent increases beyond that which the regulation’s
formula provides in order to obtain a “just and reasonable
return.”
B. Procedural History
On October 13, 2000, MHC commenced this suit
challenging the constitutionality of the City’s regulations on
the ground that they violate the Takings Clause of the Fifth
MHC LIMITED FINANCING V . CITY OF SAN RAFAEL 9
Amendment as made applicable to the states by the
Fourteenth Amendment.
In 2001, the parties reached a settlement agreement
whereby the City agreed to “initiate” amendments that would
repeal vacancy control.1 The City Council held public
1
As relevant here, the agreement is as follows:
2. AGREEMENT
The parties make the following agreement:
2.1 Amendments to Mobilehome Rent Stabilization
Ordinance. Subject to approval by the City Council
and following notice and public hearing, the City will
initiate the following amendments of the City’s
Mobilehome Rent Stabilization regulations, Chapter 20
of the San Rafael Municipal Code:
a. Vacancy decontrol . . .
b. Calculation of automatic permissible
annual rent increase . . .
c. Clarification regarding appeal of rent
arbitration to City Council . . .
d. Applicability to subtenancies . . .
...
2.7 Subject to approval by City. The Agreement
is expressly conditioned upon and subject to the
approval of the Agreement by the San Rafael City
Council. Following agreement by the parties on the
final form and content of the Agreement, the City
Council will meet in closed session to consider the
Agreement with counsel. In the event the City Council
10 MHC LIMITED FINANCING V . CITY OF SAN RAFAEL
hearings, but elected not to repeal vacancy control. MHC
moved to enforce the settlement agreement, claiming that the
City had committed itself to actually repealing vacancy
control. The district court granted MHC’s motion, holding
that the City was contractually obligated to repeal vacancy
control, but in 2002, the court granted the City’s motion for
reconsideration of the court’s earlier holding that the
settlement agreement was a valid contract. In October and
November 2002, the district court held a jury trial on the
contract claims, resulting in a jury verdict in favor of the City,
and conducted a bench trial on MHC’s constitutional claims.
MHC filed motions for judgment as a matter of law
notwithstanding the verdict and motions for a new trial,
which the district court denied.
After the bench trial, the district court stayed its ruling on
the takings causes of action pending the Ninth Circuit’s
decision in Chevron USA, Inc. v. Bronster, 363 F.3d 846, 849
(9th Cir. 2004), rev’d sub nom. Lingle v. Chevron U.S.A. Inc.,
544 U.S. 528 (2005) and extended the stay after the Supreme
Court granted certiorari in that case. See Lingle v. Chevron
U.S.A. Inc., 543 U.S. 924, (2004) (granting certiorari).
fails to approve the Agreement as drafted, the
Agreement shall be void and of no effect. In the event
the form and content of the Agreement are approved as
drafted, the Agreement will be circulated for signature
by the parties and their respective counsel. The
obligation of the City to process Ordinance
amendments pursuant to paragraph 2.1 of this
Agreement and to implement the same shall not arise
until a fully executed Agreement has been received by
the City Attorney’s office. Further, MHC shall have no
obligation hereunder if the Ordinance is not amended
and effective by 120 days after the Agreement is fully
executed.
MHC LIMITED FINANCING V . CITY OF SAN RAFAEL 11
In August 2004, while the case was stayed, MHC filed a
second lawsuit, “MHC II,” (3:04-CV-03325) seeking
monetary damages for takings and equal protection
violations, arguing that it was challenging acts subsequent to
the filing of its first complaint. The district court determined
that MHC had already waived its monetary damages as part
of the first lawsuit, so it dismissed with prejudice that
complaint in December 2006.
On May 23, 2005, the Supreme Court issued its decision
in Lingle, and rejected the “substantially advances” theory of
regulatory takings that had been the theory of MHC’s claims.2
Lingle v. Chevron U.S.A. Inc., 544 U.S. 528 (2005). MHC
then requested leave to amend its complaint and file new
constitutional claims, which the court granted in January
2006. Id.
MHC filed its Second Amended Complaint in February
2006, claiming that the Ordinance constitutes a regulatory
taking under Penn Central, a private taking under Kelo, and
that the Ordinance denied substantive due process under
Lingle. The district court conducted a second bench trial in
April and May 2007, issued preliminary findings of fact and
conclusions of law on July 26, 2007, and issued a final order
on January 28, 2008.
