Apartment Ass'n of L. A. Cnty., Inc. v. City of L. A.

500 F.Supp.3d 1088

APARTMENT ASSOCIATION OF LOS ANGELES COUNTY, INC., Plaintiff,

v.CITY OF LOS ANGELES, et al., Defendants.

Case No. CV 20-05193 DDP (JEMx)

United States District Court, C.D. California.

Signed November 13, 2020

Douglas J. Dennington, John A. Ramirez, Kelsey Quist, Peter J. Howell, Rutan and Tucker LLP, Irvine, CA, for Plaintiff.

Craig Takenaka, David J. Michaelson, Deborah J. Breithaupt, Matthew Alex Scherb, Los Angeles City Attorney's Office, Elaine Zhong, Los Angeles City Attorney, Los Angeles, CA, for Defendants.

ORDER DENYING PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION

[Dkt. 46]

DEAN D. PREGERSON, United States District Judge Presently before the court is Plaintiff Apartment Association of Los Angeles County, doing business as the Apartment Association of Greater Los Angeles ("AAGLA")'s Motion for Preliminary Injunction. Having considered the submissions of the parties and heard oral argument, the court denies the motion and adopts the following Order.¹

I. Background

The COVID-19 global pandemic is the gravest public health crisis in over a century. At present, the novel coronavirus has killed at least 230,000 Americans and infected over 9 million more.² The true toll may never be known, but is likely significantly higher. The Centers for Disease Control and Prevention ("CDC"), for example, estimates that the number of "excess deaths" in the United States is closer to 300,000.³ Neither the State of California nor the City of Los Angeles have been spared from the ravages of COVID-19. Nearly a million Californians have been infected, and nearly 18,000 have died.⁴ Approximately 300,000 of those cases and 7,000 of those fatalities have occurred in the Los Angeles area.⁵

Eight months into the pandemic, the City of Los Angeles remains in a state of emergency. In accordance with recommendations from national, state, and local public health authorities, state and local officials have taken hitherto unthinkable steps to slow the spread of the virus. For a time, all state and city residents were ordered to stay confined to their places of residence, with limited exceptions.⁶ Although restrictions have eased somewhat at present, many types of businesses and gathering places remain closed in Los Angeles, including movie theaters, bars, athletic fields, theme parks, gyms and fitness centers, museums, live performance venues, indoor restaurants, and "non-critical" offices. ⁷

These measures, in conjunction with other coronavirus-related concerns, have had devastating economic consequences. By one estimate, over 16 million California households have lost employment income as a result of the coronavirus.⁸ Over the last six months, the unemployment rate in the Los Angeles area has ranged from 15 to 20 percent.⁹

Crises of national scope require national responses. Initially, the federal government rose to meet the economic challenge presented by the COVID crisis and passed the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"), Pub. L. No. 116-136. Among the CARES Act's provisions were (1) a one-time stimulus payment to taxpayers and (2) an additional $600 weekly payment to Americans collecting unemployment benefits.^{10 ,11} Those additional unemployment payments expired, however, at the end of July, and Congress has not provided for further stimulus payments or other assistance to the American people. But the crisis has not abated. As the pandemic has worsened, its economic consequences have persisted.

These economic impacts have, unsurprisingly, affected the ability of many residential tenants to make rent payments. Somewhere between one million and 1.4 million California households are behind on their rent.¹² Approximately 14% of renter households in Los Angeles County are behind on rent, largely due to the effects of the pandemic on employment.¹³ These households include over 450,000 people in the City of Los Angeles.¹⁴

As the CDC has explained, the novel coronavirus "spreads very easily and sustainably between people who are in close contact with one another ...."¹⁵ "[H]ousing stability helps protect public health because homelessness increases the likelihood of individuals moving into congregate settings ..."¹⁶ Thus, "[i]n the context of a pandemic, eviction moratoria – like quarantine, isolation, and social distancing – can be an effective public help measure utilized to prevent the spread of communicable disease," and "facilitate self-isolation by people who become ill or who are at risk for severe illness from COVID-19."¹⁷

Recognizing that "[t]he COVID-19 pandemic threatens to undermine housing security and generate unnecessary displacement of City residents," the City of Los Angeles adopted, among other measures, Ordinance 186606 ("the Eviction Moratorium," "City Moratorium," or "Moratorium"). The Moratorium "temporarily prohibits evictions of residential and commercial tenants for failure to pay rent due to COVID-19, and prohibits evictions of residential tenants during the emergency for no-fault reasons, for unauthorized occupants or pets, and for nuisances related to COVID-19." (Plaintiff's Request for Judicial Notice, Ex. 3 at 2.) Landlords may continue to seek to evict tenants for other reasons, and do not run afoul of the Moratorium at all if they seek to evict a tenant on the basis of a good faith belief that the tenant does not qualify for the Moratorium's protections.¹⁸ (Id. at 3, 4).

