Manufactured Home Communities Inc. v. City of San Jose , 420 F.3d 1022 ( 2005 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
MANUFACTURED HOME COMMUNITIES 
INC.; MHC OPERATING LIMITED
PARTNERSHIP, an Illinois limited
partnership, No. 03-16766
Plaintiffs-Appellants,
v.  D.C. No.
CV-03-01713-JW
CITY OF SAN JOSE; ENIS RICE; GARY OPINION
DEWET; MARTIN VANCIL; MARSHA
SKRATT,
Defendants-Appellees.

Appeal from the United States District Court
for the Northern District of California
James Ware, District Judge, Presiding
Argued April 14, 2005
Submitted August 17, 2005
San Francisco, California
Filed August 23, 2005
Before: Donald P. Lay,* Betty B. Fletcher, and
Michael Daly Hawkins, Circuit Judges.
Opinion by Judge B. Fletcher
*The Honorable Donald P. Lay, Senior United States Circuit Judge for
the Eighth Circuit, sitting by designation.
11163
MANUFACTURED HOME CMTYS. v. SAN JOSE 11167
COUNSEL
Elliott L. Bien, Bien & Summers, LLP, Novato, California,
for the appellants.
David Bradford and Lisa T. Scruggs, Jenner & Block, LLC,
Chicago, Illinois, for the appellants.
Richard Doyle, George Rios, and Shannon Smyth-Mendoza,
Office of the City Attorney, San Jose, California, for appellee
City of San Jose.
Bruce E. Stanton, Law Offices of Bruce E. Stanton, San Jose,
California, for appellees Enis Rice, Gary DeWet, Martin Van-
cil, and Marsha Skratt.
OPINION
B. FLETCHER, Circuit Judge:
Manufactured Home Communities, Inc.1 and MHC Operat-
1
Appellant Manufactured Home Communities, Inc. recently changed its
name to Equity Lifestyle Properties, Inc. For continuity, we to refer to the
Appellant by its name at the time of filing.
11168 MANUFACTURED HOME CMTYS. v. SAN JOSE
ing Limited Partnership2 (collectively MHC) sued the City of
San Jose challenging the City’s Mobilehome Rent Ordinance
as unconstitutional. MHC also sued four individual tenants of
the MHC mobilehome park: Enis Rice, Gary DeWet, Martin
Vancil, and Marsha Skratt (collectively Individual Defen-
dants). MHC argued that the Individual Defendants are not
eligible for rent control under California state law and are,
thus, in violation of the City’s Ordinance and California state
law for refusing to pay increased rent.
MHC appeals the district court’s dismissal of MHC’s com-
plaint for various jurisdictional and res judicata problems. We
affirm the district court’s decision on the basis of res judicata,
untimeliness, failure to state a federal question, lack of sup-
plemental jurisdiction, and California’s statute of limitations.3
Although it does not affect the outcome of this case, we
reverse the district court’s holding on the Rooker-Feldman doc-
trine.4 We reverse and remand the matter of attorneys’ fees.
Jurisdiction and Standard of Review
The district court dismissed several of MHC’s claims for
lack of subject matter jurisdiction under the Rooker-Feldman
doctrine. Manufactured Home Cmtys., Inc. v. San Jose, 358 F.
Supp. 2d 896 (N.D. Cal. 2003). The district court affirmed its
dismissal under res judicata. The district court also dismissed
MHC’s claims for lack of ripeness, want of supplemental
jurisdiction, and failure to comply with California’s statute of
limitations. This court has jurisdiction to review the district
court’s decision pursuant to 28 U.S.C. § 1291. Hacienda Val-
ley Mobile Estates v. City of Morgan Hill Rent Review
Comm’n, 353 F.3d 651, 653 (9th Cir. 2003).
2
D/b/a Westwinds Manufactured Home Community.
3
This court “may affirm a dismissal on any basis supported by the
record, even if the district court relied on different grounds or reasoning.”
Maldonado v. Harris, 370 F.3d 945, 949 (9th Cir. 2004).
4
District Court of Columbia Court of Appeals v. Feldman, 460 U.S. 462
(1983); Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923).
MANUFACTURED HOME CMTYS. v. SAN JOSE 11169
Rooker-Feldman jurisdiction claims are reviewed de novo.
Noel v. Hall, 341 F.3d 1148, 1154 (9th Cir. 2003). Res judi-
cata claims are also reviewed de novo. Palomar Mobilehome
Park Ass’n. v. City of San Marcos, 989 F.2d 362, 363 (9th
Cir. 1993). Ripeness is a question of law, and it is reviewed
de novo. Ventura Mobilehome Cmtys. Owners Ass’n v. City
of San Buenaventura, 371 F.3d 1046, 1050 (9th Cir. 2004).
Whether a district court had supplemental jurisdiction is
reviewed de novo; a district court’s decision to decline sup-
plemental jurisdiction is reviewed for abuse of discretion. Trs.
of the Constr. Indus. & Laborers Health & Welfare Trust v.
Desert Valley Landscape & Maint., Inc., 333 F.3d 923, 925
(9th Cir. 2003). Whether a claim is barred by a statute of limi-
tations and when a statute of limitations begins to run are
reviewed de novo. Cashman v. City of Cotati, 374 F.3d 887,
892 (9th Cir. 2004). The facts alleged in a complaint dis-
missed for lack of subject matter jurisdiction are accepted as
true. Carson Harbor Village, Ltd. v. City of Carson, 353 F.3d
824, 826 (9th Cir. 2004).
