LEXSEE DANIEL GUGGENHEIM; SUSAN ... - Land Use Law

Page 1LEXSEEDANIEL GUGGENHEIM; SUSAN GUGGENHEIM; MAUREEN H. PIERCE,Plaintiffs-Appellants, v. CITY OF GOLETA, a municipal corporation,Defendant-Appellee.No. 06-56306UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT2010 U.S. App. LEXIS 25981June 22, 2010, Argued and Submitted, Pasadena, CaliforniaDecember 22, 2010, FiledPRIOR HISTORY: [*1]Appeal from the United States District Court for theCentral District of California. D.C. No.CV-02-02478-FMC. Florence-Marie Cooper, DistrictJudge, Presiding.Guggenheim v. City of Goleta, 582 F.3d 996, 2009 U.S.App. LEXIS 21313 (9th Cir. Cal., 2009)DISPOSITION:AFFIRMED.COUNSEL: Robert S. Coldren, Hart, King & Coldren,Santa Ana, California, for the appellants.Andrew W. Schwartz(argued), Shute, Mihaly &Weinberger, LLP, San Francisco, California, and Amy E.Morgan (briefed), Burke, Williams & Sorensen, LLP,Los Angeles, California, for appellees.David J. Bradford(briefed), Jenner & Block LLP,Chicago, Illinois, for amicus curiae Equity LifestyleProperties.Michael M. Berger (briefed), Manatt, Phelps & Phillips,LLP, Los Angeles, California, for amicus curiae Centerfor Constitutional Jurisprudence.Gordon C. Atkinson (briefed), Cooley Godward KronishLLP, San Francisco, California, for amicus curiae GoldenState Manufactured-Home Owners League.John J. McDermott(briefed), Arlington, Virginia, foramici curiae National Apartment Association, NationalMulti Housing Council, Apartment Association ofCalifornia Southern Cities, Inc., and the ApartmentAssociation of Orange County.Grant Habata (briefed), California Association ofRealtors, Los Angeles, California, for amicus curiaeCalifornia Association [*2] of Realtors.R. S. Radford (briefed), Pacific Legal Foundation,Sacramento, California, for amici curiae Pacific LegalFoundation and Manufactured Housing Institute.Amy E. Margolin (briefed), Bien & Summers, Novato,California, for amicus curiae Western ManufacturedHousing Communities Association.Karen K. McCay, Sonia S. Shah, Anthony J. Adair, andStepanie M. Vaughan, (briefed), Pahl & McCay, SanJose, California, for amicus curiae California ApartmentAssociation.Meaghan McLaine VerGow (briefed), O'Melveny &Myers LLP, Washington, D.C., for amici curiaeManufactured Housing Educational Trust, GoldsteinProperties, Inc., and Morgan Partners, Inc.Michael von Loewenfeldt (briefed), Kerr & WagstaffeLLP, San Francisco, California, and Jeff M. Malawy(briefed), Aleshire & Wynder, LLP, Irvine, California,

2010 U.S. App. LEXIS 25981, *2Page 2for amici curiae League of California Cities, andCalifornia State Association of Counties.Terry R. Dowdall (briefed), Dowdall Law Offices,Orange, California, for amicus curiae CaliforniaMobilehome Parkowners Alliance.Elizabeth B. Wydra (briefed), ConstitutionalAccountability Center, Washington, D.C., for amicicuriae American Planning Association, APA California,Constitutional Accountability [*3] Center, and WesternCenter on Law and Poverty.Meliah Schultzman (briefed), National Housing LawProject, Oakland, California, for amici curiae AARP,California Coalition for Rural Housing, HousingCalifornia, Legal Services of Northern California,Non-Profit Housing, Association of Northern California,R. Keith Traphagen, and Tenants Together.JUDGES: Before: Alex Kozinski, Chief Judge, Alfred T.Goodwin, Stephen Reinhardt, Pamela Ann Rymer,Andrew J. Kleinfeld, Ronald M. Gould, Richard R.Clifton, Consuelo M. Callahan, Carlos T. Bea, Sandra S.Ikuta, and N. Randy Smith, Circuit Judges. Opinion byJudge Kleinfeld; Dissent by Judge Bea.OPINION BY: Andrew J. KleinfeldOPINIONKLEINFELD, Circuit Judge:We address the viability of a takings claim arisingout of a rent control ordinance affecting mobile homeparks.I. FactsIn 1979, Santa Barbara County, California adopted arent control ordinance for mobile homes. 1 Mobile homeshave the peculiar characteristic of separating ownershipof homes that are, as a practical matter, affixed to theland, from the land itself. 2 Because the owner of themobile home cannot readily move it to get a lower rent,the owner of the land has the owner of the mobile homeover a barrel. [*4] The Santa Barbara County rentcontrol ordinance for mobile homes had as its statedpurpose relieving "exorbitant rents exploiting" a shortageof housing and the high cost of moving mobile homes. 3The rent control ordinance was amended in 1987. 4 Theordinance has a complex scheme for setting rents,limiting how fast they rise, and affording landlords amechanism for disputing the limits. 51 Santa Barbara County, Cal., Ordinance 3, 122(Oct. 22, 1979).2 See Yee v. City of Escondido:The term "mobile home" issomewhat misleading. Mobilehomes are largely immobile as apractical matter, because the costof moving one is often asignificant fraction of the value ofthe mobile home itself. They aregenerally placed permanently inparks; once in place, only about 1in every 100 mobile homes is evermoved. A mobile home ownertypically rents a plot of land, calleda "pad," from the owner of amobile home park. The park ownerprovides private roads within thepark, common facilities such aswashing machines or a swimmingpool, and often utilities. Themobile home owner often investsin site-specific improvements suchas a driveway, steps, walkways,porches, or landscaping. When themobile home [*5] owner wishes tomove, the mobile home is usuallysold in place, and the purchasercontinues to rent the pad on whichthe mobile home is located.503 U.S. 519, 523, 112 S. Ct. 1522, 118 L. Ed. 2d153 (1992) (citation omitted).3 The first section of the ordinance provides the"purpose" of enacting it:A growing shortage of housingunits resulting in a critically lowvacancy rate and rapidly rising andexorbitant rents exploiting thisshortage constitutes serioushousing problems affecting asubstantial portion of those SantaBarbara County residents whoreside in rental housing. These

2010 U.S. App. LEXIS 25981, *5Page 3conditions endanger the publichealth and welfare of the County ofSanta Barbara. Especially acute isthe problem of low vacancy ratesand rapidly rising and exorbitantrents in mobile home parks in theCounty of Santa Barbara. Becauseof such factors and the high cost ofmoving mobilehomes, the potentialfor damage resulting therefrom,requirements relating to theinstallation of mobilehomes,including permits, landscaping andsite preparation, the lack ofalternative homesites formobilehome residents and thesubstantial investment ofmobilehome owners in suchhomes, the Board of Supervisorsfinds and declares it necessary toprotect the owners [*6] andoccupiers of mobilehomes fromunreasonable rents while at thesame time recognizing the need formobile home park owners toreceive a fair return on theirinvestment and rent increasessufficient to cover their increasedcosts. The purpose of this chapteris to alleviate the hardship causedby this problem by imposing rentcontrols in mobilehome parkswithin the unincorporated area ofthe County of Santa Barbara.Goleta, Cal., Mun. Code § 08.14.010; see alsoSanta Barbara County, Cal., Ordinance 3,122 § 1(Oct. 22, 1979), codified at Santa Barbara County,Cal., Code § 11A-1.4 Santa Clara County, Cal., Ordinance 3,678(Dec. 21, 1987).5 The ordinance limits the ability of park ownersto increase rent of existing tenants. Park ownersmay only do so once a year, or at the terminationof a lease term. Goleta, Cal., Mun. Code §§08.14.070-080. The amount of the increase isdetermined through arbitration. Goleta, Cal., Mun.Code § 08.14.040. Park owners can automaticallyraise rent by 75% of the local consumer priceindex (a measure of inflation), and may seekadditional increases for various reasons providedin the ordinance. Id. § 08.14.050. When a tenantsells the mobile home to a new [*7] tenant, thepark owner may only increase the rent by 10%.Id. § 08.14.140.Eighteen years after the original rent controlordinance went into effect, and ten years after theamendment, the plaintiffs Daniel and Susan Guggenheimand Maureen H. Pierce (the Guggenheims) bought amobile home park, "Ranch Mobile Estates," burdened bythe ordinance.The park, when the Guggenheims bought it in 1997,was in what California calls "unincorporated territory" inSanta Barbara County. Five years later, in 2002, the Cityof Goleta incorporated in territory including theGuggenheims' land. California law requires a newlyincorporated city comprising previously unincorporatedterritory to adopt, as its first official act, an ordinancekeeping all the county ordinances in effect for 120 daysor until the new municipality changes them, whicheverhappens first. 6 Goleta did what was required on its firstday of existence, February 1, 2002, so the county rentcontrol ordinance for mobile home parks became the cityrent control ordinance on the first day of the City'sexistence, as the City's very first official act. And onApril 22, 2002, within the 120-day sunset period, the Cityof Goleta adopted the [*8] county code including theordinance, this time without the statutory 120-day sunsetperiod. 7 The parties have stipulated that there was a legalgap when the ordinance was not in effect, apparentlyreferring to the hours between the City's coming intolegal existence and the performance of the City's firstofficial act on its first day. Those hours on the first day ofGoleta's existence are the only time between 1979 and thepresent day, and the only time during the Guggenheims'ownership, when no rent control ordinance has burdenedthe Guggenheims' mobile home park. 86 Cal. Gov't Code § 57376(a) ("If the newlyincorporated city comprises territory formerlyunincorporated, the city council shall,immediately following its organization and priorto performing any other official act, adopt anordinance providing that all county ordinancespreviously applicable shall remain in full forceand effect as city ordinances for a period of 120days after incorporation, or until the city councilhas enacted ordinances superseding the county