The district court held that “[p]urchasers of mobilehomes
in Contempo Marin after the 1999 Amendments have paid a
premium reflecting the present value of expected rent savings
2
The Supreme Court concluded that the question of whether a regulation
“substantially advances” a legitimate state interest “prescribes an inquiry
in the nature of a due process, not a takings, test, and that it has no proper
place in our takings jurisprudence.” Lingle, 544 U.S. at 540.
12 MHC LIMITED FINANCING V . CITY OF SAN RAFAEL
due to San Rafael rent regulation. This premium averages
$67,000 for the right the enjoy the below market regulated
rent.” Because the premium is being paid to the Contempo
Marin mobilehome owners, “the amendments reduced
MHC’s revenue streams from Contempo Marin and the value
of its property by $10,609,136.” The district court also held
that “the whole Ordinance reduced MHC’s net operating
income by 75 percent and reduced the value of the park from
$120 million to $23 million.”
The district court held the ordinance to be “(a)
unconstitutional and invalid as a private taking both on its
face and as applied to Plaintiffs . . . and (b) unconstitutional
and invalid as applied to Plaintiffs . . . as an uncompensated
regulatory taking under the standards set forth in Penn
Central . . . .” The district court held that the Ordinance did
not deny MHC due process of law under the Fourteenth
Amendment.
The City brought motions to stay enforcement of the
judgment pending appeal. The district court permanently
enjoined the City from enforcing the Ordinance, but phased
out its enforcement. Current Contempo Marin residents
could continue to pay controlled rents for ten years, and rent
and vacancy controls would be lifted immediately for any
new residents.
The district court awarded fees and costs to MHC under
42 U.S.C. § 1988 for having prevailed on its taking claims,
and fees and costs to the City under the terms of the
settlement agreement for successfully defending MHC’s
contract claims. MHC was awarded a total of $3,303,226.91,
and the City was awarded a total of $1,249,550.43.
MHC LIMITED FINANCING V . CITY OF SAN RAFAEL 13
We have jurisdiction under 28 U.S.C. § 1291. The City
and MHC timely appealed from the district court’s June 30,
2009 final judgment and from all interlocutory orders that
gave rise to that judgment. “In reviewing a final judgment,
we have jurisdiction to review interlocutory rulings that may
have affected the outcome of the proceedings in the district
court.” U.S. Dominator, Inc. v. Factory Ship Robert E.
Resoff, 768 F.2d 1099, 1103 (9th Cir. 1985), superseded on
other grounds by FED . R. CIV . P. 72(a); see also Hall v. City
of L.A., 697 F.3d 1059, 1070 (9th Cir. 2012).
II.
The district court properly rejected the City’s arguments
that MHC’s claims were barred by the statute of limitations
and precluded by res judicata, and the district court did not
abuse its discretion in allowing MHC to amend its complaint.
A. Statute of Limitations
The City first contends that this suit is barred by the
statute of limitations. All parties agree that the applicable
statute of limitations in this case is one year. The City claims
that MHC is challenging the 1993 Ordinance, which makes
its complaint filed in 2000 untimely. “Whether a claim is
barred by a statute of limitations and when a statute of
limitations begins to run are reviewed de novo.”
Manufactured Home Communities Inc. v. City of San Jose,
420 F.3d 1022, 1025 (9th Cir. 2005); see also Hooper v.
Lockheed Martin Corp., 688 F.3d 1037, 1045 (9th Cir. 2012).
We agree with MHC and the district court that the
complaint is a timely challenge to the Ordinance as amended
in 1999. MHC is permitted to challenge the entire Ordinance
14 MHC LIMITED FINANCING V . CITY OF SAN RAFAEL
as it existed in 1999 because the constitutionality of the
Ordinance can only be determined by evaluating the totality
of its provisions and effects and because the 1999
amendments cannot be evaluated in isolation. The 1999
amendments did substantively change the operation of the
Ordinance, and provisions that were found in the predecessor
Ordinance are not immunized from judicial scrutiny.
B. Res Judicata
Judicial proceedings of any state “have the same full faith
and credit in every court within the United States . . . as they
have by law or usage in the courts of such State.” 28 U.S.C.
