Capri Mobile Villa LLC v. City of Petaluma

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 CAPRI MOBILE VILLA LLC, Case No. 25-cv-09096-JSC 8 Plaintiff, ORDER GRANTING DEFENDANT’S 9 v. MOTION TO DISMISS PLAINTIFF’S SECOND AMENDED COMPLAINT 10 CITY OF PETALUMA, Re: Dkt. No. 35 Defendant. 11 12 13 Plaintiff Capri Mobile Village LLC, a mobilehome park owner in Petaluma, California, 14 alleges Petaluma’s mobilehome rent-control ordinance violates the Fifth Amendment’s Takings 15 Clause. (Dkt. No. 34.)1 Plaintiff’s Second Amended Complaint’s (“SAC”) sole cause of action 16 alleges Petaluma’s ordinance is an impermissible regulatory taking under Penn Central 17 Transportation Co. v. New York City, 438 U.S. 104 (1977). Defendant moves to dismiss 18 Plaintiff’s SAC. (Dkt. No. 35.) Having carefully considered the parties’ arguments, and having 19 held oral argument on the motion to dismiss the First Amended Complaint, the Court concludes 20 oral argument is not required, see N.D. Cal. Civ. L.R. 7-1(b), VACATES the August 20, 2026 21 hearing, and GRANTS Defendant’s motion for the reasons set forth below. Drawing inferences in 22 Plaintiff’s favor, Plaintiff has not alleged facts sufficient to support an inference Plaintiff’s as- 23 applied takings challenge is ripe or an inference Petaluma’s ordinance constitutes a Penn Central 24 regulatory taking. 25 // 26 27 1 Record citations are to material in the Electronic Case File (“ECF”); pinpoint citations are to the 1 BACKGROUND 2 A. The City’s Rent Control Ordinance 3 In 1994, Petaluma enacted the “Mobilehome Park Space Rent Stabilization Program.” 4 Petaluma, Cal. Municipal Code Ch. 6.50.010 (“the ordinance”). The year before the city council 5 had retained a consultant to conduct a survey of mobilehome park residents. Id. Ch. 6.50.010(D). 6 The ordinance adopted findings from the survey, including how nearly 80% of residents are at 7 least 62 years old and rely on fixed incomes, roughly 90% are low income, and over half spend 8 more than 30% of their income on housing. Id. Ch. 6.50.010(E). The council also found “there is 9 a shortage of spaces for the locations of mobilehomes in the city, a condition which results in low 10 vacancy rates and tends to prevent normal competition between the owners and tenants of 11 mobilehome parks.” Id. Ch. 6.50.010(M). The city council therefore recognized “a need to … 12 provide protection to tenants from unreasonable rent increases” and “alleviat[e] the unequal 13 bargaining power which exists between” residents and park owners, while simultaneously 14 allowing “park owners to obtain a fair and reasonable rate of return and … to generate income” 15 from rent. Id. Ch. 6.50.010(F), (X). 16 The ordinance’s primary solution was to cap rent increases, i.e., rent control. Unless an 17 exception applies, a mobilehome park owner “shall not” increase a tenant’s rent within one year of 18 the most recent rent increase, and any rent increase “may not exceed” the lesser of 4%, or 70% of 19 the percent change in the Consumer Price Index (“CPI”). Id. Ch. 6.50.040(A). “If the change in 20 the CPI is negative, no rent increase is permitted.” Id. An owner may raise rent in excess of those 21 limits by either (1) resetting the base rent price to market value pursuant to the “vacancy control” 22 provision or (2) raising rents pursuant to owners’ right to a “fair return.” 23 B. The 2025 Vacancy Control Amendment 24 As relevant here, the primary rent-control exception is a so-called “vacancy control” 25 provision. “A mobilehome park owner shall be permitted to charge a new base rent for a 26 mobilehome space whenever a lawful space vacancy occurs.” Id. Ch. 6.50.220(A). As originally 27 enacted, the ordinance defined a “lawful space vacancy” to include “the termination of the tenancy 1 through 798.60[.]” (Dkt. No. 16-2 at 33 (citing the version of Ch. 6.50.220(A)(1) effective August 2 13, 2025).) Those California Civil Code sections provide a tenancy can be terminated when a 3 tenant is evicted for just cause or the mobilehome owner sells the home. See generally Cal. Civ. 4 Code §§ 798.55-798.60. So, in either scenario, as originally enacted, the vacancy control 5 provision allowed park owners to reset rent for a space to market value, i.e., the price the owner 6 would charge in the absence of rent control. 