Factual Background and Procedural History
The City of San Jose passed a Mobilehome Rent Ordinance
in 1986. San Jose Municipal Code (SJMC) ch. 17.22. The
Ordinance includes, among other things, rent control provi-
sions. The rent control provisions allow for a maximum
annual rent increase calculated in relation to the Consumer
Price Index. SJMC § 17.22.450. Proposed increases exceed-
ing the calculated amount are subject to administrative
review.
The maximum annual rent increase is supposed to allow
mobilehome park owners a fair and reasonable return on their
investment. A fair return is defined as an amount allowing an
owner to maintain the same level of income, adjusted for
inflation, as the owner received in the “base year.” SJMC
§ 17.22.550. This system is known as the maintenance of net
11170 MANUFACTURED HOME CMTYS. v. SAN JOSE
operating income approach to stabilizing rents. The base year
under the Ordinance is 1985. SJMC § 17.22.490.
If a mobilehome park owner believes the maximum annual
rent increase will not provide a fair return, then he may peti-
tion the City for a rent increase. SJMC § 17.22.700. An
administrative hearing officer will conduct a hearing on the
petition. SJMC § 17.22.750. At the hearing there is a rebutta-
ble presumption that the level of income received in the base
year provides a fair and reasonable return. SJMC § 17.22.480.
An owner may rebut this presumption by showing that operat-
ing expenses were unusually high or low in the base year or
that gross income was disproportionate in the base year.
SJMC § 17.22.510. Decisions by the administrative hearing
officers are subject to judicial review. SJMC § 17.22.1040.
Individual mobilehome owners may voluntarily exempt
themselves from the City’s rent control provisions. SJMC
§ 17.22.370. Certain mobilehome units are automatically
exempt from the provisions. SJMC § 17.22.350-360. Under
California’s Civil Code “if a mobilehome space within a
mobilehome park is not the principal residence of the home-
owner and the homeowner has not rented the mobilehome to
another party, it shall be exempt” from the City’s Ordinance.
Cal. Civ. Code § 798.21(a). The burden of proving a unit is
exempt from the rent control provisions or that a rent increase
is exempt from the provisions rests with the park owner.
SJMC §§ 17.22.390 & 17.22.452.
MHC, a publicly traded real estate investment company,
owns and operates Westwinds mobilehome park in San Jose,
California. MHC purchased Westwinds in August 1997. Due
to an increase in ground rent in 1996, MHC says the park’s
operating expenses increased by $1.3 million that year. In
May of 1998, MHC petitioned the City’s rental dispute pro-
gram for a special rent increase to cover the increased costs.
Unfortunately, Westwinds’ financial records for the base year,
1985, were destroyed by the park’s previous owner. MHC
MANUFACTURED HOME CMTYS. v. SAN JOSE 11171
only has financial records for Westwinds for the years 1996
and 1997. Although MHC’s initial petition for review
included an estimate of the 1985 numbers, MHC now says an
accurate estimate of the 1985 numbers is impossible. MHC
submitted an amended petition using 1996 as the base year for
determining whether a rent increase was appropriate.
After an administrative hearing, an administrative hearing
officer ruled against MHC’s petition for a rent increase in
October of 1998.5 The hearing officer determined that finan-
cial information for 1996 could not be used as a base and only
1985 could be used. MHC then sought a writ of administra-
tive mandamus in California Superior Court pursuant to Cali-
fornia Civil Procedure Code § 1094.5. MHC alleged that the
failure to grant a rent increase was arbitrary, capricious, an
abuse of discretion, and in disregard of the uncontradicted
evidence. MHC argued the City’s actions violated the Ordi-
nance and the Constitutions of California and the United States.6
The Superior Court ruled in favor of MHC, deeming the Ordi-
nance unconstitutional because it did not provide a mecha-
nism for calculating a fair return when mobilehome park
owners cannot, through no fault of their own, prove actual
base year net operating income.
In response, the City passed an Urgency Ordinance amend-
ing the Ordinance.7 City of San Jose Urgency Ordinance No.
25958. The Urgency Ordinance allowed for estimates of base
5
Approximately eighty-five percent of Westwinds’ unit owners settled
with MHC, accepting a rent increase, prior to the hearing officer’s deci-
sion. This leaves approximately sixty-eight mobilehome owners, subject
to a potential rent increase pending the outcome of this lawsuit.
6
“[A] claim involving federal constitutional rights may be joined to a
California mandamus action.” Clark v. Yosemite Cmty. Coll. Dist., 785
F.2d 781, 787 n.5 (9th Cir. 1986).
7
The City also appealed the Superior Court’s decision. In light of the
City’s Urgency Ordinance, the appeal was dismissed as moot by the Cali-
fornia Court of Appeals. MHC Operating Ltd. P’ship v. City of San Jose,
130 Cal. Rptr. 2d 564, 571 (Cal. Ct. App. 2003).
11172 MANUFACTURED HOME CMTYS. v. SAN JOSE
year income and expenses when exact information is unavail-
able. SJMC § 17.22.495. It also said that “[n]o provision . . .
shall be applied so as to prohibit the Administrative Hearing
Office from granting a rent increase that is demonstrated as
necessary.” SJMC § 17.22.030.
After passage of the Urgency Ordinance, MHC re-
petitioned for a rent increase. MHC again provided only 1996
financial information. The administrative hearing officer held
a hearing in November of 1999. At the hearing MHC pre-
sented evidence that it is impossible to estimate the 1985
financial information. The City presented evidence that it is
possible to estimate the 1985 financial information. The hear-
ing officer found it possible to estimate the 1985 financial
data and denied MHC’s petition without prejudice.
