South Lake Tahoe Property etc. v. City of South Lake Tahoe

Filed 6/20/23
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(El Dorado)
----
SOUTH LAKE TAHOE PROPERTY OWNERS C093603
GROUP,
(Super. Ct. No. SC20180243)
Plaintiff and Appellant,
v.
CITY OF SOUTH LAKE TAHOE,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of El Dorado County, Dylan
Sullivan, Judge. Reversed in part, remanded in part and affirmed in part.
Pierce & Shearer, Andrew F. Pierce and Youchen Wang for Plaintiff and
Appellant.
Heather Leyn Stroud, City Attorney, Daniel J. Bardzell and Beverly Anne Roxas,
Assistant City Attorneys, for Defendant and Respondent.
Best Best & Krieger, Trevor Louis Rusin and Emily S. Chaidez for League of
California Cities on behalf of The City of South Lake Tahoe.
Tahoe Regional Planning Agency, John L. Marshall for Tahoe Regional Planning
Agency on behalf of The City of South Lake Tahoe.
1
This appeal challenges the constitutionality of a municipal ordinance that prohibits
short-term or vacation rental housing. In 2018, voters in the City of South Lake Tahoe
(City) enacted Measure T, an initiative that prohibits the use of dwellings in residential
zones as short-term or vacation rentals. Measure T amended the City’s vacation home
rental ordinances to bar the City from issuing any new permits for vacation home rentals
in residential zones except for permanent residents’ dwellings, and to declare that all such
existing and new permits would expire by the end of 2021. Measure T also imposed
more strict occupancy limits on vacation rental homes which were to be effective
immediately.
Plaintiff South Lake Tahoe Property Owners Group brought this action against the
City to have Measure T declared unconstitutional. On cross-motions for summary
judgment, the trial court granted summary judgment in favor of the City and denied
plaintiff’s motion.
Before us, plaintiff contends Measure T (1) unconstitutionally interferes with
vested property rights; (2) creates an unconstitutional durational residency requirement to
qualify for the exception to the ban; (3) exceeds the initiative power in violation of land
use authority vested in the Tahoe Regional Planning Agency (TRPA); and (4) violates
rights of privacy and equal protection by restricting occupancy.
We affirm in part and reverse in part and remand for further proceedings.
FACTS AND HISTORY OF THE PROCEEDINGS
The City began regulating vacation home rentals in 2003. The City’s vacation
home rental ordinance requires homeowners who want to let their dwellings for rentals of
less than 30 days to obtain a vacation home rental permit. Since 2017, the ordinance has
declared that the permits expire after one year and must be renewed on an annual basis
2
prior to expiration. (South Lake Tahoe City Code (City Code), § 3.50.400, subds. A, B.)1
The ordinance states the City’s director of development services “shall issue” the permit
and a renewed permit if the director makes required findings. (City Code, § 3.50.410,
subds. B, C.)
Before Measure T, the City capped the number of vacation home rentals at 1,400,
except rentals in the area subject to the Tourist Core Area Plan were not subject to the
cap. Maximum occupancy in each vacation rental was the lesser of the number of
parking spaces multiplied by four or the number of bedrooms multiplied by two and
adding four.
Beginning in 2015, the vacation home rental ordinance informed permit holders
that the permit was not a property right, commodity, or anything other than a revocable
license issued annually to the property owner in lieu of a business license otherwise
required for commercial activity. In 2016, the City amended the ordinance to state that
the permit shall not run with the land. In 2017, the City reenacted and amended the
ordinance to state: “Vacation home rental permits shall not be construed as providing
property rights or vested interests and entitlements in continued operation of a vacation
home rental. Vacation home rental permits are revocable licenses which expire annually.
Vacation home rental permits shall not run with the land.” (City Code, § 3.50.460.)
As of July 2018, there were 1,764 active vacation home rental permits within the
City. Of those permits, 1,373, or 77.8 percent, were issued for dwelling units outside the
Tourist Core Area. Approximately 10 percent of the dwelling units in the City held
vacation home rental permits.
Proponents of Measure T sought to prohibit vacation home rentals in residential
zones. In their notice of intent to circulate their petition, they claimed the City had not
1 We grant the City’s request for judicial notice of relevant portions of the City
Code.
3
adequately addressed residents’ complaints of excessive noise, disorderly conduct,
overcrowding, traffic, parking, and trash. Proponents believed that vacation home rentals
were negatively affecting the character and livability of the City’s residential
neighborhoods. They also asserted that the rentals were affecting the availability of
housing for the City’s workforce.
Voters passed Measure T on November 6, 2018: 3,517 votes, or 50.42 percent,
were in favor, and 3,459 votes, 49.58 percent, were against. The measure became
effective the day of its passage.
In an uncodified section, Measure T states the people ordain that the City “shall
not permit any Vacation Home Rental of any real property within any residential zone”
within the City after December 31, 2021, except as provided in the ordinance. To
accomplish this mandate, the initiative (1) immediately prohibited the City from issuing
new or additional permits for vacation home rentals in residential zones; (2) provided that
all existing permits for such rentals would continue and were eligible to be renewed until
the permit’s expiration date in 2021; and (3) provided that all existing permits for
vacation home rentals in residential zones would be discontinued by December 31, 2021.
Measure T eliminated the vacation home rental cap and stated that vacation home
rentals would continue to be permitted in commercial zones and the Tourist Core Area.
Any owner found operating a vacation home rental after December 31, 2021, without a
permit will be fined a minimum of $1,000 per violation.
Measure T created an exception for vacation home rentals of permanent residents’
dwellings. It authorized a permanent resident to let the resident’s dwelling up to a total
of 30 days per year, subject to obtaining a permit. For purposes of the exception, a
permanent resident is a person who lives in his or her home for the majority of the year
and claims a homeowner’s property tax exemption.
Measure T also imposed new occupancy limits on all vacation home rentals in
residential zones. It limited occupancy to the number of bedrooms multiplied by 2 up to
4
a maximum occupancy of 12 persons. These occupancy limits were effective
immediately, but their enforcement has been stayed.
Plaintiff is an unincorporated association of owners and managers of vacation
home rental properties in the City’s residential zones. It brought this action for
declaratory and injunctive relief. It claimed Measure T violated the federal and state
constitutions, state statutes, and common law rights, and in particular the rights of due
process, privacy, privileges and immunities, obligation of contracts, travel, vested rights,
and equal protection. Plaintiff also alleged that the initiative violated state and county
laws regulating land use in the Lake Tahoe Basin, was vague and ambiguous, and was
beyond the voters’ power to adopt.
The parties filed cross-motions for summary judgment or adjudication. The trial
court denied plaintiff’s motion and granted the City’s motion for summary adjudication
on all issues except impairment of contracts.
Plaintiff filed a petition for writ of mandate with this court. We denied the
petition.
The parties thereafter stipulated that plaintiff would dismiss the impairment of
contracts claim with prejudice as moot. The City also agreed not to enforce Measure T’s
occupancy limits during the pendency of the action. The trial court entered the stipulated
order and granted the City’s motion for summary judgment.
After noticing this appeal, plaintiff also filed a petition for writ of supersedeas to
stay Measure T in its entirety. We denied the petition.2
2 The League of California Cities and the Tahoe Regional Planning Agency (TRPA)
filed amicus curiae briefs in support of the City on the merits.
5
DISCUSSION
I
Standard of Review
We review an order granting summary judgment de novo. We consider all the
evidence set forth in the moving and opposition papers except that to which objections
were made and properly sustained by the trial court. (Guz v. Bechtel National, Inc.
(2000) 24 Cal.4th 317, 334; Pipitone v. Williams (2016) 244 Cal.App.4th 1437, 1451-
1452.)
“A defendant moving for summary judgment must show ‘that one or more
elements of the cause of action . . . cannot be established, or that there is a complete
defense to the cause of action.’ (Code Civ. Proc., § 437c, subd. (p)(2).) ‘In performing
our de novo review, we must view the evidence in a light favorable to plaintiff as the
losing party [citation], liberally construing [his or] her evidentiary submission while
strictly scrutinizing defendants’ own showing, and resolving any evidentiary doubts or
ambiguities in plaintiff’s favor.’ (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763,
768.) We accept as true both the facts shown by the losing party’s evidence and
reasonable inferences from that evidence. (Aguilar v. Atlantic Richfield Co. (2001)
25 Cal.4th 826, 856.)
“Summary judgment is appropriate only when ‘all the papers submitted show that
there is no triable issue as to any material fact and that the moving party is entitled to a
judgment as a matter of law.’ (Code Civ. Proc., § 437c, subd. (c).) A triable issue of
material fact exists if the evidence and inferences therefrom would allow a reasonable
juror to find the underlying fact in favor of the party opposing summary judgment.
(Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at pp. 850, 856.)” (Featherstone v.
Southern California Permanente Medical Group (2017) 10 Cal.App.5th 1150, 1158.)
6
We presume Measure T is constitutional, and we must uphold it unless its
unconstitutionality “clearly, positively, and unmistakably appears.” (Legislature v. Eu
(1991) 54 Cal.3d 492, 501.)
II
Vested Rights
Plaintiff contends it submitted sufficient evidence to establish a triable issue of
material fact that despite Measure T, its members have a vested right to continue
operating vacation home rentals on their residentially zoned properties. They performed
substantial work and incurred substantial liabilities by relying in good faith on their
vacation home rental permits, which plaintiff asserts were automatically renewable.
Plaintiff also claims that its members’ lawful use of their properties when Measure T was
enacted are now legal nonconforming uses which cannot be prohibited.
A. Legal background
The local electorate’s right to initiative is guaranteed by the state constitution “and
is generally co-extensive with the legislative power of the local governing body.”
(DeVita v. County of Napa (1995) 9 Cal.4th 763, 775; Cal. Const., art. II, § 11, subd. (a).)
Electors in general law cities such as the City may enact zoning ordinances by initiative.
(Associated Home Builders etc., Inc. v. City of Livermore (1976) 18 Cal.3d 582, 596, fn.
14.)3
3 After Measure T was adopted, the Legislature expressly authorized most cities and
their electorates to prohibit short-term rentals in residential areas. Pursuant to statute
effective January 1, 2020, a city “may enact a development policy, standard, or condition
to prohibit the commercial use of land that is designated for residential use, including, but
not limited to, short-term occupancy of a residence, consistent with the authority
conferred on the county or city by other law.” (Gov. Code, § 66300, subds. (a)(1), (a)(3),
(c).)
7
The City’s authority, and by extension the electorate’s authority, to enact zoning
ordinances and an ordinance banning vacation rentals in residential zones is derived from
the City’s constitutional police power. The police power is the state’s inherent authority
to enact laws to regulate and promote the public convenience and general prosperity and
to promote public health, public morals, and public safety. (Chicago, Burlington &
Quincy Railway Co. v. Illinois (1906) 200 U.S. 561, 592.) With this authority, cities may
make and enforce within their limits “all local, police, sanitary, and other ordinances and
regulations not in conflict with general laws.” (Cal. Const., art. XI, § 7.)
Police power is not limitless. The due process clauses of the federal and state
constitutions “are the most basic substantive checks” on a government’s exercise of its
police power. (Hale v. Morgan (1978) 22 Cal.3d 388, 398.) In general, a city does not
violate due process so long as its regulation “is procedurally fair and reasonably related to
a proper legislative goal.” (Ibid.) If, however, the regulation infringes on rights afforded
express constitutional protection or which are so “fundamental” or “ ‘implicit in the
concept of ordered liberty’ ” as to require equivalent protection, due process subjects the
regulation to a more searching level of scrutiny. (Perez v. City of San Bruno (1980)
27 Cal.3d 875, 889-890.)
In California, the common law doctrine of vested rights also limits police power in
land use affairs. This doctrine as developed in land use law is that “a property owner
who, in good faith reliance on a government permit, has performed substantial work and
incurred substantial liabilities has a vested right to complete construction under the
permit and to use the premises as the permit allows.” (Communities for a Better
Environment v. South Coast Air Quality Management Dist. (2010) 48 Cal.4th 310, 323
(Communities).) The requisite permit on which a vested right may be based is a valid
building permit or its functional equivalent. (Avco Community Developers, Inc. v. South
Coast Regional Com. (1976) 17 Cal.3d 785, 791, 793, 797 (Avco).)
8
The vested rights doctrine is predicated upon “estoppel of the governing body.”
(Anderson v. City Council of City of Pleasant Hill (1964) 229 Cal.App.2d 79, 89.) Where
the holder of a building permit acts upon it and incurs obligations, the permittee’s rights
“become vested and the governmental body is thereafter estopped to set up a zoning
ordinance subsequently enacted. [Citation.] Where no such permit has been issued, it is
difficult to conceive of any basis for such estoppel.” (Ibid.; see Avco, supra, 17 Cal.3d at
p. 793.)
The doctrine is also based on the constitutional prohibition against the taking of
property. (Communities, supra, 48 Cal.4th at p. 323, fn. 8.) The rule is grounded on
“ ‘ “the constitutional principle that property may not be taken without due process of
law.” ’ ” (Russ Building Partnership v. City and County of San Francisco (1988)
44 Cal.3d 839, 846.)
B. Analysis
Plaintiff contends it introduced sufficient evidence to create triable issues of
material fact on whether its members’ operation of vacation home rentals pursuant to
their vacation home rental permits created a vested right to have their permits renewed
and to continue operating their rental homes despite Measure T. Plaintiff claims the
permits’ one-year limit did not preclude rights from vesting because the permits were
ministerial; they were “automatically” renewable and could not be denied without good
cause. Plaintiff also argues the evidence shows its members performed substantial work
and incurred substantial liabilities in good faith reliance on their permits. Neither
argument persuades.
Our colleagues in the Sixth Appellate District rejected plaintiff’s arguments in
Hobbs v. City of Pacific Grove (2022) 85 Cal.App.5th 311, 325 (Hobbs). There, the
city’s ordinance authorized issuance of licenses for short-term rentals, subject to a cap on
the number of licenses the city could issue. (Id. at pp. 316-317.) The ordinance declared
9
the licenses would not be renewed automatically, and each applicant acknowledged
renewal was not guaranteed. (Id. at p. 317.) When the city realized it had exceeded the
cap, it used a random lottery to reduce the number of licenses. (Ibid.)
The plaintiffs, whose license was selected not to be renewed, contended the city’s
action violated their procedural due process rights. They argued they had a vested right
to have their license renewed because the licenses were ministerial and they had
expended significant sums in reliance on their license. (Hobbs, supra, 85 Cal.App.5th at
pp. 324-325.) The court of appeal disagreed. That issuance of the license was ministerial
did not entitle the plaintiffs to renewal, given the limitations on the number of licenses
the city could issue. (Id. at p. 325.) To the extent the plaintiffs had a vested right to
renew their license, that right was limited by the license’s express terms, including its
expiration date. (Id. at pp. 325-326.) Additionally, the plaintiffs’ evidence did not
establish sufficient detrimental reliance on the license’s renewal. It did not quantify what
expenses if any plaintiffs incurred solely because of short-term rental expectations, as
opposed to the general maintenance of their capital investment. (Id. at p. 325.)
We agree with the analysis in Hobbs and apply it here. The ministerial nature of
plaintiff’s members’ permits did not entitle the members to renewal. Any vested rights
the members may have had in their permits were limited by their permits’ terms and
conditions, including the one-year expiration dates. (Hobbs, supra, 85 Cal.App.5th at
pp. 325-326; Avco, supra, 17 Cal.3d at p. 791 [vested right is “to complete construction
in accordance with the terms of the permit”].) “[T]he rights which may ‘vest’ through
reliance on a government permit are no greater than those specifically granted by the
permit itself.” (Santa Monica Pines, Ltd. v. Rent Control Bd. (1984) 35 Cal.3d 858, 866,
overruled on another ground in City of West Hollywood v. Beverly Towers (1991)
52 Cal.3d 1184, 1192.)
Since 2015, the City’s ordinance has informed permit holders that their permits
were not a property right or anything other than a revocable license issued annually. The
10
ordinance was later amended to state that the permits do not run with the land, and that
the permits do not provide property rights or vested interests and entitlements to
continued operation of vacation home rentals.
Plaintiff argues the City may not simply declare that use permits do not run with
the land or declare in a subsequent law that their rights are not vested. Generally, a
vested right in the land use context may not be divested through ordinary police power
regulations. It may, however, be impaired or revoked if the use authorized or conducted
under it constitutes “ ‘ “a menace to the public health and safety or a public nuisance.” ’ ”
(Stewart Enterprises, Inc. v. City of Oakland (2016) 248 Cal.App.4th 410, 423.) A
vested right does not prohibit a local government from enacting and applying new
regulations necessitated by public health and safety concerns. (Davidson v. County of
San Diego (1996) 49 Cal.App.4th 639, 648 [crematorium developer’s vested right under
county ordinance to have building permit application reviewed under regulations existing
on the date of the application did not prevent the county from enacting and applying new
crematorium regulations due to public health and safety concerns].)