7 But in 2025 the City amended the definition of “lawful space vacancy.” The vacancy 8 control now reads, in relevant part: 9 For purposes of this chapter, a lawful space vacancy is defined as follows: 10 1. A vacancy occurring because of the termination of the tenancy of 11 the affected mobilehome tenant in accordance with the Mobilehome Residency Law pursuant to Civil Code Section 798.56. Notice given 12 by a tenant to the manager or owner of a mobilehome park sixty days prior to vacating a tenancy pursuant to Civil Code Section 798.59 13 does not create a lawful vacancy permitting the charging of a new base rent pursuant to this section. 14 Petaluma, Cal. Municipal Code Ch. 6.50.220(A)(1) (emphasis added). Under the amended 15 vacancy control provision, a park owner may reset rents to market value when a tenant is evicted 16 for just cause, but may no longer do so when the mobilehome owner sells the home pursuant to 17 Section 798.59. Id.; see Cal. Civ. Code §§ 798.56, 798.59. 18 C. Park Owners’ Right to a Fair Return 19 A park owner may also increase rent above the ordinance’s limits to receive a “fair return” 20 on their investments. Id. Ch. 6.50.040(E); Ch. 6.50.060. “A park owner has the right to obtain a 21 net operating income equal to the base year net operating income adjusted by” inflation “since the 22 base year.” Id. Ch. 6.50.100(B). The “base year” is 1993, the year prior to the ordinance’s 23 enactment. Id. If the owner believes they are not getting a “fair return,” the owner may file a 24 petition with the City, which begins an arbitration process. Id. “Upon receipt” of the petition, the 25 city “shall, within seven working days, assign an arbitrator” and “set a date for … hearing” 26 between 14 and 60 days after the arbitrator is assigned. Id. Ch. 6.50.060(E). 27 During the arbitration, “park owners shall bear the burden to prove [… by] the 1 preponderance of the evidence the reasonable necessity of any rent increase” beyond the 2 ordinance’s caps “to earn a reasonable return.” Id. Ch. 6.50.060(G)(1). The ordinance imposes 3 two rebuttable presumptions: “the net operating income received by the owner in [1993] provided 4 the park owner with a fair return” at the time, and since then, “a net operating income equal to” 5 their 1993 income plus inflation also “provides a fair return.” Id. Ch. 6.50.100(A), (b). In the 6 arbitration, the parties “may present evidence regarding” the first presumption, i.e., evidence about 7 the park owner’s expenses and income in 1993. Id. Ch. 6.050.100(C). For instance, the parties 8 may offer and cross-examine witnesses, experts, and oral and documentary evidence about a park 9 owner’s “exceptional expenses” for “maintenance and repairs,” whether the owner’s “expenses 10 were unreasonably high or low notwithstanding the application of prudent business practices,” and 11 any “uncollected rents … and bad debts” which are “beyond the control of the owner.” Id. Ch. 12 6.50.060(G)(3); Ch. 6.50.100(B), (C). “The hearing need not be conducted according to technical 13 rules relating to evidence and witnesses” and evidentiary rules “may be relaxed at the discretion of 14 the arbitrator in the interest of justice.” Id. Ch. 6.50.060(G)(3). The arbitrator must submit a 15 “written statement of decision” “within fourteen days of the hearing.” Id. Ch. 6.50.060(G)(4). 16 D. Second Amended Complaint Allegations 17 “At a mobilehome park, the park owner owns the land on which mobilehomes are placed. 18 In most cases, the […] residents own the mobilehome and rent the underlying […] space on which 19 the home is placed.” (Dkt. No. 34 ¶ 9.) “[W]hen a homeowner decides to move out of a park, he 20 typically will sell the home ‘in-place’ at the park to a new homeowner, who then becomes the 21 lessor of the underlying space.” (Id. ¶ 10.) 