2010 U.S. App. LEXIS 25981, *8Page 4ordinances, whichever occurs first.").7 Goleta, Cal., Ordinance 02-17 (Apr. 22, 2002).8 We say there was a gap because the parties sostipulated, but we do not [*9] imply aconstruction of California law to that effect. TheCalifornia statute says that the newly incorporatedcity must "immediately" and "prior to performingany other official act" adopt an ordinancemaintaining the effectiveness of all countyordinances, so it may be that, were it not for thestipulation, there would be an arguable questionwhether there was any gap.That year, 2002, the Guggenheims sued the Cityclaiming that the rent control ordinance was a taking oftheir property without compensation, and assertingnumerous other claims. 9 They have limited their takingsclaim to a facial challenge, not an "as applied" challenge.They claim that it is the rent control ordinance itself, notits particularized application to their mobile home park orthe regulatory process applied to their park, that hasdenied them their constitutional rights. The theory of thetakings claim is that by locking in a rent below marketrents, and allowing tenants to sell their mobile homes tobuyers who will still enjoy the benefits of the controlledrent (albeit subject to upward adjustment 10 ), theordinance shifts much of the value of ownership of theland from the landlord to the tenant. The [*10]Guggenheims submitted an expert's report with thesummary judgment papers explaining that rents for sitesin their mobile home park would average about $13,000 ayear without rent control, but average less than $3,300with rent control, and that the tenants could sell theirmobile homes for around an average of $14,000 withoutrent control, but because of rent control, the averagemobile home in the park sells for roughly $120,000.Since the Guggenheims lost on summary judgment, weassume for purposes of decision that this is correct.9 These claims include a substantive due processclaim, damages for the deprivation ofconstitutional rights, an equal protection claim,violations of the California state constitution, anda variety of other claims not at issue here. Thefederal constitutional claims are brought under 42U.S.C. § 1983.10 Park owners can automatically raise rent by75% of the local consumer price index (a measureof inflation), and may seek additional increasesfor various reasons provided in the ordinance.Goleta, Cal., Mun. Code § 08.14.050.The case went through a complex procedural course,but the complexities are of no importance here. First thecase in federal court [*11] was stayed pursuant toPullman 11 abstention while the Guggenheims pursuedclaims in state court. They and the City settled the statecase. Returning to federal court, the Guggenheims wonsummary judgment, and the City appealed. While theappeal was pending, the Supreme Court decided Lingle v.Chevron U.S.A. Inc., 12 and the Guggenheims and theCity agreed that Lingle so undermined the district courtjudgment that they stipulated to dismiss the appeal andthey reopened the litigation in district court. This time theCity won summary judgment, and the Guggenheimsappeal. The district court observed that the Guggenheims"got exactly what they bargained for when theypurchased the Park--a mobile-home park subject to adetailed rent-control ordinance." We reversed, 13 butdecided to rehear the case en banc, 14 and now vacate ourearlier decision and affirm.II. Analysis11 See Railroad Comm. of Tex. v. Pullman Co.,312 U.S. 496, 501-02, 61 S. Ct. 643, 85 L. Ed. 971(1941).12 544 U.S. 528, 125 S. Ct. 2074, 161 L. Ed. 2d876 (2005).13 Guggenheim v. City of Goleta, 582 F.3d 996(9th Cir. 2009).14 Guggenheim v. City of Goleta, 598 F.3d 1061(9th Cir. 2010).We review a grant of summary judgment de novo. 15The Guggenheims' challenge is to the 2002 City ofGoleta [*12] ordinance adopting the county rent controlordinance, and its readoption within the 120-day period.15 Carmen v. San Francisco Unified Sch. Dist.,237 F.3d 1026, 1029 (9th Cir. 2001).A. JurisdictionThe City does not dispute jurisdiction, but we raisedthe issues of standing and ripeness sua sponte in ourpanel decision. 16 The Guggenheims have claimed aninjury in fact to themselves (deprivation of much of thevalue of their land), which is fairly traceable to Goleta'srent control ordinance, and is redressable by a decision intheir favor, so they do indeed have standing to maintain

2010 U.S. App. LEXIS 25981, *12Page 5their challenge to the 2002 ordinances. 17 They ownedthe land in 2002 when the City of Goleta promulgated the2002 ordinances.16 Guggenheim, 582 F.3d at 1004 n. 4.17 See Lujan v. Defenders of Wildlife, 504 U.S.555, 560-61, 112 S. Ct. 2130, 119 L. Ed. 2d 351(1992); Colwell v. Dep't of Health & HumanServs., 558 F.3d 1112, 1121-22 (9th Cir. 2009)(quoting Lujan); see also Equity Lifestyle Props.,Inc. v. County of San Luis Obispo, 548 F.3d 1184,1193 (9th Cir. 2008) (holding that a propertyowner must own the affected property at the timethe land use regulation is enacted to have standingto bring a facial regulatory takings claim); CarsonHarbor Village Ltd. v. City of Carson, 37 F.3d468, 472 (9th Cir. 1994), [*13] overruled onother grounds by WMX Techs. Inc. v. Miller, 104F.3d 1133, 1136 (9th Cir. 1997) (same).Ripeness is more complicated, because ofWilliamson County Regional Planning Commission v.Hamilton Bank of Johnson City. 18 In Williamson, theSupreme Court imposed two ripeness requirements onfederal takings claims. First, a regulatory takings claim isnot ripe until the appropriate administrative agency hasmade a final decision on how the regulation will beapplied to the property at issue. 19 That requirement hasno application to this facial challenge. "Facial challengesare exempt from the first prong of the Williamsonripeness analysis because a facial challenge by its naturedoes not involve a decision applying the statute orregulation." 20 Second, a property owner who sues forinverse condemnation, claiming that his property wastaken without just compensation, generally must seek thatcompensation through the procedures provided by thestate before bringing a federal suit. 2118 473 U.S. 172, 105 S. Ct. 3108, 87 L. Ed. 2d126 (1985).19 Id. at 192-93; see also Equity Lifestyle, 548F.3d at 1190.20 Hacienda Valley Mobile Estates v. City ofMorgan Hill, 353 F.3d 651, 655 (9th Cir. 2003).21 Williamson, 473 U.S. at 195; [*14] EquityLifestyle, 548 F.3d at 1190.In Yee v. City of Escondido, another Californiamobile home rent control case, the Court held thatalthough an "as applied" challenge would have beenunripe because the park owner had not sought permissionto increase rents from the administrative body establishedby the ordinance, the facial challenge by the park ownerswas indeed ripe, because it did not depend on the extentto which they were deprived of the economic use of theirproperty or the extent to which they were compensated.22 Subsequently in Suitum v. Tahoe Regional PlanningAgency, the Court described the Williamson ripenessrequirements as "prudential" rather than jurisdictional inthe context of regulatory takings case. 23 In AdamBrothers Farming, Inc. v. County of Santa Barbara, weheld that we had discretion to waive the Williamsonexhaustion requirement where the case raised onlyprudential ripeness concerns, and did so, assumingwithout deciding that the takings claim was ripe. 24 In sodoing, we applied McClung v. City of Sumner. 25 InMcClung we had also interpreted Suitum as describingWilliamson ripeness as prudential rather thanjurisdictional, and concluded that "we need [*15] notdetermine the exact contours of when takings claimripeness is merely prudential and not jurisdictional." 2622 503 U.S. 519, 533-34, 112 S. Ct. 1522, 118 L.Ed. 2d 153 (1992).23 520 U.S. 725, 733-34, 117 S. Ct. 1659, 137 L.Ed. 2d 980 (1997).24 604 F.3d 1142, 1147-48 (9th Cir. 2010).25 548 F.3d 1219 (9th Cir. 2008).26 Id. at 1224.That is not to suggest that Williamson is dead. InVentura Mobilehome Communities Owners Associationv. City of San Buenaventura, we held that the onlycognizable claim raised was an as applied challenge, soheld that it was properly dismissed as unripe. 27 And inSinclair Oil Corp. v. County of Santa Barbara, we heldthat while as applied challenges required Williamsonexhaustion, facial challenges sometimes did andsometimes did not. 28 A complication that makes itespecially difficult to determine the continuing viabilityof our ripeness precedents is that many involve"substantially advances legitimate state interests" claimsunder Agins v. City of Tiburon, 29 and Agins wasoverruled by Lingle. 30 Indeed, in the case before us,Agins was the law during state proceedings, and Lingledid not come down until the first appeal was pending infederal court. It may be that a claim (even a facial claim),alleging a regulatory taking [*16] based on the theorythat an ordinance takes property without justcompensation, is unripe until that property owner hassought compensation through such state proceedings as

