AIDS Healthcare Foundation v. City of Los Angeles ( 2020 )

Filed 6/15/20
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
AIDS HEALTHCARE B303308
FOUNDATION,
Los Angeles County
Plaintiff and Appellant, Super. Ct. No.
19STCP03387
v.
CITY OF LOS ANGELES et al.,
Defendants and Respondents;
CH PALLADIUM, LLC et al.,
Real Parties in Interest and
Respondents.
APPEAL from a judgment of dismissal of the Superior
Court of Los Angeles County, Robert S. Draper, Judge. Affirmed.
AIDS Healthcare Foundation, Thomas A. Myers, Arti L.
Bhimani, Liza M. Brereton; Strumwasser & Woocher and
Beverly Grossman Palmer for Plaintiff and Appellant.
Office of the Los Angeles City Attorney, Michael N. Feuer,
Terry Kaufmann-Macias, John W. Fox, Jennifer Tobkin,
Kathryn Phelan, Kabir Chopra, Craig Takenaka, Mei-Mei Cheng,
Elaine Zhong; Burke, Williams & Sorensen, Charles E.
Slyngstad, Nicholas J. Muscolino; Best, Best & Krieger and
Christi Hogin for Defendants and Respondents City of
Los Angeles and the Los Angeles City Council.
Latham & Watkins, James L. Arnone and Benjamin
J. Hanelin for Real Parties in Interest and Respondents
CH Palladium, LLC, CH Palladium Holdings, LLC and
5929 Sunset (Hollywood), LLC.
DLA Piper, A. Catherine Norian, Kyndra Joy Casper,
Andrew Brady and Karen L. Hallock for Real Party in Interest
and Respondent CRE-HAR Crossroads SPV, LLC.
Glaser Weil Fink Howard Avchen & Shapiro, Patricia L.
Glaser, Joel Klevens and Alexander J. Suarez for Real Party
in Interest and Respondent 6400 Sunset, LLC.
_________________________
INTRODUCTION
This appeal concerns four separate multi-use development
projects within a one-mile radius along Sunset Boulevard in
Hollywood. After filing unsuccessful petitions for writ of
mandate challenging the approval of two of the projects under
various land use laws,1 appellant AIDS Healthcare Foundation
(AHF) sued the City of Los Angeles and the Los Angeles City
Council (collectively, City) for violating the federal Fair Housing
Act (the FHA) and the state Fair Employment and Housing Act
(FEHA) based on a disparate-impact theory of liability. AHF now
alleges the City’s approval of the four “upscale” developments will
cause housing prices in the area to rise and disproportionately
1 AHF filed separate petitions for writ of mandate to
challenge the projects under CEQA, the Los Angeles City Charter
and Municipal Code, and other zoning and land use laws. Final
judgments have been entered against AHF on two of its
challenges and its other two petitions await trial.
2
displace Black and Latino residents who no longer will be able to
afford to live there.
The City and Real Parties in Interest—the projects’ owners
and developers—separately demurred to AHF’s complaint. The
trial court sustained the demurrers without leave to amend after
finding AHF failed to state a cause of action for violation of the
FHA or FEHA, the statute of limitations barred the complaint
as to three of the projects, and the doctrine of res judicata and
prohibition against basing two lawsuits on a single cause of
action precluded the action.
We conclude the trial court correctly found AHF cannot
assert a cause of action under the FHA and FEHA based on
its alleged disparate-impact theory of liability and affirm the
judgment on that basis alone.
FACTS AND PROCEDURAL BACKGROUND
Consistent with the applicable standard of review, we draw
our statement of facts from the allegations in the complaint and
matters properly subject to judicial notice.2 (Blank v. Kirwan
2 The trial court properly took judicial notice of several court
documents and City records. Our summary includes facts stated
in those documents. On appeal, Real Parties in Interest 5929
Sunset (Hollywood), LLC and CRE-HAR Crossroads SPV, LLC
filed a joint motion requesting we take judicial notice of court
records from the related petitions for writ of mandate AHF
and others filed against them. AHF did not oppose the motion.
We now grant the joint motion and take judicial notice of the
identified documents. (See Evid. Code, § 452, subd. (d) [“Judicial
notice may be taken of . . . [r]ecords of [ ] any court of this state.”];
§ 453 [court “shall” take judicial notice of a matter specified in
Evidence Code section 452 on request of a party if the party
provides notice to the adverse party and provides the court with
“sufficient information to enable it to take judicial notice of the
matter”].)
3
(1985) 39 Cal. 3d 311, 318; Landmark Screens, LLC v. Morgan,
Lewis & Bockius, LLP (2010) 183 Cal. App. 4th 238, 240.)
We treat as true “ ‘all material facts properly pleaded, but not
contentions, deductions or conclusions of fact or law.’ ” (Blank,
at p. 318.)
1. AHF
AHF is a nonprofit organization based in Los Angeles that
provides medicine and advocacy to over 1,250,00 people in 43
countries. Many of AHF’s clients are at risk of homelessness
and are in extremely low to moderate income households. AHF’s
“Housing is a Human Right” project advocates for housing
policies that reduce homelessness, protect racial minorities, and
avoid or reduce gentrification. AHF also provides affordable
housing to lower-income people in the Los Angeles area through
its Healthy Housing Foundation.