MHC then petitioned for a supplemental writ of administra-
tive mandamus in Superior Court. MHC abandoned its consti-
tutional claims before the Superior Court and challenged only
the hearing officer’s interpretation of the Ordinance and the
officer’s factual finding that MHC is able to estimate the 1985
financial data. The Superior Court said that the City remedied
the constitutional problems with the Ordinance by passing the
Urgency Ordinance, noting MHC “no longer challenges its
constitutionality.” The court affirmed the hearing officer’s
interpretation of the Ordinance and affirmed the officer’s
decision that estimating the 1985 financial information is pos-
sible for the purposes of calculating a fair return under the
Ordinance.
MHC then appealed to the California Courts of Appeal.
MHC argued that the City hearing officer and the Superior
Court misinterpreted the Urgency Ordinance. MHC also
revived its constitutional challenge to the Ordinance. The
Courts of Appeal characterized MHC’s challenge by quoting
MHC’s opening brief saying, “[T]he issues before this Court
arise out of the legal conclusions that were drawn by the
Hearing Officer and whether those conclusions are constitu-
MANUFACTURED HOME CMTYS. v. SAN JOSE 11173
tionally proper.” MHC Operating Ltd. P’ship, 130 Cal. Rptr.
2d at 573.
The Courts of Appeal affirmed the Superior Court’s deci-
sion. Recognizing the constitutional considerations inherent in
analyzing rent control ordinances, the Courts of Appeal said,
“Fair return is the constitutional measuring stick by which
every rent control board decision is evaluated.” Id. at 576
(quoting Carson Harbor Village, Ltd. v. City of Carson
Mobilehome Park Rental Review Bd., 82 Cal. Rptr. 2d 569,
574 (Cal. Ct. App. 1999)). The court found that San Jose’s
Ordinance, on its face, provides owners with a fair return. The
court also found that MHC did not prove the hearing officer’s
interpretation and application of the Ordinance were either
unreasonable or unlawful. Based on the evidentiary record,
the court found MHC could estimate financial expenses for
1985. Thus, the court found the Ordinance on its face and as
applied does not deprive MHC of a fair return. The California
Supreme Court declined discretionary review of the Courts of
Appeal’s decision.
In May of 2002, MHC pursued a second avenue for raising
rents at Westwinds. MHC notified four mobilehome owners,
the Individual Defendants, that under California Civil Code
§ 798.21 they were not eligible for rent control. This section
of the Code exempts mobilehome owners who also own sec-
ond homes from qualifying for rent control. MHC believes the
Code exempts the Individual Defendants from the City’s rent
control Ordinance. The Individual Defendants argue they do
not qualify as second homeowners as defined by the statute
and/or they qualify for an exception to the exemption under
the statute. Cal. Civ. Code § 798.21(f) (listing exception). The
City Attorney issued a letter saying the Individual Defendants
were not covered by the second homeowner exemption. MHC
never petitioned the City’s administrative process to raise the
Individual Defendants’ rent. Instead, MHC sued the City and
the Individual Defendants in federal court.
11174 MANUFACTURED HOME CMTYS. v. SAN JOSE
In April of 2003, MHC in its complaint petitioned the fed-
eral district court in the Northern District of California for
relief against the City and the Individual Defendants. MHC
brought eight “Counts” before the district court. The Counts
are:
I. The City’s Ordinance denies MHC proce-
dural due process under the Fourteenth
Amendment in violation of 42 U.S.C. § 1983
by denying a fair hearing and imposing arbi-
trary, capricious, and unreasonable burdens
on MHC.
II. The City’s Ordinance denies MHC equal
protection under the Fourteenth Amendment
in violation of 42 U.S.C. § 1983 by accord-
ing MHC’s property rights disparate and
injurious treatment compared to other
mobilehome park owners.
III. The City’s hearing officer is biased thus
denying MHC procedural due process.
IV. The City denied MHC procedural due pro-
cess by not giving notice and a fair hearing
before determining the Individual Defen-
dants are not subject to the second home-
owner exemption.
V. MHC requests declaratory relief interpreting
California Civil Code § 798.21 to mean the
Individual Defendants are subject to the sec-
ond homeowner exemption.
VI. MHC requests enforcement of the second
homeowner exemption against the City and
the Individual Defendants.
MANUFACTURED HOME CMTYS. v. SAN JOSE 11175
VII. The City Ordinance as applied violates the
Fifth Amendment’s Takings Clause.
A. The Ordinance allows tenants to sell
their homes for a premium (based on
rent control savings), the premium
transfers value of MHC’s land to the
tenants.
B. The Ordinance does not provide a fair
and reasonable return on MHC’s
investment.
VIII. The City’s Ordinance does not substantially
advance a legitimate governmental objective.
It is facially invalid as violating the Fifth
Amendment’s Takings Clause.
The City moved to dismiss MHC’s complaint under the
Rooker-Feldman doctrine, Younger abstention, ripeness, fail-
ure to present a federal question, and California’s statute of
limitations. The City also moved for attorneys’ fees and sanc-
tions.
The district court granted the City’s motion to dismiss and
granted the City’s attorneys’ fees. The court denied sanctions.
The district court dismissed Counts I (procedural due pro-
cess), II (equal protection), and III (biased hearing officer)
under Rooker-Feldman and res judicata. The district court dis-
missed Counts IV (procedural due process), V (declaratory
relief), and VI (enforcement), as not ripe for adjudication and
for failing to present a federal question. The district court also
declined to exercise supplemental jurisdiction over Counts V
and VI as related to the Individual Defendants. The takings
claims, Counts VII (as applied) and VIII (facial), were dis-
missed as untimely (ripeness and statute of limitations) and as
improper under Rooker-Feldman and res judicata. MHC filed
a timely Notice of Appeal on September 16, 2003.