2010 U.S. App. LEXIS 25981, *16Page 6may be available. But under Suitum this ripenessrequirement now appears to be prudential rather thanjurisdictional.27 371 F.3d 1046, 1052-54 (9th Cir. 2004).28 96 F.3d 401, 406-07 (9th Cir. 1996).29 447 U.S. 255, 260, 100 S. Ct. 2138, 65 L. Ed.2d 106 (1980).30 Lingle v. Chevron U.S.A. Inc., 544 U.S. 528,545, 125 S. Ct. 2074, 161 L. Ed. 2d 876 (2005).In this case, we assume without deciding that theclaim is ripe, and exercise our discretion not to imposethe prudential requirement of exhaustion in state court.Two factors persuade us to follow this course. First, wereject the Guggenheims' claim on the merits, so it wouldbe a waste of the parties' and the courts' resources tobounce the case through more rounds of litigation.Second, the Guggenheims did indeed litigate in statecourt, and they and the City of Goleta settled in statecourt. Unfortunately the law changed after their trip tostate court, so they might well have proceeded differentlythere had they been there after Lingle came down, but itis hard to see any value in forcing a second trip on them.B. Penn Central and PalazzoloThe [*17] Guggenheims challenge only the 2002City of Goleta ordinance, not the 1979 or 1987 County ofSanta Barbara ordinances. The fundamental weakness ofthe dissent is its blending of the economic effects of allthree ordinances, even though challenges to the first twohave long been barred and are not asserted. There is a bigproblem with challenging as a taking the government'sfailure to repeal a long existing law. The Countyordinances were both promulgated long before theGuggenheims bought their land, and the rent controlregime created by the county ordinances limited the valueof the land when the Guggenheims bought it. TheGuggenheims assert no claim against the County of SantaBarbara, just the City of Goleta. They frame theirchallenge narrowly, solely as a facial challenge to theCity of Goleta ordinance promulgated in 2002. And theyargue that their facial challenge should be evaluatedunder Penn Central Transportation Co. v. New York City.31 We assume, without deciding, that a facial challengecan be made under Penn Central. 3231 438 U.S. 104, 98 S. Ct. 2646, 57 L. Ed. 2d631 (1977).32 See Tahoe-Sierra Preserv. Council, Inc. v.Tahoe Reg. Planning Agency, 535 U.S. 302, 334,122 S. Ct. 1465, 152 L. Ed. 2d 517 (2002) ("[I]fpetitioners had challenged [*18] the applicationof the moratoria to their individual parcels,instead of making a facial challenge, some ofthem might have prevailed under a Penn Centralanalysis.").Palazzolo v. Rhode Island 33 is of no help to theGuggenheims. They do not have the problem thatPalazzolo solved. In Palazzolo the taking was from thefirst owner and the "as applied" lawsuit was by thesecond. The transfer was by operation of law, during theperiod when the owner was ripening the claim byexhausting state remedies. 34 One reason why thesedistinctions matter is that even though in Palazzolo titlepassed to the plaintiff after the land use restriction wasenacted, he acquired his economic interest as a 100%shareholder in the corporation owning the land before theland use restriction was enacted, and title shifted to himbecause his corporation was dissolved, not because hebought the property for a low price reflecting theeconomic effect of the regulation.33 533 U.S. 606, 627-28, 121 S. Ct. 2448, 150 L.Ed. 2d 592 (2001).34 Id. at 614.Palazzolo holds that an owner who acquires title toproperty during the period required for an as appliedregulatory taking to ripen (in that case during proceedingson applications to build on wetlands) [*19] is notnecessarily barred from bringing the action when it ripenseven though he did not own the property when theregulation first started to be applied to the property. 35This difference matters because an as applied challengenecessarily addresses the period during which theadministrative or judicial proceedings for relief occur, sojustice may require that title transfers during the ripeningperiod not bar the action. By contrast, there is no suchextended period applicable to a facial challenge, becausethe only time that matters is the time the ordinance wasadopted.35 Id. at 628 ("A challenge to a land useregulation, by contrast, does not mature untilripeness requirements have been satisfied, underprinciples we have discussed; until this point aninverse condemnation claim alleging a regulatorytaking cannot be maintained. It would be illogical,and unfair, to bar a regulatory takings claim

2010 U.S. App. LEXIS 25981, *19Page 7because of the post-enactment transfer ofownership where the steps necessary to make theclaim ripe were not taken, or could not have beentaken, by a previous owner.").The Guggenheims, unlike the owner in Palazzolo,have owned the mobile home park at all relevant times.The Guggenheims [*20] owned during, before, and afteradoption of the two City of Goleta ordinances theychallenge, both upon incorporation and within the120-day period. Palazzolo does not revive a challenge tothe 1979 and 1987 county ordinances, 36 and theGuggenheims do not make one. Thus whatever wrongsthe 1979 and 1987 county ordinances may have done towhoever owned the mobile home park then, those wrongsare not before us.36 Daniel v. County of Santa Barbara, 288 F.3d375, 384 (9th Cir. 2002). We have also rejectedthe argument that Palazzolo "eliminat[es] anystatute of limitations requirement." EquityLifestyle, 548 F.3d at 1193 n.15.And the Guggenheims carefully limit their challengeto a facial one, not an as applied challenge. By so doing,they reserve the possibility of an as applied challenge if atsome subsequent time the City of Goleta's arbitratordenies them a fair rent increase. 37 If the rent controlscheme effects an unconstitutional taking when applied,the challenge will be to that application, not to theordinance on its face, and the time for the challenge willrun from when the administrative action became final asopposed to when the ordinance was enacted. It is not asthough [*21] an unconstitutional law becomesimmunized from all challenges once limitations bar facialchallenges to its enactment.37 We do not address whether the limitation onthe amount by which rents can increase and theprovisions for arbitration of rent increases maywork a taking, because that cannot be determineduntil these limitations are applied. That we rejectthe facial challenge has no bearing one way or theother on whether an as applied challenge mightsucceed.As we held in Levald, Inc. v. City of Palm Desert,"[i]n the takings context, the basis of a facial challenge isthat the very enactment of the statute has reduced thevalue of the property or has effected a transfer of aproperty interest. This is a single harm, measurable andcompensable when the statute is passed." 38 Nor does itmatter that a challenge might not have been worthmaking in 1979 or 1987 when property values werelower, but became worth making when the housingbubble inflated many prices. As Levald stated, "while therising property values may be relevant to an as-appliedchallenge, they are not relevant to a claim that the veryenactment of the statute effected a taking." 3938 998 F.2d 680, 688 (9th Cir. 1993).39 Id.But [*22] this is not to say that passage of thecounty ordinances in 1979 and 1987 can be ignored. It iscentral. Yee v. City of Escondido 40 holds that a takingschallenge to mobile home rent control ordinancematerially similar to Goleta's should be analyzed as aregulatory taking under Penn Central, not a physicaloccupation amounting to a per se taking as in Loretto v.Teleprompter Manhattan CATV Corp. 41 Lingle explainsPenn Central as identifying several factors, not a setformula, to determine whether a regulatory action is"functionally equivalent to the classic taking." 42"Primary among those factors are the economic impact ofthe regulation on the claimant and, particularly, the extentto which the regulation has interfered with distinctinvestment-backed expectations." 43 Lingle points outthat the character of the government action may also berelevant, 44 but this cuts against the Guggenheimsbecause the government action here is a continuation ofan old ordinance. The case before us turns on the"primary" factor.40 503 U.S. 519, 532, 112 S. Ct. 1522, 118 L.Ed. 2d 153 (1992).41 458 U.S. 419, 102 S. Ct. 3164, 73 L. Ed. 2d868 (1982).42 Lingle, 544 U.S. at 539.43 Id. at 538-39 (internal editorial and quotationmarks omitted).44 Id. at 539.That "primary [*23] factor," "the extent to which theregulation has interfered with distinct investment-backedexpectations," is fatal to the Guggenheims' claim. Weassume for purposes of discussion (since theGuggenheims' summary judgment evidence would soestablish) that the rent control ordinance, unchangedsince 1987, did indeed transfer about $10,000 a year inrent for the average mobile home owner from thelandlord to the tenant, and that this has had the effect of

2010 U.S. App. LEXIS 25981, *23Page 8raising the price of the average mobile home from$14,000 to $120,000. That had happened before theGuggenheims bought the mobile home park. Since theordinance was a matter of public record, the price theypaid for the mobile home park doubtless reflected theburden of rent control they would have to suffer.They could have no "distinct investment-backedexpectations" that they would obtain illegal amounts ofrent. To "expect" can mean to anticipate or look forwardto, but it can also mean "to consider probable or certain,"and "distinct" means capable of being easily perceived, orcharacterized by individualizing qualities. 45 "Distinctinvestment-backed expectations" implies reasonableprobability, like expecting rent to be paid, not [*24]starry eyed hope of winning the jackpot if the lawchanges. A landlord buys land burdened by leaseholds inorder to acquire a stream of income from rents and thepossibility of increased rents or resale value in the future.The stream already suffered a reduced flow when theGuggenheims bought it, so what they paid would reflectthe flow that the law allowed. The Guggenheims mightconceivably have paid a slight speculative premium overthe value that the legal stream of rent income wouldyield, on the theory that rent control might someday end,either because of a change of mind by the municipality orcourt action. But that premium could be no more than aspeculative possibility, not an "expectation." Speculativepossibilities of windfalls do not amount to "distinctinvestment-backed expectations," unless they are shownto be probable enough materially to affect the price. 46The idea, after all, of the constitutional protection weenjoy in the security of our property against confiscationis to protect the property we have, not the property wedream of getting. The Guggenheims bought a trailer parkburdened by rent control, and had no concrete reason tobelieve they would get something [*25] much morevaluable, because of hoped-for legal changes, than whatthey had.45 Webster's Third New InternationalDictionary 658, 799 (1981).46 The dissent suggests that any speculativepossibility, including the speculative possibilitythat a long existing law might change, should beenough to give rise to a takings claim if thatspeculative possibility is cut off. Thus, under thedissent's approach, if a statute prohibiting someland use were converted into a state constitutionalamendment, the identical language in theconstitutional amendment would amount to ataking, because it reduced the speculativepossibility that the law might be repealed.It is one thing to speculate that the value ofyour land might change based on market demand;it is another to gamble that a stable law may berepealed or nullified. While there is always somepossibility that the law may change, and thedissent suggests that possibility may be especiallygreat in California, that possibility oughtgenerally to be deemed too slight to give rise to atakings claim when the law is reenacted ratherthan repealed.The Guggenheims and the City of Goleta stipulatedthat there was a period of time when their mobile [*26]home park was free of rent control. That was the periodof hours after "organization" of the City of Goleta and,"prior to performing any other official act." 47 Thisperiod could not have given rise to a reasonableinvestment-backed expectation, because theGuggenheims had already made their investment yearsbefore, and even if they had bought the mobile home parkduring those few hours, they would have known thatGoleta's first official act would, under controlling law,have to be adoption of the county's rent controlordinance.47 See Cal. Gov't Code § 57376(a).The Guggenheims also argue that the 120-day periodwhen the rent control ordinance would be terminatedunless readopted gave them a reasonable expectation thatit would not be readopted. This argument too fails toaccount for the fact that their investment had alreadybeen made, years before. And even if it had been madeduring the 120 days, it is not as though the ordinance wasin limbo during that period. The rent control ordinancewas the law. Though the city might choose to let theordinance lapse instead of readopting it, that possibilitywas as speculative as the possibility that the city mightend rent control after [*27] the 120-day period. Thisspeculation is less than an expectation.Lingle holds that Penn Central, though notestablishing a set formula, identifies significant factors,"the economic effect on the claimant and, particularly,the extent to which the regulation has interfered withdistinct investment-backed expectations. In addition, thecharacter of the governmental action--for instance