2. The Real Parties in Interest
The Real Parties in Interest (real parties) are four
unrelated real estate developers that each applied for and
secured entitlements from the City to develop four different
mixed-use development projects along Sunset Boulevard in
an area of Hollywood known as the “Hollywood Center.” The
projects are known as: the Palladium project, the Sunset Gordon
project, the Crossroads project, and the 6400 Sunset project
(collectively, the Projects).3
3 The Palladium project belongs to real parties CH
Palladium, LLC and CH Palladium Holdings, LLC (Palladium);
the Sunset Gordon project belongs to real party 5929 Sunset
(Hollywood), LLC (Sunset Gordon); the Crossroads project
belongs to real party CRE-HAR Crossroads SPV, LLC
(Crossroads); and the 6400 Sunset Project belongs to real party
6400 Sunset, LLC (6400 Sunset).
4
a. The Palladium Project
The Palladium project is a 28-story, 927,354 square foot
development consisting of an 86-foot high, 800,000 square foot
parking “podium” and a pair of “luxury residential towers” with
731 condominium units and 24,000 square feet of restaurant/bar
and retail space. The proposed site is on two surface lots located
alongside and behind the Hollywood Palladium music and
entertainment building. The project will restore the Palladium
building and also include 33,800 square feet of landscaped public
courtyards. Ninety-five percent of the dwelling units will be sold
or rented at market rate and five percent (about 37) of the units
will be reserved for “ ‘households earning between 50 and 120
percent of the area’s median income.’ ”
The City approved the project on March 22, 2016 after
holding public hearings. In April 2016, AHF filed a petition for
writ of mandate challenging the Palladium project’s approvals.
The trial court entered judgment on the pleadings on some of
AHF’s claims and separately denied AHF’s petition on the
remaining causes of action. On August 29, 2019, the Court of
Appeal affirmed the trial court’s judgment, and the Supreme
Court denied AHF’s petition for review on November 13, 2019.
b. The Sunset Gordon Project
The Sunset Gordon project is a 22-story, 324,693 square
foot mixed-use development on about 1.65 acres. It includes
a four-story parking podium, a luxury residential tower with
299 apartments, 46,100 square feet of restaurant/bar, retail,
and office space, and a 18,962 square foot public park. Of the
299 apartments, five percent (15 units) are set aside for very
low income residents, and five percent (15 units) are set aside for
5
workforce housing.4 The remaining apartments are market rate
units.
Sunset Gordon purchased the property in 2011 after the
original developer and owner went bankrupt. In 2015, it applied
to the City to re-entitle the project. After holding public
hearings, the City approved the Sunset Gordon project on
December 12, 2018.
On January 15, 2019, Coalition to Preserve L.A. filed
a petition for writ of mandate challenging the Sunset Gordon
project. AHF joined the lawsuit as a petitioner in an amended
petition alleging additional causes of action.5 On December 13,
2019, the trial court denied the petition as to the original six
causes of action brought by Coalition to Preserve L.A. Trial
on the causes of action added by the amended petition is yet to
be conducted.
c. The Crossroads Project
The Crossroads Project is a 1,381,000 square foot
mixed-use development on about 8.34 acres at the edge of the
Crossroads of the World complex. It consists of a 26-story hotel,
an eight-story parking podium, 95,000 square feet of office space,
and 190,000 square feet of restaurant/bar, retail, and commercial
space. It includes 18 proposed restaurants, a supermarket,
a 30,000 square foot movie theater, a private gym, publicly
4 Although not alleged in the complaint, according to the
City’s Notice of Determination for the Sunset Gordon project,
of which the court took judicial notice, the project also included
15 moderate income units.
5 On October 15, 2019, the trial court granted Coalition to
Preserve L.A.’s motion for leave to add AHF as a petitioner and
to file the amended petition. The amended petition was not filed
until December 17, 2019, however.
6
accessible courtyards, and a “pedestrian paseo” for outdoor
events.
The project also includes 950 dwelling units: 89 percent
(845) are market-rate units and 11 percent (105) are reserved
for very low income residents. The project will demolish an
apartment building with 84 units of existing rent-stabilized
housing. Forty units are to be reserved for former tenants of
the demolished apartments who qualify as very low income
households.
In November 2016, Governor Brown certified the
Crossroads project as an Environmental Leadership Development
Project (ELDP) under the Jobs and Economic Improvement Act
of 2011, Public Resources Code section 21178 et seq. The City
approved the project on January 22, 2019.
On February 19, 2019, AHF and another entity filed a
petition for writ of mandate challenging the City’s approval of
the Crossroads project.6 The trial court denied the petition.
On July 26, 2019, the Court of Appeal dismissed AHF’s appeal
as untimely. The Supreme Court denied AHF’s petition for
review on October 16, 2019.
d. The 6400 Sunset Project
The 6400 Sunset project is a 26-story, 231,836 square foot
development with a six-story parking podium, a luxury
residential tower with 200 dwelling units, and 7,000 square feet
of restaurant/bar and retail space. The development is proposed
on a lot “looming over the historic ArcLight Cinerama Dome.”
Ninety-five percent of the project’s dwelling units (190) will
be sold or rented at market rates and five percent of the units
6 Crossroads filed a notice of related case in this action. The
trial court granted it and found the earlier petition was the lead
case.
7
(10) will be set aside for very low income residents. The City
approved the project on June 25, 2019.
On July 22, 2019, AHF and Coalition to Preserve L.A. filed
a petition for writ of mandate challenging the City’s approval
of the 6400 Sunset project. The trial has not yet taken place.