§ 1738; see San Remo Hotel, L.P. v. City & Cnty. of S.F.,
545 U.S. 323, 347–48 (2005). Res judicata therefore
precludes a party that has proceeded on federal claims in state
court from relitigating those claims in federal court. San
Remo Hotel, 545 U.S. at 346–48. “When applying res
judicata to a state court decision, we ‘give the same
preclusive effect to [that] judgment as another court of that
State would give,’ meaning that we apply res judicata as
adopted by that state.” Adam Bros. Farming, Inc. v. Cnty. of
Santa Barbara, 604 F.3d 1142, 1148 (9th Cir. 2010)
(alteration in original) (citation omitted). “Under California
law, res judicata precludes a party from relitigating (1) the
same claim, (2) against the same party, (3) when that claim
proceeded to a final judgment on the merits in a prior action.”
Id. at 1148–49 (citing Mycogen Corp. v. Monsanto Co.,
51 P.3d 297, 301 (Cal. 2002)).
A claim is the “same claim” if it is derived from the same
“primary right,” which is “‘the right to be free from a
particular injury, regardless of the legal theory on which
liability for the injury is based.’” Id. at 1149 (quoting Fed’n
MHC LIMITED FINANCING V . CITY OF SAN RAFAEL 15
of Hillside & Canyon Ass’ns v. City of L.A., 24 Cal. Rptr. 3d
543, 557 (Cal. Ct. App. 2004)). Res judicata claims are
reviewed de novo. Manufactured Home Communities,
420 F.3d at 1025 (citation omitted).
The district court held that, although there was a final
judgment on the merits in the previous action and MHC was
in privity with the De Anza plaintiffs, the City’s res judicata
argument failed because the De Anza litigation did not
concern the same primary rights because this litigation
involves the operation of the 1999 Amendments and their
application to MHC’s property. We agree that the De Anza
litigation does not speak to the constitutionality of the 1999
Amendments and whether they amount to an unconstitutional
taking; therefore, res judicata does not bar MHC’s claims.
See Adam Bros., 604 F.3d at 1148–49.
C. Amendment of the Complaint
The City also challenges the district court’s grant of leave
to amend the complaint three years after the bench trial had
already occurred, which allowed MHC to add new theories of
takings after the “substantially advances” theory it did
advance was eliminated by the Supreme Court in Lingle.
A trial court’s decision to grant leave to amend a
complaint is reviewed for abuse of discretion. See
Metrophones Telecomms., Inc., v. Global Crossing
Telecomms., Inc., 423 F.3d 1056, 1063 (9th Cir. 2005).
“Discretion is abused when the judicial action is ‘arbitrary,
fanciful or unreasonable’ or ‘where no reasonable man [or
woman] would take the view adopted by the trial court.’”
Golden Gate Hotel Ass’n v. City & Cnty. of S.F., 18 F.3d
1482, 1485 (9th Cir. 1994) (alteration in original) (quoting
16 MHC LIMITED FINANCING V . CITY OF SAN RAFAEL
Delno v. Market St. Ry. Co., 124 F.2d 965, 967 (9th Cir.
1942)). Because the district court’s decision to allow MHC
to amend its complaint was not arbitrary, fanciful, or
unreasonable, the district court did not abuse its discretion.
See id.
III.
The regulation did not constitute either a Penn Central or
a private taking. Because we reach the merits of the takings
issue, we need not resolve the question of ripeness. A district
court’s ruling on the constitutionality of a statute is reviewed
de novo. See Am. Acad. of Pain Mgmt. v. Joseph, 353 F.3d
1099, 1103 (9th Cir. 2004).
Here, the district court held the ordinance to be “(a)
unconstitutional and invalid as a private taking both on its
face and as applied to Plaintiffs . . . and (b) unconstitutional
and invalid as applied to Plaintiffs . . . as an uncompensated
regulatory taking under the standards set forth in Penn
Central . . . .” The district court concluded that the Ordinance
as amended in 1999 effected a regulatory taking under the
Penn Central test as well as a private taking under the Public
Use Clause of the Fifth Amendment.3
3
“It is not clear that a facial challenge can be made under Penn Central.
As we did in Guggenheim, we will ‘assume, without deciding, that a facial
challenge can be made under Penn Central.’” Laurel Park Cmty., LLC v.