2010 U.S. App. LEXIS 25981, *27Page 9whether it amounts to a physical invasion or insteadmerely affects property interests through some publicprogram adjusting the benefits and burdens of economiclife to promote the common good--may be relevant indiscerning whether a taking has occurred." 48 Thecharacter of the government action does not help theGuggenheims. The City of Goleta did not adjust thebenefits and burdens of economic life, it left them as theyhad been for many years.48 Lingle, 544 U.S. at 538-39 (internal editorialand quotation marks omitted).Whatever unfairness to the mobile home park ownermight have been imposed by rent control, it was imposedlong ago, on someone earlier in the Guggenheims' chainof title. The Guggenheims doubtless paid a lot less for thestream of income mostly blocked by the rent control lawthan they [*28] would have for an unblocked stream.The 2002 City of Goleta adoption by reference of theSanta Barbara County ordinance did not transfer wealthfrom them to their tenants. That transfer occurred in 1979and 1987, from other landlords, and probably benefittingother tenants.The people who really do have investment-backedexpectations that might be upset by changes in the rentcontrol system are tenants who bought their mobilehomes after rent control went into effect. Ending rentcontrol would be a windfall to the Guggenheims, and adisaster for tenants who bought their mobile homes afterrent control was imposed in the 70's and 80's. Tenantscome and go, and even though rent control transferswealth to "the tenants," after a while, it is likely to affectdifferent tenants from those who benefitted from thetransfer. The present tenants lost nothing on account ofthe City's reinstitution of the County ordinance. But theywould lose, on average, over $100,000 each if the rentcontrol ordinance were repealed. The tenants whopurchased during the rent control regime have invested anaverage of over $100,000 each in reliance on the stabilityof government policy. 49 Leaving the ordinance [*29] inplace impairs no investment-backed expectations of theGuggenheims, but nullifying it would destroy the valuethese tenants thought they were buying.49 We do not imply that a change in governmentpolicy amounts to a taking from the beneficiaries.See Madera Irrigation Dist. v. Hancock, 985 F.2d1397, 1403 (9th Cir. 1993) (holding that"[r]easonable expectations arising out of pastpolicy but without a basis in cognizable propertyrights may be honored by prudent politicians,because to do otherwise might be unfair, orbecause volatility in government policy willreduce its effectiveness in inducing long termchanges in behavior. But violation of suchexpectations cannot give rise to a FifthAmendment claim.").C. Equal Protection and Due Process ClaimsThe Guggenheims make two other arguments, thatthe ordinance denies them substantive due processbecause it does not assure them a fair return on theirinvestment, and that it denies them equal protection of thelaw because it treats mobile home park owners differentlyfrom other landlords.Due process claims can succeed when a rent controlordinance fails to substantially further a legitimategovernment interest. 50 The dissent argues [*30] that thisordinance did not achieve its purpose because it fails tocontrol the price of sublets. It is true that the rent controlordinance at issue here does not control the rental price ofa mobile home for occupants such as subletters. Itcontrols the rental price of the land on which the mobilehome is situated. This is in keeping with the purpose ofthe ordinance, which is not just to lower rents, but to"alleviate the hardship" to mobile home owners causedby "the high cost of moving mobilehomes, the potentialfor damage resulting therefrom, requirements relating tothe installation of mobilehomes, including permits,landscaping and site preparation, the lack of alternativehomesites for mobilehome residents and the substantialinvestment of mobilehome owners in such homes." 51The ordinance protects mobile home owners, not allrenters. Such a purpose does not protect mobile homerenters from all market increases in the value ofoccupancy. It protects owners of mobile homes from theleverage owners of the pads have, to collect a premiumreflecting the cost of moving the mobile home on top ofthe market value of use of the land. This is a legitimategovernment purpose, related [*31] to but distinct fromlowering housing prices for all renters.50 Richardson v. City and County of Honolulu,124 F.3d 1150, 1165 (9th Cir. 1997).51 Goleta, Cal., Mun. Code § 08.14.010.Whether the City of Goleta's economic theory forrent control is sound or not, and whether rent control will

2010 U.S. App. LEXIS 25981, *31Page 10serve the purposes stated in the ordinance of protectingtenants from housing shortages and abusively high rentsor will undermine those purposes, is not for us to decide.We are a court, not a tenure committee, and are bound byprecedent establishing that such laws do have a rationalbasis. 52 Students in Economics 101 have for manydecades learned that rent control causes the higher rentsand scarcity it is meant to alleviate, 53 but the DueProcess Clause does not empower courts to imposesound economic principles on political bodies. 5452 See Pennell v. City of San Jose, 485 U.S. 1,13, 108 S. Ct. 849, 99 L. Ed. 2d 1 (1988) ("wehave long recognized that a legitimate andrational goal of price or rate regulation is theprotection of consumer welfare"); Equity LifestyleProps., Inc. v. County of San Luis Obispo, 548F.3d 1184, 1194 (9th Cir. 2008) ("The SupremeCourt and this Circuit have upheld rent controllaws as rationally [*32] related to a legitimatepublic purpose."); Carson Harbor Village Ltd. v.City of Carson, 37 F.3d 468, 472 (9th Cir. 1994),overruled on other grounds by WMX Techs. Inc.v. Miller, 104 F.3d 1133, 1136 (9th Cir. 1997)("A generally applicable rent-control ordinancewill survive a substantive due process challenge ifit is 'designed to accomplish an objective withinthe government's police power, and if a rationalrelationship existed between the provisions andthe purpose of the ordinances.'").53 See, e.g., William J. Baumol & Alan S.Blinder, ECONOMICS: PRINCIPLES ANDPOLICY 64-67 (2d ed. 1982).54 See Lochner v. New York, 198 U.S. 45, 75, 25S. Ct. 539, 49 L. Ed. 937 (1905) (Holmes, J.,dissenting) ("The Fourteenth Amendment does notenact Mr. Herbert Spencer's Social Statics.").The Guggenheims' equal protection theory is alsoforeclosed by precedent, 55 and would have no force evenif it were not, because only a rational basis is needed forthis ordinance, and mobile parks differ from most otherproperty in the separation of ownership of the land fromthe improvements affixed to the land. It is possible thatapplication of the ordinance by the arbitrator will violatesubstantive or procedural due process requirements,[*33] but that remains to be seen, if at all, in an as appliedchallenge to its application.55 Equity Lifestyle, 548 F.3d at 1195 (9th Cir.2008) ("This equal protection challenge must beconsidered under rational basis review becausemobilehome park owners are not a suspectclass.").AFFIRMED.DISSENT BY: Carlos T. BeaDISSENTBEA, Circuit Judge, dissenting, joined byKOZINSKI, Chief Judge, and IKUTA, Circuit Judge:I must respectfully dissent for two reasons.First, because the majority misapplies the SupremeCourt's analysis of regulatory takings claims. It ignorestwo essential elements of that analysis, and fails to followthe Court's instructions on the one element it uses todisqualify the claim. The majority impermissibly picksout only one of the three factors the Court has told us toconsider in determining whether a regulation effects ataking under the Penn Central test--whether the claimanthad "distinct investment-backed expectations"--andinexplicably disdains the other two. This converts athree-factor balancing test into a "one-strike-you're-out"checklist. Not content to rewrite one binding precedent,the majority ignores the Court's recent holding inPalazzolo that an investor can validly expect [*34] that aland control measure, in place when he invests, is notnecessarily eternal and therefore does not disqualify hisclaim of regulatory taking. Palazzolo v. Rhode Island,533 U.S. 606, 627, 121 S. Ct. 2448, 150 L. Ed. 2d 592(2001).Second, because it decides the substantive dueprocess and equal protection claims by citing rent controlcases. But, the Goleta ordinance is not a rent control lawfor the simple reason that it is not designed to--nor doesit--control rents. It does not just miss the mark because ofunintended consequences or inefficient administration. Itsvery structure was designed and intended not to providehousing rent control, but to transfer wealth from mobilehome park owners to one group of lucky tenants. Themeasure we deal with here is a wealth transfer, pure andsimple, with none of the features of rent control thoughtlegitimate governmental interests. As such, itsenforcement violates due process and equal protection.I. Background