When the City reenacted its vacation home rental ordinance in 2017, declaring that
vacation home rental permits granted no vested rights and requiring existing permits to be
renewed annually, it found that its new regulations were “necessary for the preservation
and protection of the public peace, health, safety and/or welfare of the community . . . .”
Plaintiff does not challenge the validity of this legislative finding, and its members’
permits have been subject to the one-year expiration date ever since.
Relying on Goat Hill Tavern v. City of Costa Mesa (1992) 6 Cal.App.4th 1519(Goat Hill), plaintiff contends its owners had a “fundamental vested right” in the
continued operation of their vacation home rental businesses. Plaintiff misapplies the
case. At issue there was whether the denial of a conditional use permit for a long-running
business affected a “fundamental vested right” for purposes of determining the scope of
review in administrative mandamus, not whether the business operator had a common
11
law vested right to continue his use of the land. (Id. at p. 1525.) The Goat Hill court
itself made the distinction: “Preliminarily, we note ‘the term “vested” in the sense of
“fundamental vested rights” to determine the scope of judicial review . . . [in an
administrative mandamus proceeding] is not synonymous with . . . the “vested rights”
doctrine relating to land use and development.’ [Citation.]” (Id. at p. 1526.)
Where an administrative decision affects a “fundamental vested right,” as that
term as been defined by the courts, the trial court on administrative mandamus must
apply its independent judgment, as opposed to the substantial evidence test, to determine
whether the administrative decision is supported by the evidence. (Goat Hill, supra,
6 Cal.App.4th at p. 1526.) This is because “ ‘abrogation of the right is too important to
the individual to relegate it to exclusive administrative extinction.’ [Citation.]” (Ibid.)
In contrast, under the judicial “vested rights” doctrine relating to land use and
development, “a property owner acquires the irrevocable right to complete construction
‘notwithstanding an intervening change in the law that would otherwise preclude it.’
[Citation.]” (Hobbs, supra, 85 Cal.App.5th at p. 324.) Whether plaintiff’s members have
a fundamental vested interest in continuing their vacation home rental businesses for
purposes of determining the scope of review in administrative mandamus does not
address whether the members have a vested right to continue using their residential
properties for vacation rentals in violation of Measure T and the City’s vacation home
rental ordinance.
In addition to the limitations contained in the members’ permits, the evidence
plaintiff submitted to establish detrimental reliance also did not create a disputed issue of
material fact. To meet its evidentiary burden in opposing the City’s motion for summary
judgment, plaintiff submitted two original declarations with its opposition, and it
requested the trial court take judicial notice of sworn declarations by four other members
it had submitted to support its own motion for summary judgment. Three of the members
own vacation home rentals, one of whom also manages other vacation rental properties in
12
the City, and the fourth member is an owner of a construction business who has built
several vacation home rentals in the City. The trial court denied the request for judicial
notice, as plaintiff sought to have the court take judicial notice of the truth of the matters
asserted in the declarations. The court ruled they could be admitted for that purpose only
if they had been filed as original declarations in opposition to the City’s motion, which
they had not.
As a result of the trial court’s ruling, the only testimonial evidence of plaintiff’s
members submitted in opposition to the City’s motion for summary judgment consisted
of declarations by Christopher Cefalu and Timothy Jordan. Cefalu stated he owned a
vacation home rental in the City just outside the Tourist Core Area. He built the house to
be a vacation rental, and he included extra durable flooring and interior finishes. He
estimated his investment could be returned to him only over a 10-year period. He stated
his house had lost value as compared to properties outside the City limits which could
still be rented for vacation rentals. Cefalu did not quantify his investment or lost value.
Jordan is a trustee of a trust that owns a house in the City’s residential area which
has been used for vacation rentals for more than 10 years. He first obtained a vacation
home rental permit in 2005. He and his family and friends use the property
approximately one-eighth to one-tenth of each year. Renting the property is not a profit-
making enterprise. He rents the property to afford owning it. He improved the property
by installing a bear box and significant landscaping to obtain the permit. He will be
unable to pay for the property through vacation home rentals if Measure T takes effect.
Jordan also did not quantify his investment.
This evidence is insufficient to establish or create a triable issue of material fact on
the issue of detrimental reliance Neither declaration discloses the amount each person
invested in his rental property or in permanent improvements to the property in reliance
on an approved vacation home rental permit, nor does either discuss the ability to recover
some or all of the investment by using or selling the property for its permitted uses. We
13
are unable to determine the extent to which either member performed substantial work
and incurred substantial liabilities in reliance on a rental permit.
Plaintiff contends the trial court erred in not taking judicial notice of its other
evidence because the four excluded declarations were not offered to prove the truth of the
matters stated. Plaintiff asserts they were instead offered to establish the existence of
material, triable issues to deny summary judgment. We disagree with that distinction.
The declarations could present triable issues only if they were admitted for the truth of
the factual matters they stated. It is the allegations contained in the declaration that are
subject to dispute, not the declaration’s existence. The mere existence of a declaration in
the court files, which is all the court could judicially notice, does not establish a triable
issue of material fact.
A court “may in its discretion take judicial notice of any court record in the United
States. (Evid. Code, § 451.) This includes any orders, findings of facts and conclusions
of law, and judgments within court records. (See, e.g., Columbia Casualty Co. v.
Northwestern Nat. Ins. Co. (1991) 231 Cal.App.3d 457; Day v. Sharp (1975)
50 Cal.App.3d 904.) However, while courts are free to take judicial notice of the
existence of each document in a court file, including the truth of results reached, they
may not take judicial notice of the truth of hearsay statements in decisions and court files.
(Williams v. Wraxall (1995) 33 Cal.App.4th 120, 130, fn. 7.) Courts may not take
judicial notice of allegations in affidavits, declarations and probation reports in court
records because such matters are reasonably subject to dispute and therefore require
formal proof. (See, e.g., Magnolia Square Homeowners Assn. v. Safeco Insurance Co.
(1990) 221 Cal.App.3d 1049, 1056-1057.)” (Lockley v. Law Office of Cantrell, Green,
Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 882.)
Plaintiff nonetheless asks us to consider the excluded evidence. It claims we
should consider it because the trial court considered the excluded declarations as part of
ruling on plaintiff’s motion for summary judgment for which they were submitted, the
14
City did not object to the declarations being included in the request to take judicial notice,
plaintiff filed the declarations as original declarations in opposition to the City’s motion
after the trial court released its tentative ruling and before the court released its final
ruling, and the court’s ruling was not dependent on the admission of the evidence.
We will not consider the evidence. The trial court was required to determine the
cross-motions independently of each other. (Tahoe Regional Planning Agency v. King
(1991) 233 Cal.App.3d 1365, 1375, fn. 1 (King).) It thus did not abuse its discretion in
requiring plaintiff to submit original declarations in opposition to the City’s motion.
The City’s lack of an objection is irrelevant when it is plaintiff who claims the trial
court erred. And although the trial court, after denying the judicial notice request,
assumed for the sake of argument that all the declarations were properly before it, it still
determined the declarations did not raise a triable issue of material fact. Because the trial
court’s ruling excluding the evidence was based on the denial of judicial notice, we need
go no further to affirm that ruling.
C. Amortization of nonconforming use
In addition to claiming a vested right in the vacation home rental permit, plaintiff
argues the trial court erred when it determined Measure T’s three-year amortization
period was a reasonable period for ending plaintiff’s members’ now nonconforming uses
of residentially zoned property. There was no study of how Measure T would affect the
members or what a reasonable amortization period would be. Plaintiff relied on its
submitted declarations to assert the amortization period was unreasonable.
Zoning legislation “may validly provide for the eventual termination of
nonconforming uses without compensation if it provides a reasonable amortization period
commensurate with the investment involved.” (Metromedia, Inc. v. City of San Diego
(1980) 26 Cal.3d 848, 882 (Metromedia), reversed on other grounds, Metromedia, Inc. v.
City of San Diego (1981) 453 U.S. 490, 521.) An amortization provision provides a
15
period in which a new land use ordinance will not be enforced. During that time, an
affected property user can make a use conform to the ordinance, or, if the user cannot or
chooses not to conform, the user can recover all or a part of his or her investment before
the use must be discontinued. (King, supra, 233 Cal.App.3d at p. 1393.)