11176 MANUFACTURED HOME CMTYS. v. SAN JOSE
Analysis
1. Rooker-Feldman — Counts I, II, III, VII, VIII
The district court dismissed the bulk of MHC’s complaint,
including the procedural due process, equal protection, and
takings claims, under the Rooker-Feldman doctrine. On
appeal MHC argues the Ninth Circuit’s opinion in Noel v.
Hall, 341 F.3d 1148 (9th Cir. 2003), issued after the district
court’s order, requires reversal of the district court’s decision.8
We agree and find the Rooker-Feldman doctrine does not bar
federal jurisdiction over MHC’s complaint.
[1] The Rooker-Feldman doctrine stands for the proposition
that “a federal district court does not have subject matter juris-
diction to hear a direct appeal from the final judgment of a
state court.” Noel, 341 F.3d at 1154. This court’s opinion in
Noel provides a detailed history of how Rooker-Feldman
developed. Id. at 1154-65. It also clarifies the narrow scope
and application of the doctrine. Noel offers this “general for-
mulation” of the doctrine:
If a federal plaintiff asserts as a legal wrong an alleg-
edly erroneous decision by a state court, and seeks
relief from a state court judgment based on that deci-
sion, Rooker-Feldman bars subject matter jurisdic-
tion in federal district court. If, on the other hand, a
federal plaintiff asserts as a legal wrong an allegedly
illegal act or omission by an adverse party, Rooker-
Feldman does not bar jurisdiction.
8
The Supreme Court affirmed Noel’s approach to Rooker-Feldman in
Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 125 S. Ct. 1517 (2005).
Since the Noel decision the Ninth Circuit has reversed several district
court decisions dismissing claims under the Rooker-Feldman doctrine.
See, e.g., Kougasian v. TMSL, Inc., 359 F.3d 1136 (9th Cir. 2004); Mal-
donado v. Harris, 370 F.3d 945 (9th Cir. 2004); Wolfe v. Strankman, 392
F.3d 358 (9th Cir. 2004).
MANUFACTURED HOME CMTYS. v. SAN JOSE 11177
Id. at 1164.9 Here MHC sues the City of San Jose10 (an
adverse party), not a state court.11 MHC is challenging the
City’s interpretation of the Ordinance. MHC’s complaint does
not directly challenge a state court’s factual or legal conclu-
sion. MHC’s complaint to the district court is, therefore, not
a forbidden appeal under Rooker-Feldman.
[2] The district court, however, observed the interconnec-
tedness of MHC constitutional claims with the state courts’
holding that MHC is capable of estimating the 1985 financial
figures and that MHC is capable of receiving a fair return as
constitutionally mandated. The district court dismissed
MHC’s constitutional claims as “inextricably intertwined”
with issues raised in state court and, thus, inappropriate for
federal review under Rooker-Feldman. After the district
court’s decision, this court clarified the proper application of
the “inextricably intertwined” test. Noel, 341 F.3d at 1157-58.
Under Noel, claims are dismissed as “inextricably inter-
twined” only when an improper appeal under Rooker-
Feldman is already before the district court. Noel says:
The premise for the operation of the “inextricably
intertwined” test in Feldman is that the federal plain-
tiff is seeking to bring a forbidden de facto appeal.
The federal suit is not a forbidden de facto appeal
9
The Supreme Court affirmed the substance of this formulation in
Exxon Mobil Corp., saying, “The Rooker-Feldman doctrine, we hold
today, is confined to cases of the kind from which the doctrine acquired
its name: cases brought by state-court losers complaining of injuries
caused by state-court judgments rendered before the district court proceed-
ings commenced and inviting district court review and rejection of those
judgments.” 125 S. Ct. at 1521-22.
10
The claims against the Individual Defendants do not involve the
Rooker-Feldman Doctrine.
11
MHC’s brief specifically says it is not suing any state court: “Accord-
ingly, MHC’s federal complaint sought relief against the city and the sec-
ond homeowner tenants — not against the state courts or their final
judgment.”
11178 MANUFACTURED HOME CMTYS. v. SAN JOSE
because it is “inextricably intertwined” with some-
thing. Rather, it is simply a forbidden de facto
appeal. Only when there is already a forbidden de
facto appeal in federal court does the “inextricably
intertwined” test come into play: Once a federal
plaintiff seeks to bring a forbidden de facto appeal,
as in Feldman, that federal plaintiff may not, as part
of the suit in which the forbidden appeal is brought,
seek to litigate an issue that is “inextricably inter-
twined” with the state court judicial decision from
which the forbidden de facto appeal is brought.
Id. at 1158. We already determined MHC’s appeal is not a
forbidden appeal, thus, while MHC’s constitutional chal-
lenges are related to the state courts’ factual and legal conclu-
sions, they are not “inextricably intertwined” for the purposes
of Rooker-Feldman. The district court’s dismissal of MHC’s
claims on the basis of the Rooker-Feldman doctrine is
reversed.
The relationship between MHC’s constitutional challenges
and the California state courts’ legal and factual conclusions
is best addressed under preclusion law. As the Supreme Court
recently made clear: “If a federal plaintiff ‘present[s] some
independent claim, albeit one that denies a legal conclusion
that a state court has reached in a case to which he was a party
. . . , then there is jurisdiction and state law determines
whether the defendant prevails under principles of preclu-
sion.” Exxon Mobil, 125 S. Ct. at 1527 (quoting GASH
Assocs. v. Village of Rosemont, 995 F.2d 726, 728 (7th Cir.
1993); accord Noel v. Hall, 341 F.3d 1148, 1163-64 (9th Cir.
