Jenner & Block has obtained an important victory establishing that a pervasive form of mobilehome rent control in California constitutes an unconstitutional regulatory taking and private taking. This trial court victory, after seven years of litigation, represents the first federal court decision to resolve the merits of an important constitutional issue that was expressly left open by the United States Supreme Court in its decision in
Yee v. City of Escondido.
Since 2001, Jenner & Block has represented its longstanding client, Equity Lifestyles Properties, previously known as Manufactured Home Communites, in a lawsuit over the constitutionality of mobilehome rent control in California. ELS filed a lawsuit against the City of San Rafael, California, in the United States District Court for the Northern District of California, seeking to invalidate an ordinance that effectively allows any arguable benefits of rent control to be sold by departing tenants to incoming tenants. ELS demonstrated that any benefits of the regulation were fully capitalized so that the cost of housing was not reduced by the regulation.
The case first proceeded to trial in 2002 before Chief Judge Vaughn R. Walker on the constitutionality of the ordinance. Following trial, the United States Supreme Court agreed to review a case,
Lingle v. Chevron U.S.A. Inc., 544 U.S. 528 (2005), that would shed light on the applicable legal standards. Following the decision in
Lingle, ELS was permitted to amend its pleadings and supplement its proof to address the legal standards as set forth in Lingle.
In April 2007, Chief Judge Walker conducted further trial proceedings. Through the course of the case, ELS presented expert testimony from some of the nation’s leading experts in affordable housing and economics. It also presented empirical evidence that the effect of the ordinance reduced the value of ELS’s property by $80 to $100 million, which represented over 75% of the value of the property.
On January 29, 2008, Chief Judge Walker concluded that the City’s conduct and its adoption and enforcement of the ordinance amounted to a regulatory taking under
Penn Central and a “private taking.” He found that the City’s conduct in enacting and enforcing the ordinance was pretextual, that the ordinance had no rational relationship to a public purpose, and that the ordinance served principally to transfer property rights from one private party, ELS, to another private party, the park residents. Chief Judge Walker also rejected numerous procedural defenses raised by the City including statute of limitations, ripeness and res judicata.
This victory is a major one for ELS as it continues to pursue litigation aimed at enabling the company and its shareholders to realize the full value of its real estate investments across the state of California.
The trial team was led at all times by
David J. Bradford, co-chair of the firm’s Business Litigation Practice. The trial included partner
Lisa T. Scruggs, who participated in both the 2002 and 2007 trials, and associate
Bradley Yusim.