Determining the reasonableness of an amortization period “is not merely a matter
of accounting. ‘It is not required that the nonconforming property concerned have no
value at the termination date.’ [Citation.] The determination instead involves a process
of weighing the public gain to be derived from a speedy removal of the nonconforming
use against the private loss which removal of the use would entail.” (Metromedia, supra,
26 Cal.3d at pp. 882-883.)
Courts have upheld relatively short amortization periods for ending a
nonconforming use. (See Castner v. City of Oakland (1982) 129 Cal.App.3d 94, 96-97
[one-year amortization for nonconforming adult bookstore use]; People v. Gates (1974)
41 Cal.App.3d 590, 604-605 [18-month period to terminate nonconforming auto
wrecking yard use as a nuisance]; City of Los Angeles v. Gage 127 Cal.App.2d 442, 460-
461 [five-year period to end nonconforming plumbing business use in residential zone].)
In light of these authorities, Measure T’s three-year period facially appears to be a
reasonable amortization period.
However, in determining whether an amortization period for ending a
nonconforming use is reasonable and commensurate with the investment involved, each
case must be determined on its own facts. (National Advertising Co. v. County of
Monterey (1970) 1 Cal.3d 875, 879.) The plaintiff’s burden “is to establish the invalidity
of the ordinance in its application to plaintiff’s property.” (Ibid.)
Factors courts have found useful to consider when reviewing an amortization
period include, but are not limited to, the amount invested in the facility or in permanent
improvements to the property, the effect on the plaintiff’s business, the cost and time
required to move the business, the amount of favorably zoned land in the jurisdiction
16
where the business could be relocated, the ability to recover the investment by using or
selling the property for its permitted uses, the time the owner had notice of the
nonconforming use, and the extent of the nonconformity. (See Castner v. City of
Oakland, supra, 129 Cal.App.3d at p. 97; People v. Gates, supra, 41 Cal.App.3d at
pp. 604-605; City of Los Angeles v. Gage, supra, 127 Cal.App.2d at p. 461.)
Plaintiff did not submit sufficient evidence that created a triable issue of material
fact regarding the reasonableness of the three-year amortization period. As already set
forth, plaintiff’s declarations did not include sufficient detailed information to create a
disputed issue on the reasonableness of the amortization period. Nor did they discuss the
ability to recover some or all of their investment by using or selling the properties for
their permitted uses.
Because plaintiff has not established a triable issue of material fact regarding the
existence of a vested right or the reasonableness of Measure T’s amortization period, we
affirm the trial court’s grant of summary adjudication to the City on the vested rights
claim.
III
Exception for Residents
Despite its ban on vacation home rentals in residential zones, Measure T allows
permanent residents to let their dwellings up to a total of 30 days per year, subject to
obtaining a permit. For purposes of the exception, a permanent resident is a person who
lives in his or her home a majority of the year and claims a homeowner’s property tax
exemption under article XIII, section 3, subdivision (k) of the California Constitution.
That provision exempts from property taxation $7,000 of the full value of a “dwelling . . .
occupied by an owner as his principal residence[.]”
Plaintiff contends Measure T’s exception for residents is an unconstitutional
durational residency requirement. Plaintiff argues the distinction triggers strict scrutiny
17
as an infringement on property rights in violation of equal protection, the right to travel,
the dormant Commerce Clause, and the Privileges and Immunities Clause. Plaintiff also
asserts that the exception does not survive under a rational basis review.
Following oral argument, we vacated submission and asked the parties to address
in supplemental briefing the following questions: did the operative complaint sufficiently
allege a dormant Commerce Clause violation to support granting summary judgment; did
plaintiff forfeit its dormant Commerce Clause claim by not including citations to the
record or a developed legal argument in its opening brief as required by the Rules of
Court; and what effect, if any, did the analysis in Hignell-Stark v. City of New Orleans
(5th Cir. 2022) 46 F.4th 317 (Hignell-Stark), a case plaintiff brought to our attention
before oral argument, have on plaintiff’s dormant Commerce Clause claim. The parties
have submitted their supplemental briefs and we have reviewed them.
We agree with plaintiff that its complaint sufficiently pleaded a violation of the
dormant Commerce Clause, its opening brief satisfied the Rules of Court, and
Measure T’s residency requirement facially discriminates against interstate commerce in
violation of the dormant Commerce Clause. We will remand for further proceedings on
whether the measure’s legitimate purposes cannot be served by nondiscriminatory
alternatives. We do not address plaintiff’s other constitutional arguments against the
residency requirement.
A. Sufficiency of the operative complaint
The City initially contends that plaintiff did not allege a violation of the dormant
Commerce Clause in its complaint. We asked the parties to address whether the
complaint alleges the violation sufficiently to support granting summary judgment. (See
Soria v. Univision Radio Los Angeles, Inc. (2016) 5 Cal.App.5th 570, 585 (Soria).) We
conclude that, considering the case’s history, plaintiff sufficiently pleaded the claim and
the City suffered no prejudice.
18
1. Background
It is correct that in the specific causes of action alleging unconstitutionality, the
complaint does not allege a violation of the Commerce Clause. However, the causes of
action incorporate paragraph 1 of the complaint, and in that paragraph, plaintiff alleged
Measure T was unconstitutional because “it discriminates against owners who are not
‘permanent residents’ while allowing ‘permanent residents’ to continue renting their
properties to visitors as short-term rentals[.]” The causes of action also incorporate
paragraph 12 of the complaint, which alleges Measure T contains “a discriminatory and
unconstitutional exception for ‘permanent residents’ who may rent their home for up to
thirty days per year even after 2021.”
The issue was specifically raised in law and motion proceedings. In a motion for
preliminary injunction, plaintiff argued that Measure T’s permanent resident exception
was an unconstitutional durational residency requirement and violated the dormant
Commerce Clause. The City did not respond because the trial court awarded a
preliminary injunction based on the parties’ stipulation.
Plaintiff raised the issue in its motion for summary judgment. It contended that
Measure T contained an unconstitutional durational residency requirement. It repeated its
constitutional arguments from its preliminary injunction papers, including the argument
that Measure T violated the dormant Commerce Clause.
In its opposition to plaintiff’s motion, the City addressed plaintiff’s argument
under the dormant Commerce Clause. Initially, the City argued that plaintiff did not
allege a violation of the dormant Commerce Clause in its complaint and should be barred
from making the argument. The City then addressed the argument on its merits, arguing
that under Rosenblatt v. City of Santa Monica (9th Cir. 2019) 940 F.3d 439 (Rosenblatt),
Measure T’s residency requirement did not violate the dormant Commerce Clause.
19
Plaintiff also raised the argument in its opposition to the City’s motion for
summary judgment. In its reply, the City repeated its argument from its opposition to
plaintiff’s motion. It stated plaintiff did not allege a violation of the dormant Commerce
Clause in its complaint, and in any event, the permanent resident exception did not
violate the dormant Commerce Clause under Rosenblatt.
The trial court resolved the dormant Commerce Clause claim on its merits in its
rulings on both motions. It did not address the City’s claim that plaintiff had forfeited the
issue. On plaintiff’s motion, the court ruled that plaintiff had not established as a matter
of law that the permanent resident exception violated the dormant Commerce Clause. On
the City’s motion, it ruled that the permanent resident exception did not discriminate
against interstate commerce as a matter of law.
Before us, both parties have addressed the issue on its merits.
2. Analysis
“ ‘A defendant moving for summary judgment need address only the issues raised
by the complaint; the plaintiff cannot bring up new, unpleaded issues in his or her
opposing papers.’ (Government Employees Ins. Co. v. Superior Court (2000)
79 Cal.App.4th 95, 98-99, fn. 4; see Distefano v. Forester (2001) 85 Cal.App.4th 1249,
1264 [‘[t]o create a triable issue of material fact, the opposition evidence must be directed
to issues raised by the pleadings’].) In assessing whether the issues raised by plaintiff in
opposing summary judgment are encompassed by the controlling pleading, we generally
construe the pleading broadly (see, e.g., Laabs v. City of Victorville (2008)
163 Cal.App.4th 1242, 1257); but the pleading must allege the essential facts ‘ “ ‘with
reasonable precision and with particularity sufficient to acquaint a defendant with the
nature, source and extent of [the] cause of action.’ ” ’ (Doheny Park Terrace
Homeowners Assn., Inc. v. Truck Insurance Exchange (2005) 132 Cal.App.4th 1076,
1099.)” (Soria, supra, 5 Cal.App.5th at p. 585.)