City of Tumwater, 698 F.3d 1180, 1188-89 (9th Cir. 2012) (internal
citation omitted).
MHC LIMITED FINANCING V . CITY OF SAN RAFAEL 17
A. Penn Central Regulatory Taking
“This Court has consistently affirmed that States have
broad power to regulate housing conditions in general and the
landlord-tenant relationship in particular without paying
compensation for all economic injuries that such regulation
entails.” Yee, 503 U.S. at 528-29 (internal quotation marks
and citation omitted). However, under Penn Central
Transportation Co. v. City of New York, 438 U.S. 104 (1978),
a regulatory taking may occur – and just compensation is
required – when “regulatory actions [occur] that are
functionally equivalent to the classic taking in which
government directly appropriates private property or ousts the
owner” with the inquiry “focus[ing] directly upon the severity
of the burden that government imposes upon private property
rights.” Lingle, 544 U.S. at 539. Penn Central identified
“several factors that have particular significance” in
determining whether a regulation constitutes a taking. Id. at
538 (internal quotation marks and citation omitted). These
include the regulation’s economic impact on the claimant, the
extent to which the regulation interferes with distinct
investment-backed expectations, and the character of the
government action. Id. “Primary among those factors are
[t]he economic impact of the regulation on the claimant and,
particularly, the extent to which the regulation has interfered
with distinct investment-backed expectations.” Id. at 538–39
(internal quotation marks and citation omitted) (alteration in
original).
1. Economic impact
In determining that the Ordinance resulted in a Penn
Central taking, the district court analyzed the Penn Central
factors by comparing the effect of the 1999 Ordinance with
18 MHC LIMITED FINANCING V . CITY OF SAN RAFAEL
the hypothetical economic result assuming that there was no
rent control ordinance in effect at all. Using that analysis, the
district court concluded that, without any rent control, the
park would be worth $120 million, but it was worth only $23
million in 1999 and even less at the time of the district court’s
decision.
However, that analysis assumes that MHC purchased the
property prior to the enactment of the original ordinance,
when it did not. The ordinance was in effect when MHC
acquired the property. Therefore, the appropriate analysis of
the economic impact on MHC is a comparison of the
economic impact of the 1993 Ordinance in effect when MHC
purchased the mobilehome park, and the economic effect of
the 1999 Ordinance enacted after the property acquisition.
See id. (focusing on the “economic impact of the regulation”).
The district court made this comparison when it held that “the
[1999] amendments reduced MHC’s revenue streams from
Contempo Marin and the value of its property by
$10,609,136.” The district court should have used this value
when analyzing the economic impact of the ordinance.
Furthermore, even if the district court’s comparison were
the correct one, the 81% diminution in value (from $120
million to $23 million) would not have been sufficient
economic loss or interference with MHC’s reasonable
investment-backed expectations to constitute a taking.
Supreme Court precedent has “long established that mere
diminution in the value of property, however serious, is
insufficient to demonstrate a taking.” Concrete Pipe &
Prods. of Cal., Inc. v. Constr. Laborers Pension Trust for S.
Cal., 508 U.S. 602, 645 (1993) (citing Village of Euclid v.
Ambler Realty Co., 272 U.S. 365, 384 (1926) (approximately
75% diminution in value); Hadacheck v. Sebastian, 239 U.S.
MHC LIMITED FINANCING V . CITY OF SAN RAFAEL 19
394, 405 (1915) (92.5% diminution)); see also William C.
Haas & Co., Inc. v. City & Cnty. of S.F., 605 F.2d 1117, 1120
(9th Cir. 1979) (finding no taking where “the value of its
property was reduced from about $2,000,000 to about
$100,000”).
Similarly, MHC errs in claiming that the premium
transfer was an effect of the 1999 Amendments. The transfer
occurred when vacancy control was implemented in 1993,
and MHC has not explained what effect, if any, the 1999
Amendments had on the premium.
2. Investment-backed expectation
As to Penn Central’s second prong, the district court held
that MHC’s investment-backed expectation was that it would
be able to “increase rent at a rate consistent with the rate of
increase in housing costs in the immediate area” – that is,
MHC’s expectation was that Contempo Marin would be
subject to no rent control at all.