22 Plaintiff “is a limited liability company that owns” a mobilehome park in the City of 23 Petaluma. (Id. ¶ 4.) The “park has 69 spaces or pads, with mobilehomes on all of them. Each 24 home is currently owned by the resident or residents that live there. Each homeowner rents or 25 leases, from [Plaintiff], the space on which the home sits.” (Id. ¶ 16.) Plaintiff “acquired the park 26 on April 23, 2024,” before the City enacted the Vacancy Control Amendment, and therefore “[t]he 27 price [Plaintiff] paid for the park did not reflect” the effect of the amendment, which is “the 1 To contextualize its takings challenge, Plaintiff alleges details about mobilehome markets. 2 Like homes and cars, every “space at the park has a fair market value.” (Id. ¶ 13.) “[T]he vast 3 majority” of mobilehomes are “sold ‘in-place’ at a park,” and when those sales occur, “the 4 mobilehome’s market value is at least partly a function of the rent paid for the underlying space. 5 All things being equal, the lower the rent, the higher the mobilehome’s value.” (Id. ¶ 15.) A rent 6 control ordinance like Petaluma’s “artificially suppresses the rent charged for a space,” thereby 7 raising mobilehome sale prices and benefiting mobilehome owners. (Id. ¶ 18.) 8 Plaintiff asserts the impact on mobilehome sale prices undermines the ordinance’s “stated 9 purpose […] to improve housing affordability, especially for low-income and middle-income 10 residents.” (Id. ¶ 25.) The ordinance “artificially suppresses market-based increases for existing 11 residents and thereby makes housing more affordable for that select group.” (Id.) And while the 12 Vacancy Control Amendment “is aimed at ensuring that space rents remain artificially low for 13 future residents […] and […] those future residents may enjoy artificially low space rents” the 14 prohibition makes “[f]uture residents […] pay significantly higher prices for purchasing the 15 homes[.]” (Id.) This, Plaintiff alleges, “undermin[es] the short- and long-term affordability of 16 park residency for incoming residents.” (Id.) 17 Additionally, the benefits to mobilehome owners and existing residents come at the 18 expense of park owners like Plaintiff. The Vacancy Control Amendment prohibits resetting rents 19 to market value when a mobilehome is sold or upon a homeowner’s departure, meaning Plaintiff 20 “can now almost never reset space rents to market levels.” (Id. ¶ 20.) Meanwhile, “used homes 21 sold in-place at Capri sell for many multiples of their inherent value.” (Id.) “A variety of factors 22 explain this: Petaluma is an extremely expensive housing market, with a median single family 23 home value over $900,000; the local housing demand far exceeds housing supply; [and] there is a 24 near-zero vacancy rate in the local rental market.” (Id.) 25 The combination of these impacts–limiting rent increases while raising mobilehome sale 26 prices–“forcibly transfer[s] substantial wealth from the park owner[.]” (Id. ¶ 17.) “[D]ue to the 27 City’s onerous rent-control law, [Plaintiff]’s space rents are roughly 40% of their fair market 1 equity decreases by $10,000, though the impact is likely greater.” (Id.) Plaintiff cites an example 2 of a home “listed for $250,000,” even though “the value of the home itself no more than $50,000.” 3 (Id. ¶ 24.) “The difference–$200,000–is equity forcibly transferred by the City from [Plaintiff] to 4 the selling homeowner.” (Id.) In total, Plaintiff estimates the “economic impact” of being unable 5 to reset rents is “approximately $3.8 million,” or “55% of the park’s fair market value.” (Id. ¶ 32.) 6 Plaintiff also makes two points regarding its right to petition for rent increases under the 7 ordinance. First, the ordinance’s “rent-adjustment procedure […] does not […] eliminate […] the 8 transfer of [wealth] from” Plaintiff because a “fair return” under the ordinance is “significantly 9 less than the increase than an owner could implement in an unregulated market for spaces.” (Id. ¶ 10 28.) In other words, “[t]he difference between a market-rate [rent] increase and a ‘fair return’ 11 increase” is “significant” and therefore does not “change[] or remed[y] the fact the owner cannot 12 raise a space’s rent to market” when certain vacancies occur. (Id.) Second, “it would be utterly 13 futile” for Plaintiff to petition for a rent increase because the ordinance requires Plaintiff to 14 “establish its inflation-adjusted net operating in 1993,” but “few park owners, including [Plaintiff], 15 have 32-year-old records of its net operating income in 1993.” (Id. ¶ 29.) 