20
The City argues that our ruling on this issue should mirror the result reached in
Soria. In that case, the plaintiff’s complaint alleged that her employment termination
violated the Fair Employment and Housing Act’s prohibition against employment
discrimination based on disability, but it did not expressly allege discrimination based on
a medical condition, a separate statutory ground of employment discrimination. (Soria,
supra, 5 Cal.App.5th at pp. 580, 583-584.) Opposing her employer’s motion for
summary judgment, the plaintiff claimed triable issues of fact existed about
discrimination based on a medical condition. (Id. at p. 581.)
The court of appeal affirmed the grant of summary judgment for the employer.
Although the complaint used the term “medical condition” several times, it did not allege
the plaintiff met the definition of having a medical condition under the statute, or that a
medical condition was the cause of or a motivating factor for her termination. The only
reason for termination expressly or impliedly alleged in the complaint was disability.
The complaint did not sufficiently put the employer on notice the plaintiff was asserting
the separate claim. (Soria, supra, 5 Cal.App.5th at pp. 585-586.)
Our case is distinguishable from Soria. We agree that the complaint did not
expressly inform the City that the dormant Commerce Clause was a source of plaintiff’s
claims for declaratory and injunctive relief. But the complaint’s allegation that
Measure T unconstitutionally discriminated against out-of-state interests in favor of
permanent City residents alleges a classic violation of the dormant Commerce Clause.
(Brown-Forman Distillers Corp. v. New York State Liquor Auth. (1986) 476 U.S. 573,
579 [when the effect of a state statute “is to favor in-state economic interests over out-of-
state interests, we have generally struck down the statute without further inquiry”].) In
that regard, the complaint, interpreting it broadly, alleged the essential facts with
sufficient particularity to acquaint the City with its claim under the dormant Commerce
Clause. (See Soria, supra, 5 Cal.App.5th at p. 585.)
21
In its supplemental brief, the City argues that the facts plaintiff would have needed
to plead to allege a dormant Commerce Clause violation are different than what it
alleged, and that plaintiff does not point to any facts alleged in the complaint that would
have entitled it to relief under the dormant Commerce Clause. The City’s argument is
meritless, as whether Measure T facially violates the dormant Commerce Clause is an
issue of law, and the complaint’s undisputed allegations of Measure T’s adoption and its
terms were the only facts necessary to plead a facial dormant Commerce Clause
violation.
Moreover, the issue was fully briefed in the City’s motion for summary judgment
by both parties, and the trial court ruled on the issue’s merits. These facts satisfy Soria
and provide us with a sufficient ground to address the issue on its merits. (See Hauselt v.
County of Butte (2009) 172 Cal.App.4th 550, 564 [court of appeal rejected arguments that
defendant had waived statute of limitations defense by not pleading it and plaintiff had
waived the specific pleading requirement where the defense was fully briefed and
litigated on the merits in the trial court at a bench trial].)
B. Sufficiency of plaintiff’s opening brief
Rule 804 of the California Rules of Court requires briefs to “[s]tate each point
under a separate heading or subheading summarizing the point, and support each point by
argument and, if possible, by citation of authority,” and “[s]upport any reference to a
matter in the record by a citation to the volume and page number of the record where the
matter appears.” (Cal. Rules of Court, rule 8.204(a)(1)(B), (C).)
While plaintiff’s opening brief is not a model for compliance with the rule, it
contains enough information on the dormant Commerce Clause claim to pass muster.
The dormant Commerce Clause discussion falls within a larger section of the brief under
the heading “Measure T Is Unconstitutional as a Whole Because It Contains an
Unconstitutional ‘Permanent Resident’ Exception.” Introducing the argument, plaintiff
22
stated that the ballot argument for Measure T highlighted the exception for permanent
residents and made clear the proponents’ “anti-outsider bias by castigating the opponents
as ‘residents of Nevada’ and ‘outside realtors.’ ” The brief cited to the ballot arguments
contained in the administrative record to support this assertion.
The brief explained that courts have found durational residency requirements to be
unconstitutional under various provisions of the Constitution, including the Commerce
Clause as well as the Equal Protection Clause, the Privileges and Immunities Clause, and
the right to travel. Plaintiff argued that strict scrutiny applied to each of the constitutional
provisions mentioned, and then it discussed each provision.
Under the heading “Commerce Clause,” plaintiff cited a case, Selevan v. New York
Thruway Authority (2d.Cir. 2009) 584 F.3d 82, 90 (Selevan), for the proposition that a
statute violates the dormant Commerce clause “ ‘if it “clearly discriminates against
interstate commerce in favor of intrastate commerce.” ’ ” Plaintiff then repeated its
argument that the ballot arguments indicated that Measure T intended to prevent Nevada
residents from renting out vacation homes in the City. We infer from these statements
that plaintiff is arguing Measure T discriminates against interstate commerce, and it
supports the argument with a citation to authority.
The omission of a citation to the ballot argument or other parts of the record in the
“Commerce Clause” portion of the brief does not concern us. Plaintiff cited to the ballot
argument earlier as part of introducing its constitutional arguments against the permanent
resident exception. Moreover, whether Measure T facially violates the dormant
Commerce Clause is a question of law, and citations to the record beyond what is
contained in plaintiff’s statement of facts and introduction to the constitutional arguments
were not necessary.
In any event, we have discretion to disregard violations of the briefing rules,
particularly where the opposing party “cannot reasonably claim prejudice from our
consideration” of plaintiff’s argument. (Nelsen v. Legacy Partners Residential, Inc.
23
(2012) 207 Cal.App.4th 1115, 1122.) The City cannot claim prejudice. Plaintiff’s brief
was sufficient to put the City on notice of its argument, and the City fully addressed the
issue in its respondent’s brief. Plaintiff thus did not forfeit its dormant Commerce Clause
argument due to noncompliance with rule 804 of the Rules of Court.
C. The dormant Commerce Clause
1. Legal background
The dormant Commerce Clause, which is judicially inferred in the federal
constitution, limits a state’s power to regulate domestic interstate and foreign commerce.
(U.S. Const., art. I, § 8, cl. 3; Pacific Merchant Shipping Assn. v. Voss (1995) 12 Cal.4th
503, 514 (Voss).) Its purpose is to restrict state taxes and regulatory matters that
“imped[e] free private trade in the national marketplace.” (Reeves, Inc. v. Stake (1980)
447 U.S. 429, 437.) It accomplishes its purpose by prohibiting a state from enacting laws
that discriminate against or unduly burden interstate commerce. (South Dakota v.
Wayfair, Inc. (2018) __ U.S. __ [201 L.Ed.2d 403, 416-417].)
State laws that discriminate against interstate commerce “face ‘a virtually per se
rule of invalidity.’ [Citation.]” (South Dakota v. Wayfair, Inc., supra, 201 L.Ed.2d at
p. 417.) “[I]n all but the narrowest circumstances, state laws violate the Commerce
Clause if they mandate ‘differential treatment of in-state and out-of-state economic
interests that benefits the former and burdens the latter.’ (Oregon Waste Systems, Inc. v.
Department of Environmental Quality [] (1994) 511 U.S. 93, 99 [] [(Oregon Waste)];
[citation].) This rule is essential to the foundations of the Union. The mere fact of
nonresidence should not foreclose a producer in one State from access to markets in other
States.” (Granholm v. Heald (2005) 544 U.S. 460, 472.)
Discrimination against interstate commerce may take any of three forms: “first,
the state statute may facially discriminate against interstate or foreign commerce; second,
it may be facially neutral but have a discriminatory purpose; third, it may be facially
24
neutral but have a discriminatory effect.” (Voss, supra, 12 Cal.4th at p. 517.) “In
determining whether a state statute is facially discriminatory, the following matters are
irrelevant: the justification that the state offers for the discrimination, the legitimacy of
the state interests that the statute is designed to protect, the degree and scope of the
discrimination, and the volume of commerce affected.” (Ibid.)