The district court explained that “MHC had no reason to
expect that the City would amend the Ordinance, transferring
much of the park’s value to third parties, and denying MHC
return on its capital in an escalating real estate market.”4 But
MHC had even less reason to expect that the rent control
regime would disappear altogether. “‘[T]hose who do
business in the regulated field cannot object if the legislative
4
The district court did not make a finding about the value of Contempo
Marin under the 1993 ordinance when it was purchased by MHC, but the
Executive Vice President and General Counsel for MHC testified that the
purchase price allocated to Contempo Marin (it was purchased as part of
a portfolio of mobilehome parks) was approximately $18.9 million.”
20 MHC LIMITED FINANCING V . CITY OF SAN RAFAEL
scheme is buttressed by subsequent amendments to achieve
the legislative end.’” Concrete Pipe, 508 U.S. at 645.
Indeed, sitting en banc in Guggenheim v. City of Goleta,
638 F.3d 1111 (9th Cir. 2010) (en banc), we recently held that
the “‘primary factor,’ ‘the extent to which the regulation has
interfered with distinct investment-backed expectations’” to
be “fatal” to the Guggenheims’ takings claim, where the
Guggenheims purchased a mobilehome park with a rent
control ordinance already in place. 638 F.3d at 1120. “[T]he
price they paid for the mobile home park doubtless reflected
the burden of rent control they would have to suffer. They
could have no ‘distinct investment-backed expectations’ that
they would obtain illegal amounts of rent.” Id. Therefore,
this factor also favors the conclusion that no taking occurred.
3. Character of the Ordinance
As to the character of the City’s Ordinance, a “‘taking’
may more readily be found when the interference with
property can be characterized as a physical invasion by
government, than when interference arises from some public
program adjusting the benefits and burdens of economic life
to promote the common good.” Penn Cent., 438 U.S. at 124
(internal citation omitted).
Here, the Ordinance is much more an “adjust[ment of] the
benefits and burdens of economic life to promote the
common good” than it is a physical invasion of property, and
it is only a slight modification to an already-existing rent
control ordinance, so this factor also counsels against finding
a Penn Central taking. See id.
MHC LIMITED FINANCING V . CITY OF SAN RAFAEL 21
The economic impact, investment-backed expectations,
and character of the Ordinance all lead us to conclude that the
1999 Ordinance does not constitute a Penn Central taking.
B. Private Taking
We also conclude that the regulation does not constitute
a private taking. The Fifth Amendment states that “nor shall
private property be taken for public use, without just
compensation.” U.S. Const. amend. V. MHC claims that the
Ordinance does not qualify as a “public use,” and therefore
the taking is prohibited, regardless of compensation. See
Haw. Hous. Auth. v. Midkiff, 467 U.S. 229, 241, 245 (1984).
“[T]he City would no doubt be forbidden from taking
petitioners’ land for the purpose of conferring a private
benefit on a particular private party,” “[n]or would the City
be allowed to take property under the mere pretext of a public
purpose, when its actual purpose was to bestow a private
benefit.” Kelo, 545 U.S. at 477, 477–78.5
MHC contends that we must apply a heightened standard
of review to the Ordinance, but the Supreme Court “has
declared that a taking should be upheld as consistent with the
Public Use Clause as long as it is ‘rationally related to a
conceivable public purpose.’ This deferential standard of
review echoes the rational-basis test used to review economic
regulation under the Due Process and Equal Protection
Clauses.” Id. at 490 (Kennedy, J., concurring) (citations
omitted) (quoting Haw. Hous. Auth., 467 U.S. at 241).
5
W e are aware of no court that has ever recognized a regulatory private
taking, such as the one MHC alleges here. W e assume without deciding
that such a claim is possible, and reject the claim on the merits.
22 MHC LIMITED FINANCING V . CITY OF SAN RAFAEL
This Court has also explained the extreme deference due
to the legislature:
[A] rational legislator could have believed
that the rent control ordinance would further
the stated goals, at least insofar as the purpose
is to protect existing tenants. For example, a
rational legislator could have believed that the
unfettered right of a park owner to raise the
rent on a space when ownership of a mobile
home was transferred might make it difficult
for a mobile home owner to sell. The
legislator thus could have believed that the
ordinance protects owners’ investments in
their units. It may be true that in operation the
ordinance does nothing more than take
“money from the landlord and put[] it into the
pocket of a tenant who no longer resides at the
park.” However, while one might believe that
the ordinance is an ineffective-and indeed
draconian-means by which to effect its goals,
“[h]ow well the ordinance serves [its]
purpose[s] is a legislative question, one the
court will not consider” . . . .