The Moratorium's prohibition of evictions for COVID-related unpaid rent extends for twelve months after the expiration of the local emergency.¹⁹ (Id. at 3.) In other words, tenants have one year after the end of the emergency to make any rent payments that were missed as a result of COVID, including as a result of workplace closures, health care expenses, child care expenses due to school closures, "or other reasonable expenditures stemming from government-ordered emergency measures."²⁰ (Id. ) The Moratorium explicitly states, however, that it does not "eliminate[ ] any obligation to pay lawfully charged rent." (Id. at 4.) If, at the end of the one year grace period, a tenant still owes rent that came due during the emergency period, a landlord may seek to evict for that unpaid rent. Landlords may not, however, charge late fees or interest for missed rent during the emergency or twelve month grace period. (Id. at 3.)

Plaintiff AAGLA is comprised of thousands of owners and managers of rental housing units, including over 55,000 properties within the City of Los Angeles. Plaintiff's Third Amended Complaint ("TAC") alleges that the City Eviction Moratorium and Rent Freeze Ordinance violate landlords' rights under the Contract Clause of the Constitution, as well as the Due Process Clause, Takings Clause, and Tenth Amendment. Plaintiff now moves for a preliminary injunction on the basis of the TAC's first two claims.

II. Legal Standard

A private party seeking a preliminary injunction must show that: (i) it is likely to succeed on the merits; (ii) it will suffer irreparable harm in the absence of preliminary relief; (iii) the balancing of the equities between the parties that would result from the issuance or denial of the injunction tips in its favor; and (iv) an injunction will be in the public interest. Winter v. Natural Resources Def. Council, 555 U.S. 7, 20, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008). Preliminary relief may be warranted where a party: (i) shows a combination of probable success on the merits and the possibility of irreparable harm; or (ii) raises serious questions on such matters and shows that the balance of hardships tips in favor of an injunction. See Arcamuzi v. Continental Air Lines, Inc., 819 F.2d 935, 937 (9th Cir. 1987). "These two formulations represent two points on a sliding scale in which the required degree of irreparable harm increases as the probability of success decreases." Id.; see also hiQ Labs, Inc. v. LinkedIn Corp., 938 F.3d 985, 992 (9th Cir. 2019). Under both formulations, the party must demonstrate a "fair chance of success on the merits" and a "significant threat of irreparable injury" absent the requested injunctive relief.²¹ Arcamuzi, 819 F.2d at 937.

III. Discussion

A. Likelihood of Success on the Merits

AAGLA contends that the Eviction Moratorium and the Rent Freeze Ordinance run afoul of the Contract Clause's prescription that states shall not pass "any Law impairing the Obligation of Contracts." U.S. Const., Art. I, § 10. Although this language "is facially absolute, its prohibition must be accommodated to the inherent police power of the State to safeguard the vital interests of its people." Energy Reserves Grp., Inc. v. Kansas Power & Light Co., 459 U.S. 400, 410, 103 S.Ct. 697, 74 L.Ed.2d 569 (1983) (internal quotation marks omitted). "The constitutional question presented in the light of an emergency is whether the power possessed embraces the particular exercise of it in response to particular conditions." Home Bldg. & Loan Ass'n v. Blaisdell, 290 U.S. 398, 426, 54 S.Ct. 231, 78 L.Ed. 413 (1934). Thus, to determine whether the Eviction Moratorium runs afoul of the Contract Clause, this Court must examine (1) whether the law "operate[s] as a substantial impairment of a contractual relationship," (2) whether the City "has a significant and legitimate public purpose" in enacting the moratorium, and (3) whether the "adjustment" of the rights of the contracting parties is "based upon reasonable conditions and is of a character appropriate to the public purpose justifying the legislation's adoption." Energy Reserves, 459 U.S. at 411-12, 103 S.Ct. 697 (alterations omitted); see also Sveen v. Melin, ––– U.S. ––––, 138 S. Ct. 1815, 1821, 201 L.Ed.2d 180 (2018) (combining public purpose and reasonableness inquiries). Here, although AAGLA concedes that the Eviction Moratorium is motivated by a legitimate public purpose, it nevertheless contends that the moratorium substantially and unreasonably impairs landlords' contract rights.²²

1. Substantial Impairment

Whether...