The dormant Commerce Clause prohibits state discrimination only between
similar entities. “[A]ny notion of discrimination assumes a comparison of substantially
similar entities. . . . [W]hen the allegedly competing entities provide different products,
. . . there is a threshold question whether the companies are indeed similarly situated for
constitutional purposes. This is so for the simple reason that the difference in products
may mean that the different entities serve different markets, and would continue to do so
even if the supposedly discriminatory burden were removed. If in fact that should be the
case, eliminating the tax or other regulatory differential would not serve the dormant
Commerce Clause’s fundamental objective of preserving a national market for
competition undisturbed by preferential advantages conferred by a State upon its
residents or resident competitors.” (General Motors Corp. v. Tracy (1997) 519 U.S. 278,
298-299, fn. omitted.) “Thus, in the absence of actual or prospective competition
between the supposedly favored and disfavored entities in a single market there can be no
local preference . . . to which the dormant Commerce Clause may apply. The dormant
Commerce Clause protects markets and participants in markets . . . .” (Id. at p. 300.)
A state law that discriminates against interstate commerce must be declared
unconstitutional “unless the state can justify the discrimination by showing that it
‘ “advances a legitimate local purpose that cannot be adequately served by reasonable
nondiscriminatory alternatives.” ’ ([Oregon Waste, supra, 511 U.S. at pp. 100-101].)
The high court has repeatedly emphasized just how exacting this burden is: ‘Our cases
require that justifications for discriminatory restrictions on commerce pass the “strictest
scrutiny.” [Citation.] The State’s burden of justification is so heavy that “facial
25
discrimination by itself may be a fatal defect.” [Citations.]’ ([Oregon Waste, at
p. 101.])” (Voss, supra, 12 Cal.4th at p. 527.)
In addition to prohibiting a state from discriminating against interstate commerce,
the dormant Commerce Clause prohibits states from enacting laws that unduly burden
interstate commerce. Unlike laws that discriminate, laws that burden interstate
commerce are not per se invalid. Nondiscriminatory state laws that “regulat[e] even-
handedly to effectuate a legitimate local public interest . . . will be upheld unless the
burden imposed on such commerce is clearly excessive in relation to the putative local
benefits.” (Pike v. Bruce Church, Inc. (1970) 397 U.S. 137, 142.)
Plaintiff contends that the permanent resident exception in Measure T facially
discriminates against interstate commerce. Plaintiff does not contend that Measure T
unduly burdens interstate commerce.
2. Analysis
Measure T’s resident owner exception discriminates on its face against interstate
commerce. Measure T unlawfully requires “ ‘an out-of-state firm “to become a resident
in order to compete on equal terms.” ’ [Citations.]” (Rosenblatt, supra, 940 F.3d at
p. 451, fn. 5.) The mere fact of nonresidence unlawfully forecloses out-of-state owners
from accessing the residential vacation rental market in South Lake Tahoe and directly
competing against City residents who let their homes as vacation rentals. (Granholm v.
Heald, supra, 544 U.S. at p. 472.) The ordinance mandates differential treatment of
similarly situated in-state and out-of-state economic interests in a way that wrongfully
benefits the former and burdens the latter based solely on the latter’s out-of-state
domicile. (Oregon Waste, supra, 511 U.S. at p. 99.)
The City disagrees and claims Measure T does not violate the dormant Commerce
Clause under the holding in Rosenblatt. Our decision, however, comports with
Rosenblatt and is distinguishable from that ruling. Rosenblatt concerned an ordinance
26
adopted by the City of Santa Monica that prohibited owners or lessees of residential
property to let their property for 30 days or less, with an exception for rentals where one
of the dwelling unit’s “primary residents” lived on site in the dwelling unit throughout the
visitor’s stay. The ordinance referred to the exception as “home sharing.” (Rosenblatt,
supra, 940 F.3d at pp. 442-443.) The plaintiff sued, claiming the ordinance violated the
dormant Commerce Clause. (Id. at p. 443.) The Ninth Circuit Court of Appeals affirmed
the district’s court’s dismissal of the complaint.
The plaintiff, a city resident who let her home while she traveled, claimed the
ordinance discriminated against interstate commerce because, among other reasons, it
was an attempt to preclude out-of-state travelers from accessing residential
neighborhoods, and it contained an unconstitutional residency requirement allowing only
Santa Monica residents to engage in short-term rentals under the “home sharing”
exception. (Rosenblatt, supra, 940 F.3d at pp. 443, 449, 450.) The Ninth Circuit easily
disagreed with the plaintiff’s first argument. The ordinance did not preclude anyone from
accessing the city’s residential neighborhoods. “And, insofar as the ordinance might
favor owners by allowing them to live in residential neighborhoods, it does not
discriminate against persons outside of Santa Monica, who stand on equal footing with
Santa Monica residents in their ability to purchase Santa Monica property and reside
there.” (Id. at p. 449.)
More significantly, the Ninth Circuit also rejected the plaintiff’s argument that the
ordinance allowed only city residents to engage in short-term rentals. Unlike Measure T,
the Santa Monica ordinance did not require the primary resident of the home-shared
dwelling to be the dwelling’s owner. (Rosenblatt, supra, 940 F.3d at p. 450.) As a result,
the ordinance did not prevent an out-of-state owner of a Santa Monica residence from
home sharing its property or extracting economic value from it. “For example, the out-
of-state owner could rent out the property on a long-term basis with a condition that one
of the rooms be used for the owner’s short-term rentals. Or the owner could expressly
27
allow the long-term renter to sublet a room on a short-term basis in exchange for paying a
higher monthly rent. The ordinance also applies equally to owners who reside in Santa
Monica, or elsewhere in California, but at a property separate from their rental property.
Accordingly, the complaint fails to plausibly allege that the home-sharing exception
obviously advantages Santa Monica residents at the expense of out-of-state
homeowners.” (Id. at pp. 450-451, fn. omitted.)
Indeed, the Ninth Circuit distinguished the Santa Monica ordinance from laws that
had unlawfully required out-of-state interests to establish distribution networks in the
state or to incorporate in the state to take advantage of benefits offered to in-state
businesses. The court stated, “Here, the ordinance does not ‘require an out-of-state firm
“to become a resident in order to compete on equal terms.” ’ [Citations.]” (Rosenblatt,
supra, 940 F.3d at p. 451, fn. 5.)
The City nonetheless relies on Rosenblatt to support several of its arguments
against finding Measure T violated the dormant Commerce Clause. The City argues that
in-state and out-of-state property owners are not substantially similar. The City relies on
a statement by the Rosenblatt court that non-resident property owners were not similarly
situated to resident owners because they could not personally serve as the primary
resident. (Rosenblatt, supra, 940 F.3d at p. 451.) The Rosenblatt court’s statement was a
secondary point, and the City ignores its context as well as the opinion’s ruling in relying
on it.
The Ninth Circuit said the plaintiff’s argument, that the ordinance allowed only
Santa Monica residents to engage in home sharing, drew “a false equivalence” between
residents and out-of-state property owners. (Rosenblatt, supra, 940 F.3d at p. 451.) It
explained: “Santa Monica’s ordinance does not prohibit out-of-state property owners
from home sharing in their out-of-state homes, nor does it prohibit them from allowing
home sharing in their Santa Monica properties. While non-resident property owners
cannot personally serve as the primary resident whose presence is required during the
28
home share, that is because they are not similarly situated to the Santa Monica residents
who can.” (Ibid.)
We surmise from the court’s opinion that the plaintiff had argued the ordinance
discriminated against out-of-state owners because they could not serve as the primary
resident required to be onsite and thus could not home share. The court rejected the
argument, stating, “Contrary to Rosenblatt’s characterization, the ordinance does not
require the primary resident in the dwelling to be the owner of the dwelling.”
(Rosenblatt, supra, 940 F.3d at p. 450.) The court rejected the argument further by
stating that for purposes of being the on-site primary resident, out-of-state owners were
not similarly situated to the primary resident. (Id. at p. 451.)
The plaintiff’s argument also failed because the comparison she sought to draw
was irrelevant to the dormant Commerce Clause issue. The Commerce Clause interest at
issue was not equal opportunity to serve as the primary resident. It was equal opportunity
to own and operate short-term rentals in the city’s residential zones. Thus, the court
framed the primary issue to be whether the ordinance prevented one of two groups of
similarly situated owners, the non-resident owners, “from allowing home sharing in their
Santa Monica properties.” (Rosenblatt, supra, 940 F.3d at p. 451.) The court held it did
not. (Ibid.) Non-resident owners had equal opportunity to own and operate short term
rentals in Santa Monica on the same conditions as residents. They do not have that equal
opportunity in South Lake Tahoe under Measure T.
The City cites to Rosenblatt where the Ninth Circuit found that the Santa Monica
ordinance did not discriminate because non-residents and residents had equal ability to
purchase Santa Monica property and reside there. But this argument does not address
plaintiff’s argument. Rosenblatt made this point in response to the argument that the
Santa Monica ordinance precluded out-of-state travelers from accessing or purchasing
property in the city’s residential neighborhoods. (Rosenblatt, supra, 940 F.3d at p. 449.)
