Howard Iten v. County of Los Angeles

— 1 — — 2 — O — 3 — — 4 — — 5 — — 6 — — 7 — 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA — 10 — 11 HOWARD ITEN, ) Case No. CV 21-00486 DDP (JEMx) ) 12 Plaintiff, ) ) 13 v. ) ORDER GRANTING DEFENDANT’S MOTION ) TO DISMISS FIRST AMENDED 14 COUNTY OF LOS ANGELES, ) COMPLAINT ) 15 Defendant. ) [Dkt. 33] [JS-6] ___________________________ ) — 16 — — 17 — — 18 — — 19 — — 20 — — 21 — — 22 — — 23 — — 24 — — 25 — — 26 — — 27 — — 28 — 1 Presently before the court for further consideration is 2 Defendant County of Los Angeles (“the County”)’s Motion to Dismiss 3 Plaintiff’s First Amended Complaint (“FAC”) (Dkt. 33). Having 4 considered the submissions of the parties and heard oral argument, 5 the court grants the motion and adopts the following Order. 6 I. Background 7 As described in this Court’s prior Order (Dkt. 44), Plaintiff 8 Howard Iten is part-owner of a commercially zoned property in the 9 City of Lawndale, in Los Angeles county. (FAC ¶ 8.) Beginning in 10 March 2020, the County imposed a moratorium on commercial tenant 11 evictions for nonpayment of rent related to the COVID-19 global 12 pandemic (“the Moratorium”).1 2 (Id. ¶¶ 9, 18.) The Moratorium 13 prohibited the eviction of a commercial tenant for nonpayment of 14 rent or late fees “if the Tenant demonstrates an inability to pay 15 rent and/or such related charges due to Financial Impacts related 16 to COVID-19 . . . and the Tenant has provided notice to the 17 Landlord within seven (7) days after the date that rent and/or such 18 related charges were due, unless extenuating circumstances exist, 19 that the Tenant is unable to pay.” (FAC Ex. 1 (Moratorium § 20 V(A)(1)).) Commercial tenants with fewer than ten employees could 21 satisfy these notice requirements with a self-certification. 22 (Moratorium § V(B)(2)(a).) Such tenants had twelve months from the — 23 — — 24 — 1 The term “tenant” excludes commercial tenants “that are 25 multi-national, publicly-traded, or have more than 100 employees.” (Declaration of Kathryn D. Valois (Dkt. 24-1), Ex. A at § 3(a).) — 26 — 2 Although initially applicable only in unincorporated areas — 27 — of Los Angeles County, the Moratorium was extended as a “baseline for all incorporated cities” on September 1, 2020, the same day — 28 — Plaintiff’s lease was allegedly executed. (FAC Ex. 1 at 4.) 1 expiration of the Moratorium to repay any unpaid rent.3 (FAC ¶ 31; 2 Moratorium § V(C)(2)(a).) The Moratorium also prohibited 3 harassment of tenants, including any attempt to evict a tenant 4 “based upon facts which the Landlord has no reasonable cause to 5 believe to be true or upon a legal theory which is untenable under 6 the facts known to the Landlord.”4 (Moratorium § VIII(I).) 7 Failure to comply with the Moratorium could result in civil 8 penalties, including fines of up to $5,000 per day, and was 9 punishable as a misdemeanor. (Moratorium § X(A),(B).) 10 Plaintiff “had a number of issues” with his commercial tenant 11 since 2015, including failure to pay rent and unauthorized 12 alterations to the property, resulting in building code violations. 13 (FAC ¶ 23.) In April 2020, the tenant informed Plaintiff that the 14 tenant “is very adversely affected by Covid 19 and . . . will not 15 be able to pay the rent.” (Id.) Plaintiff’s tenant did not pay 16 rent for the next several months. (Id.) 17 The tenant’s lease expired at the end of August 2020. (FAC ¶ 18 24.) Notwithstanding the tenant’s nonpayment of rent and the other 19 “issues,” Plaintiff entered into a new five-year lease with the 20 tenant, reasoning that so doing would increase the chances that 21 Plaintiff would recover past-due rent. (Id.) The new lease 22 required the tenant to pay both base rent and $3,200 in past-due 23 rent every month. (FAC ¶ 26.) Although the new lease went into 24 effect on September 1, 2020, sometime in October the tenant — 25 — 3 The Moratorium expired as to commercial tenants on January 26 31, 2022. — 27 — 4 No Landlord is liable for harassment for pursuing eviction “unless and until the Tenant has obtained a favorable termination — 28 — of that action.” (Moratorium § VIII(I).) 1 conveyed to Plaintiff that “times are tough and [the tenant] will 2 not be able to pay the full amount on time.” (Id. ¶¶ 25, 29.) By 3 the end of September 2021, the tenant was over $30,000 in arrears. 