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Yim v. city of Seattle

Supreme Court of Washington, En Banc

November 14, 2019

CHONG and MARILYN YIM, KELLY LYLES, BETH BYLUND, CNA APARTMENTS, LLC, and EILEEN, LLC, Respondents,
v.
CITY OF SEATTLE, Appellant.

          YU, J.

         This case concerns the constitutionality of Seattle's "first-in-time rule" (FIT rule), Seattle Municipal Code (SMC) 14.08.050. Broadly speaking, the FIT rule provides that Seattle landlords seeking to fill vacant tenancies must provide notice of their rental criteria, screen all completed applications in chronological order, and offer tenancy to the first qualified applicant, subject to certain exceptions. The plaintiffs are Seattle landlords, who claim the FIT rule facially violates their state constitutional rights.

         On cross motions for summary judgment, the trial court ruled that the FIT rule is unconstitutional on its face because (1) the FIT rule facially effects a per se regulatory taking for private use in violation of article I, section 16, (2) the FIT rule facially infringes on the plaintiffs' substantive due process rights in violation of article I, section 3, and (3) the FIT rule facially infringes on the plaintiffs' free speech rights in violation of article I, section 5. Wash. Const, art. I, §§ 16, 3, 5. Defendant city of Seattle (City) appealed. We granted direct review and now reverse.

         FACTUAL AND PROCEDURAL BACKGROUND

         In September 2014, Seattle's mayor and the Seattle City Council appointed a committee "to evaluate potential strategies to make Seattle more affordable, equitable, and inclusive." Clerk's Papers (CP) at 319. The committee recommended "a multi-prong approach of bold and innovative solutions." Id. After considering the committee's recommendations, the Seattle City Council amended Seattle's Open Housing Ordinance, ch. 14.08 SMC. These amendments included adoption of the FIT rule.

         The FIT rule provides that when a Seattle property owner seeks to fill a tenancy, the owner must first "provide notice to a prospective occupant" of "the criteria the owner will use to screen prospective occupants and the minimum threshold for each criterion," as well as "all information, documentation, and other submissions necessary for the owner to conduct screening." SMC l4.08.050(A)(1)(a)-(b). Next, the property owner must "note the date and time of when the owner receives a completed rental application" and "screen completed rental applications in chronological order." Id. at (A)(2)-(3). "If, after conducting the screening, the owner needs more information than was stated in the notice," the owner must "notify the prospective occupant in writing, by phone, or in person of what additional information is needed." Id. at (A)(3). Finally, the property owner must "offer tenancy of the available unit to the first prospective occupant meeting all the screening criteria necessary for approval of the application." Id. at (A)(4). The first qualified applicant has 48 hours in which to accept the offer of tenancy. Id. If the applicant does not accept, "the owner shall review the next completed rental application in chronological order until a prospective occupant accepts the owner's offer of tenancy." Id.

         There are a number of exceptions to these general procedures. No part of the FIT rule applies "to an accessory dwelling unit or detached accessory dwelling unit wherein the owner or person entitled to possession thereof maintains a permanent residence, home or abode on the same lot." Id. at (F). In addition, an owner does not have to offer tenancy to the first qualified applicant if the owner "is legally obligated to" or "voluntarily agrees to set aside the available unit to serve specific vulnerable populations." Id. at (A)(4)(a)-(b). The FIT rule also contains procedures for potential occupants with disabilities to seek "additional time to submit a complete rental application because of the need to ensure meaningful access to the application." Id. at (B).

         The FIT rule became effective on January 1, 2017, although compliance was not required until July 1, 2017. Id. at (A), (E). On August 16, 2017, the plaintiffs filed a first amended complaint, "seeking a declaration that the City's [FIT] rule . . . violates the Takings, Due Process, and Free Speech Clauses of the Washington State Constitution, and also seeking a permanent injunction forbidding the City from enforcing its unconstitutional rule." CP at 19. The plaintiffs challenge the FIT rule only "on its face," not as applied. Id. at 30, 33.

         The parties filed cross motions for summary judgment based on a statement of stipulated facts and a stipulated record. The trial court ruled in favor of the plaintiffs on each of their claims, concluding that the FIT rule facially violates article I, section 16 (the takings clause), section 3 (the due process clause), and section 5 (the free speech clause) of the Washington State Constitution. The City appealed, and we granted direct review. Order, No. 95813-1 (Wash. Nov. 28, 2018).

         ISSUES

         A. Does the FIT rule facially effect a regulatory taking for purposes of article I, section 16?

          B. If the FIT rule does facially effect a regulatory taking, is it for private use in violation of article I, section 16?