3. Hollywood Center
a. The Hollywood Community Plan
In 1988, the City Council of the City of Los Angeles adopted
the Hollywood Community Plan “to provide an official guide to
the future development of the Community.” The Community
Plan describes the Hollywood Center as the “focal point of the
Community,” and states it “shall function . . . as the commercial
center for Hollywood and surrounding communities . . . and as
an entertainment center for the entire region.” The Community
Plan provides that “[f]uture development [in the Hollywood
Center] should be compatible with existing commercial
development, surrounding residential neighborhoods, and
the transportation and circulation system.” It “especially
encourage[s]” “[d]evelopments combining residential and
commercial uses” in this area.
The Community Plan was implemented “to promote an
arrangement of land use, circulation, and services which will
encourage and contribute to the economic, social and physical
health, safety, welfare, and convenience of the Community . . .;
guide the development, betterment, and change of the
Community to meet existing and anticipated needs and
conditions; balance growth and stability; reflect economic
potentials and limits, land development and other trends;
and protect investment to the extent reasonable and feasible.”
Its objectives include to (1) “coordinate the development of
Hollywood with that of other parts of the City,” including,
“the development of Hollywood as a major center of population,
8
employment, retail services, and entertainment”; (2) “designate
lands at appropriate locations for the various private uses and
public facilities in the quantities and at densities required to
accommodate population and activities”; (3) “make provision for
the housing required to satisfy the varying needs and desires of
all economic segments of the Community”; (4) “promote economic
wellbeing and public convenience through: [¶] (a) allocating and
distributing commercial lands for retail, service, and office space
in quantities and patterns based on accepted planning principles
and standards.”
The City found each Project is “consistent with and/or
will help to implement one or more of the” Community Plan’s
objectives and goals. The City also found the Projects “to be
consistent with the goals, objectives, and policies of the General
Plan Framework,” including its objective to “[r]einforce existing
and encourage the development of new regional centers that
accommodate a broad range of uses that serve, provide job
opportunities, and are accessible to the region, are compatible
with adjacent land uses, and are developed to enhance urban
lifestyles.” The Projects are located in an area designated as
a “Regional Center.”
For example, the City found the Palladium project
consistent with the above goals and objectives because it
“would enliven the Hollywood Center area by contributing
to the Regional Center’s identity through the replacement
of surface parking with the provision of new housing and
commercial uses in a high quality development that reinforces
the iconic character of Sunset Boulevard, thereby enhancing
the existing concentration of housing and amenities that serve
nearby residents, the City, and which caters to tourists.”
9
Together, the four Projects will net 2,096 new housing units
with 182 of those units reserved for very low, low, and moderate-
income households.
b. Gentrification/Demographics7
In 2015, the City was awarded a grant to create a team “to
study gentrification8 from a data-driven perspective.” According
to the City Manager at the time, the City’s goal was “ ‘to take
advantage of something that’s clearly positive: neighborhoods
seeing more private investment—and [to] ensure the current
residents and businesses in those neighborhoods enjoy the
benefits.’ ” (Emphasis omitted.) The team created “two tools
to evaluate the potential for displacement and neighborhood
change”: the “ ‘Los Angeles Index of Displacement Pressure’ ”
and the “ ‘Los Angeles Index of Neighborhood Change.’ ”9
According to those indices, which take into account several
metrics, the neighborhoods in and around the Projects’ sites
have had “high levels of change” from 2000 to 2014, reflecting
“the fact that gentrification in this area has begun, and will
be exacerbated by the Projects.” Based on the City’s Index of
7 The complaint spends several paragraphs describing the
factors of gentrification and causes of displacement, and their
effects, as stated by various academic studies and analyses.
We do not repeat those studies here.
8 The complaint defines “gentrification” as “ ‘a
simultaneously spatial and social practice that results in “the
transformation of a working-class or vacant area of the central
city into middle-class residential or commercial use” – meaning
the influx of both capital (real estate investment) and high-
income or – educated residents.’ ”
9 Displacement, according to the complaint, occurs “ ‘when
households are forced to move out of their neighborhood.’ ”
10
Displacement Pressure, the area surrounding the Projects
has a “ ‘Very High’ rate of displacement pressure,” making
the “residents in the area around the Project[s] at ‘risk’ of
displacement.”
In the part of Hollywood where the Projects are located,
32 percent of residents are Hispanic or Latino, 12 percent are
Asian, and 6 percent are Black or African American. Twenty-one
percent of the Latino population in the area live below the
poverty rate. The median household income for Latino residents
is $44,492, less than the county-wide median of $57,952, and the
per capita income for Latino residents is $17,241 versus $30,798
county-wide.10 “Over two-thirds of Latino households are
classified by the Department of Housing and Urban Development
as ‘low income’ (income at 80% or below of the County median
income), and 44% as ‘very low income’ (at or below 50% of County
median).” About “half of all Latino renter households are rent-
burdened, spending over 30 percent of their household income on
rent.” The “significant” disparity “between non-Hispanic whites
and Latino per capita income . . . show[s] that Latino residents
will more likely be impacted and displaced by the Projects.”
“The approvals of the Projects involve at least three of
the [four] factors that lead to gentrification and displacement:
they add amenities in the form of improved retail and restaurant
facilities in a more attractive shopping center; they add
productivity by providing office space and additional jobs in the
hotel and retail/restaurant facilities; and they provide access
throughout the LA area through the nearby Metro stations. . . .
Even though the amenities and productivity may benefit the
10 AHF drew its statistics from the U.S. Census Bureau’s
American Community Survey Public Use Microdata Area for
the Projects’ location within the 90028 zip code.