Appellants Daniel Guggenheim, Susan Guggenheim,and Maureen H. Pierce (collectively, the"Guggenheims"), appeal the district court's grant ofsummary judgment in favor of the City of Goleta. TheGuggenheims own the land on which mobile homes sit.In 2002, the City [*35] of Goleta adopted a mobile homerent control ordinance. The Ordinance capped the rate ofannual rent the Guggenheims could charge for the mobilehome lots, and provided for a maximum of 10% rentincreases upon the sale of the mobile home to a newtenant. Importantly, the Ordinance provided no cap on theamount mobile home owners could charge when leasingor selling the actual mobile home.The Guggenheims brought suit alleging theOrdinance constituted a regulatory taking, thus entitlingthem to just compensation under the Fifth and FourteenthAmendments. The Guggenheims also alleged due processand equal protection claims. Although the Guggenheimspresented evidence that the Ordinance effects a wealthtransfer from the mobile home land owners to the lucky,"windfall tenants" who held tenancies at the time of theenactment of the Ordinance, and that the Ordinance is notwritten in such a way as to effect a legitimate stateinterest--such as providing affordable housing to lowincome people--the district court granted summaryjudgment against them. 11 We review the district court's order grantingsummary judgment in favor of the City de novo.Lovell v. Chandler, 303 F.3d 1039, 1052 (9th Cir.2002). [*36] We "must determine, viewing theevidence in the light most favorable to thenon-moving party, whether there are any genuineissues of material fact and whether the districtcourt correctly applied the relevant law." VenturaPackers, Inc. v. F/V Jeanine Kathleen, 305 F.3d913, 916 (9th Cir. 2002).II. Takings ClauseClaiming to apply the three-factor test from PennCentral, the en banc majority opinion holds as a matter oflaw that the Guggenheims cannot establish the mobilehome rent control ordinance effects a regulatory taking ofits property for public use within the meaning of the FifthAmendment, as applied to Goleta through the FourteenthAmendment. The majority's principal error is its finding,as a matter of law, that the Ordinance could not interferewith the Guggenheims' "distinct investment-backedexpectations" of freeing their land from "rent control."2010 U.S. App. LEXIS 25981, *34Page 11Maj. Op. at 20434. The majority reaches this conclusiononly by adopting a view of the law and of the economiceffects of the Goleta ordinance that is static and providesno opportunity for change or innovation. While attractivefor its simplicity, such stasis does not reflect the world inwhich we live, nor the teachings of [*37] the Court.In Penn Central Transportation Company v. NewYork City, 438 U.S. 104, 98 S. Ct. 2646, 57 L. Ed. 2d 631(1978), the Court set forth the three factors that must beconsidered in determining whether a regulation effects ataking: (1) the economic impact of the regulation on theclaimant; (2) the character of the government's action;and (3) the extent to which the regulation interferes withthe claimant's investment-backed expectations. Id. at 124.The majority opinion deals only with the last factor, as ifPenn Central established a "one-strike-you're-out"checklist for knocking property owners out of court,rather than a three-factor balancing test in which eachfactor must be considered. No one factor is "talismanic,"Justice O'Connor said in Palazzolo when she criticizedthe state supreme court for "elevating what it believed tobe '[petitioner's] lack of reasonable investment-backedexpectations' to 'dispositive status.'" Palazzolo, 533 U.S.at 634 (O'Connor, J., concurring). The extent ofinterference with investment-backed expectations instead"is one factor that points toward the answer to thequestion whether the application of a particular regulationto particular property 'goes too far.'" Id. (quoting [*38]Penn. Coal Co. v. Mahon, 260 U.S. 393, 415, 43 S. Ct.158, 67 L. Ed. 322 (1922)). Since Penn Central requiresall factors be considered, that is what I shall do. Each ofthese factors militates in favor of finding that Goleta'sso-called rent control ordinance (the "Ordinance")effected a regulatory taking.A. The Economic Impact of the OrdinancePrimary among [the Penn Central]factors are the economic impact of theregulation on the claimant and,particularly, the extent to which theregulation has interfered with distinctinvestment-backed expectations.Lingle v. Chevron, 544 U.S. 528, 538-39, 125 S. Ct. 2074,161 L. Ed. 2d 876 (2005) (internal quotation marksomitted). 2

2010 U.S. App. LEXIS 25981, *38Page 122 In Lingle, an oil company brought suit underthe Fifth and Fourteenth Amendments challenginga Hawaii statute which limited the rent oilcompanies could charge dealers to leasecompany-owned service stations. Applying Aginsv. City of Tiburon, 447 U.S. 255, 100 S. Ct. 2138,65 L. Ed. 2d 106 (1980)in which the SupremeCourt declared that government regulation ofprivate property "effects a taking if [it] does notsubstantially advance legitimate stateinterests--the District Court held that the rent capeffected a taking. The Ninth Circuit affirmed. TheSupreme Court reversed and remanded, holdingthat Agins' "substantially [*39] advances" test isnot a valid takings test. Lingle, 544 U.S. at 548.The majority opinion settles on the factor of "distinctinvestment-backed expectations," but fails to provide anyanalysis of the general economic impact of the GoletaOrdinance on the claimant. 3 Let's provide that analysis.3 I am puzzled, but grateful, to learn what themajority thinks is the fundamental weakness ofthis dissent: "[the] blending of the economiceffects on the Guggenheims of all threeordinances." Maj. Op. at 20431.Puzzled, because there are no economiceffects on the Guggenheims from the twopreviously-enacted ordinances: the Santa Barbara1979 and 1987 ordinances. Since Goletaincorporated itself into a city in 2002, only the2002 Goleta ordinance imposes price control onthe land the Guggenheims rent out. Indeed, themajority acknowledges it is only the 2002ordinance which the Guggenheims challenge.Maj. Op. at 20431.Grateful, to learn that I need not worry aboutthe economic effects of the Santa Barbaraordinance; neither do the Guggenheims.The Guggenheims presented evidence that theOrdinance deprives them of approximately 80% of themarket value of their mobile home park land--nearly allof which [*40] value is effectively transferred to theoriginal tenants by enactment of the Ordinance. TheOrdinance limits the amount by which rents on themobile home pads may be increased to 75% of theConsumer Price Index, plus an additional amount to passthrough increased operating costs, capital expenses, andcapital improvements. Ordinance §§ 11A-5, 11A-6. TheOrdinance also contains a vacancy control provision,which limits to 10% the permissible rent increase on themobile home pad when a mobile home unit changesownership. Id. § 11A-14. The parties and the districtcourt did not dispute that the Ordinance seriouslyimpacted the value of the Guggenheims' property:During the time that [the Guggenheims]have owned the Park, housing costs in theCity have increased approximately 225%.Because of the rent-control ordinance, therents charged by [the park owners] havenot kept pace with this increase . . .existence of lower-than-market value rentshas resulted in the ability of mobilehomeowners to sell their homes at a significantpremium [the "transfer premium"].According to the analysis of [theGuggenheims'] expert, based on the sale of64 mobile homes from January 15, 1999through July [*41] 21, 2004, the premiumamounted to, on average, 88% of the saleprice. In other words, an average mobilehome worth $12,000 would sell forapproximately $100,000.As outlined in the report by the Guggenheims' expert, Dr.Quigley 4 , and accepted by the district court, theOrdinance required the Guggenheims to rent all Parkmobile home pad spaces at approximately 20% of theirmarket value. 5 The market price of a mobile homeincreases when the rent the homeowner pays for space ina mobile home park decreases. Dr. Quigley estimatedthat, on average, almost 90% of a mobile home's saleprice represented the value of the lower rents set by theOrdinance, and this premium went into the pockets of thetenants incumbent at the time of the Ordinance'senactment, hereafter the "windfall tenants."4 Dr. Quigley is a professor of economics,business, and policy at the University ofCalifornia, Berkeley. See Carl Mason & John M.Quigley, The Curious Institution of Mobile HomeRent Control, 16 J. Housing Econ. 189, 189(2007).5 Of course, as the years go by, and if housingcosts increase, this 80% disparity between marketand regulated rents will increase and themagnitude of the Ordinance's economic [*42]

2010 U.S. App. LEXIS 25981, *42Page 13impact will grow.There is no authority for the proposition relied on bythe district court that a taking has not occurred when thecomplaining party continues to receive some return oninvestment. See Cienega Gardens v. United States, 331F.3d 1319, 1343 (Fed. Cir. 2003) (finding that anexaction of 96% of the property's return on equity wassevere enough to constitute a taking under Penn Central).The Penn Central test looks at the severity of theeconomic burden, and a finder of fact could easilydetermine that a loss of 80% of the market value ofproperty is just such a severe economic burden, eventhough the property owner receives some return oninvestment. In Penn Central, the Court held thatenforcement of a landmark preservation ordinance to barconstruction of a fifty-story office building was not aregulatory taking because the restricted airspace rightscould be transferred to other parcels owned by thelitigant; the option of constructing an office building atthose other locations reduced the economic impact of theregulation. Penn Central, 438 U.S. at 137. But theGuggenheims are not so positioned: (1) they have noother lots, and (2) if they had, there is no benefit [*43]under the Ordinance which they could transfer to suchlots. Moreover, the Penn Central landmark ordinancewas generally-applicable to all types of property ownersand barred only expansions of existing uses.Further, California imposes considerable obstacles toalternate uses of the mobile home park. To convert thepark to any other use, the Guggenheims must obtainapproval of their plan from the city council. Cal. Gov.Code § 66427.5(e). As part of the approval process, theymust file a plan outlining the new use to which theproperty will be put and detailing the impact of theconversion on existing residents, and also conduct a"survey of support of residents . . . . pursuant to a writtenballot," the results of which must be submitted along withthe application and may be taken into account by the citycouncil when it votes on the conversion plan. Id. §66427.5(b), (d); see Colony Cove Props., LLC v. City ofCarson, 187 Cal. App. 4th 1487, 114 Cal. Rptr. 3d 822,835 (Cal. Ct. App. 2010). Additionally, because the costof the Ordinance is borne solely by mobile home parkowners--and not lessors of other housing--its economicimpact on those park owners is more severe than abroad-based housing regulation. [*44] This factor favorsfinding a "taking" has occurred.B. Investment-Backed Expectations of All the ParkOwnersThe majority opinion holds that the determinativePenn Central factor must be the extent to which theregulation has interfered with the claimant's distinctinvestment-backed expectations; and that factor "is fatalto the Guggenheims' claim." Maj. Op. at 20434. Inaddition to avoiding the question of how a single factor ina three-factor test could be "fatal" without considerationor balancing of the other factors, 6 this holding isincorrect for three reasons.6 Justice O'Connor made this precise point in herconcurrence in Palazzolo, supra at p. 20443.First, the majority opinion holds, as a matter of law,that the Guggenheims cannot have investment-backedexpectations of freeing their land from the rent controlordinance because they knew the regulation was in effectwhen they purchased the mobile home park. This couldbe a logical conclusion to reach--but only were one toignore (1) the instructions of the Supreme Court, (2)decades of political, legal, and economic developments,and (3) the actions of the Guggenheims.First, the Supreme Court has specifically held thatthe fact [*45] claimants knew of a land-use regulation atthe time they took title to their land does not bar themfrom challenging that regulation, nor from contendingthat the ordinance lessened the value of their land byinterference with their investment-backed expectations.Were we to accept the State's rule [thatappellants had no investment-backedexpectations because the ordinance wasenacted before they purchased the land],the postenactment transfer of title wouldabsolve the State of its obligation todefend any action restricting land use, nomatter how extreme or unreasonable. AState would be allowed, in effect, to put anexpiration date on the Takings Clause.This ought not to be the rule. Futuregenerations, too, have a right to challengeunreasonable limitations on the use andvalue of land.Palazzolo, 533 U.S. at 627 (emphasis added). In his