         C. Does the FIT rule facially violate the plaintiffs' article I, section 3 right to substantive due process?

         D. Does the FIT rule facially violate the plaintiffs' article I, section 5 right to free speech?

         ANALYSIS

         This case presents two important questions of state constitutional law that will have consequences far beyond the particular claims at issue here. First, we must define when a law regulating the use of property crosses the line into a "regulatory taking" for purposes of article I, section 16. Second, we must determine the standard of review that applies to article I, section 3 substantive due process challenges to laws regulating the use of property.

         As to the first issue, this court has always attempted to define regulatory takings consistently with federal courts applying the takings clause of the Fifth Amendment. U.S. CONST, amend. V. The federal definition of regulatory takings has been substantially clarified since we last considered the issue, such that the "legal underpinnings of our precedent have changed or disappeared altogether." W.G. Clark Constr. Co. v. Pac. Nw. Reg'l Council of Carpenters, 180 Wn.2d 54, 66, 322 P.3d 1207 (2014). It has not been shown that we should adopt a Washington-specific definition as a matter of independent state law at this time, and we therefore adopt the definition of regulatory takings set forth by the United States Supreme Court in Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 125 S.Ct. 2074, 161 L.Ed.2d 876 (2005), as discussed in more detail below. The following precedent is disavowed to the extent that it defines regulatory takings in a manner that is inconsistent with Chevron U.S.A.: Orion Corp. v. State, 109 Wn.2d 621, 747 P.2d 1062 (1987); Presbytery of Seattle v. King County, 114 Wn.2d 320, 787 P.2d 907 (1990); Sintra, Inc. v. City of Seattle, 119 Wn.2d 1, 829 P.2d 765 (1992); Robinson v. City of Seattle, 119 Wn.2d 34, 830 P.2d 318 (1992); Guimont v. Clarke, 121 Wn.2d 586, 854 P.2d 1 (1993); Margola Associates v. City of Seattle, 121 Wn.2d 625, 854 P.2d 23 (1993); and Manufactured Housing Communities of Washington v. State, 142 Wn.2d 347, 13 P.3d 183 (2000) (plurality opinion).

         Regarding the second issue, as analyzed in more detail in our opinion for Chong Yim v. City of Seattle, No. 96817-9 (Wash. Nov. 14, 2019) (Jim II), this court has always attempted to apply a standard of review to article I, section 3 substantive due process claims that is consistent with the standard used by federal courts applying the due process clauses of the Fifth and Fourteenth Amendments to the United States Constitution. As with defining regulatory takings, it has not been shown that we should depart from federal law at this time, and we therefore apply rational basis review to the plaintiffs' substantive due process challenge to the FIT rule.

         Turning to the specific claims presented in this case, the constitutionality of the FIT rule is a question of law reviewed de novo. Amunrud v. Bd. of Appeals, 158 Wn.2d 208, 215, 143 P.3d 571 (2006). The plaintiffs' facial takings and substantive due process claims cannot succeed unless the plaintiffs show that "no set of circumstances exists in which [the FIT rule], as currently written, can be constitutionally applied." City of Redmond v. Moore, 151 Wn.2d 664, 669, 91 P.3d 875 (2004). They cannot meet that burden on the record presented, while the City has met its burden of justifying the FIT rule for purposes of the plaintiffs' facial free speech claim. We therefore reverse and remand with instructions to grant the City's motion for summary judgment.

         A. The FIT rule does not facially effect a regulatory taking

         The takings clause of the Fifth Amendment provides, "[N]or shall private property be taken for public use, without just compensation." U.S. CONST, amend. V. Likewise, article I, section 16 provides, "No private property shall be taken or damaged for public or private use without just compensation having been first made." WASH. CONST, art. I, § 16. Both the federal and state takings clauses allow for "[c]laims of inverse condemnation by excessive regulation," otherwise known as "regulatory takings" claims. Orion Corp., 109 Wn.2d at 642.

         Regulatory takings claims are based on the premise that "while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking." Pa. Coal Co. v. Mahon, 260 U.S. 393, 415, 43 S.Ct. 158, 67 L.Ed. 322 (1922). When a regulation goes too far, it becomes "a de facto exercise of eminent domain," even though the private individual still actually owns and possesses the property. Orion Corp., 109 Wn.2d at 645. Such regulatory takings, like traditional exercises of eminent domain, require either just compensation (if the property is taken for public use) or invalidation of the law (if the property is taken for private use). Mfd. Hous., 142 Wn.2d at 362.