16 DISCUSSION 17 The Court previously granted Defendant’s motion to dismiss Plaintiff’s First Amended 18 Complaint (“FAC”). (Dkt. No. 33.) As relevant here, the FAC alleged Petaluma’s ordinance 19 constituted an as-applied regulatory taking under Penn Central. The Court dismissed this claim 20 because drawing all inferences in Plaintiff’s favor, Plaintiff did not allege facts sufficient to 21 support an inference its as-applied challenge is ripe or an inference the ordinance constitutes a 22 Penn Central regulatory taking. 23 Defendant moves to dismiss Plaintiff’s SAC, again asserting Plaintiff’s as-applied 24 challenge is not ripe and Plaintiff has not alleged a Penn Central regulatory taking. The Court 25 agrees on both points. Given the SAC re-alleges and builds upon the FAC’s allegations, the Court 26 reincorporates and repeats the previous order’s analysis where relevant. 27 I. Plaintiff’s Challenge Is Still Not Ripe 1 made a final decision on how the regulation will be applied to the property at issue.” Guggenheim 2 v. City of Goleta, 638 F.3d 1111, 1117 (9th Cir. 2010) (en banc). To satisfy the ripeness 3 requirement, “a plaintiff must show is that there is no question … about how the regulations at 4 issue apply to the particular land in question.” Pakdel v. City & Cnty. of San Francisco, 594 U.S. 5 474, 478 (2021). The ripeness requirement is “prudential,” not jurisdictional. Suitum v. Tahoe 6 Regional Planning Agency, 520 U.S. 725, 733–34 (1997). 7 The Court previously dismissed Plaintiff’s as-applied takings challenge as not ripe, 8 explaining: 9 Drawing inferences in Plaintiff’s favor, Plaintiff has not alleged facts supporting an inference its as-applied challenge is ripe because 10 Plaintiff has not alleged whether it petitioned the City to increase rent above the ordinance’s annual limits. As explained above, the 11 “primary” factor in Plaintiff’s as-applied regulatory takings claim is the economic impact on Plaintiff. Guggenheim, 638 F.3d at 1120 12 (cleaned up). Yet Plaintiff does not specify how much income it has lost, or will lose, due to the vacancy control amendment. Instead, 13 Plaintiff’s allegations of an economic impact are based on generalized findings from “[s]ome studies,” an allegation rent values are 40% of 14 fair market value due to the entire ordinance, and one example of “a mobilehome for sale at the park” for which Plaintiff “expects” a 15 vacancy “to occur at the park in the next several months.” (See Dkt. No. 18 ¶¶ 20, 25-27.) While these allegations suggest the vacancy 16 control amendment has at least some economic impact, the ordinance provides a potential remedy to offsets those harms: Plaintiff can 17 petition the City for an arbitration hearing, offer evidence its rental income is not providing it a “fair return,” and subsequently earn the 18 right to charge rents in excess of the ordinance’s limits. See generally Petaluma, Cal. Municipal Code Ch. 6.50.040, 6.50.060. Because 19 Plaintiff has not availed itself of a potential remedy which could reduce the amendment’s economic impact, the Court cannot ascertain 20 how “the regulations at issue apply to the particular land in question,” namely the degree to which the vacancy control amendment impacts 21 Plaintiff. See Pakdel, 594 U.S. at 478; MHC [Fin. Ltd. P’ship v. City of San Rafael, 714 F.3d 1118, 1127 (9th Cir. 2013)] (“[T]he 22 constitutionality of the Ordinance can only be determined by evaluating the totality of its provisions and effects and because […] 23 amendments cannot be evaluated in isolation.”) 24 (Dkt. No. 33 at 16-17.)2 25 26 2 The parties dispute whether Plaintiff’s amended claim exceeds the scope of the Court’s permitted leave. Given the Order was unclear as to whether Plaintiff had leave to amend to bring an as- 27 applied challenge, the Court will again consider whether Plaintiff’s as-applied challenge is ripe 1 Plaintiff still does not allege it petitioned for a rent increase, and instead alleges facts 2 explaining why its challenge is nonetheless still ripe. First, the ordinance’s fair-return procedure 3 “does not […] eliminate” the alleged wealth transfer from Plaintiff because “[t]he difference 4 between a market-rate rent and a ‘fair return’ increase” is “significant.” (Dkt. No. 34 ¶ 28.) 