11
area, without appropriate mitigation, these features are likely
to result in displacement of the current local community.”
Based on, among other things, the area’s “ ‘Very High’ ” risk of
displacement, “the amenities and productivity that the Project[s]
will bring to the area which are shown to cause gentrification-
related displacement, and the already rent-burdened status of
the Black and Latino population, the Projects are likely to have a
disparate impact on Black and Latino residents by increasing the
likelihood that these residents will be displaced from the homes
in which they currently reside.”
4. The complaint
AHF filed its complaint against the City and City Council
on August 8, 2019, alleging two causes of action: (1) violation
of the FHA, 42 U.S.C. § 3601 et seq., and HUD regulations,
24 C.F.R. § 100.1 et seq. (2020); and (2) violation of FEHA,
Gov. Code, § 12955 et seq. The complaint challenges the
City’s decisions to permit construction of the Projects “without
providing adequate measures to ensure that the Projects would
not displace protected minorities, as required by the [FHA] and
[FEHA].” AHF alleges the City approved the Projects “without
including measures that will address the displacement of Black
and Latino residents, such as requiring sufficient affordable
housing be included in the Projects, or by requiring the provision
of other permanent affordable housing elsewhere near the
Project[s].”
In support of its FHA claim, AHF alleges the “approval
of the Projects and the terms of their respective Conditions
of Approval constitute policies of the City . . .” which will
disparately impact Black and Latino residents through “the
gentrification of the surrounding community by the construction
of a large number of residential housing units that are
unaffordable to the vast majority of current Black and Latino
12
residents of the surrounding neighborhood.” AHF alleges the
City’s determinations about what community benefits should
be included in the development agreements for the Projects
are “policy determination[s] made by the City in agreeing to
the terms of each” project’s development agreement, rendering
“the approval of the Projects . . . a facially-neutral policy under
the FHA.”
The complaint asserts the City made findings that the
Projects were consistent with previously adopted City policies,
including the Hollywood Community Plan, the General Plan
Amendment, and the Community Redevelopment Area for
the Hollywood Redevelopment Area. AHF alleges those listed
policies “cause the disparate impacts identified in th[e]
Complaint because [they] encourage development that, like
the Projects, has the effect of displacing lower income Black
and Latino residents by providing amenities like ‘high quality’
restaurants, retail, and entertainment options that make the
neighborhood more attractive to higher income residents, while
only providing housing that is unaffordable to the vast majority
of the current Black and Latino residents. The Projects’
operation will lead to rising rents and increase the likelihood
that current residents will be displaced from their homes in the
neighborhoods around the Projects without housing affordable
to these residents within the Projects themselves.” Because
the approval of the Projects “has an unjustified discriminatory
effect on members of minority communities” and “perpetuates
segregated housing patterns because of race, color, or national
origin,” the approval of the Projects “violates the FHA as
implemented through the HUD Regulations.” AHF makes
similar allegations in support of its FEHA cause of action.
13
AHF asks the court to void the City’s “approvals”11 of the
four projects and enjoin the City and Real Parties from “taking
any action to implement the Projects” or to construct them “until
such time as the City Council has issued approvals without a
discriminatory effect as required by the FHA and FEHA, which
approvals include measures that adequate [sic] mitigate for
the future displacement of Black and Latino residents.”
5. The demurrers and judgment
The City and real parties filed separate demurrers to
the complaint. The Crossroads real party also filed a separate
motion for an order confirming the case is subject to California
Rules of Court, rules 3.2220 et seq. and 8.700 et seq., that govern
ELDP litigation (ELDP rules).
The trial court heard oral argument on November 15, 2019.
After hearing argument, the court sustained the demurrers
without leave to amend and filed its final written ruling that
same day. The court found the complaint failed to state a cause
of action against the City or the real parties under the FHA and
FEHA. The court also concluded AHF’s causes of actions as to
the Crossroads, Palladium, and Sunset Gordon projects were
barred by the statute of limitations, and the case as it relates to
all four Projects was barred on res judicata (or related) grounds.
Finally, the trial court granted Crossroads’ ELDP motion. On
11 The “approvals” AHF challenges include “(a) an
Environmental Impact Report [(EIR)] and various Errata[,] (b) a
General Plan Amendment, (c) Zone and Height District Changes,
(d) a Conditional Use for Alcohol, (e) a Finding of Convenience
and Necessity for an Offsite Alcohol License, and Conditional
Use Permits for on-site alcohol consumption, (f) a Zoning
Administrator’s Interpretation specifying front, rear and side
yards, (g) a Site Plan Review, and other associated entitlements.”
14
December 13, 2019, the trial court entered judgment in favor
of the City and real parties.
AHF appealed within the time prescribed by the ELDP
rules. Palladium, Sunset Gordon, and Crossroads filed a joint
respondents’ brief and joined in the City’s respondent’s brief.
The City also joined in part of the joint respondents’ brief.
6400 Sunset joined in the City’s respondent’s brief.
DISCUSSION
1. Standards of review
“On appeal from a judgment after a demurrer is sustained
without leave to amend, we assume the truth of the properly
pleaded factual allegations, facts that reasonably can be inferred
from those expressly pleaded, and facts of which judicial notice
can be taken.” (Syngenta Crop Protection, Inc. v. Helliker
(2006) 138 Cal. App. 4th 1135, 1181.) “[W]e give the complaint
a reasonable interpretation, and read it in context.” (Schifando
v. City of Los Angeles (2003) 31 Cal. 4th 1074, 1081 (Schifando).)