         Regulatory takings may be either "per se" or "partial." A per se regulatory taking is found where a regulation's impact is necessarily so onerous that the regulation's mere existence is, "from the landowner's point of view, the equivalent of a physical appropriation." Lucas v. S.C Coastal Council, 505 U.S. 1003, 1017, 112 S.Ct. 2886, 120 L.Ed.2d 798 (1992). As a matter of federal law, such categorical treatment is appropriate for only "two relatively narrow categories" of regulations-regulations that "require[ ] an owner to suffer a permanent physical invasion of her property" and "regulations that completely deprive an owner of 'all economically beneficial us[e]' of her property." Chevron U.S.A., 544 U.S. at 538 (second alteration in original) (quoting Lucas, 505 U.S. at 1019).[1] All other regulations are susceptible of partial regulatory takings claims, which federal courts decide based on a multifactor test (the Penn Central factors) applied on a case-by-case basis. Id. at 538-39 (citing Penn Cent. Transp. Co. v. New York City, 438 U.S. 104, 124, 98 S.Ct. 2646, 57 L.Ed.2d 631 (1978)).

         The plaintiffs here claim the FIT rule facially effects a per se regulatory taking, but they do not contend that it fits into either of the per se categories recognized by federal courts. Instead, they contend that Washington courts recognize another category of per se regulatory takings, which includes any regulation that "destroys one or more of the fundamental attributes of ownership (the right to possess, exclude others and to dispose of property)." Mfd. Hous., 142 Wn.2d at 355. The plaintiffs argue that the FIT rule falls into this per se category "because it strips landlords of a fundamental attribute of property ownership-the right to choose to whom one will rent their property." Resp'ts' Br. at 1.

         We now clarify that none of our regulatory takings cases have purported to define regulatory takings (either per se or partial) as a matter of independent state law. Instead, we have always attempted to discern and apply the federal definition of regulatory takings. Since we last attempted to do so, the federal definition has been clarified substantially and is now clearly inconsistent with the definitions set forth in our precedent. Thus, the legal underpinnings of our precedent have disappeared, and it has not been shown that we should now adopt a Washington-specific definition of regulatory takings as a matter of independent state law.

         Therefore, we disavow our precedent, adopt the federal definition of regulatory takings, and hold that the plaintiffs cannot show the FIT rule facially meets this definition on the record presented. We express no opinion as to whether the FIT rule effects a regulatory taking as applied to any particular property.

         1. We have never defined regulatory takings as a matter of independent state law

         The plaintiffs emphasize that their takings claim is based on the Washington State Constitution and contend that "[t]he federal approach to takings therefore does not offer a relevant comparison because this Court can interpret its own state constitution as it sees fit-so long as its interpretation does not go below the floor of protection guaranteed by the Federal Constitution." Id. at 20-21. It is certainly true that we have the authority to interpret article I, section 16 independently of the Fifth Amendment's takings clause. However, it is incorrect to suggest that we have already done so for purposes of defining regulatory takings. To the contrary, for over 30 years, we have attempted to define regulatory takings in a manner that is consistent with federal law. Unfortunately, for many years, federal regulatory takings cases were complex and occasionally inconsistent, making our task extremely challenging and giving the inaccurate impression that this court was attempting to set forth a Washington-specific doctrine based on independent state law.

         a. Our pre-Manufactured Housing cases did not define regulatory takings based on independent state law

         Although we have never defined regulatory takings based on independent state law, our precedent may appear to have done so. See, e.g., Laurel Park Cmty., LLC v. City of Tumwater, 698 F.3d 1180, 1191-93 (9th Cir. 2012) (analyzing state regulatory takings claim separately from federal regulatory takings claim); Lemire v. Dep't of Ecology, 178 Wn.2d 227, 242, 309 P.3d 395 (2013) ("The parties and amici strenuously debate the framework on which this court should rest a taking analysis, including whether and to what extent our state constitutional takings provision may offer greater protection than its federal counterpart."); Roger D. Wynne, The Path out of Washington's Takings Quagmire: The Case for Adopting the Federal Takings Analysis, 86 WASH. L. Rev. 125, 136 (2011) (pointing to "three unique elements" of Washington takings law). Regrettably, this court has added to the confusion by occasionally characterizing our cases as setting forth a "state 'regulatory takings' doctrine." Robinson, 119 Wn.2d at 47. We resolve this confusion now.

         The reason our precedent appears unusual is because this court was attempting to set forth "a doctrinally consistent, definitive test" for regulatory takings, which "has proved an elusive goal, sometimes characterized as 'the lawyer's equivalent of the physicist's hunt for the quark.'" Orion Corp., 109 Wn.2d at 645 (internal quotation marks omitted) (quoting Williamson County Reg'l Planning Comm'n v. Hamilton Bank,473 U.S. 172, 199 n.17, 105 S.Ct. 3108, 87 L.Ed.2d 126 (1985), overruled in part by Knick v. Township of Scott, 588 U.S.___, 139 S.Ct. 2162, 204 L.Ed.2d 558 (2019)). It should not be surprising that our pursuit of such an elusive goal left this court as something of an outlier. However, our attempts to articulate a test ...


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