Hotop v. City of San Jose

982 F.3d 710

Dean HOTOP; Ken Schneebeli; Jeff Zell; Sherman Zell; Lois Zell; Louise Peter; Seigi Tadokoro; Pat Crema; Sean Rhinehart; Shuchun Huang; James Campagna; Sal Ruiz; Isaac Agam; Steve Mahl; Lloyd Kip; Roberta Moore ; Deng Liu; Shasha Chen; Small Property Owners Association - San Jose; Zhonghua Pei; Xiaocong Ye; Xiaodong Li, Plaintiffs-Appellants,

v.CITY OF SAN JOSE, a municipal corporation, Defendant-Appellee.

No. 18-16995

United States Court of Appeals, Ninth Circuit.

Argued and Submitted January 9, 2020 Pasadena, California

Filed December 7, 2020

PER CURIAM:

In 2017, the City of San Jose passed Ordinance 30032 ("Ordinance") to amend the City's Apartment Rent Ordinance, and adopted Resolution 78413 to establish regulations for implementing the Ordinance ("Regulations"). Certain provisions of the Ordinance and Regulations require landlords to disclose information about rent stabilized units to the City and condition landlords’ ability to increase rents on providing that information. These provisions are challenged by individual apartment owners subject to the Ordinance and by the Small Property Owners Association-San Jose, an unincorporated trade association of San Jose landlords. Plaintiffs sued under 42 U.S.C. § 1983, claiming that the challenged provisions violate their Fourth, Fifth, and Fourteenth Amendment rights, as well as the Contracts Clause. The district court granted the City's motion to dismiss plaintiffs’ first amended complaint without prejudice. Plaintiffs chose to stand on that complaint and now appeal. Reviewing the district court's decision de novo, see Arpin v. Santa Clara Valley Transportation Agency , 261 F.3d 912, 923 (9th Cir. 2001), we affirm.

I

Plaintiffs’ Fourth Amendment claim is predicated on their theory that the Ordinance and Regulations violate the prohibition against unreasonable searches by requiring landlords to provide certain information to the City through the Director of the Department of Housing. The claim implicates three different disclosure requirements applicable to rent stabilized units.¹

First, plaintiffs point to the required annual registration of rent stabilized units under San Jose Municipal Code ("SJMC") § 17.23.900. To complete the annual registration, § 4.05 of the Regulations requires landlords to submit to the City, on a City-provided form, the following information: the address of the subject unit; the name and address of each landlord of the unit; the occupancy status and commencement date of the current tenancy; a history of the rent charged for use and occupancy of the unit; the amount charged as a security deposit; the metering status of the unit; the names of all tenants occupying the unit; and any household services provided at the start of the current tenancy. Second, plaintiffs point to the Ordinance's re-registration requirements. When a tenant vacates a rent stabilized unit, the landlord must re-register the unit by submitting a City-approved form that discloses the following information: the address of the unit; the reason the prior tenant vacated the unit, if known; the names of subsequent tenants; the rent charged to subsequent tenants; and a copy of the rental agreement between the landlord and subsequent tenants. SJMC § 17.23.600(C). Finally, plaintiffs point to the Ordinance's buyout requirements. A landlord offering to buy out a tenant's lease must make certain mandatory disclosures to the tenant. When a tenant accepts a landlord's buyout offer, the landlord must provide the City with executed copies of the agreement and disclosure form. SJMC § 17.23.700.

Landlords violating the Ordinance face civil penalties and misdemeanor criminal charges punishable by up to six months in jail. SJMC § 17.23.500(A).² Additionally, landlords who fail to comply with the registration or re-registration requirements may not increase rent for unregistered units. SJMC § 17.23.310. Landlords who charge fees or rents higher than what is allowed by the Ordinance or Regulations are guilty of a misdemeanor. SJMC § 17.23.530.

