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Los Altos El Granada Investors v. City of Capitola

October 7, 2009

LOS ALTOS EL GRANADA INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP DBA CASTLE MOBILE ESTATES, PLAINTIFF-APPELLANT,
v.
CITY OF CAPITOLA; CITY OF CAPITOLA MOBILE HOME RENT REVIEW BOARD, DEFENDANTS-APPELLEES.
LOS ALTOS EL GRANADA INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP DBA CASTLE MOBILE ESTATES, PLAINTIFF-APPELLEE,
v.
CITY OF CAPITOLA; CITY OF CAPITOLA MOBILE HOME RENT REVIEW BOARD, DEFENDANTS-APPELLANTS.



Appeal from the United States District Court for the Northern District of California Jeremy D. Fogel, District Judge, Presiding. D.C. No. CV-04-05138-JF/PVT.

The opinion of the court was delivered by: Bybee, Circuit Judge

FOR PUBLICATION

Argued and Submitted March 12, 2009 -- San Francisco, California.

Before: J. Clifford Wallace, Sidney R. Thomas and Jay S. Bybee, Circuit Judges.

OPINION

Despite clear language from the Supreme Court establishing that "a state court determination may not be substituted, against a party's wishes, for his right to litigate his federal claims fully in the federal courts," England v. La. State Bd. of Med. Exam'rs, 375 U.S. 411, 417 (1964), two California courts determined that this right to a federal forum was "irrelevant" and struck appellant's clear reservation of its federal claims from its complaint. The district court then determined that the actions of the California courts should be given preclusive effect in federal court. Although we agree that we must give full faith and credit to the state court's decision to strike the England reservation from the complaint, we conclude that doing so has no effect on the validity of appellant's reservation of federal claims. We thus reverse the judgment of the district court.

I.

The complicated procedural history of this case reveals the sisyphean task that the Supreme Court's decision in Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, 473 U.S. 172 (1985), has created for plaintiffs who seek to have their federal takings claims adjudicated in federal court. After a full complement of administrative appeals, three California Superior Court decisions, a California Court of Appeal decision, three federal district court decisions, and one prior federal appellate court decision, the plaintiff in this case assumed that it had properly exhausted its state law causes of action in state court and would be entitled to present its unadjudicated federal claims in federal court. Yet, the district court decided that in the process of exhausting its state law causes of action the plaintiff had created a bar to any subsequent assertion of federal claims in federal court.

The protracted legal struggle that is the basis for this appeal began on March 9, 2000, when appellant Los Altos El Granada Investors ("Los Altos"), owner of a mobile home park, "Castle Mobile Estates," located in the City of Capitola ("the City"), petitioned the City for license to increase rents on its mobile home pads from $200 to $500 per month. A 1970s-era mobile home rent control ordinance provides that mobile home rents can be increased in only two situations. First, an "automatic increase" occurs in the event of an increase in the Consumer Price Index, and in such a case rent can be increased by no more than 60 percent of the increase in the Consumer Price Index. Second, mobile home park owners may effect a "discretionary increase" in rent to pass through increased operating costs, capital expenses, and capital improvements. This process requires that park owners work with mobile home owners and an arbitrator to determine the amount of the increase.

Los Altos submitted evidence to the City indicating that the rent control ordinance was permitting mobile home owners to sell their homes at a significant premium, essentially transferring wealth from mobile home park owners to mobile home tenants.*fn1 Los Altos's evidence suggested that the market price for a comparable mobile home pad not subject to rent control would be around $1200 per month, six times what Los Altos's tenants were paying. The City apparently disagreed with the import of this evidence. After deliberating, the City granted Los Altos a discretionary rent increase of $5.84 per month.

Los Altos filed two suits in federal court that were eventually consolidated. See Hillsboro Props. v. City of Capitola, No. C 01-20543 JF (N.D. Cal. 2001); Los Altos El Granada Investors v. City of Capitola, No. C 01-20667 JF (N.D. Cal. 2001). Los Altos alleged both as-applied and facial challenges to the City's rent control ordinance-its complaint asked for relief for violations of the Fifth and Fourteenth Amendments, and also requested a writ of administrative mandamus. The City moved to dismiss, arguing that the Supreme Court's decision in Williamson required Los Altos to seek (and be denied) relief in state court first before bringing its claims in federal court. See 473 U.S. at 192-95. The district court agreed and dismissed the action, holding that to the extent Los Altos was asserting facial claims it was barred by the statute of limitations, and to the extent it was asserting as-applied claims it needed to first contest those claims in state court. The district court dismissed Los Altos's amended complaint on the same grounds, and we eventually affirmed those dismissals. See Los Altos El Granada Investors v. City of Capitola, 97 Fed. App'x 698 (9th Cir. 2004).