“[W]e examine the complaint de novo to determine whether it
alleges facts sufficient to state a cause of action under any legal
theory.” (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal. 4th 412,
415.) “If the complaint fails to plead, or if the defendant negates,
any essential element of a particular cause of action, this court
should affirm the sustaining of a demurrer.” (Consumer Cause,
Inc. v. Arkopharma, Inc. (2003) 106 Cal. App. 4th 824, 827.)
We also “must decide whether there is a reasonable
possibility the plaintiff could cure the defect with an amendment.
[Citation.] If we find that an amendment could cure the defect,
we conclude that the trial court abused its discretion and we
reverse; if not, no abuse of discretion has occurred. [Citation.]
The plaintiff has the burden of proving that an amendment
would cure the defect. [Citation.]” (Schifando, supra, 31 Cal.4th
at p. 1081.)
15
2. The complaint fails to state a cause of action for
violation of the FHA and FEHA as a matter of law
a. Disparate-impact theory of liability
The FHA makes it unlawful to “refuse to sell or rent . . .
or otherwise make unavailable or deny, a dwelling to any person
because of race, color, religion, sex, familial status, or national
origin.” (42 U.S.C. § 3604(a).) “A dwelling can be made
otherwise unavailable by, among other things, action that limits
the availability of affordable housing.” (Mt. Holly Gardens
Citizens in Action, Inc. v. Township of Mt. Holly (3d Cir. 2011)
658 F.3d 375, 381 (Mt. Holly).) The statute was enacted to
“eradicate discriminatory practices within [the housing] sector
of our nation’s economy.” (Texas Dept. of Housing & Community
Affairs v. Inclusive Communities Project, Inc. (2015) __ U.S. __, __
[135 S. Ct. 2507, 2521] (Inclusive Communities).)
AHF alleges a disparate-impact claim under both the FHA
and FEHA.12 A disparate-impact claim challenges “practices
that have a ‘disproportionately adverse effect on minorities’ and
are otherwise unjustified by a legitimate rationale.” (Inclusive
Communities, supra, 135 S.Ct. at p. 2513; 24 C.F.R. § 100.500(a)
(2020) [“A practice has a discriminatory effect where it actually
or predictably results in a disparate impact on a group of persons
or creates, increases, reinforces, or perpetuates segregated
housing patterns because of race, color . . . or national origin.”].)
12 The Legislature sought to make FEHA substantially
equivalent to the FHA and its amendments. (Sisemore v.
Master Financial, Inc. (2007) 151 Cal. App. 4th 1386, 1421, 1420.)
“Accordingly, ‘[c]ourts often look to cases construing the FHA . . .
when interpreting FEHA.’ ” (Id. at p. 1420.) We address, as the
parties and trial court did, the two claims together and intend
our references to the FHA also to cover FEHA.
16
Disparate-impact claims are cognizable under both the FHA and
FEHA. (Inclusive Communities, at p. 2525; Sisemore, supra,
151 Cal.App.4th at p. 1423.) Suits challenging “zoning laws
and other housing restrictions that function unfairly to exclude
minorities from certain neighborhoods without any sufficient
justification. . . . reside at the heartland of disparate-impact
liability.” (Inclusive Communities, at pp. 2521-2522.)
Although the Supreme Court in Inclusive Communities
recognized disparate-impact liability under the FHA, it cautioned
that the “FHA is not an instrument to force housing authorities
to reorder their priorities. Rather, the FHA aims to ensure that
those priorities can be achieved without arbitrarily creating
discriminatory effects or perpetuating segregation.” (Inclusive
Communities, supra, 135 S.Ct. at p. 2522.) The Court thus held
“[g]overnmental or private policies are not contrary to the
disparate-impact requirement unless they are ‘artificial,
arbitrary, and unnecessary barriers.’ ” (Id. at pp. 2522, 2524.)
The Court also explained, “a disparate-impact claim that
relies on a statistical disparity must fail if the plaintiff cannot
point to a defendant’s policy or policies causing that disparity.
A robust causality requirement ensures that ‘[r]acial imbalance
. . . does not, without more, establish a prima facie case of
disparate impact’ and thus protects defendants from being
held liable for racial disparities they did not create.” (Inclusive
Communities, supra, 135 S.Ct. at p. 2523.) The Supreme Court
directed courts to “examine with care whether a plaintiff has
made out a prima facie case of disparate impact . . . . A plaintiff
who fails to allege facts at the pleading stage or produce
statistical evidence demonstrating a causal connection cannot
make out a prima facie case of disparate impact.” (Ibid.)
The Supreme Court emphasized these “limitations on
disparate-impact liability . . . are also necessary to protect
17
potential defendants against abusive disparate-impact claims.”
(Inclusive Communities, supra, 135 S.Ct. at p. 2524.) Finally,
the Court noted “[r]emedial orders in disparate-impact cases
should concentrate on the elimination of the offending practice
that ‘arbitrar[ily] . . . operate[s] invidiously to discriminate on
the basis of rac[e].’ ” (Ibid.)
With these principles in mind, we consider AHF’s alleged
theory of disparate-impact liability.
b. AHF has not alleged a policy that is an “artificial,
arbitrary, and unnecessary barrier[ ]” to fair housing
AHF initially contends the complaint alleges the existence
of a policy or practice, challenging the City’s argument that
the alleged policy is too vague or constitutes the lack of a policy.