The first question raised by plaintiffs’ Fourth Amendment claim is whether the challenged provisions effect a "search." A Fourth Amendment search occurs when the government either physically intrudes upon "persons, houses, papers, [or] effects" or invades "a person's ‘reasonable expectation of privacy’ " in one of the constitutionally enumerated areas. United States v. Jones , 565 U.S. 400, 405–06, 132 S.Ct. 945, 181 L.Ed.2d 911 (2012) (quoting Katz v. United States , 389 U.S. 347, 360, 88 S.Ct. 507, 19 L.Ed.2d 576 (1967) ). With respect to searches of "papers," we need not decide whether the Fourth Amendment is implicated only by a physical inspection of the documents themselves. Even if the Fourth Amendment is implicated by certain non-physical intrusions, in that context the plaintiff must have a reasonable expectation of privacy in the contents of the documents before the government's conduct can be deemed a Fourth Amendment "search." And here, as the district court held, plaintiffs failed to adequately allege that they have a reasonable expectation of privacy in the information contained in the business records at issue.³

Plaintiffs’ sole substantive allegation regarding privacy is that the information they must disclose under the challenged provisions "constitute plaintiffs’ private business records that is not found in the public domain." The district court found this lone allegation, without additional factual matter, insufficient to establish a reasonable expectation of privacy in the information subject to disclosure. The court noted that San Jose landlords are already required to provide similar information about rent stabilized units to the City by other regulations not challenged here. As one example, when landlords petition to raise the rent by more than is ordinarily permitted, they must provide financial information showing their net operating income in both a "base year" (usually 2014) and the current year. SJMC §§ 17.23.800–870. This information must suffice to show (1) income from all sources, including rent, laundry, and other services, as well as interest on tenant deposits; and (2) expenses, including fees, taxes, utilities, insurance, maintenance, managerial and administrative costs, and legal fees. Landlords can establish these items using a variety of evidence, including "receipts, cancelled checks, and detailed invoices" (which the Regulations consider "the best documentation"), as well as tax returns, ledgers, and insurance claims. Regulations § 8.02.02. As another example, when landlords petition to pass through to tenants the cost of capital improvements, they must provide the number of units affected; the occupancy status and rent charged for each unit; and detailed records concerning the improvement itself, including "invoices and proof of payment" and "[a] copy of the building permit(s) and final inspection(s)." Regulations § 9.02.1. Although the details differ, the information that landlords must submit under these regulations overlaps to a significant degree with the information landlords must disclose under the challenged provisions.

Confronted with this overlap, the district court concluded that plaintiffs’ lone allegation concerning privacy does not "explain how the information implicated by the Ordinance disclosure requirements differs meaningfully from" the information landlords already disclose in other contexts. The court thus dismissed plaintiffs’ Fourth Amendment claim with leave to amend. As noted, however, plaintiffs did not amend their complaint, and they rely on the same lone allegation on appeal.

We agree with the district court that plaintiffs’ complaint fails to allege facts plausibly suggesting that they have a reasonable expectation of privacy in the information that must be disclosed under the challenged provisions. The complaint does not contain any factual allegations distinguishing the information at issue in this case from the similar information landlords already provide to the City in other contexts under regulations whose validity has not been challenged.

The district court's ruling is supported by our recent decision in San Francisco Apartment Association v. City and County of San Francisco , 881 F.3d 1169 (9th Cir. 2018). In that case, landlords in San Francisco argued that a similar ordinance, which required landlords to provide tenant buyout agreements to the city for inclusion in a publicly searchable database, violated their right to privacy under the California Constitution. See id. at 1173–75. Affirming the district court's grant of judgment on the pleadings, we held that the landlords had no "reasonable expectation of privacy in the information" because they "offer no explanation why" the information at issue "is more sensitive or private than other financial information routinely submitted to the government and made publicly available" in other contexts. Id. at 1178 ; see also In re Facebook, Inc. Internet Tracking Litigation , 956 F.3d 589, 604 n.7 (9th Cir. 2020) (treating as comparable the reasonable expectation of privacy under the California Constitution and the Fourth Amendment). The district court applied the same rule here: As in San Francisco Apartment Association , plaintiffs in this case offered no factual allegations plausibly suggesting that they maintain a reasonable expectation of privacy in information that, generally speaking, they already disclose to the City in other contexts.⁴

Our decision in Patel v. City of Los Angeles , 738 F.3d 1058 (9th Cir. 2013) (en banc), aff'd , 576 U.S. 409, 135 S.Ct. 2443, 192 L.Ed.2d 435 (2015), on which plaintiffs rely, is not to the contrary. The ordinance challenged in Patel permitted police officers to perform warrantless, on-demand inspections of hotel owners’ guest registries. Id. at 1061. But in that case no one contested that the information contained in the guest registries was private, for it was undisputed...