Plaintiff is not arguing that Measure T denies its members the right to purchase property
29
in the City and live there. Plaintiff argues that Measure T’s requirement that out-of-state
owners must purchase and reside in property in the City to be eligible to let the property
short-term violates the dormant Commerce Clause. Merely having the ability to purchase
and reside in that property is irrelevant to the Commerce Clause analysis.
The City argues we should follow Rosenblatt for additional reasons explained in
the City’s prior briefing. The City argued in its respondent’s brief that Measure T, like
the Santa Monica ordinance in Rosenblatt, did not directly regulate interstate commerce
or place an undue burden on interstate commerce. Plaintiff, however, does not contend
Measure T directly regulates or unduly burdens interstate commerce. It asserts that
Measure T discriminates against interstate commerce, a different prohibition of the
dormant Commerce Clause. The Rosenblatt court addressed whether the Santa Monica
ordinance directly regulated interstate commerce because the plaintiff there raised the
issue separately from her discrimination claim. (Rosenblatt, supra, 940 F.3d at pp. 445,
448, 451.)
The City contended in its respondent’s brief that Measure T did not discriminate
against interstate commerce because, in addition to the arguments we have addressed
above, Measure T did not prohibit out-of-state residents from renting their South Lake
Tahoe homes so long as they were not located in a residential area, or, if they were in a
residential area, were rented for 30 days or more. This argument ignores the fact that
Measure T prohibits out-of-state owners from doing what it authorizes residents to do:
rent out their homes in the City’s residential zones for periods of less than 30 days.
Because both groups share the same economic interests and want to conduct the same
economic activity in the same market, the dormant Commerce Clause prohibits the City
from barring out-of-state owners from conducting that activity based on their residency.
(See Hignell-Stark, supra, 46 F.4th at p. 327.) In determining whether Measure T
discriminates, the degree and scope of the discrimination are irrelevant. (Voss, supra,12 Cal.4th at p. 517.)
30
We find the analysis of the dormant Commerce Clause issue contained in Hignell-
Stark to be persuasive. Its holding does not conflict with Rosenblatt. Hignell-Stark
concerned an ordinance enacted by the City of New Orleans that prohibited any person
from obtaining a license to own and operate a short-term rental in a residential
neighborhood unless the property to be rented was also the property owner’s primary
residence. (Hignell-Stark, supra, 46 F.4th at p. 321.) A group of property owners sued,
claiming the ordinance violated the dormant Commerce Clause by discriminating against
interstate commerce. (Id. at p. 322.) The district court awarded summary judgment in
favor of the city on the dormant Commerce Clause issue, but the Fifth Circuit Court of
Appeals reversed.
The Fifth Circuit held that the ordinance discriminated against out-of-state
property owners on its face. The ordinance allowed only city residents to enter the
market for short-term rentals in residential neighborhoods. (Hignell-Stark, supra,
46 F.4th at p. 326.) Resident owners and out-of-state property owners were substantially
similar for purposes of the dormant Commerce Clause. Like South Lake Tahoe resident
owners and non-resident owners, both were private business owners who sought to
compete in the market for lodging in the city’s residential neighborhoods. The only
difference between them was that one group did not live in the city—which meant the
prohibition discriminated against interstate commerce. (Ibid.)
The Fifth Circuit distinguished its case from Rosenblatt. The Santa Monica
ordinance permitted out-of-state residents to enter Santa Monica’s short-term rental
market on equal terms as residents because the person the ordinance required to live on
the property being rented did not need to be the property’s owner. (Hignell-Stark, supra,
46 F.4th at p. 326, fn. 16.) In contrast, the New Orleans ordinance, like Measure T,
allowed only owners who resided in their residential properties to enter the market for
short-term rentals in residential neighborhoods. (Id. at p. 326.)
31
The City contends the Hignell-Stark court “inexplicably found residents of New
Orleans to be ‘substantially similar’ private businesses to out-of-state investors.” The
City argues it is not clear why the Hignell-Stark court made that finding because the court
“did not explain its reasoning on this point.” To the contrary, the Fifth Circuit clearly
explained why it found the two groups were substantially similar for purposes of the
dormant Commerce Clause: “Both are private businesses, not public entities carrying out
traditional government functions. [Citations.] And both seek to compete in the market
for lodging in the City’s residential neighborhoods. [Citation.] Out-of-staters want to
offer the same services to the same customers in the same locations as the City’s
residents. The only difference between them is that one group doesn’t live in the City.
That means the residency requirement discriminates against interstate commerce for
purposes of the dormant Commerce Clause.” (Hignell-Stark, supra, 46 F.4th at p. 326.)
The City does not explain why it believes this finding makes a difference here. To
the extent the City implies that its private residents and out-of-state owners are not
substantially similar because private residents are not “private businesses,” the argument
is a red herring and misunderstands the point made in Hignell-Stark. As explained by the
authorities the court cited to support its statement, the prohibitions of the dormant
Commerce Clause do not apply to laws authorizing governments to provide public goods
and services pursuant to their police power. Such laws have legitimate objectives that are
distinct from the simple economic protectionism of private businesses which the
Commerce Clause abhors. (Department of Revenue v. Davis (2008) 553 U.S. 328, 340-
341.) Hignell-Stark’s point was simply that resident homeowners and out-of-state
owners were private, as opposed to public, entities seeking to earn money from letting
their homes as short-term rentals, an activity which is not a traditional government
function, and thus the dormant Commerce Clause applied and prohibited protecting the
residents’ economic interests at the expense of out-of-state owners’ similar economic
interests.
32
Lastly, the City argues we should not follow the reasoning of Hignell-Stark
because that case was not a facial challenge to the New Orleans ordinance. The plaintiffs
in that case sued under 42 U.S.C. section 1983 for violations of their constitutional rights,
including their dormant Commerce Clause claim. (Hignell-Stark, supra, 46 F.4th at
p. 322.) To succeed on a facial challenge like the one here, a plaintiff must establish that
“ ‘no set of circumstances exists under which the [Ordinance] would be valid.’
(Rosenblatt, [supra,] 940 F.3d at 444 [].)” The City contends that Hignell-Stark did not
apply this analysis.
We disagree. In Hignell-Stark, the plaintiffs were a group of property owners who
sought either to renew or obtain short term rental licenses. (Hignell-Stark, supra,
46 F.4th at pp. 322-323.) They did not argue that the city violated the dormant
Commerce Clause by not renewing or granting their licenses. They contended the
ordinance itself violated the Commerce Clause because it discriminated against interstate
commerce. (Id. at p. 325.) The Fifth Circuit found the residency requirement
“discriminates on its face against interstate commerce.” (Id. at p. 328.) The owners’
claim was a facial challenge against the ordinance.
The City’s contentions notwithstanding, Rosenblatt and Hignell-Stark are not
inconsistent with each other. Both state that a requirement to become a city resident to
let dwellings for short term rentals violates the dormant Commerce Clause. (Hignell-
Stark, supra, 46 F.4th at p. 326; Rosenblatt, supra, 940 F.3d at p. 451, fn. 5.) Our
holding comports with both cases and with the distinctions the Ninth Circuit drew in
Rosenblatt between unlawful residency requirements and the Santa Monica ordinance.
Because Measure T’s permanent resident exception facially discriminates against
interstate commerce, it is per se invalid unless the City can justify the discrimination by
showing that the resident exception ‘ “advances a legitimate local purpose that cannot be
adequately served by reasonable nondiscriminatory alternatives.” ’ (Oregon Waste,
supra, 511 U.S. at p. 101.) In Hignell-Stark, the city advanced legitimate local
33
purposes—preventing nuisances, promoting affordable housing, and protecting
neighborhoods’ residential character—but the court held that those purposes could be
adequately served by reasonable nondiscriminatory alternatives, and the ordinance was
therefore unconstitutional. (Hignell-Stark, supra, 46 F.4th at pp. 328-329.) Here, neither
party has addressed this element of a dormant Commerce Clause violation. We will thus
remand for further proceedings to address this issue.
IV
TRPA Land Use Preemption
Plaintiff contends Measure T exceeded the initiative power because it was
preempted by TRPA’s regional plan and the City’s area plans approved by TRPA. Those
plans allegedly authorize the use of single and multiple family dwellings in the City’s
residential areas for vacation rentals. Plaintiff argues that because the City has not sought
to amend the regional plan and its area plans to accommodate Measure T, the plans
supersede Measure T’s prohibitions and render them invalid.