2003)). We now turn to California’s preclusion law to deter-
mine if MHC’s constitutional claims are reviewable in federal
court.
2. Res Judicata — Counts I, II, III, VII, VIII
[3] Federal courts are required to give full faith and credit
to state court judgments under 28 U.S.C. § 1738. See San
MANUFACTURED HOME CMTYS. v. SAN JOSE 11179
Remo Hotel, L.P. v. City & County of San Francisco, 125
S. Ct. 2491 (2005). Generally “[u]nder res judicata, a final
judgment on the merits of an action precludes the parties or
their privies from relitigating issues that were or could have
been raised in that action.” Allen v. McCurry, 449 U.S. 90, 94
(1980). To determine the preclusive effect of a state court
judgment federal courts look to state law. Palomar Mobile-
home Park Ass’n. v. City of San Marcos, 989 F.2d 362, 364
(9th Cir. 1993). California’s res judicata doctrine is based on
a primary rights theory. The California Supreme Court
explained that the primary rights theory:
[P]rovides that a “cause of action” is comprised of a
“primary right” of the plaintiff, a corresponding “pri-
mary duty” of the defendant, and a wrongful act by
the defendant constituting a breach of that duty. The
most salient characteristic of a primary right is that
it is indivisible: the violation of a single primary
right gives rise to but a single cause of action.
Mycogen Corp. v. Monsanto Co., 51 P.3d 297, 306 (Cal.
2002) (citations omitted). A party may bring only one cause
of action12 to vindicate a primary right. Id. at 302. Claims not
12
MHC argues, based on a decision by the California Courts of Appeal,
that a mandamus proceeding is a special proceeding, not a cause of action,
and cannot have preclusive effect. See Mata v. City of Los Angeles, 24
Cal. Rptr. 2d 314, 319 (Cal. Ct. App. 1993). A later decision by that court
clarifies, however, that the Mata decision did not create such a holding.
See Federation of Hillside & Canyon Assns. v. City of Los Angeles, 24
Cal. Rptr. 3d 543, 559-60 (Cal. Ct. App. 2004). This later opinion held
that if the requirements of the preclusion doctrine are met, then a manda-
mus action will preclude further litigation. Id. at 559. The court said:
We see no reason to distinguish between actions and special pro-
ceedings (see Code Civ. Proc., §§ 22, 23) for purposes of res
judicata if the requirements of the doctrine are satisfied and if the
issues asserted in the later proceeding could have been asserted
in the prior proceeding. Application of res judicata in those cir-
cumstances serves the purposes of the doctrine, to prevent incon-
11180 MANUFACTURED HOME CMTYS. v. SAN JOSE
raised in this single cause of action may not be raised at a
later date. Id.
MHC’s claims in federal and state court all involve a single
primary right: the right to receive a fair return on its invest-
ment at Westwinds. They all stem from a single injury MHC
claims to suffer. See Takahashi v. Bd. of Trs., 783 F.2d 848,
851 (9th Cir. 1986) (holding the plaintiff’s statutory manda-
mus proceeding in state court barred the plaintiff’s constitu-
tional claims in federal court because both actions stemmed
from a single primary right: the contractual right to employ-
ment). MHC’s claims all relate to a single Ordinance and the
City’s application of that Ordinance to MHC’s petition for a
rent increase. MHC’s different Counts13 are simply different
legal theories under which MHC may recover. Different theo-
ries of recovery are not separate primary rights. Mycogen
Corp., 51 P.3d at 307; see also Slater v. Blackwood, 543 P.2d
593, 594-95 (Cal. 1975) (“Even where there are multiple legal
theories upon which recovery might be predicated, one injury
gives rise to only one claim for relief.”). MHC has already lit-
igated its right to a fair return in state court. The state courts
held that if MHC will estimate the 1985 financial figures for
sistent rulings, promote judicial economy by preventing repetitive
litigation, and protect against vexatious litigation.
Id. Moreover, it is well-settled by the California Supreme Court that “the
doctrine of res judicata applies to judgments on the merits in proceedings
in mandamus.” Hollywood Circle, Inc. v. Dep’t of Alcoholic Beverage
Control, 361 P.2d 712, 715 (Cal. 1961). MHC’s argument misrepresents
California law on this matter. A mandamus action may, and in this case
does, preclude further litigation.
13
The Counts at issue here are: substantive due process (fair hearing,
biased hearing officer, and arbitrary, capricious, and unreasonable bur-
den); equal protection; as-applied takings claim for general application of
the Ordinance; and facial takings claim. Claims related to the second
homeowner exemption and the Individual Defendants are not affected by
this analysis. Those are separate from the MHC’s general claims against
the Ordinance.
MANUFACTURED HOME CMTYS. v. SAN JOSE 11181
its mobilehome park, then MHC will receive a fair return.
Additional theories of recovery based on MHC’s right to a
fair return may not be asserted in federal court.
[4] To adjudicate MHC’s constitutional claims would
require upsetting legal conclusions of the California courts
regarding the Ordinance. The California Superior Court and
the California Courts of Appeal both held the City’s Ordi-
nance allows MHC to receive a fair return. MHC need only
estimate the financial figures for 1985, as both courts held
MHC is capable of doing, to determine a fair return. As the
district court recognized, “[T]his Court would be unable to
pass judgment on MHC’s claims without addressing the state
court’s determinations on those issues. Any remedy for Plain-
tiff on these claims would in effect nullify that judgment in
violation of res judicata.” Manufactured Home Cmtys. v. San
Jose, 358 F. Supp. 2d 896, 906 (N.D. Cal. 2003). MHC’s
claims either have been or should have been raised in state
court, and MHC is precluded from raising them in federal
court.