As articulated by AHF, “the City’s specific implementation of the
Hollywood Community Plan and its approval of these four major
projects constitutes various policies and decisions.” It contends
the City approved the Projects after “numerous negotiations
[and] determinations,” including zoning waivers and the granting
of conditional use permits, and imposing certain “conditions,”
all of which constitute “policy decisions, made to implement
the Hollywood Community Plan.”
We agree that AHF has sufficiently alleged the existence
of a City policy or practice, at this early pleading stage. For
example, in Mhany Management v. County of Nassau (2016)
819 F.3d 581, 619 (Mhany), the Second Circuit concluded a City’s
decision to rezone an area for single family dwellings rather than
multi-family dwellings—that affected one piece of property—fell
“within a classification of a ‘general policy,’ ” where the zoning
change involved months of hearings and meetings, consideration
of objections, and the passage of a local law. (See also Avenue 6E
Investments, LLC v. City of Yuma (D.Ariz. Jan. 29, 2018, 2:09-cv-
00297 JWS) 2018 U.S. Dist. Lexis 14913 at *19-20 (Avenue 6E)
18
[finding a city was “setting policy” in an area by denying a
rezoning request to allow for smaller lots; denial “involved
hearings and discussions as to how neighboring developments
in the area would be affected and also directly resulted in
a change to the adjacent property’s zoning to ensure future
development in that area was reserved for the largest lots”].)
The complaint makes similar express and implied
allegations about the City’s approval of the Projects to revitalize
the area. AHF alleges the approval process for the Projects was
“lengthy,” and included debate “in public hearings and in written
communications” about what “community benefits” should be
included as part of the development agreements (presumably
between the City and the Projects’ developers). AHF also alleges
the City approved the Projects, including granting various land
use entitlements, to “aid in the implementation” of the City’s
existing land use policies, including the Hollywood Community
Plan, the General Plan Amendment, and the Community
Redevelopment Area for the Hollywood Redevelopment Area.
Accepting these allegations as true, the City’s approval of the
Projects made in the context of implementing its land use plans
can be classified as a policy.
Whether the complaint alleges a policy that is an
“ ‘artificial, arbitrary, and unnecessary barrier[ ]’ ” to fair
housing is another matter. In essence AHF alleges the City’s
implementation of its land use policy by approving “these four
large, upscale, multiuse projects within a one-mile radius”—
without requiring measures to mitigate against the displacement
of minority residents—creates a barrier to fair housing because
the Projects will lead to gentrification and thereby drive rents up,
disparately displacing Latino and Black residents who will be
unable to afford the higher rents.
19
The City contends there is no barrier to housing for the
court to remove because its approval of the Projects creates
housing—both market rate and income-restricted units.13 We do
not agree that the creation of housing alone is an absolute shield
from disparate-impact liability. After all, in Mhany, the city’s
decision to rezone an area for single-family dwellings—instead
of multi-family housing—opened the door for the construction of
housing where none had existed due to the area’s former public
zone designation. (Mhany, supra, 819 F.3d at pp. 589, 597-598.)
But there, the city’s shift from zoning for multi-family to single-
family housing decreased the availability of affordable housing in
the area, which disparately impacted minorities. (Id. at pp. 598,
619-620.)
Nevertheless, as the City argues, its alleged discriminatory
policy is missing a key feature of the policies examined in the
cases relied on by AHF: the City’s approval of the Projects
neither prohibits the construction of affordable housing in
the area nor physically removes affordable housing to make
way for more expensive housing or other uses.
AHF relies on Mhany, supra, 819 F.3d 581; Avenue 6E,
supra, 2018 U.S. Dist. Lexis 14913; and Mt. Holly, supra, 658
F.3d 375. In Mhany, the zoning decision prevented the building
of multi-family dwellings thereby decreasing the availability
of housing for minorities where affordable housing already was
scarce. (Mhany, at pp. 588, 620.) The court of appeals thus
affirmed the district court’s finding that the plaintiffs established
a prima facie case of disparate-impact liability under the FHA.
13 As alleged by AHF, the City’s approval of the Projects will
result in a net increase of 2,096 residential units, at least 182
of which will be income-restricted.
20
(Id. at p. 620.) In other words, the restriction on the development
of multi-family housing created a barrier to fair housing.
Similarly, in Avenue 6E, the city’s denial of a developer’s
request to rezone an area to allow for smaller lots prevented the
building of affordable or moderately priced homes that allegedly
“exclude[d] Hispanic homebuyers from [the] area.” (Avenue 6E,
supra, 2018 U.S. Dist. Lexis 14913 at *3-5, 18, 24 [denying city’s
motion for summary judgment on plaintiffs’ disparate-impact
claim under the FHA].) Finally, in Mt. Holly, the Third Circuit
reversed an order granting summary judgment on residents’
disparate-impact claim under the FHA where their township
implemented a redevelopment plan that “would eliminate
existing homes in [a neighborhood], occupied predominately by
low-income residents, and replace them with significantly more
expensive housing units.” The replacement housing was “well
outside the range of affordability for a significant portion of the
African-American and Hispanic residents.” (Mt. Holly, supra, at
pp. 377, 379-380 [concluding district court misapplied standard
to determine whether residents could establish a prima facie
disparate-impact case].)
