The opinion of the court was delivered by: VAUGHN R. WALKER
In 1988, plaintiffs, Paul Schulz and Deborah Savage, purchased a house at 251 Ripley Street located in the Bernal Heights neighborhood of San Francisco. The house was dilapidated, unsafe and uninhabitable. Plaintiffs decided to renovate the house and filed an application with the City and County of San Francisco, Department of City Planning and Department of Public Works (together, "City") for the required permits. In the application, plaintiffs requested permission to add a floor to the existing house, alter the existing interior and basement and add twelve feet to the rear of the house. The city allegedly told plaintiffs that they had to work out any renovation plans with defendants Bernal Heights Neighborhood Review Board ("the Board") and Terry Milne, an officer on the Board. The Board is a local citizen's group that offers comments and recommendations to the City on building projects in the Bernal Heights neighborhood.
From 1988 to 1991, plaintiffs pursued an application to the City and the Board for a permit to repair and upgrade their property. According to plaintiffs, they submitted approximately thirteen revisions to the initial permit application, and incurred great expenses in the process. Plaintiffs contend that each time they presented a revision in compliance with all applicable zoning laws, the City, the Board, and Milne refused to approve the plan, and instead informed plaintiffs that there were additional requirements, not found in any zoning or other statutes, which plaintiffs had yet to meet. Plaintiffs allege that defendants "repeatedly, consistently, arbitrarily and capriciously" failed to approve their renovation plans. At one point, after the City finally approved their permit application, but before plaintiffs could begin work, plaintiffs claim that the city revoked the permit on the recommendations of Milne and the Board. Plaintiffs object to the fact that they had no notice or opportunity to be heard before the revocation. When the City finally issued a second permit in November 1991, plaintiffs maintain that they had expended so much money pursuing permits that they were financially ruined and incapable of renovating their home.
Plaintiffs filed a complaint for damages alleging various torts and constitutional violations. On October 28, 1993, the court granted defendants' motions to dismiss the first amended complaint. Most of plaintiffs' original claims were dismissed without prejudice. In dismissing the first amended complaint, the court noted that plaintiffs might be able to allege an action for injunctive relief and possibly damages under 42 USC § 1983 against defendants for an unconstitutional delegation of state police power to a private entity. See Order Granting Defendants' Motion to Dismiss at 6-7.
Plaintiffs apparently took the court's comment to heart and on December 17, 1993, filed a second amended complaint alleging, inter alia, that city violated several of plaintiffs' constitutional rights by delegating its power to review and decide on plaintiffs' land use application to Board and Milne. The second amended complaint alleges the following causes of action:
(2) an inverse condemnation claim under state law against all defendants;
(3) claims for common law fraud and deceit against Milne and the Board;
(4) claims for negligent misrepresentation against Milne and the Board;
(5) claims for intentional interference with prospective economic advantage against Milne, the Board, and various individual City employees; and
(6) claims for negligent interference with prospective economic advantage against Milne and the Board.
Defendants move to dismiss all of plaintiffs' claims. After considering the arguments, the court hereby DENIES defendants' motions to dismiss plaintiffs' § 1983 claims based on City's alleged unconstitutional delegation of legislative and police powers.
Defendants make various arguments in support of their motions to dismiss plaintiffs' constitutional claims. The most fundamental challenge to plaintiffs' constitutional claims is the argument that plaintiffs are not even entitled to bring a claim of unconstitutional delegation of police or legislative power. See City's Reply Mem at 15. By making this argument, defendants apparently fail to apprehend basic constitutional tenets restricting the extent to which state power may be delegated to private parties. See General Electric Co v New York State Dept of Labor, 936 F.2d 1448, 1454 (2d Cir 1991) (citing numerous Supreme Court cases).
In Eubank v City of Richmond, 226 U.S. 137, 57 L. Ed. 156, 33 S. Ct. 76 (1912), the Supreme Court scrutinized a municipal ordinance that required the city of Richmond's Building Committee to establish "set-back lines" for a specific parcel of property whenever requested to do so by two-thirds of adjacent land owners. In striking down the ordinance as a violation of due process, the Court stated:
One set of owners determines not only the extent of use, but the kind of use which another set of owners may make of their property * * * . The statute and ordinance, while conferring the power on some property holders to virtually control and dispose of the property rights of others, creates no standard by which the power thus given is to be exercised; in other words, the property holders who desire and have the authority to establish the line may do so solely for their own interest and even capriciously.
Similarly, in Washington ex rel Seattle Title Trust Co v Roberge, 278 U.S. 116, 73 L. Ed. 210, 49 S. Ct. 50 (1928), the Supreme Court struck down a Seattle zoning ordinance requiring plaintiffs who sought to build a home for the aged poor to get the written consent of two-thirds of the property ...