[5] The Supreme Court very recently addressed res judicata
in the context of a takings claim in San Remo Hotel, L.P. v.
City & County of San Francisco, 125 S. Ct. 2491 (2005).
There, much like here, the claims presented in federal court
“depended on issues identical to those that had previously
been resolved in the state-court action.” Id. at 2495. We can-
not consider MHC’s claims without rejecting the California
courts’ conclusion that MHC will receive a fair return if it
estimates the necessary financial figures. The district court’s
conclusion that Counts I, II, III, VII, and VIII of MHC’s com-
plaint are res judicata is affirmed.
3. Ripeness — Count IV
MHC’s Counts IV, V, and VI were not dismissed under
either Rooker-Feldman or res judicata. These claims were not
pursued in state court, but were brought against the City and
11182 MANUFACTURED HOME CMTYS. v. SAN JOSE
the Individual Defendants in federal court for violations
related to the second homeowner exemption under California
state law. The exemption is part of California’s Civil Code,
not San Jose’s municipal code. It exempts mobilehome own-
ers who own second homes from rent control ordinances. Cal.
Civ. Code § 798.21.
MHC believes that the Individual Defendants, four resi-
dents of Westwinds, are exempt from San Jose’s rent control
Ordinance as second homeowners. MHC notified those resi-
dents it was raising their rent. The City and the residents
objected. The City told MHC that it had to go through the
administrative process to raise the residents’s rent. The City
Attorney issued a letter opinion stating the residents were not
subject to the statutory exemption. The Individual Defendants
argued they qualified for exceptions to the second homeowner
exemption under California Civil Code § 798.21(f).
MHC did not pursue a rent increase through San Jose’s
administrative process; instead it sued the City and the Indi-
vidual Defendants in federal court. MHC claims the City
denied procedural due process by rendering a final decision
without notice or an opportunity to be heard (Count IV).
MHC requested declaratory relief (Count V) and enforcement
of the statutory exemption (Count VI).
The district court dismissed these claims as unripe under
Williamson County Regional Planning Commission v. Hamil-
ton Bank, 473 U.S. 172 (1985), and as failing to state a claim
within the federal question jurisdiction of the court. MHC
argues Count IV is not subject to the Williamson County ripe-
ness test because Count IV is a due process claim, separate
from MHC’s takings claim. In the alternative MHC argues,
that if the Williamson County test applies to Count IV, the
City Attorney’s letter was a final administrative action. Id. at
45-46. MHC believes it either fulfills or is exempt from ful-
filling the Williamson County ripeness test.
MANUFACTURED HOME CMTYS. v. SAN JOSE 11183
[6] We need not decide whether Count IV is subject to the
Williamson County ripeness test for takings claims because
Count IV fails even the basic requirements of the ripeness
doctrine, to which all claims in federal court are subject. See
Babbitt v. United Farm Workers Nat’l Union, 442 U.S. 289,
297-98 (1979). The Supreme Court has explained that the
ripeness doctrine’s “basic rationale is to prevent the courts,
through avoidance of premature adjudication, from entangling
themselves in abstract disagreements over administrative poli-
cies, and also to protect the agencies from judicial interfer-
ence until an administrative decision has been formalized and
its effects felt in a concrete way by the challenging parties.”
Abbott Labs. v. Gardner, 387 U.S. 136, 148-49 (1967). Pre-
mature adjudication is exactly the problem plaguing MHC’s
due process claim: MHC never engaged in the administrative
process. MHC never filed a petition to raise the Individual
Defendants’ rents. No final administrative decision exists for
MHC’s claims related to the second home owner exemption.
If MHC files a petition, then the hearing officer may or may
not grant the rent increase. Until MHC files the petition, there
is no way of knowing whether a real case or controversy
exists. Due process has not been denied because no process
was pursued. MHC’s due process claim is not ripe for adjudi-
cation.
The prudential aspect of ripeness is considered in a two
prong test: “(1) the fitness of the issues for judicial decision;
and (2) the hardship to the parties of withholding court con-
sideration.” Principal Life Ins. Co. v. Robinson, 394 F.3d 665,
670 (9th Cir. 2005). Only four homes in MHC’s 700+ unit
mobilehome park are at issue under the second homeowner
exemption. Nothing in the record suggests delaying resolution
of this legal issue will significantly harm either party. MHC
has not sought an administrative rent increase for the four
homes. The interpretation of the statute is an issue of state law
and no California court has interpreted that statute as applied
in these circumstances. The fitness of these issues for judicial
decision is poor, and the hardship to the parties is minor.
11184 MANUFACTURED HOME CMTYS. v. SAN JOSE
MHC’s argument that the City Attorney’s letter is a final
interpretation of the City’s law is belied by the plain language
of the City’s municipal code. Under the code only decisions
by hearing administrators are binding and final. Opinions by
the City Attorney are not endowed with any legal authority.
Compare SJMC § 17.22.840 and SJMC § 17.22.1030. The
City Attorney’s letter is not a final administrative decision.
[7] MHC must pursue a rate increase for the Individual
Defendants before pursuing these claims in federal court. This
MHC has not done. Its claims related to the second home-
owner exception are not ripe for review.
4. Federal question and supplemental jurisdiction —
Counts V & VI
[8] MHC’s Counts V and VI do not raise independent fed-
eral questions. MHC does not argue otherwise. In the absence
of jurisdiction over Count IV, there is no federal jurisdiction
over Counts V and VI. See 28 U.S.C. § 1367(a). However,
even if the district court has jurisdiction over Count IV, the
court may exercise its discretion to decline supplemental
jurisdiction over Counts V and VI. 28 U.S.C. § 1367(c). The
district court declined to exercise supplemental jurisdiction
over Counts V and VI because the claims raise “novel” issues
of State law. Manufactured Home Cmtys., 358 F. Supp. 2d at
910 (citing 28 U.S.C. § 1367(c)).