4 (Id. ¶ 28.) 5 This suit followed. Plaintiff’s FAC brings a single cause of 6 action alleging that the Moratorium’s ban on commercial evictions 7 violated Plaintiff’s rights under the Contracts Clause of the 8 United States Constitution. Defendant now moves to dismiss the 9 FAC. — 10 — — 11 — 12 II. Legal Standard 13 A complaint will survive a motion to dismiss when it 14 “contain[s] sufficient factual matter, accepted as true, to state a 15 claim to relief that is plausible on its face.” Ashcroft v. Iqbal, — 16 — 556 U.S. 662, 678 (2009)(quoting Bell Atl. Corp. v. Twombly, 550 17 U.S. 544 , 570 (2007)). When considering a Rule 12(b)(6) motion, a 18 court must “accept as true all allegations of material fact and 19 must construe those facts in the light most favorable to the 20 plaintiff.” Resnick v. Hayes, 213 F.3d 443, 447 (9th Cir. 2000). 21 Although a complaint need not include “detailed factual 22 allegations,” it must offer “more than an unadorned, 23 the-defendant-unlawfully-harmed-me accusation.” Iqbal, 556 U.S. at 24 678. Conclusory allegations or allegations that are no more than a 25 statement of a legal conclusion “are not entitled to the assumption 26 of truth.” Id. at 679 . In other words, a pleading that merely 27 offers “labels and conclusions,” a “formulaic recitation of the 28 elements,” or “naked assertions” will not be sufficient to state a 1 claim upon which relief can be granted. Id. at 678 (citations and 2 internal quotation marks omitted). 3 “When there are well-pleaded factual allegations, a court 4 should assume their veracity and then determine whether they 5 plausibly give rise to an entitlement of relief.” Iqbal, 556 U.S. 6 at 679 . Plaintiffs must allege “plausible grounds to infer” that 7 their claims rise “above the speculative level.” Twombly, 550 U.S. 8 at 555-56 . “Determining whether a complaint states a plausible 9 claim for relief” is “a context-specific task that requires the 10 reviewing court to draw on its judicial experience and common 11 sense.” Iqbal, 556 U.S. at 679 . 12 III. Discussion 13 The Contracts Clause proscribes “any . . . Law impairing the 14 Obligation of Contracts.” U.S. Const. art. I, § 10, cl. 1. As this 15 Court has explained, 16 Although this language “is facially absolute, its prohibition must be accommodated to the inherent police 17 power of the State to safeguard the vital interests of its people.” Energy Reserves Grp., Inc. v. Kansas Power & 18 Light Co., 459 U.S. 400, 410, 103 (1983) (internal quotation marks omitted). “The constitutional question 19 presented in the light of an emergency is whether the power possessed embraces the particular exercise of it in 20 response to particular conditions.” Home Bldg. & Loan Ass’n v. Blaisdell, 290 U.S. 398, 426 (1934). — 21 — 22 Apartment Ass’n of Los Angeles Cnty., Inc. v. City of Los Angeles, — 23 — 500 F. Supp. 3d 1088 , 1094 (C.D. Cal. 2020), aff’d, 10 F.4th 905 24 (9th Cir. 2021). To answer this constitutional question, courts 25 employ a two-step test that looks first, as a threshold issue, to 26 whether the law in question has “operated as a substantial 27 impairment of a contractual relationship.” Sveen v. Melin, 584 28 U.S. 811 , 819 (2018) (quoting Allied Structural Steel Co. v. 1 Spannaus, 438 U.S. 234, 244 (1978)); see also Apartment Ass’n, 10 2 F.4th at 913. If so, “the inquiry turns to the means and ends of 3 the legislation,” or “whether the state law is drawn in an 4 ‘appropriate’ and ‘reasonable’ way to advance ‘a significant and 5 legitimate public purpose.’” Sveen, 548 U.S. at 819 (quoting 6 Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 7 400, 411–412 (1983). Where there is no substantial impairment of a 8 pre-existing contractual relationship, however, the inquiry may 9 conclude after step one. Sveen, 584 U.S. at 819; see also Allied 10 Structural Steel, 438 U.S. at 244-45 . 11 In determining whether a law interferes with a contractual 12 relationship, courts look to “the extent to which the law 13 undermines the contractual bargain, interferes with a party's 14 reasonable expectations, and prevents the party from safeguarding 15 or reinstating his rights.” Sveen, 584 U.S. at 819; see also 16 Apartment Ass’n, 10 F.4th at 913. In Apartment Association, this 17 Court analyzed an eviction moratorium, similar to that at issue 18 here, implemented by the City of Los Angeles with respect to 19 residential tenancies. Apartment Ass’n, 500 F. Supp. 3d at 1092. 