2010 U.S. App. LEXIS 25981, *45Page 14concurrence, Justice Scalia was even more explicit incriticizing the methodology employed by the majorityhere:In my view, the fact that a restrictionexisted at the time the purchaser took title. . . should have no bearing upon thedetermination of whether the restriction isso substantial as to constitute a taking. The'investment-backed expectations' [*46]that the law will take into account do notinclude the assumed validity of arestriction that in fact deprives property ofso much of its value as to beunconstitutional.Id. at 637 (Scalia, J., concurring) (emphasis added)(internal citation omitted). The majority's dismissal of theGuggenheim's investment-backed expectations, on thebasis that they knew what they were getting into, directlycontravenes Supreme Court precedent and assumes theeternal validity, without reform, of the so-called rentcontrol ordinance. 7 It does not come as a surprise themajority's stance on this subject comes without legalauthority.7 Not only does Palazzolo recognize theGuggenheims' ability to bring a takings claim onthe basis of their own reasonableinvestment-backed expectations, but it alsoacknowledges the ability of a land owner to bringa regulatory takings action for a loss in value thatwas suffered by a previous land owner. AsPalazzolo points out, the government is notabsolved of its obligation to defend actionsrestricting land use, merely on account of apostenactment transfer of title. 533 U.S. at 627. Arule barring land owners from challengingordinances that were enacted during a [*47]previous landowner's tenure, the Court explained,"would work a critical alteration to the nature ofproperty, as the newly regulated landowner isstripped of the ability to transfer the interestwhich was possessed prior to the regulation. TheState may not by this means secure a windfall foritself." Id. Consequently, the panel majority'sobservation that any unfairness attributable to therent control ordinance "was imposed long ago []on someone earlier in the Guggenheims' chain oftitle," is unavailing. Maj. Op. at 20437. Palazzolomakes clear that to the extent a previouslandowner had the right to bring a regulatorytakings challenge against an ordinance enactedduring its tenure, successive landowners enjoy thesame right. 533 U.S. at 627. Thus, even thoughthe ordinance at issue effected a wealth transferfrom the previous land owner to tenants in 1979and 1987, which wealth transfer is kept in placeby the 2002 Goleta ordinance, the Guggenheimsmay challenge the ordinance and seek recovery onthe basis of the previous land owner's loss. Id.That loss is passed on to the Guggenheims as anincident of property ownership. In accountingterms, it is a transferable contingent [*48] asset.The majority opinion asserts that Palazzolo "is of nohelp to the Guggenheims," Maj. Op. at 20431, but one ispuzzled by its attempts to distinguish Palazzolo. Themajority notes that the claimant in Palazzolo challengedthe land-use regulation as it was applied to him, whereashere, the Guggenheims bring a facial challenge to theOrdinance. Id. at 20431. So? Penn Central involved anas-applied challenge; but it gave us rules of generalapplication as to what constitutes a regulatory taking. 8Next, the majority points out the transfer in Palazzolowas by operation of law (the claimant, as controllingshareholder of the corporation which owned the land,acquired the property when the corporation dissolved),whereas the Guggenheims purchased the mobile homepark on the open market. So? The plaintiff in Palazzoloacquired title after the challenged land-use restriction wasenacted and nonetheless prevailed without claiming thathe should be considered to have become the owner whenhis corporation bought the land before the restriction'senactment, on some theory of advantageous piercing ofthe corporate veil cum relation back. These "distinctions"are mere differences, no more [*49] significant than thatthe Palazzolo land was in Rhode Island 9 and theGuggenheim land was in California.8 See Lingle, 544 U.S. at 539 (calling the PennCentral factors the "principal guidelines forresolving regulatory takings claims"); see alsoChevron USA, Inc. v. Cayetano, 224 F.3d 1030,1032-33 (9th Cir. 2000) (describing the facialchallenge addressed in Lingle).9 Where he was up against a more formidableand resourceful takings opponent: the State ofRhode Island and Providence Plantations. Here,the Guggenheims face the town of Goleta.

2010 U.S. App. LEXIS 25981, *49Page 15Tellingly, the majority opinion provides nojustification or legal support for why these proposeddistinctions matter. Why should the investment-backedexpectations of a land owner bringing a facial challengebe analyzed differently from those of an as-appliedclaimant? If the expectations are valid and areexpropriated, what does it matter as to their existence thatthey will be injured in all cases (facial challenge) or justin some (as-applied challenge)? Either they are validexpectations, or they aren't. Likewise, the majorityopinion provides no justification, legal or otherwise, forlimiting the broad language of Palazzolo to the type of[*50] transaction that vests title.But this misprism of Supreme Court precedent ismade worse by the majority opinion's failure to recognizespecific evidence of the Guggenheims'investment-backed (after all, the Guggenheims investedmoney to buy the property) expectations. As the Courtnoted in Palazzolo, a court should analyze the claimant'sinvestment-backed expectations as if the regulation atissue could be repealed at any time. Id. at 637. Here, theGuggenheims purchased the mobile home park with theapparent belief they could free the land from theOrdinance, either through administrative action, politicallobbying, or court action. After buying the property in1997, they applied for a variance from the zoningcommission, which variance could exempt their landfrom the Ordinance. 10 The application was denied. Theysubsequently instituted this court action to have theOrdinance declared facially unconstitutional under theFifth Amendment. 1110 Although the Guggenheims did not need toseek a land-use variance to bring their facialchallenge to the Ordinance, see Sinclair Oil Corp.v. Cnty. of Santa Barbara, 96 F.3d 401, 406 (9thCir. 1996), the fact that they applied for such avariance [*51] immediately after purchasing themobile home park is objective evidence that theyhad at least some investment-backed expectationsthey could free the land from the Ordinance.Reference to such administrative action is made tostrengthen that prong of the Guggenheims'regulatory taking claim, and should not suggestany uncertainty as to whether this is an as-appliedor facial challenge; this is indisputably a facialchallenge.11 The Guggenheims' complaint contains furtherdescription of their efforts to contest the validityof the rent control ordinance and prevent itsapplication to their mobile home park.Prior to the incorporation of theCity, Plaintiffs unsuccessfullyattempted to meet with Cityofficials-elect to discuss the City'sadoption of the mobilehome rentcontrol provisions of the Orindance[sic]. In addition, Plaintiffs causedto be sent to the CityAttorney-elect, a proposedordinance that stayed the City'senforcement and the effectivenessof the newly adopted Ordinancerelating to the vacancy controlprovision of mobilehome rentcontrol and specifically thelimitation of the adjustment ofrents upon the sale of amobilehome, i.e., vacancy control.Plaintiffs applied [*52] to the Cityfor relief from the vacancy controlrestriction in the Ordinance. . . .Defendant's City Councilconsidered adoption of theproposed moratorium and rejectedit.Guggenheim Complaint at 6-7.The majority opinion even acknowledges thepossibility of rent control repeal or reform by concedingthat "[t]he Guggenheims might conceivably have paid aspeculative premium over the value that the legal streamof rent income would yield, on the theory that rentcontrol might someday end, either because of a change ofmind by the municipality or court action." Maj. Op. at20435. But, the majority dismisses this contention as a"speculative possibility, not an 'expectation,'" id. at20435, without any citation of authority as to why a"speculative possibility" is not an expectation, nor why ajudge, not a jury, should determine whether there wassuch an "expectation." The majority opinion flatly states(without a citation to any case, statute, or even a lawreview article) that "speculative possibilities of windfallsdo not amount to 'distinct investment-backedexpectations,' unless they are shown to be probableenough materially to affect the price." Id. at 20435.However, this self-supporting, [*53] self-defining