In an attempt to ripen its federal claims under Williamson, Los Altos filed a suit in Santa Cruz Superior Court on July 3, 2002, seeking several types of relief. It sought a declaratory judgment that the Ordinance, as applied to Los Altos, had effected a taking of property under the California Constitution, resulted in a violation of Los Altos's due process and equal protection rights under the California Constitution, and failed to provide Los Altos with a just and reasonable return under the California Constitution. Los Altos also asserted a cause of action for inverse condemnation and asked for a writ of administrative mandamus to overturn the City's decision denying Los Altos's full discretionary rent increase.

In its complaint, Los Altos asserted an England reservation: it "reserv[ed] for independent adjudication in the federal courts . . . all federal questions, including but not limited to any federal Fifth Amendment and Fourteenth Amendment claims for a taking of property, due process or equal protection, for adjudication before the United States District Court." Los Altos expressly cited England.

On September 15, 2003, the Santa Cruz Superior Court sustained the City's demurrer to Los Altos's causes of action for declaratory relief and inverse condemnation, holding that to the extent that these causes of action asserted facial challenges to the ordinance they were barred by the statute of limitations and the "res judicata/collateral estoppel effect" of the first district court decision. The court also held that to the extent these causes of action asserted as-applied challenges, they were not ripe until Los Altos had completed the process of requesting a writ of administrative mandamus.*fn2 The Superior Court also granted the City's motion to strike Los Altos's England reservation from its complaint, holding that the reservation was "irrelevant and not proper in the context of this case." The Superior Court failed to explain why the reservation was "irrelevant."

Meanwhile, on August 20, 2003, Los Altos had filed a new action in the district court, re-alleging its federal claims. See Los Altos El Granada Investors v. City of Capitola, No. C03-3859 JF (N.D. Cal. 2003). Los Altos argued that it had adequately ripened its state law causes of action under Williamson because the Superior Court had denied its rights to compensation by sustaining the City's demurrer. The district court disagreed and dismissed the action on November 13, 2003, holding that Los Altos had not yet exhausted its state causes of action and declining to exercise supplemental jurisdiction over the writ petition.

Back in Santa Cruz Superior Court, the petition for a writ of administrative mandamus was argued and decided. On May 25, 2004, the court held a motions hearing in which it announced its intention to deny the writ petition. Although Los Altos argued that if the court was denying the writ petition its state law takings causes of action were no longer moot, and therefore asked for leave to reassert the state law inverse condemnation cause of action, the court rejected this request and stated that "[it] would be a cleaner procedure . . . to let the park owners then appeal this and have the Appellate Court determine any aspects of taking and anything else." The Statement of Decision, prepared by the City and filed on June 25, 2004, implemented the Superior Court's oral decision, and Los Altos filed an appeal to the California Court of Appeal.

On December 3, 2004, after judgment was entered by the Superior Court, Los Altos also filed another action in the district court (the present case). See Los Altos El Granada Investors v. City of Capitola, No. C04-5138 JF (N.D. Cal. 2004). The complaint alleged five claims: (1) a Fifth Amendment regulatory taking claim under Penn Central Transportation Co. v. City of New York, 438 U.S. 104 (1978), (2) a Fifth Amendment "private" taking claim, (3) a Fourteenth Amendment equal protection claim, (4) a Fourteenth Amendment due process claim, and (5) a claim that the taking should be invalidated for failure to "substantially advance" a legitimate state interest.

The City filed a motion to dismiss for failure to state a claim and for lack of subject matter jurisdiction. The district court granted that motion in part on July 26, 2005, holding that Los Altos's "failure to substantially advance" claim was no longer viable after the Supreme Court's decision in Lingle v. Chevron U.S.A., Inc., 544 U.S. 528 (2005). As to the remaining claims, the district court held that they were now ripe for purposes of Williamson but concluded that it should abstain from considering them, under Younger v. Harris, 401 U.S. 37 (1971), until the state appellate court had announced its ruling. See Gilbertson v. Albright, 381 F.3d 965, 984 (9th Cir. 2004) (en banc) ("[W]hen damages are at issue rather than discretionary relief, deference-rather than dismissal-is the proper restraint [under Younger].").

A year later, on May 17, 2006, the California Court of Appeal reversed the prior judgment of the Santa Cruz Superior Court in part, and remanded to the Superior Court to allow Los Altos to state its ripened as-applied state law takings causes of action. Los Altos El Granada Investors v. City of Capitola, 43 Cal. Rptr. 3d 434, 456 (Cal. Ct. App. 2006). The court, however, upheld the Superior Court's decision to strike the England reservation, reasoning that because the reservation was made before district court proceedings were filed and in the context of a Younger abstention rather than an abstention under Railroad Commission of Texas v. Pullman Co., 312 U.S. 496 (1941), the court did not err in determining that an England reservation was irrelevant. Los Altos, 43 Cal. Rptr. 3d at 452-54.

On September 18, 2006, Los Altos took the remand provided by the California Court of Appeal and filed an amended complaint in the Superior Court. The complaint asserted causes of action for inverse condemnation, a violation of the equal protection clause of the California Constitution, and a violation of the due process clause of the California ...


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