In other words, in all of these cases the defendant’s
policy affirmatively prevented the building of or removed
affordable housing in areas where minority residents were
disproportionately affected. The City’s approval of the Projects
here does not. AHF responds it has alleged a barrier to housing
for a protected class because the Projects will (1) demolish
existing “rent-controlled housing occupied by a significant
number of minorities”; (2) create housing “disproportionately
unavailable and unaffordable to a protected group”; and
(3) “cause[ ] the disproportionate displacement of a protected
group by making surrounding housing unaffordable (thus
eliminating previously existing affordable housing).” Assuming
21
the truth of these allegations, AHF has not alleged the City’s
approval of the Projects—and its decisions and implementation
of land use policies that went with it—is itself a barrier to fair
housing as Inclusive Communities requires.14
i. AHF has not alleged the City’s policy
restricts affordable housing
First, AHF has not alleged the City has restricted the
building of affordable housing in the area through zoning,
an ordinance, or other land use decision, as part of its approval
of the Projects. AHF does not allege, for example, that the City
applied a zoning or other land use law effectively to preclude
construction of affordable housing in the area, as in Mhany’s
restriction on multi-family dwellings or Avenue 6E’s lot-size
restrictions. Moreover, in both Mhany and Avenue 6E, the
cities were faced with development proposals requiring a less
restrictive zoning designation to enable the construction of more
affordable housing than the ultimate designations allowed. AHF
does not suggest the City’s approval of the Projects prevented
a competing development from constructing affordable housing.
14 In discussing causation, AHF argues that, for purposes of
establishing a prima facie case, the HUD regulations—left intact
by Inclusive Communities—require it to allege only that the
City’s policy “predictably will cause a discriminatory effect on
a protected class.” (Citing 24 C.F.R. § 100.500(c)(1).) While we
need not address the parties’ causation arguments, Inclusive
Communities made clear “[g]overnmental . . . polices are not
contrary to the disparate-impact requirement unless they are
‘artificial, arbitrary, and unnecessary barriers.’ ” (Inclusive
Communities, supra, 135 S.Ct. at p. 2524, italics added.)
Accordingly, as part of its prima facie case, AHF must plead
the City’s policy itself is the barrier to fair housing.
22
Second, AHF has not alleged what actual restrictions
the City’s approval of the Projects places on access to affordable
housing. Instead, under AHF’s gentrification theory, the
City’s development policy has disproportionately limited the
availability of housing to Latinos by “making surrounding
housing unaffordable.” AHF theorizes the “upscale” Projects
will revitalize the area causing rents to rise as higher-earning
residents are attracted to the developments. Latinos will be
disproportionately displaced from the area as they no longer
will be able to afford their current housing and cannot afford
the new market rate housing the Projects will create.
Assuming the Projects will cause a rise in surrounding
rents and disproportionately impact Latinos as AHF portends,
AHF has not alleged the City’s implementation of its land use
plan is the barrier to affordable housing. Rather, the anticipated
barrier to affordable housing rests in the hands of private third
parties. AHF alleges the possibility of private landowners raising
rents as property values in the area increase when the Projects
are built. Of course, landlords could raise rents—or not—due to
other socio-economic forces, too. Nonetheless, the City’s land use
decisions and policies associated with its approval of the Projects
themselves do not impose higher rents, do not physically reduce
the number of available affordable housing units, and do not
preclude the development of affordable housing units. In the
absence of the City placing actual restrictions on housing, we
cannot conclude the City’s approval of the Projects is actionable
under the FHA or FEHA based on the reduction of affordable
housing units as a result of private actors’ anticipated increase
of rents due to the revitalization of the area stemming from new
development.
ii. The City’s approval of the Projects does
not eliminate housing
23
AHF alleges minorities disproportionately will be unable
to afford most of the new housing the Projects will construct,
but that new housing will not eliminate existing housing.
The market rate housing the Projects will build does not replace
existing, occupied housing: the Palladium project will be built
on an empty parking lot; the Sunset Gordon project will re-open
an already built tower that has sat vacant for about three years
with empty housing units; the Crossroads project creates new
income-restricted units with a net increase in affordable housing;
and the 6400 Sunset project will be built on a lot with no current
housing units. Accordingly, the new market rate units will not
displace current residents who cannot afford them because they
do not replace existing affordable units.
As AHF alleges, and the City does not dispute, the
Crossroads project will result in the destruction of an existing
rent-stabilized apartment building. The 84 rent-stabilized units
slated for demolition, however, will be replaced with 105 units
restricted for very-low income households.15 Rather than reduce
available affordable housing, the replacement of the existing
building will increase the number of affordable housing units
on that site. And, 40 of those new units will be reserved for
former tenants of the demolished building. In stark contrast to
Mt. Holly, the City’s policy does not remove existing affordable
15 The City notes that units subject to its rent stabilization
ordinance are not income restricted. (L.A. Mun. Code, ch. 15,
§ 151.00 et seq.) The ordinance protects tenants from excessive
rent increases, but allows “landlords to re-set rent to market
rates in several circumstances, including, when units are
voluntarily vacated.” (See, e.g., id., § 151.06(C)1.(a).) The new
construction not only will add 21 affordable units to the area, but
the 84 units replaced with income-restricted units arguably will
be more affordable than they are now.