2010 U.S. App. LEXIS 25981, *53Page 16language ignores the actual dictionary definition of"speculate." As defined by Webster's New 20th CenturyUnabridged Dictionary (1979), one meaning of"speculate" is precisely "to buy or sell land hoping totake advantage of an expected rise or fall in price."(emphasis added). Having determined that they might beable to free their mobile home park from the Ordinance,the Guggenheims bought the land based on theseinvestment-backed expectations--expectations whichinfluenced the price they were willing to pay for theproperty as well as their expected rate of return on theinvestment.The Guggenheims' beliefs regarding the possibilityof freeing their land from the Ordinance were notself-indulgent delusions, or "starry eyed hope of winningthe jackpot if the law changes," as the majority terms it.Maj. Op. at 20435. Their beliefs were at least plausible inlight of contemporary legal, political, and academicthought. In the modern economic marketplace, thespectre of legal uncertainty haunts every commercialtransaction and influences each party's valuation of theassets involved. For example, the validity of apharmaceutical company's patent will affect thatcompany's [*54] value as a potential acquisition target.Legal uncertainty over rent control has been particularlymarked in California. In 1989 the state amended itsMobilehome Residency Law to exempt all newconstruction from local control. Cal. Civ. Code § 798.45.Less than two years before the Guggenheims purchasedtheir property, California had abolished vacancy controlfor rental apartments statewide. Costa-Hawkins RentalHousing Act, § 1, 1995 Cal. Legis. Serv. 331 (A.B. 1164)(West) (codified at Cal. Civ. Code § 1954.50-.53). InJanuary 1999, Santa Monica reformed its strict rentcontrol ordinance, repealing its operation as to any newtenants. Tierra Properties, Santa Monica: A Case Study inGrowth and Rent Control (1999).The Guggenheims and the prior owners of theirmobile home park may have reasonably thought that thestate would abolish rent control--or at least vacancycontrol--for mobile home parks. And the Guggenheimscould reasonably retain those expectations today, asrecent efforts to repeal rent control in California havegarnered significant support. For example, a 2008 ballotproposition to phase out rent control won almost 40% ofthe votes cast. Patrick McGreevy, Prop. 98 Backers[*55] Seek Eminent Domain Limits, L.A. Times, June 5,2008, at 1.Moreover, mobile home rent control ordinances havebeen heavily criticized in academia as an inefficientmethod for providing affordable housing to low andmiddle-income households. See, e.g., Mason & Quigley,16 J. Housing Econ. at 192, 205 (concluding that"housing is no more "affordable" [to subsequent tenants]afterwards than it was before the ordinance was adopted,"and that "virtually all of the economic benefits fromlower regulated rents are paid out annually to finance thehigher sales prices commanded by those dwellings").Given the instances of actual or attempted repeal andreform of rent control ordinances across the country, theparticular scrutiny paid to the issue in California, and thecriticism of mobile home rent control in the academicliterature, the Guggenheims had a reasonableexpectation--or at least, a trier of fact could reasonablyfind they had such an expectation--that they could freetheir land from the Ordinance either through the grant ofa zoning variance, political action targeted towardrepealing the regulation in its entirety, or court action toinvalidate the law. This inference is supported [*56] byevidence presented to the district court that theGuggenheims pursued relief from the Ordinance throughat least two of these avenues in the years following theirpurchase of the mobile home park. The majority readilyadmits that this investment-backed expectation couldhave materially affected the price the Guggenheims werewilling to pay for the mobile home park. "TheGuggenheims might conceivably have paid a slightspeculative premium over the value that the legal streamof rent income would yield, on the theory that rentcontrol might someday end, either because of a change ofmind by the municipality or court action." Maj. Op. at20435. At most, this concession establishes that theGuggenheims did in fact have investment-backedexpectations of freeing the land from the Ordinance; atthe very least, it raises a question of fact for the jury todecide.Finally, the majority, perhaps sensing itsvulnerability on the issue of investment-backedexpectations, attempts to distract the reader byintroducing an entirely irrelevant consideration into theanalysis: the alleged investment-backed expectations ofthe mobile home tenants. Maj. Op. at 20437. Themajority opinion paints a sympathetic [*57] portrait ofsubsequent tenants who purchased mobile homes atmarket rates, in reliance on the continued validity of theOrdinance. But, the Penn Central regulatory taking

2010 U.S. App. LEXIS 25981, *57Page 17analysis does not apply to them for the simple reason thatno government action took economic value from them orwould take such value from them were the Goletaordinance held invalid. The Takings Clause prohibitsonly takings, without compensation, by governmentaction, not losses from the workings of the free market.See Madera Irrigation Dist. v. Hancock, 985 F.2d 1397,1403 (9th Cir. 1993) ("Reasonable expectations arisingout of past policy but without a basis in cognizableproperty rights . . . . cannot give rise to a [taking].").Moreover, Penn Central does not contemplate anyconsideration of the expectations of other market players,or any balancing of the interests of various marketplayers in determining whether the government has takenproperty. Its analysis is focused solely on theinvestment-backed expectations of the claimants, here,the Guggenheims.In sum, the majority opinion ignores Supreme Courtprecedent by holding that a claimant cannot haveinvestment-backed expectations if he purchases property[*58] with notice of an existing regulation, by assumingthe eternal regnancy of a land-use regulation, and byintroducing irrelevant considerations which tend only toconfuse the regulatory taking analysis. Furthermore, themajority adopts a static and somewhat simplistic view oflaw, politics, and economics by failing to recognize thatthe Guggenheims had a reasonable expectation of freeingtheir land from the Ordinance through political or legalmeans, and by failing to acknowledge that this beliefcould influence the price they were willing to pay for theland.The Guggenheims presented sufficient evidence toraise a triable issue of fact regarding theirinvestment-backed expectations to survive a motion forsummary judgment. The case should have gone to trial.C. The Character of the Government's ActionThe majority opinion also ignores the final PennCentral factor, the character of the governmental action,which likewise cuts in favor of the Guggenheims. Inanalyzing this factor, a court looks at the purpose of theregulation, the effect it has in practice, and thedistribution and magnitude of the burdens and benefits itplaces on private citizens. Penn Central, 438 U.S. at130-34.The [*59] stated purpose of Goleta's mobile homerent control ordinance was to protect "owners andoccupiers of mobilehomes from unreasonable rents"brought about by a shortage of housing and the high costof moving mobile homes. Ordinance § 11A-1 (emphasisadded). Rent control measures also have the claimedancillary benefit of allowing stable communities to form.See Jay M. Zitter, Validity, Construction, and Applicationof Inclusionary Zoning Ordinances and Programs, 22A.L.R.6th 295, § 13 [*60] (2007). However, as discussedbelow with regard to the substantive due process claim,this Ordinance does not serve its stated purposes becauseof the way it is structured and written. The Ordinancerestricts only the amount the landowner can charge atenant for rental of the mobile home parcel; it does notlimit the amount which that tenant, in turn, can demandfor sale or lease of the mobile home to other owners ortenants. The designed structure and working of theordinance amounts to nothing more than a wealth transferfrom the landowner to the original tenant, andindisputably does nothing to curb housing costs orprovide a stable population once the original tenant hassold or leased the mobile home.The Ordinance unquestionably places a high burdenon a few private property owners instead of apportioningthe burden more broadly among the tax base. SeeArmstrong v. United States, 364 U.S. 40, 49, 80 S. Ct.1563, 4 L. Ed. 2d 1554 (1960) ("[The Takings Clause]was designed to bar Government from forcing somepeople alone to bear public burdens which, in all fairnessand justice, should be borne by the public as a whole.");see also Lingle, 544 U.S. at 542-43; First EnglishEvangelical Lutheran Church of Glendale v. County ofLos Angeles, 482 U.S. 304, 318-19, 107 S. Ct. 2378, 96 L.Ed. 2d 250 (1987). [*61] Similar laws concentrating thecost of affordable housing on a small group ofproperty-owners have been found unconstitutional. InCienega Gardens, developers of low-income apartmentswere able to secure low-interest, forty-year loans fromprivate lenders because the Department of Housing andUrban Development provided the developers withmortgage insurance. Cienega Gardens, 331 F.3d at 1325.Two federal statutes eliminated the developers'contractual rights to prepay their forty-year mortgageloans after twenty-years. Id. at 1326-27. The purpose ofthe statutes was to prevent the developers from exitingthe low-rent housing programs in which they wererequired to participate while carrying the loans, but notonce they paid off the loans. See id. at 1323. But thestatutes caused a 96% loss of return on equity for thedevelopers. Id. at 1343. The developers brought suit

2010 U.S. App. LEXIS 25981, *61Page 18against the government, claiming that the federal statutesrestricting their right to prepay their mortgage loanseffected a regulatory taking under the Fifth Amendment.The Federal Circuit, applying Penn Central, foundthat the character of the government action was to placethe expense of low-income housing on a few [*62]private property owners (those who had previouslyparticipated in the federal loan program but now wantedto pay their way out), instead of distributing the expenseamong all taxpayers in the form of incentives fordevelopers to construct more low-rent apartments. Id. at1338-39.Similarly, here it is undisputed that the Ordinanceapplies only to mobile home park owners. The districtcourt found that the City did not impose such extremecosts for providing affordable housing on any otherproperty owners in the City, except as a condition of newdevelopment. In contrast to the burden of renting all thelow-rent housing property at an 80% discount, the burdenon new developers was to make only 20% of theirhousing available at below-market rates. There is nothingin the record to suggest why the Federal Circuit'sreasoning should not be applied to the facts of this case;substituting "Goleta" for "Congress":Unquestionably, Congress acted for apublic purpose (to benefit a certain groupof people in need of low-cost housing), butjust as clearly, the expense was placeddisproportionately on a few privateproperty owners. Congress' objective . ..--preserving low-income housing--andmethod--forcing [*63] some owners tokeep accepting below-market rents--is thekind of expense-shifting to a few personsthat amounts to a taking. This is especiallyclear where, as here, the alternative wasfor all taxpayers to shoulder the burden.331 F.3d at 1338-39. This analysis, ignored by themajority opinion, weighs heavily in favor of finding aregulatory taking under Penn Central.D. Weighing the Penn Central Factors Shows theGuggenheims Suffered a Regulatory Taking.The majority opinion errs in considering only oneelement of a three-factor, balancingtest--investment-backed expectations--and making thatelement dispositive. It treats the factors as a requirementschecklist, rather than a list of considerations to weigh,one against or with another. Further, it flouts the SupremeCourt's holding in Palazzolo that a "post-enactmenttransfer of title [does not] absolve the [government] of itsobligation to defend" the restrictions a regulation imposeson property-owners. Palazzolo, 533 U.S. at 627. At aminimum, the case should be remanded for trial on theseverity of the economic impact on the claimants, theexistence of investment-backed expectations, and thecharacter of the governmental action because [*64] theseare at least mixed questions of fact and law on whichreasonable triers of fact could find that there was ataking. The Guggenheims produced evidence from whicha finder of fact could find that a taking had occurred: theGuggenheims bought the mobile home park with thereasonable expectation that they could free the land fromthe Ordinance either through a variance, repeal of theregulation, or through court action. They were forced torent mobile homes at 20% of the current market rate, andsit by as incumbent mobile home owners captured atransfer premium averaging approximately 90% of thesale price of their mobile homes. On summary judgment,drawing all reasonable inferences in favor of thenon-moving party, the district court erred in holding, as amatter of law, that the Ordinance was not a taking. SeeVentura Packers, Inc., 305 F.3d at 916.III. Substantive Due Process ClaimThe Supreme Court in Lingle clarified the differencebetween a challenge to a rent control ordinance as aregulatory takings claim and as a substantive due processclaim, and affirmed the independent vitality of boththeories.[The Takings Clause] is designed not tolimit the governmental interference [*65]with property rights per se, but rather tosecure compensation in the event ofotherwise proper interference. . . . Dueprocess violations cannot be remediedunder the Takings Clause, because if agovernment action is found to beimpermissible--for instance because it failsto meet the 'public use' requirement or isso arbitrary as to violate due process--thatis the end of the inquiry. No amount of