MHC argues the California statute at issue does not present
a novel or complex issue of law. The City and the Individual
Defendants disagree. While the statute may not be complex
on its face, the application of the law in these circumstances
is uncertain. The second homeowner exemption does not
apply to owners who are renting their mobilehome, Cal. Civ.
Code § 798.21(a), and it does not apply if the mobilehome is
for sale, id. § 798.21(f)(2).
The Individual Defendants argue the second homeowner
exemption does not apply to them under these sections of the
MANUFACTURED HOME CMTYS. v. SAN JOSE 11185
statute. The four spaces challenged by MHC are either occu-
pied by a co-owner, subject to a valid sublease, or held out for
sale as of the original rent increase notice. Under these cir-
cumstances, the application of the exceptions to the exemp-
tion for rent control depends on how the statute is interpreted.
No California state court has interpreted this statute for these
purposes.
[9] The district court was correct to conclude that MHC’s
Counts V and VI raise novel issues of state law. The district
court did not abuse its discretion in declining to exercise sup-
plemental jurisdiction.
5. Ripeness — Count VII
MHC made several arguments to support its as-applied tak-
ings claim under Count VII. The as-applied claim challenges
the City’s application of the Ordinance and the second home-
owner exception. MHC argues the City’s application of the
Ordinance creates a sales premium for mobilehomes within
Westwinds. This premium, MHC argues, impermissibly trans-
fers property from MHC to the individual homeowners. MHC
also argues the City’s application of the Ordinance does not
allow MHC a fair and reasonable return on its investment.
Thus, MHC argues, the City fails to “substantially advance”
the stated goals of the Ordinance or any other legitimate gov-
ernment interest.14
[10] Constitutional takings claims are subject to the Wil-
liamson County ripeness test. Williamson County Reg’l Plan-
ning Comm’n v. Hamilton Bank, 473 U.S. 172 (1985). Under
Williamson County there are two parts to establishing ripeness
for a takings claim brought in federal court against a state or
14
This claim is now foreclosed by the Supreme Court’s decision in
Lingle v. Chevron U.S.A., 125 S. Ct. 2074, 2087 (2005) (holding the
“ ‘substantially advances’ formula is not a valid takings test, and indeed
[ ] it has no proper place in our takings jurisprudence”).
11186 MANUFACTURED HOME CMTYS. v. SAN JOSE
subdivision thereof. The first step requires that “the govern-
ment entity charged with implementing the regulations has
reached a final decision regarding the application of the regu-
lations to the property at issue.” Id. at 186. The second step
requires the plaintiff to “seek compensation through the pro-
cedures the State has provided for doing so.” Id. at 194.
[11] A petitioner need not seek state remedies if to do so
would be futile. Id. at 194-95. The futility exception is nar-
row, and mere uncertainty does not establish futility. Del
Monte Dunes at Monterey, Ltd. v. City of Monterey, 920 F.2d
1496, 1501 (9th Cir. 1990).15 Under the exception:
The landowner bears the burden of establishing, by
more than mere allegations, the futility of pursuing
any of the steps needed to obtain a final decision.
Moreover, before claiming the exception, the land-
owner must submit at least one development pro-
posal and one application for a variance if
meaningful application and submission can be made.
Id. (citations omitted); see also Carson Harbor Vill., Ltd. v.
City of Carson, 353 F.3d 824, 827 (9th Cir. 2004).
Applied takings claims — General rent increases
[12] MHC pursued its general rate increase claims through
the administrative process provided by the Ordinance. The
hearing officer twice denied MHC’s rent increase. These
actions are sufficient to fulfill the first prong of the William-
son County test for MHC’s takings claims related to a general
rent increase.
[13] As to the second prong, MHC claims to be excused
15
Del Monte Dunes dealt with land use regulations but the same stan-
dards apply to rent control regulations. See Amberhill Props. v. City of
Berkeley, 814 F.2d 1340, 1341 (9th Cir. 1987).
MANUFACTURED HOME CMTYS. v. SAN JOSE 11187
from seeking compensation because doing so would be futile.
MHC argues that the City’s hearing officer was financially
biased against it and, as a result, California’s Kavanau adjust-
ment16 is inadequate as compensation for MHC. MHC’s argu-
ment that the hearing officer is biased is nothing more than
speculation. Although the facts alleged by a plaintiff are
assumed true under a motion to dismiss, this court need not
accept baseless allegations as proof of futility. This court is
not “required to accept as true allegations that are merely con-
clusory, unwarranted deductions of fact, or unreasonable
inferences.” Sprewell v. Golden State Warriors, 266 F.3d 979,
988 (9th Cir. 2001) (reviewing motion to dismiss for failure
to state a claim under Rule 12(b)(6)). MHC’s bias allegations,
at best, produce uncertainty and uncertainty does equal futil-
ity. See Del Monte Dunes, 920 F.2d at 1501.
Moreover, “The Supreme [C]ourt has indicated that at least
one application must be submitted before the futility excep-
tion applies.” Kinzli v. City of Santa Cruz, 818 F.2d 1449,
1454 (9th Cir. 1987); see also Amberhill Props., 814 F.2d at
1341 (holding failure to seek a rent adjustment before bring-
ing takings action makes a claim of futility wholly specula-
tive). MHC did not pursue even a single petition for
compensation.