5 Second, petitioning the City would be “futile” because “to make an application” for a rent 6 increase, Plaintiff “must” establish its net operating income in 1993, but Plaintiff does not have 7 those “32-year-old records,” which “frustrate[s]” Plaintiff’s “ability to prove its case for a […] 8 rent increase.” (Id. ¶ 29.) 9 Drawing inferences in Plaintiff’s favor, Plaintiff still does not allege facts supporting an 10 inference Plaintiff’s as-applied takings challenge is ripe. Plaintiff’s first allegation the fair-return 11 procedure does not “eliminate” the alleged wealth transfer is beside the point. The primary Penn 12 Central factor inquires into the ordinance’s economic impact on Plaintiff, i.e., whether the 13 ordinance creates a “sufficient economic loss” to constitute a regulatory taking. MHC, 714 F.3d at 14 1127–28 (emphasis added). Moreover, MHC held “the constitutionality of the Ordinance can only 15 be determined by evaluating the totality of its provisions and effects” and “amendments cannot be 16 evaluated in isolation.” Id. at 1127. Given Penn Central requires courts to examine the degree of 17 harm caused by the totality of the ordinance, and a successful rent-increase petition could reduce 18 the ordinance’s economic impact on Plaintiff, the allegation a petition would not fully “eliminate” 19 one aspect of ordinance’s impact (Dkt. No. 34 ¶ 28) does not mean “there is no question […] 20 about how the regulations at issue apply” to Plaintiff. Pakdel, 594 U.S. at 478. 21 Additionally, drawing all inferences in Plaintiff’s favor, Plaintiff’s allegation the fair-return 22 procedure is “futile” does not meet that burden either. While the ordinance does not explain how 23 Plaintiff, which purchased the park in 2024, would establish the 1993 “base year” net operating 24 income as the predicate to showing it needs a rent increase to receive a “fair return,” that 25 uncertainty begs the “question […] about how the [fair-return procedures] apply to the particular 26 land in question,” meaning Plaintiff’s challenge is unripe. Id. Moreover, the ordinance identifies 27 several types of evidence Plaintiff could use in a fair-return arbitration, including “witnesses,” 1 6.50.060(G)(3). And evidentiary “rules may be relaxed at the discretion of the arbitrator in the 2 interest of justice.” Id. Given the many ways a fair-return arbitration could play out, drawing all 3 inferences in Plaintiff’s favor, Plaintiff’s allegation the rent-increase procedure is “futile” does not 4 establish there is “no question” about how the rent-increase procedure applies to Plaintiff’s 5 “particular” park. Pakdel, 594 U.S. at 478. 6 Accordingly, Plaintiff’s as-applied takings challenge is not ripe and the Court grants 7 Defendant’s motion to dismiss on that basis. 8 II. Plaintiff Does Not Plausibly Allege a Penn Central Regulatory Taking 9 In the alternative, and assuming Plaintiff’s regulatory taking claim is ripe, Plaintiff still 10 does not plausibly allege a regulatory taking. See Guggenheim, 638 F.3d at 1118 (assuming, 11 without deciding, a regulatory taking claim was ripe). An ordinance is a regulatory taking when it 12 is “functionally equivalent to the classic taking in which government directly appropriates private 13 property or ousts the owner from his domain.” Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 539 14 (2005). “[A] takings challenge to [a] mobile home rent control ordinance […] should be analyzed 15 as a regulatory taking under Penn Central[.]” Guggenheim, 638 F.3d at 1120. 