Levald, 998 F.2d at 690 (internal citation omitted) (alterations
in original).
“When the legislature’s purpose is legitimate and its
means are not irrational, our cases make clear that empirical
debates over the wisdom of takings—no less than debates
over the wisdom of other kinds of socioeconomic
legislation—are not to be carried out in the federal courts.”
Kelo, 545 U.S. at 488 (citation omitted). Because we
MHC LIMITED FINANCING V . CITY OF SAN RAFAEL 23
conclude that the Ordinance is rationally related to a
conceivable public purpose, the Ordinance does not amount
to a private taking.6
C. Ripeness
The City argues that MHC’s claims are not ripe, and
therefore we should dismiss them. “Ripeness is a question of
law, and it is reviewed de novo.” Manufactured Home
Communities, 420 F.3d at 1025 (citation omitted).
Generally, “a landowner may not establish a taking before
a land-use authority has the opportunity, using its own
reasonable procedures, to decide and explain the reach of a
challenged regulation,” Palazzolo v. Rhode Island, 533 U.S.
606, 620-21 (2001). The test for ripeness for takings claims
was set out in Williamson County Planning Commission v.
Hamilton Bank, 473 U.S. 172 (1985), in which the Supreme
Court refused to decide the merits of a takings claim because
the claims under the Fifth Amendment and Due Process
Clause were not yet ripe. Id. at 186. Williamson County sets
forth a two-prong test for ripeness for takings claims: first, an
6
Because MHC has not prevailed on its claims, it is therefore not
entitled to attorneys’ fees or costs. See McCown v. City of Fontana,
565 F.3d 1097, 1101 (9th Cir. 2009) (“A trial court abuses its discretion
if its fee award is based on an inaccurate view of the law or a clearly
erroneous finding of fact.”). W e similarly do not need to decide whether
an injunction was an appropriate remedy. See Perry v. Brown, 671 F.3d
1052, 1075 (9th Cir.), cert. granted sub nom. Hollingsworth v. Perry,
133 S. Ct. 786 (U.S. 2012) (No. 12-1440) (“W e review the district court’s
decision to grant a permanent injunction for abuse of discretion, but we
review the determinations underlying that decision by the standard that
applies to each determination. Accordingly, we review the court’s
conclusions of law de novo and its findings of fact for clear error.”).
24 MHC LIMITED FINANCING V . CITY OF SAN RAFAEL
owner must “obtain[] a final decision regarding how it will be
allowed to develop its property,” id. at 190, and second, “a
plaintiff must have sought compensation for the alleged
taking through available state procedures. . . . ‘[I]f a State
provides an adequate procedure for seeking just
compensation, the property owner cannot claim a violation of
the Just Compensation Clause until it has used the procedure
and been denied just compensation.’”7 Daniel v. Cnty. of
Santa Barbara, 288 F.3d 375, 381 (9th Cir. 2002) (alteration
in original) (quoting Williamson Cnty., 473 U.S. at 195).
Here, we follow the approach suggested by the en banc
panel in Guggenheim. “In this case, we assume without
deciding that the claim is ripe, and exercise our discretion not
to impose the prudential requirement of exhaustion in state
court.” Guggenheim, 638 F.3d at 1118. In Guggenheim, as
here, “we reject the [takings] claim on the merits, so it would
be a waste of the parties’ and the courts’ resources to bounce
the case through more rounds of litigation.” Id.
IV.
The district court did not err in granting judgment on
MHC’s substantive due process claims. “A municipal act . . .
will violate substantive due process rights when it is shown
that the action is not ‘rationally related to a legitimate
governmental purpose.’ We will strike down a statute on
7
MHC’s private takings challenge needs not comply with Williamson
County. “[I]f a government action is found to be impermissible – for
instance because it fails to meet the ‘public use’ requirement or is so
arbitrary as to violate due process – that is the end of the inquiry. No
amount of compensation can authorize such action.” Lingle, 544 U.S. at
543.