20 The court recognized that several other courts examining similar 21 moratoria looked to the extensive history of governmental 22 regulation of residential landlord-tenant relationships to conclude 23 that additional regulations in the form of eviction moratoria were 24 “relatively minor alterations to existing regulatory frameworks,” 25 and therefore did not interfere with landlords’ reasonable 26 expectations or, therefore, substantially impair existing 27 contractual relationships. Id. at 1095-96 (citing, for example, 28 HAPCO v. City of Philadelphia, 482 F.Supp.3d 337 , 351-53 (E.D. Pa. 1 2020); Auracle Homes, LLC v. Lamont, 478 F.Supp.3d 199 , 224-25 (D. 2 Conn. 2020 ); and Elmsford Apt. Assocs., LLC v. Cuomo, 469 F.Supp.3d 3 148, 155–56 (S.D.N.Y. 2020).); see also, e.g., S. California Rental 4 Hous. Ass’n v. Cnty. of San Diego, 550 F. Supp. 3d 853 , 862 (S.D. 5 Cal. 2021 ). 6 This Court respectfully disagreed with that rationale, 7 observing that “the scope and nature of the COVID-19 pandemic, and 8 of the public health measures necessary to combat it, have no 9 precedent in the modern era, and that no amount of prior regulation 10 could have led landlords to expect anything like” the city’s 11 residential moratorium. Id. at 1096. Similarly, although the city 12 ordinance there at issue, like the Moratorium here, did not prevent 13 landlords from seeking to recover unpaid rent and only temporarily 14 limited landlords’ ability to pursue evictions, this Court observed 15 that the effects of the city moratorium “were, at least in terms of 16 degree, unforeseeable.”5 Id. 17 Plaintiff here makes essentially the same argument, and indeed 18 cites to this Court’s Apartment Association decision repeatedly for 19 support. (Supplemental Opposition at 5-6.) The circumstances 20 here, however, are distinguishable from those in Apartment 21 Association. As an initial matter, it is not clear whether the 22 contractual relationship at issue here predated the extension of 23 the County Moratorium to Plaintiff’s property. It is undisputed 24 that the County extended the Moratorium to incorporated areas of — 25 — — 26 — 5 The Court of Appeals did not reach the substantial impairment issue because, even assuming the city’s eviction — 27 — moratorium substantially impaired a contractual relationship, the moratorium satisfied the second,”appropriate and reasonable” prong — 28 — of the Contracts Clause analysis. Apartment Ass’n 10 F.4th at 913. 1 Los Angeles County effective September 1, 2020. Although the FAC 2 alleges that Plaintiff’s new lease with his tenant also “commenced 3 September 1, 2020,” Plaintiff asserts in opposition to the instant 4 motion that the Moratorium was extended “only after the new lease 5 had been signed by the tenant.” (Supp. Opp. at 2:7 (emphasis 6 original)). Plaintiff elsewhere contends that he “had already 7 negotiated the new lease” by the time the Los Angeles County Board 8 of Supervisors extended the Moratorium on September 1. (Supp. Opp. 9 at 8:7). Notwithstanding this lack of clarity, the court will 10 assume for the purposes of this motion that Plaintiff executed the 11 contract shortly before the Moratorium was extended to apply to 12 Plaintiff. 13 Even assuming, however, that Plaintiff’s contract predated the 14 Moratorium, Plaintiff’s position is not comparable to that of the 15 residential landlords in Apartment Association. The city 16 moratorium at issue there was enacted in March 2020, during the 17 earliest days of the COVID-19 pandemic. As this Court observed, 18 public health measures like the city moratorium were unprecedented 19 at that time. The contract at issue here, however, was allegedly 20 executed on September 1, 2020, well into the pandemic and well 21 after the widespread adoption of eviction moratoria in the greater 22 Los Angeles area. Indeed, as Plaintiff here acknowledges, the City 23 of Lawndale, where Plaintiff’s property is located, implemented its 24 own residential and commercial eviction moratorium as early as 25 April 2020. See 26 https://lawndaleca.hosted.civiclive.com/common/pages/DisplayFile.as 27 px?itemId=17310525. Regardless whether Plaintiff’s tenant took the 28 steps necessary to qualify for relief under Lawndale’s eviction 1 moratorium, Plaintiff was on notice that regulations unheard of 2 prior to the pandemic might, and indeed already did, apply. 