2010 U.S. App. LEXIS 25981, *65Page 19compensation can authorize such action.Crown Point Develop., Inc. v. City of Sun Valley, 506F.3d 851, 856 (9th Cir. 2007) (quoting Lingle, 544 U.S.at 537).The majority opinion summarily dismisses theGuggenheims' substantive due process claim by notingthat while the Ordinance may not perfectly accomplish itsstated purposes, this court is bound by precedentestablishing that rent control ordinances are rationallyrelated to a legitimate state interest. Maj. Op. at 20439.The majority opinion even cites Justice Holmes's iconiclanguage from Lochner: "The Fourteenth Amendmentdoes not enact Mr. Herbert Spencer's Social Statics." Id.n.54. And the majority might be correct if this caseinvolved a true rent control ordinance. But, at the veryleast, a rent control ordinance must control rents, [*66]and Goleta's ordinance does no such thing.The stated purpose of the Ordinance was to protect"owners and occupiers of mobilehomes fromunreasonable rents," with the hope that affordablehousing would create a stable population. Ordinance §11A-1. But, the Ordinance is so structured so that itcannot achieve its designated purpose. Instead ofcontrolling the price of rental housing, the Ordinancerestricts only the amount the landowner can charge forone component of the cost of rental housing: land rent.There are no limits on the amount the "windfall tenant"and his successors as tenants or owners can charge whenhe in turn sub-leases or sells the mobile home to futuretenants; as the housing market improves (as it didbetween 1997 and 2002), he has every incentive tocapture that transfer premium by leasing or selling themobile home. 12 The district court found it undisputedthat this transfer premium equaled approximately 90% ofthe current sale price of a mobile home in the Park. Assoon as the "windfall tenant" leases or sells the mobilehome at a premium, the stated purposes of the Ordinanceare nullified: the lease or sale is at the market rate, andthe turnover in tenants [*67] has already interrupted thestability of the population and the goal of "affordable"(non-market) housing.12 Nor can it be argued that the future effects ofthe Ordinance should not be considered in the dueprocess analysis. By providing for a 10% rentincrease each time a mobile home is sold, thedrafters of the Ordinance clearly contemplated thefuture effect of the rent control ordinance onfuture tenants, and this fact broadens the temporalscope of this court's review.Thus, the Ordinance does not effect rent control, butsimply transfers wealth from a small group of landowners to a larger group of fortunate tenants. While thegovernment has authority to tax or encumber citizens forthe common good, it cannot violate individual rightsmerely to enrich a small, private interest group. As theCourt held in Citizens' Sav. & Loan Ass'n v. City ofTopeka, 87 U.S. 655, 22 L. Ed. 455 (1874):To lay with one hand the power of thegovernment on the property of the citizen,and with the other to bestow it uponfavored individuals to aid privateenterprises and build up private fortunes,is none the less a robbery because it isdone under the forms of law. . . .Id. at 664. The burden of this wealth transfer [*68] isborne entirely by mobile park lot owners, whose propertyrights are taken from them based solely on the nature oftheir business. Owners of condominium complexes,houses, or apartment buildings are not regulated by theOrdinance, even though their rental rates will affect theoverall housing market to a greater extent than mobilehome owners. See Quigley, supra.Our court has several times found a rent controlordinance that creates such windfalls for lucky tenantsand does not lower prices to be unconstitutional under thetheory that it failed "substantially [to] advance alegitimate state interest." See Chevron USA, Inc. v.Lingle, 363 F.3d 846, 855-57 (9th Cir. 2004) (ordinancelimiting the rent oil company could collect from gasstation operators was unconstitutional because operatorscould sell their lease rights at a premium), rev'd sub. nom.Lingle, 544 U.S. at 545; Richardson v. City & Cnty. ofHonolulu, 124 F.3d 1150, 1165-66 (9th Cir. 1997)(ordinance regulating condominium assessments thatallowed condo sellers to capture value of the regulationby selling at a premium was unconstitutional). One panelwent so far as to hold that "a [mobile home] rent controlordinance [*69] that does not on its face provide for amechanism to prevent the capture of a premium isunconstitutional, as a matter of law, absent sufficientevidence of externalities rendering a premiumunavailable." Cashman v. City of Cotati, 374 F.3d 887,

2010 U.S. App. LEXIS 25981, *69Page 20897 (9th Cir. 2004) (emphasis altered).Of course, these were regulatory takings cases, andthe Supreme Court in Lingle disapproved of the"substantially advances" theory as a means of bringing atakings claim. 544 U.S. at 540. But Lingle upheld theindependent validity of substantive due process claimsand held that ordinances creating a transfer premiummight not advance a legitimate government interest. TheCourt indicated that the "substantially advances" test wasa way to bring substantive due process claims:The 'substantially advances' formulasuggests a means-ends test: It asks, inessence, whether a regulation of privateproperty is effective in achieving somelegitimate public purpose. An inquiry ofthis nature has some logic in the context ofa due process challenge, for a regulationthat fails to serve any legitimategovernmental objective may be soarbitrary or irrational that it runs afoul ofthe Due Process ClauseId. at 542; see [*70] also Crown Point Dev., Inc., 506F.3d at 856.Also puzzling is the majority's assertion theOrdinance meets the legitimate purpose of alleviating thehardship to owners in the "costs of moving" mobilehomes from the Goleta pads. Maj. Op. at 20439. Surely,the costs of moving a mobile home, from forklift toflatbed to "wide load" flags fluttering down the road to anew site, are the same if the mobile home is moved froma rent controlled lot or from a market controlled lot.But perhaps what the majority means as the "costs ofmoving" is the increased land rent the mobile homeowner may have to pay at the new location. What themajority overlooks, however, is that--unless the mobilehome owner is one of the lucky original "windfall"tenants--the price he paid for his mobile home was jackedup by the present value of the difference between Goletarent controlled land (lower) and market price rental land(higher). See discussion of Prof. Quigley's report, supraat p. 20445. If the present value of the difference betweenrent controlled and market land rentals is correctlyreckoned in the market price of the mobile home, theonly additional "costs of moving" to be incurred areindeed the costs [*71] of permits, trucking, possibledamage to the unit, etc. But those costs would be incurredregardless whether the mobile home owners were movingfrom a rent controlled or a market rate lot. Thus, just asthe Ordinance does not control rents--a point on whichthe majority agrees, Maj. Op. at 20438-39--it does notprotect mobile home owners from the "costs of moving,"properly reckoned.The Guggenheims do not base their substantive dueprocess claim on Economics 101 or Herbert Spencer. SeeMaj. Op. at 20439 & n.54. To the contrary: theGuggenheims presented undisputed evidence that theOrdinance--by design--creates transfer premiums whichincrease the sublet rental or sale price of mobile homes.Such transfer premiums raise the eventual price to aGoleta tenant or buyer so that notwithstanding theGoleta-mandated lower regulated land rent he must pay,the combined cost of his land rent and mobile homesublease or purchase approximates the total housing pricefor similar mobile home use on unregulated land rentalsoutside of Goleta.This evidence creates a genuine question as towhether the Ordinance is so ineffective at serving itsstated public purpose of "providing affordable (low-cost)housing" [*72] that it is not rationally related to alegitimate state interest. Despite the great deference owedto legislative acts which do not implicate a fundamentalright or suspect classification, Justice Holmes's quotefrom Lochner is not a talisman which protects allgovernment regulations from examination and review,regardless of their structural integrity or effectiveness.IV. Equal Protection ClaimThe Guggenheims also argue that the Ordinanceviolates the Equal Protection Clause because it singlesout mobile home park owners, as opposed to other sortsof housing providers, to bear the burden of an affordablehousing program. This court has previously held that amobile home rent control ordinance does not per seviolate the Equal Protection Clause because it isrationally related to the legitimate public interest ofpromoting affordable housing. Equity Lifestyle Props.,Inc. v. Cnty. of San Luis Obispo, 548 F.3d 1184, 1195(9th Cir. 2008). Equity Lifestyle held that this is true evenif the statute singles out mobile home owners such as theGuggenheims, does not increase the amount of availableaffordable housing, and "serve[s] the sole purpose oftransferring the value of [the park owner's] [*73]property to a select private group of tenants." Id. at 1193.

2010 U.S. App. LEXIS 25981, *73Page 21Such a naked transfer of wealth between two privateactors, based solely on the manner in which individualschoose to use their land, violates the Equal ProtectionClause. Equity Lifestyle should have been overruled bythis en banc panel to bring our Equal Protection analysisinto line with the Supreme Court's views as to takingsand substantive due process. 13 As we are an en banccourt, we are not bound by the "law of the circuit" rule ofMiller v. Gammie, 335 F.3d 889, 899-900 (9th Cir. 2003)(en banc).13 Pennell v. City of San Jose, 485 U.S. 1,13-14, 108 S. Ct. 849, 99 L. Ed. 2d 1 (1988),which held the rent control ordinance at issue inthat case was rationally related to a legitimatestate interest is not contrary to our reasoningbecause Pennell involved a true rent controlordinance of rental apartments. The old tenants inthat case had no power to charge the new tenantsa premium over the rent controlled amount. Thus,the rent control ordinance was effective incarrying out the goal of providing affordablehousing. Again, if our case involved a true rentcontrol ordinance that was designed to beeffective in attaining its goals, I would not dissent[*74] from the majority's conclusion that theOrdinance does not violate substantive dueprocess or equal protection.We should reverse the district court's finding thatthere has been no compensable taking and no due processor equal protection violation, and remand for a trial onthe merits.