MHC LIMITED FINANCING V . CITY OF SAN RAFAEL 25
substantive due process grounds if it is arbitrary and
irrational.” Richardson v. City & Cnty. of Honolulu, 124 F.3d
1150, 1162 (9th Cir. 1997) (internal citation omitted).
The district court held that the Ordinance was permissible
under the Due Process Clause because “a rational legislator
could have believed that the rent control ordinance would
further the stated goals, at least insofar as the purpose is to
protect existing tenants.”
As discussed above, the threshold for a rationality review
challenge asks only “whether the enacting body could have
rationally believed at the time of enactment that the law
would promote its objective.” Equity Lifestyle Props., Inc. v.
Cnty. of San Luis Obispo, 548 F.3d 1184, 1194 (9th Cir.
2008) (quoting Carson Harbor Village Ltd. v. City of Carson,
37 F.3d 468, 472 (9th Cir. 1994), overruled on other grounds
by WMX Tech. v. Miller, 104 F.3d 1133, 1136 (9th Cir. 1997)
(citation omitted)). “[T]he Due Process Clause does not
empower courts to impose sound economic principles on
political bodies.” Guggenheim, 638 F.3d at 1123 (footnote
omitted). Therefore, the district court was correct that the
Ordinance does not run afoul of substantive due process.
V.
The district court did not err in submitting the breach of
settlement contract claims to the jury, denying the motion for
a directed verdict on that question, denying the motion for a
new trial, or awarding attorneys’ fees.
26 MHC LIMITED FINANCING V . CITY OF SAN RAFAEL
A. Submission of the Claim to the Jury
MHC claims that the Settlement Agreement between it
and the City was not ambiguous, so the district court erred in
allowing a jury trial on the meaning of the Agreement. A
district court’s interpretation and meaning of contract
provisions is reviewed de novo. Conrad v. Ace Prop. & Cas.
Ins. Co., 532 F.3d 1000, 1004 (9th Cir. 2008). The district
court initially determined that the Settlement Agreement
obligated the City to enact legislation to repeal mobilehome
park vacancy rent control. On the City’s motion for
reconsideration, however, the district court concluded “that
the settlement agreement is ambiguous whether the City was
obligated to enact the amendments after it approved the
settlement agreement in July 2001.”
The district court was correct that the Agreement was
ambiguous. Section 2.1 states that “Subject to approval by
the City Council and following notice and public hearing, the
City will initiate the following amendments of the City’s
Mobilehome Rent Stabilization regulations . . . .” MHC
claims that this section “provides the ‘how,’ not the ‘what’ of
the parties’ respective obligations, which are set forth in
Section 2.7.” However, Section 2.1 does specifically state
exactly what the amendments would accomplish (e.g., “City
Code section 20.08.030 will be amended to adjust the method
of calculation of the annual rent increase exempt from review
under the Ordinance, to provide for the increase (75% of the
CPI) for each mobilehome space . . . .”). The word “initiate”
also suggests that passage was not required.
Section 2.7 states that the Agreement is conditioned on
approval by the City Council, and that “The obligation of the
City to process Ordinance amendments pursuant to paragraph
MHC LIMITED FINANCING V . CITY OF SAN RAFAEL 27
2.1 of this Agreement and to implement the same shall not
arise until a fully executed Agreement has been received by
the City Attorney’s office.” Again, it is ambiguous whether
the City’s obligation “to process” Ordinance amendments
obligated it to pass the amendments, or rather it was only
bound to consider the amendments via its normal process of
initiating the amendments, providing notice, and holding a
public hearing, and then decide whether to enact the
amendments. These ambiguities are sufficient to have made
the question of contract interpretation one for a jury.
B. Directed Verdict Under Rule 50
For the same reason, MHC was not entitled to a directed
verdict. “We review de novo the district court’s denial of a
renewed motion for judgment as a matter of law.” Josephs v.
Pac. Bell, 443 F.3d 1050, 1062 (9th Cir. 2006); see FED . R.
CIV . P. 50(b). “A district court may set aside a jury verdict
and grant judgment as a matter of law only if, under the
governing law, there can be but one reasonable conclusion as
to the verdict.” Settlegoode v. Portland Pub. Sch., 371 F.3d
503, 510 (9th Cir. 2004) (internal quotation marks and
citation omitted). The jury reasonably concluded that the
City had not obligated itself to repeal vacancy control, and
MHC has not shown that the opposite conclusion is the only
reasonable one.
