No Harm, No Foul: Challenge to San Francisco’s Rent Control Ordinance Gets Tossed

In November of 2008, San Francisco voters passed Proposition M, which amended the City’s rent control ordinance by, among other things, making it illegal for landlords to try to get tenants to move out by offering them money, accompanied by threats or intimidation. A landlord’s association, joined by one landlord, sued the city in federal court, seeking to stop enforcement of the law by arguing in part that the measure restricted their free speech rights and failed to adequately describe the conduct that would be illegal. The trial court ruled in favor of the City; the association and landlord appealed to the Ninth Circuit Court of Appeals. The result: Victory for the City. The court dismissed the suit and even refused to give the association a second chance to get their complaint right. (Carrico et al v. City and County of San Francisco, 2011 DJDAR 13612.)

What’s the Problem?

Like many other rent control ordinances, the San Francisco law prohibits tenancy terminations unless they are based on one of the law’s enumerated “just causes,” or allowable reasons. These reasons include failure to pay rent, excessive damage, the owner’s need to move in, and so on. Just cause eviction protections are necessary in order to prevent landlords from terminating a tenancy in order to create a vacancy—and bumping the rent to market rates for the next tenant. Without just cause rules, the purpose of rent control could be easily avoided by landlord-initiated, constant tenant turnover.

Predictably, landlords saddled with long-term tenants or problematic tenants have looked for ways to oust these residents when none of the just cause reasons apply. Some landlords approach the problem in a business-like manner, offering buyouts that often amount to many thousands of dollars. Others use additional tactics, by threatening service cutbacks and lawsuits, or simply making life miserable, if the tenant won’t take the deal. Proposition M was intended to make such bad faith conduct a violation of the city’s ordinance.

The Landlords’ Complaint

The landlords’ association and the single landlord attacked Prop M on several fronts, most notably by arguing that it attempted to regulate their freedom of speech, and was unconstitutionally vague. The freedom of speech argument was tough—the ordinance regulated commercial speech, which enjoys less protection than speech that’s not connected with business. To pass muster, the City needed only show that it has a substantial interest in regulating the behavior at hand, and that the ordinance “materially advances” that interest in the narrowest manner possible. In short, the issue has to be really important, and scalpels, not sledge-hammers, are what’s needed. The trial judge sided with the City.

The second question of vagueness was also a loser for the landlords. The judge ruled that “bad faith” is a concept that’s generally understood and applied (many laws proscribe bad faith conduct, and they’re not overturned for that reason). Similarly, “threats,” “intimidation,” and “offers of payment” are understandable to a person of ordinary intelligence. The case was dismissed.

Adding Insult to Injury: This Case Should Never Have Been Allowed to Proceed

Appellate courts usually review the lower court’s decision, apply the law, and decide whether it was correct. They usually don’t bring up new arguments. But there’s one area of law that’s always fair game for discussion: Did the plaintiffs—the people bringing the lawsuit, in this case, the association and the single landlord—have the right to bring the lawsuit in the first place? This issue is known as “standing,” and it simply means that only those who have suffered actual or imminent harm as a result of the law can bring a lawsuit challenging it. Merely being subject to a law, and even feeling “chilled” by it, are not enough to confer standing.

Importantly, you don’t have to violate the law in order to have “suffered injury.” But if you haven’t violated the law yet, you do have to convince the judge that you’re about to, and that you’ll be harmed as a result. Here is where the landlords’ case fell apart—to show that they were about to be harmed by Prop M would have required the landlords to state that they intended to engage in rather unsavory behavior, and just needed to know “how much is too much.” They didn’t go there—but that was a fatal mistake.

The appellate court concluded that this failure to show actual or imminent harm should have doomed the case from the start. They vacated the lower court’s decision, and sent it back with instructions to dismiss it for lack of standing.

The Court Shouts

When cases fall apart, courts often give the parties a second chance to get it right. Complaints can be amended; cases can be dismissed “without prejudice,” which makes it possible to try again. Not here: The court’s decision ends with a remarkable, all-caps instruction: “VACATE AND REMAND WITH INSTRUCTIONS TO DISMISS FOR LACK OF JURISDICTION.” Ouch.

Who Has Benefited from Challenges to  Prop M?

Other challenges to Prop M have resulted in landlord victories. The proposition attempted to prohibit landlords from making repeated buy-out offers after the tenant has notified the landlord in writing that the tenant is no longer interested. A California state appellate court earlier invalidated that portion. Another section would have given San Francisco’s rent board the power to reduce rental payments to landlords who harass their tenants or coerce them to leave—that too was tossed, another win for landlords. (Larson v. City and County of San Francisco, 192 Cal.App.4th 1263 (2011).)

Standing Gets Its Day in Court

The question of standing—having the right to complain about a law—is also at the heart of the current legal tangle over Proposition 8, California’s anti-gay marriage law. In the same week that the rent control ordinance was issued, the California Supreme Court heard arguments on whether the backers of the proposition had standing to defend it in court (the state would normally defend a successful initiative, but both the governor and the attorney general refused to do so). Stay tuned for the results on that one.