February 4, 2011

Ninth Circuit’s “goofy factor” opens door to Supreme Court review of rent control

By Ninth Circuit’s “goofy factor” opens door to Supreme Court review of rent control

Author: R. S. Radford

It’s widely known that the Supreme Court reverses the Ninth Circuit Court of Appeals more often than any other court on the planet.  This is not just because the Ninth is the largest of the federal circuits.  It has more to do with the fact that such a large proportion of the Ninth Circuit’s decisions are, well, just goofy.

The Ninth Circuit once ruled that a Tahoe property owner could not sue the Tahoe Regional Planning Agency for a regulatory taking until the owner collected and tried to sell a bundle of worthless “development rights” the agency had invented – some of which could only be obtained by winning a lottery!  Really.  Pacific Legal Foundation represented that owner before the Supreme Court, which reversed the Ninth Circuit in Suitum v. TRPA.

Just before Christmas, a special panel of eleven Ninth Circuit judges decided once again to re-write the Supreme Court’s regulatory takings doctrine in a case called Guggenheim v. City of Goleta, this time upholding rent control in a California mobile home park.  No one on the panel seemed to question the fact that this sort of ordinance functions solely as a “naked wealth transfer” (a term actually employed by two judges in an earlier opinion).  That is, the tenants who successfully lobby for the adoption of rent control can immediately “cash out,” capturing the full lifetime value of reduced rents in the form of a sales premium when they sell their mobile homes.  This feature makes mobile home rent control significantly different from any other kind of property regulation -– and also makes these ordinances uniquely susceptible to challenge under the Takings Clause.

But forget all that.  All that mattered to the Ninth Circuit was that this larcenous measure had been enacted before the current owner of the mobile home park purchased the property.  No land-use regulation can be challenged as a taking, under the court’s reasoning, by an owner who takes title after the measure is in force.  This is the equivalent of saying that a newspaper can’t challenge a law forbidding criticism of the Obama administration, if the paper has changed ownership since the ban was enacted.  Unconstitutional laws do not become constitutional when titles to property change hands.

Not only was the Ninth Circuit’s ruling in Guggenheim goofy on its face, it directly contradicted a decade-old Supreme Court decision, Palazzolo v. Rhode Island.  In that case (also litigated by PLF), the Supreme Court unequivocally held that a takings claim cannot be defeated solely on the grounds that the property has changed ownership since the regulation was adopted.  But the Ninth Circuit seems to think that rule only applies to the rest of the country, not out here on the left coast.

The good news is that the property owner in Guggenheim is planning to ask the Supreme Court to review the decision, and there’s a good chance that the petition will be written by former Solicitor General Ted Olson.  If anybody reading this would like to add their voice to those who will be clamoring for the High Court to grant review and reverse the Ninth Circuit (again), this would be a good time to start drafting your amicus brief.

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