C. Motion for a New Trial Under Rule 59
MHC also seeks a new trial on its breach of settlement
agreement claims because the jury’s verdict resulted from
prejudicial trial error and was not supported by the trial
evidence. “A Rule 59 motion for a new trial is confided to
the discretion of the district court, whose decision will be
28 MHC LIMITED FINANCING V . CITY OF SAN RAFAEL
overturned on appeal only for abuse of discretion.” Kode v.
Carlson, 596 F.3d 608, 611 (9th Cir. 2010) (per curiam)
(citation omitted). The district court held that there was no
error entitling MHC to a new trial. “The trial court is in a far
better position than we to gauge the prejudicial effect of
improper comments.” Mateyko v. Felix, 924 F.2d 824, 828
(9th Cir. 1990). MHC has shown neither error nor an abuse
of discretion, so we affirm the district court’s denial of
MHC’s Rule 59 motion.
D. Attorneys’ Fees
MHC also claims that the district court erred in awarding
attorneys’ fees to the City on the Settlement Agreement
claims because the litigation over the Agreement was neither
an independent dispute nor a victory for the City. We
disagree. MHC sought up to $45 million from the City on its
claims, and the meaning of the Settlement Agreement was
very much an independent dispute. “When a defendant
obtains a simple, unqualified victory by defeating the only
contract claim in the action, [Cal. Civ. Code] section 1717
entitles the successful defendant to recover reasonable
attorney fees incurred in defense of that claim if the contract
contained a provision for attorney fees.” Hsu v. Abbara,
891 P.2d 804, 813 (Cal. 1995). Here, there was a provision
in the Settlement Agreement that entitled the prevailing party
to attorneys’ fees. Therefore we affirm the district court’s
award of attorneys’ fees to the City for its victory on the
contract claims.
VI.
In its original lawsuit, MHC waived its claim for damages
in order to have a bench trial on the constitutional claims. On
MHC LIMITED FINANCING V . CITY OF SAN RAFAEL 29
August 16, 2004, while the main lawsuit was pending, MHC
filed a second suit against the City, MHC II, (3:04-CV-
03325) seeking monetary damages for takings and equal
protection violations, arguing that the conduct at issue in this
case occurred subsequent to the filing of the First Amended
Complaint in MHC I and thus the claims asserted in this case
could not have been asserted in MHC I.
The district court granted the City’s motion to dismiss
with prejudice, holding that MHC waived the damages it now
asserts in MHC II during proceedings in MHC I when MHC
waived its claims for past and future constitutional damages
and proceeded to trial on its constitutional claims seeking
only declaratory and injunctive relief. Additionally, the
district court determined that MHC II involves the same
subject matter as the claims in MHC I. “Dismissal without
leave to amend is proper only if it is clear, upon de novo
review, that the complaint could not be saved by any
amendment.” McKesson HBOC, Inc. v. N.Y. State Common
Ret. Fund, Inc., 339 F.3d 1087, 1090 (9th Cir. 2003) (internal
quotation marks and citation omitted).
MHC asserts without explaining that if the injunction is
vacated, MHC II should be reinstated. However, a litigant
has no right to maintain two separate actions involving the
same subject matter at the same time in the same court and
against the same defendant. See Alltrade, Inc. v. Uniweld
Products, Inc., 946 F.2d 622, 623 (9th Cir. 1991) (explaining
the well-established rule that allows a “district court to
transfer, stay, or dismiss an action when a similar complaint
has already been filed in another federal court”).
We affirm the district court’s dismissal of MHC II with
prejudice. The claims in both suits are the same, and MHC
30 MHC LIMITED FINANCING V . CITY OF SAN RAFAEL
agreed to waive its damage claims in MHC I; it may not seek
those waived damages in a separate suit. Furthermore, MHC
was given an opportunity to amend its complaint in MHC I
more than two years after it filed MHC II, so it could have
incorporated any non-waived claims into its Second
Amended Complaint.
VII.
In summary, we reverse the district court’s holding as to
Penn Central and private takings, but affirm the judgment of
the district court in all other respects. Each party shall bear
its respective costs on appeal.
AFFIRMED IN PART; REVERSED IN PART.