The trial court ruled that this issue was not properly before it. Plaintiff’s
complaint alleged that Measure T “violates state and county ordinances regulating land
use in the Lake Tahoe basin and is beyond the voters’ initiative power to adopt.” The
trial court ruled that this allegation did not fairly raise the issue of TRPA preemption
because the TRPA regional plan and standards are not state or county ordinances. The
court nonetheless ruled on the issue’s merits and found that plaintiff had not raised a
triable issue of material fact as to whether Measure T was inconsistent with TRPA’s
regional and local plans.
The City contends the issue is not properly before us for the same reason stated by
the trial court. We agree. But because the issue is one of law, and because the parties
and TRPA appearing as amicus have fully briefed it, we will address it on its merits.
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A. Legal background
TRPA is a legal entity created by the Tahoe Regional Planning Compact. It serves
as a bi-state land use and environmental resource planning agency for the Lake Tahoe
Basin. (Sierra Club v. Tahoe Regional Planning Agency (9th Cir. 2016) 840 F.3d 1106,
1109 (Sierra Club).) The California and Nevada Legislatures adopted the compact in
1968, and Congress approved it in 1969. In 1980, the two states, with the approval of
Congress and the President, adopted extensive amendments to the 1969 agreement. The
1980 Tahoe Regional Planning Compact (Compact) sets forth the structure and functions
of TRPA. (Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency
(2002) 535 U.S. 302, 309-310.)
As required by the Compact, TRPA adopted standards, known as environmental
threshold carrying capacities, to protect important environmental values in the Lake
Tahoe Basin and the clarity of Lake Tahoe. (Gov. Code, § 66801, art. II, subd. (i); art. V,
subd. (b).) TRPA also adopted a regional plan and an implementing code of ordinances,
including zoning ordinances, to achieve and maintain the carrying capacities. (Id. art. V,
subd. (c).) Any development may not exceed the carrying capacities. (Sierra Club,
supra, 840 F.3d at p. 1110.)
TRPA’s ordinances establish minimum standards applicable throughout the
region. However, the Compact authorizes a local government to “adopt and enforce an
equal or higher requirement applicable to the same subject of regulation in its territory.”
(Gov. Code, § 66801, art. VI, sub. (a)(1).)
TRPA updated the regional plan in 2012. (Sierra Club, supra, 840 F.3d at
p. 1108.) The updated regional plan is a general governing document for development
and environmental protection in the Basin. It also authorizes local governments, at their
option, to develop more specific area plans with ordinances to govern land use in a
specific area. A local government’s area plan and ordinances supersede TRPA plans and
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ordinances if TRPA finds the area plan conforms to the regional plan. (Id. at p. 1110;
Code of Ordinances, §§ 13.1.1., 13.4.1.)4
TRPA’s code of ordinances states that where a single-family dwelling is a lawful
primary use of a parcel, vacation rentals are a permissible use so long as they meet local
government compatibility requirements. (Code of Ordinances, §§ 21.2, 21.4.) The
compatibility requirements are requirements implemented and enforced by a local
government through a cooperative agreement with TRPA and which regulate vacation
rentals to ensure neighborhood compatibility. The requirements include measures that
mitigate potential adverse impacts related to such issues as refuse and garbage, parking,
occupancy, noise, lighting, and signage. (Code of Ordinances, § 90.2.) The City and
TRPA entered into a cooperative agreement in 2004.
Plaintiff contends that Measure T conflicts with this provision of the regional plan
and with local plans developed by the City which purportedly allow vacation home
rentals in residential areas. The City has not sought to amend the regional plan or its area
plans in accordance with TRPA policies to accommodate Measure T. Plaintiff argues
that as a result, the regional plan supersedes Measure T and renders its provisions invalid.
B. Analysis
Plaintiff has not established that Measure T unlawfully conflicts with the regional
plan. Although TRPA may authorize vacation rental homes in its zoning ordinances, the
Compact authorizes the City to adopt more strict or narrow permissible uses than those
authorized by TRPA. Measure T’s restricting the permissible uses in residential zones
qualifies as the adoption and enforcement of “an equal or higher requirement applicable
to the same subject of regulation in its territory.” (Gov. Code, § 66801, art. VI, sub.
(a)(1).) It is a higher requirement because it imposes greater restrictions on the use of
4 We grant TRPA’s request for judicial notice.
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land than those imposed by TRPA. And plaintiff directs us to no authority that would
require such ordinances to be approved by TRPA.
Nor has plaintiff established that the City was required to adopt or amend area
plans to accommodate Measure T. Local governments in the Lake Tahoe Basin are not
required to adopt local plans. (Code of Ordinances, §§ 13.1.1., 13.4.1.) Those that do
not remain subject to TRPA’s regulations in the regional plan and its code of ordinances,
subject to the local government’s authority to adopt more stringent requirements. (Code
of Ordinances, § 13.4.1.) But nothing in TRPA’s code of ordinances requires a local
government’s more stringent vacation rental home regulations to be included in an area
plan. (Code of Ordinances, § 13.5.)
Plaintiff asserts that at least two area plans adopted by the City and approved by
TRPA allow the use of single and multiple family dwellings for vacation rentals in
various residential areas in the City outside of the tourist core: the Tahoe Valley Area
Plan/Specific Plan, adopted in 2015, and the 103 Sierra Tract-Commercial, a TRPA plan
area statement. It is not clear, however, that Measure T applies to these plan areas.
Measure T prohibits vacation home rentals “within any residential zone.” But it
does not prohibit vacation home rentals in commercial zones. Although the two area
plans cited by plaintiff permit single-family dwellings in some form in many of their
zoning districts, neither plan contains a residential zone. The Tahoe Valley Area Plan’s
zoning districts are open space, commercial mixed-use services, and five different “town
center” zones that allow commercial uses: heath care, neighborhood professions,
“gateway,” mixed use corridor, and core. Similarly, all the land in the 103 Sierra Tract-
Commercial area is classified as commercial/public service. Thus, even if the City’s
adopted area plans had to be amended to accommodate Measure T where applicable—a
point which plaintiff has not yet persuaded us—it is not clear that the area plans on which
plaintiff relies would require amendment.
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Plaintiff relies by analogy on Kracke v. City of Santa Barbara (2021)
63 Cal.App.5th 1089 (Kracke) to argue that Measure T required amending the regional
plan before it could be effective. The case is distinguishable. In Kracke, the court of
appeal held that a city’s ban on vacation home rentals in the coastal zone constituted a
“development” under the Coastal Act that required the city to obtain a coastal
development permit or amend its local coastal program. The Coastal Act broadly defines
“development” to include any change in the density or intensity of use of land. The term
is not restricted to activities that physically alter the land or water. (Id. at p. 1096.) The
court ruled that banning vacation rentals changed the intensity of use and access to
single-family residences in the Coastal Zone. The ban thus required a coastal
development permit or an amendment to the local coastal program. (Id. at pp. 1096-
1097.)
Plaintiff asserts that under the reasoning of Kracke, the City cannot ban vacation
rental homes without first amending its local plans to conform to TRPA policy. But,
unlike in Kracke, plaintiff directs us to no provision of the Compact or any TRPA
ordinance or regulation that treats Measure T as an action requiring a permit or requires
the City to obtain TRPA approval before enacting it. Nothing in the record indicates the
City must obtain TRPA approval or adopt a local plan when it exercises its right under
the Compact to enact a more restrictive standard than TRPA requires. The regional plan
thus did not preempt Measure T from becoming effective.
V
Occupancy Limits
Measure T enacted more strict occupancy limits. The new limits apply to vacation
home rentals in residential zones, and they limit occupancy to two persons per bedroom
with a maximum occupancy of 12 persons. Plaintiff contends that Measure T’s
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occupancy limits violate the right to privacy under the California Constitution and equal
protection.
Because we affirm Measure T’s ban of vacation home rentals in residential zones,
this argument is now moot.
DISPOSITION
The judgment is reversed to the extent it found that Measure T’s exception for
resident owners did not violate the dormant Commerce Clause, and the matter is
remanded for further proceedings consistent with this opinion. In all other respects, the
judgment is affirmed. Each party shall bear its costs on appeal. (Cal. Rules of Court,
rule 8.278(a)(3).)
HULL, Acting P. J.
We concur:
KRAUSE, J.
EARL, J.
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