16 Courts apply three Penn Central factors to determine whether government conduct is a 17 regulatory taking. First, “‘[p]rimary among those factors are the economic impact of the 18 regulation on the claimant[.]” Guggenheim, 638 F.3d at 1120 (quoting Lingle, 544 U.S. at 538– 19 39). The second factor, which overlaps with the first, is “‘the extent to which the regulation has 20 interfered with distinct investment-backed expectations.’” Guggenheim, 638 F.3d at 1120 21 (quoting Lingle, 544 U.S. at 538–39). “To form the basis of a taking claim, a purported distinct 22 investment-backed expectation must be objectively reasonable,” Colony Cove Properties, LLC v. 23 City of Carson, 888 F.3d 445, 452 (9th Cir. 2018), and “what is relevant and important in judging 24 reasonable expectations is the regulatory environment at the time of the acquisition of the 25 property.” Bridge Aina Le’a, LLC v. Land Use Comm’n, 950 F.3d 610, 634 (9th Cir. 2020) 26 (cleaned up). Third, courts consider “the ‘character of the governmental action’–for instance 27 whether it amounts to a physical invasion or instead merely affects property interests through 1 good.’” Lingle, 544 U.S. at 539 (quoting Penn Central, 438 U.S. at 124). 2 Plaintiff again asserts the Vacancy Control Amendment is a regulatory taking under the 3 Penn Central factors. First, the amendment has a “substantial” economic impact on Plaintiff by 4 suppressing rents, reducing Plaintiff’s “future income” by “approximately $3.8 million,” which is 5 equal to “55% of the park’s fair market value.” (Dkt. No. 34 ¶ 32.) Second, Plaintiff reiterates its 6 argument from the FAC the Vacancy Control Amendment “was enacted after [Plaintiff] acquired 7 the park” and therefore “undermines [Plaintiff’s] reasonable investment-backed expectations.” 8 (Id. ¶ 33.) In particular, Plaintiff purchased the park expecting “rents could be reset to market 9 following a lawful vacancy,” and “the price [Plaintiff] paid for the park reflected” that expectation. 10 (Id.) Third, the “character of the governmental action” is akin to a regulatory taking because the 11 ordinance “does not serve its stated purposes;” “restricts only” rents a landowner can charge while 12 not similarly restricting mobilehome sale prices; “does nothing to curb housing costs for future 13 renters;” and “places a high burden on a few private property owners […] instead of apportioning 14 the burden more broadly among members of the public.” (Id. ¶ 34.) 15 Binding Ninth Circuit precedent still forecloses Plaintiff’s argument on all three factors. 16 As the Court’s previous order explained, MHC addressed a mobilehome rent control ordinance 17 enacted in 1989 which, like Petaluma’s ordinance, tied permissible rent increases to inflation. 714 18 F.3d at 1122. In 1993, the ordinance was amended “to add ‘vacancy control,’ which gave any new 19 resident taking over a mobilehome pad lease the right to rent the pad at the same rate as the 20 previous tenant.” Id. at 1122. Then, in 1999, the government amended the ordinance again to 21 adjust the permissible rent increases. Id. at 1122–23. The plaintiff park owner purchased the park 22 in between the original vacancy control provision’s enactment and the challenged vacancy control 23 amendment. See id. at 1122–23, 1127. 24 MHC held the ordinance did not constitute a regulatory taking. First, the “economic 25 impact” Penn Central factor was not met because an “81% diminution in value” was not 26 “sufficient economic loss or interference with [the park owner’s] reasonable investment-backed 27 expectations to constitute a taking. Supreme Court precedent has long established that mere 1 at 1127–28 (citing three Supreme Court cases finding no taking when the regulations, respectively, 2 caused an “approximately 75% diminution in value,” a “92.5% diminution,” and a 90% 3 diminution). 4 Second, under the “investment-backed expectations” factor, the plaintiff urged it had the 5 expectation it would be able to “increase rent at a rate consistent with the rate of increase in 6 housing costs … that is, [the] expectation was that [the park] would be subject to no rent control at 7 all.” Id. at 1128 (cleaned up). The district court below agreed, finding the park owner “had no 8 reason to expect that the City would amend the Ordinance, transferring much of the park’s value 9 to third parties[.]” Id. (cleaned up). The Ninth Circuit ruled that holding was an error: 10 “‘[T]hose who do business in the regulated field cannot object if the legislative scheme is buttressed by subsequent amendments to 11 achieve the legislative end.’” Concrete Pipe [& Prods. Of Cal., Inc v. Constr. Laborers Pension Trust for S. Cal.,], 508 U.S. [602,] 645 12 [(1993)] Indeed, sitting en banc in Guggenheim[ …], we recently held that the “‘primary factor,’ ‘the extent to which the regulation has 13 interfered with distinct investment-backed expectations’” to be “fatal” to the Guggenheims’ takings claim, where the Guggenheims 14 purchased a mobilehome park with a rent control ordinance already in place. 