[14] At this time, MHC is foreclosed from pursuing a futil-
ity exception from the Williamson County ripeness require-
16
Under Kavanau v. Santa Monica Rent Control Board, 941 P.2d 851
(Cal. 1997), and Galland v. City of Clovis, 16 P.3d 130 (Cal. 2001), Cali-
fornia’s procedure for seeking just compensation after a local rent control
board denies an adjustment requires petitioners to file a writ of mandamus
in state court. If the writ is granted, the property owner may seek an
adjustment of future rents before the local rent control board. The rent
control board is supposed to take the past improper denial into account
when calculating the future adjustment. The future adjustment is called a
Kavanau adjustment. The writ and the Kavanau adjustment must be pur-
sued before any inverse condemnation or § 1983 action may be pursued
in state court.
11188 MANUFACTURED HOME CMTYS. v. SAN JOSE
ments. MHC’s as-applied takings claim against the Ordinance
is not ripe for review.
Applied takings claims — Second homeowner exemption
[15] MHC did not pursue any second homeowner exemp-
tion claims through the administrative process provided by the
Ordinance. Instead, MHC says a letter from the City attorney
was a “final decision” on this matter. In the alternative, MHC
claims it would be futile to pursue these claims through the
administrative process because the hearing officer was biased.
As discussed above, neither of these claims have merit. See
infra pp. 11182-84. The Ordinance does not grant any final or
binding authority to opinions by the City Attorney. SJMC
§ 17.22.1040. MHC never petitioned the City to grant the sec-
ond homeowner exemption nor did it make an application for
compensation under the second homeowner exemption.
MHC’s as-applied takings claim regarding the second home-
owner exemption is not ripe under either prong of the Wil-
liamson County ripeness test.
6. Statute of limitations — Count VIII
[16] MHC’s facial takings claim asserts that the Ordinance
fails to “substantially advance” a legitimate state interest. This
claim is foreclosed by the Supreme Court’s recent holding
that the “ ‘substantially advances’ formula is not a valid tak-
ings test, and indeed [ ] it has no proper place in our takings
jurisprudence.” Lingle, 125 S. Ct. at 2087. In any event, we
would affirm the district court’s statute of limitations decision
denying relief.
7. Attorneys fees — District Court
The district court denied sanctions against MHC’s attor-
neys under Rule 11 and granted the City of San Jose’s attor-
neys’ fees under Rule 54. Fed. R. Civ. Pro. 11 & 54(b).
Manufactured Home Cmtys., 358 F. Supp. 2d at 909. A dis-
MANUFACTURED HOME CMTYS. v. SAN JOSE 11189
trict court’s decision to award attorneys’ fees is reviewed for
abuse of discretion. Barry v. Fowler, 902 F.2d 770, 773 (9th
Cir. 1990).
[17] Defendants requesting attorneys’ fees from a plaintiff
in a civil rights action must meet a heightened standard.
Hughes v. Rowe, 449 U.S. 5, 14 (1980). The Supreme Court
said attorneys’ fees should be granted to a defendant in a civil
rights action “only if the District Court finds ‘that the plain-
tiff’s action was frivolous, unreasonable, or without founda-
tion, even though not brought in subjective bad faith.’ ” Id.
“An appeal is considered frivolous in this circuit when the
result is obvious, or the appellant’s arguments of error are
wholly without merit.” Taylor v. Sentry Life Ins. Co., 729
F.2d 652, 656 (9th Cir. 1984). The district court’s order does
not mention the heightened standard for awarding attorneys
fees in this situation. See Manufactured Home Cmtys., 358 F.
Supp. 2d at 903, 909. Rather, it cites language similar to the
Hughes language on attorneys’ fees to deny Rule 11 sanc-
tions. Id. at 909. It appears the district court overlooked the
heightened standard set by the Supreme Court for awarding
attorneys’ fees and applied the wrong legal standard for grant-
ing fees. Applying the incorrect legal standard is an abuse of
discretion. Casey v. Albertson’s Inc., 362 F.3d 1254, 1257
(9th Cir. 2004). We remand to the district court for a determi-
nation of whether granting attorneys’ fees to the City of San
Jose is proper in this case.
8. Attorneys’ fees — Courts of Appeal
[18] The City’s motion for attorneys’ fees on appeal is
denied. While the City is surely frustrated with MHC’s
unwillingness to estimate the financial data for Westwinds
and instead to pursue this lengthy litigation, the claims MHC
brought before this court are not wholly without merit. In
light of the uncertainties in the law (see Noel, 341 F.3d 1148
and Exxon Mobil Corp., 125 S. Ct. 1517), MHC had reason
to appeal the district court’s decision. MHC’s appeal was not
11190 MANUFACTURED HOME CMTYS. v. SAN JOSE
“frivolous, unreasonable, or without foundation.” Hughes,
449 U.S. at 14.
9. Motion for judicial notice
The City’s motion for judicial notice of its Answer to
MHC’s petition for review in the California Supreme Court is
granted. The City’s Answer is helpful in considering matters
related to preclusion in the state courts. In Holder v. Holder,
305 F.3d 854, 866 (9th Cir. 2002), this court took judicial
notice of a state court decision and the briefs filed in that
court to determine if an issue was raised and decided by the
state court for res judicata purposes. Likewise, in this case
judicial notice of the City’s Answer is helpful for examining
the claims litigated in state court.
Conclusion
The district court’s order dismissing MHC’s complaint is
affirmed as to res judicata, ripeness, California’s statute of
limitations, and failure to state a federal claim and lack of
supplemental jurisdiction. The district court’s order is
reversed as to the Rooker-Feldman doctrine. The matter of
attorneys’ fees is reversed and remanded.
AFFIRMED IN PART, REVERSED IN PART, AND
REMANDED.