24
housing to make way for less affordable housing; thus it cannot
be classified as a barrier to housing under the FHA.16
iii. AHF seeks to impose a new development
policy on the City, rather than to
eliminate one
Finally, as we have noted, the “FHA is not an instrument
to force housing authorities to reorder their priorities.” (Inclusive
Communities, supra, 135 S.Ct. at p. 2522.) Here, the remedy
AHF seeks—the halting of the Projects until the City initiates
measures to mitigate the effects of gentrification—is precisely
the type of remedy Inclusive Communities explained the FHA
was not intended to impose. AHF would have the court force
the City to “reorder” its development priorities by requiring,
16 Moreover, in the February 2019 Crossroads petition for
writ of mandate, AHF litigated and lost its contention that the
City did not sufficiently mitigate the loss of affordable housing
from the demolition of the rent-stabilized building, and that the
project failed to provide sufficient affordable housing. In denying
the petition, the superior court found AHF’s “evidence of
affordable housing shortages in the [Hollywood Redevelopment
Area] is lacking.” The trial court concluded that, “even if
Petitioners substantiated a severe affordable housing shortage,”
the Community Development Law provisions relating to
providing affordable housing as part of a redevelopment project
“did not compel the City to condition the [Crossroads project’s]
approvals on the inclusion of more affordable housing.” Rather,
the statute in question, Health and Safety Code section 33413,
requires the City to produce the required number of income-
restricted housing units anywhere within the Hollywood
Redevelopment Area—not the Crossroads project’s site itself—
within the City’s discretion. And, because the redevelopment
agency’s implementation plan does not expire until May 7, 2027,
the City has another seven years to satisfy the requirement.
25
for example, additional affordable housing to be built within or
near the Projects, as opposed to some other area.
Rather, disparate-impact liability under the FHA should
“solely ‘remov[e] . . . artificial, arbitrary, and unnecessary
barriers.’ ” (Inclusive Communities, supra, 135 S.Ct. at p. 2524.)
Eliminating the City’s alleged “offending” policy—its approval of
the Projects—would not make affordable housing more available
to minorities, however. As we have discussed, the Projects add
affordable housing units to the area’s existing supply. Thus,
declaring the City’s approval of the Projects void will serve only
to reduce the number of existing income-restricted housing units,
rather than provide greater access to affordable housing, as
contemplated by the FHA.
No one disputes the existence of gentrification or its
potential ill effects. But, in the absence of a policy that actually
limits the availability of affordable housing, AHF’s remedy is
to petition the City or the Legislature to enact laws or policies
to counteract the future effects of gentrification. The FHA and
FEHA, however, were designed not to impose land use policies
on public and private actors, but rather to eliminate those policies
that are barriers to fair housing. AHF has not alleged such
a policy exists here.
Because we conclude the City’s approval of the Projects
is not actionable as a matter of law under the FHA or FEHA
on the ground it does not constitute a policy that is an artificial,
arbitrary, or unnecessary barrier subject to disparate-impact
liability, we need not consider the parties’ other arguments or the
other grounds on which the trial court sustained the demurrers.
Having affirmed the judgment, we also need not consider AHF’s
contention the trial court erred when it confirmed this action is
subject to the ELDP rules.
26
3. The trial court did not abuse its discretion by denying
AHF leave to amend
When a demurrer is sustained without leave to amend,
the plaintiff bears the burden of proving there is a reasonable
possibility of amendment. To satisfy that burden on appeal, a
plaintiff “must show in what manner he can amend his complaint
and how that amendment will change the legal effect of his
pleading.” (Goodman v. Kennedy (1976) 18 Cal. 3d 335, 349.)
The assertion of an abstract right to amend does not satisfy
this burden. (McKelvey v. Boeing North American, Inc. (1999)
74 Cal. App. 4th 151, 161.) Further, the plaintiff must set forth
factual allegations that sufficiently state all required elements
of that cause of action. (McMartin v. Children's Institute
International (1989) 212 Cal. App. 3d 1393, 1408.) Allegations
must be factual and specific, not vague or conclusory. (Cooper
v. Equity Gen. Insurance Co. (1990) 219 Cal. App. 3d 1252, 1263-
1264.)
Here, AHF has set forth vague or conclusory factual
allegations to satisfy its burden of showing that there is a
reasonable possibility that it can amend the legal effect of its
complaint. For example, while it states it can plead more robust
statistics regarding the disparate impact of displacement on
Latinos, it offers no specific allegations to support the possibility
of amendment and no legal authority showing the viability of
new or amended causes of action.17 Indeed, in its reply brief,
17 At oral argument AHF’s counsel suggested it could amend
its complaint to plead additional facts to support the complaint’s
conclusory allegation that the City’s “approval of the Projects . . .
perpetuates segregated housing patterns” in violation of the
FHA. Arguably, some Latino residents in the area will be unable
to afford the market rate units in the Projects’ new “upscale”
27
AHF asks this court to “provide guidance” as to what additional
evidence may be required under Inclusive Communities. Of
course, the burden of showing that a reasonable possibility exists
that amendment can cure the defects remains with the plaintiff;
neither the trial court nor this court will rewrite a complaint.
(Gould v. Maryland Sound Industries, Inc. (1995) 31 Cal. App. 4th
1137, 1153.)
DISPOSITION
The judgment is affirmed. In the interests of justice, the
parties are to bear their own costs on appeal.
CERTIFIED FOR PUBLICATION
EGERTON, J.
We concur:
LAVIN, Acting P. J. DHANIDINA, J.
buildings. But AHF has not said how the unaffordability of
the new units perpetuates segregation in the area when currently
a disproportionate number of the residents are minorities. Put
differently, AHF offers no specific facts explaining how making
the area less segregated and more socioeconomically diverse
violates the FHA or FEHA.
28