3 The FAC itself alleges that the County first implemented its 4 Moratorium even earlier, in March 2020. (FAC ¶ 18.) Although 5 Plaintiff is correct that the first iteration of the Moratorium did 6 not apply to his property, as it only covered unincorporated areas 7 of Los Angeles County, the question is not whether Plaintiff beat 8 the Board of Supervisors to the punch. Rather, the question is 9 whether Plaintiff had a reasonable expectation in September 2020 10 that his new contractual relationship would, notwithstanding the 11 continuing public health crisis and widespread adoption of COVID12 related landlord-tenant regulations throughout the area, remain 13 insulated from similar measures. Even at this stage of 14 proceedings, the answer is no. As stated above, Plaintiff’s own 15 city had already implemented a commercial eviction moratorium, 16 which was itself preceded by the County Moratorium. Although the 17 County Moratorium initially applied only to unincorporated areas of 18 Los Angeles County, Lawndale, where Plaintiff’s property is 19 located, is immediately adjacent to an unincorporated area, the 20 border of which lies less than one mile from Plaintiff’s Artesia 21 Boulevard property. See 22 https://lacounty.maps.arcgis.com/apps/webappviewer/index.html?id=18 23 1e4d122b564303bb775632dfaf076d . 24 Although these realities alone were sufficient to notify 25 Plaintiff that his property too, might become subject to further 26 COVID-related restrictions, any uncertainty on that front was 27 dispelled before Plaintiff ever executed the September 1 lease. In 28 May 2020, County Supervisors Kuehl and Solis moved to extend the 1 Moratorium to incorporated cities within Los Angeles County that 2 did not provide eviction protections. See Ninth Circuit Court of 3 Appeals No. 22-55480, ECF 25 (County’s Request for Judicial Notice) 4 at RJN 26.6 Even though that proposed extension might not have 5 affected Plaintiff, the motion included a provision that the 6 moratorium be reevaluated every 30 days “to provide further 7 extensions.” Id. at RJN 27. Indeed, the extension at issue here 8 was then proposed in July 2020, when County Supervisors Kuehl and 9 Solis advised that “the County’s eviction protections should be 10 established as the baseline for all incorporated cities within Los 11 Angeles County even in cities that have local eviction moratoria,” 12 and made a motion to extend the Moratorium accordingly. Id. at RJN 13 33-34. Although such an extension was not adopted at that time, 14 Supervisors Solis and Kuehl later explained that the extension of 15 the Moratorium to incorporated areas was only delayed to September 16 1 to allow the Board to consider further reports from the 17 Department of Consumer and Business Affairs. Id. at RJN 47. But 18 even if the Board did not actually implement the extension until 19 just after Plaintiff executed the new lease, it was already 20 apparent prior to September 1 that such an extension was possible, 21 if not likely. 22 Under these circumstances, Plaintiff cannot plausibly allege 23 that the Moratorium challenged here took him by surprise or 24 interfered with any reasonable expectation as to regulation, or 25 lack thereof, of his landlord-tenant relationship. Accordingly, — 26 — — 27 — 6 Plaintiff himself also cites to these documents. (Supp. — 28 — Opp. at 7 n.6, 8 n.8.) 1} Plaintiff cannot adequately plead that the Moratorium substantially impaired a contractual relationship, and his claim fails.’ IV. Conclusion 4 For the reasons stated above, the County’s Motion to Dismiss 5]/is GRANTED. Plaintiff’s Complaint is DISMISSED, with prejudice. — 6 — — 5 — IT IS SO ORDERED. 9 f) _ if on" f } 1 0 ; 4 j /j / □ □ j 4} {I if ff Rane Dated: MAY 1, 2024 PORIRUA YS HON. DEAN D. PRES! RSON — 12 — United States District Judge — 13 — — 14 — — 15 — — 16 — — 17 — — 18 — — 19 — — 20 — — 21 — — 22 — — 23 — — 24 — — 25 — 26 || - FFF 27 ’ The court therefore stops at step one, without reaching the question whether the Moratorium appropriately and reasonably advances a significant and legitimate public purpose. Sveen, 584 28 ——_— U.S. at 819. — 11 —