638 F.3d at 1120. “[T]he price they paid for the mobile home 15 park doubtless reflected the burden of rent control they would have to suffer. They could have no ‘distinct investment-backed expectations' 16 that they would obtain illegal amounts of rent.” Id. Therefore, this factor also favors the conclusion that no taking occurred. 17 MHC, 714 F.3d at 1128. 18 Finally, evaluating the “character of the ordinance,” MHC briefly held the ordinance was 19 “much more an ‘adjustment of the benefits and burdens of economic life to promote the common 20 good’ than it is a physical invasion of property, and it is only a slight modification to an already- 21 existing rent control ordinance[.]” Id. (quoting Penn Central, 438 U.S. at 124). 22 Applying MHC here, drawing all inferences in Plaintiff’s favor, Plaintiff has not alleged 23 facts sufficient to support an inference the ordinance is a regulatory taking. First, Plaintiff has not 24 alleged facts which plausibly support an inference the “economic impact” of Petaluma’s ordinance 25 is sufficient to constitute a taking. Plaintiff asserts the Vacancy Control Amendment will reduce 26 Plaintiff’s “future income” by “approximately $3.8 million,” equal to “55% of the park’s fair 27 market value.” (Dkt. No. 34 ¶ 32.) Plaintiff’s opposition characterizes this impact as “[a] 55% 1 diminution in value,” (Dkt. No. 36 at 14), but accepting that allegation as true, that economic 2 impact is insufficient to support an inference the first Penn Central factor is satisfied because 3 MHC held an 81% diminution in value was not sufficient under that factor, relying on three 4 Supreme Court cases finding no taking occurred when a government action caused diminutions of 5 75%, 90%, and 92.5%. 6 Second, drawing inferences in Plaintiff’s favor, Plaintiff has not alleged facts sufficient to 7 support an inference the Vacancy Control Amendment has interfered with reasonable investment- 8 backed expectations. Plaintiff expressly alleges rent control was in effect when it purchased the 9 park, but alleges it purchased the park expecting “rents could be reset to market following a lawful 10 vacancy,” but the Vacancy Control Amendment interfered with that expectation. (Dkt. No. 34 ¶ 11 33.) Plaintiff’s argument is essentially no different than its argument in the FAC: it had a 12 reasonable investment-backed expectation the 2025 Vacancy Control Amendment would not be 13 adopted. As the Court’s previous order explained, “Plaintiff’s argument is foreclosed by” MHC 14 and Guggenheim, which held nearly identical expectations were not reasonable as a matter of law: 15 In Guggenheim, the ordinance passed in 1987, and the park owners purchased the park in 1997. 638 F.3d at 1115. The park owners, like 16 Plaintiff here, asserted the ordinance “transfer[red] … rent … from the landlord to the tenant, and that this had the effect of raising the 17 price of the average mobile home.” Id. at 1120. The court assumed that impact happened, and noted the ordinance caused that impact 18 before the [owners] bought the mobile home park. Since the ordinance was a matter of public record, the price they paid for the 19 mobile home park doubtless reflected the burden of rent control they would have to suffer. They could have no ‘distinct investment-backed 20 expectations’ that they would obtain illegal amounts of rent. […] The [owners] bought a trailer park burdened by rent control, and had no 21 concrete reason to believe that they would get something much more valuable, because of hoped-for legal changes, than what they had. Id. 22 at 1120-21. Similarly, in MHC, the original “ordinance was in effect when [the plaintiff] acquired the property,” but the plaintiff 23 challenged an amendment enacted after it purchased the property. MHC, 714 F.3d at 1127–28. Relying on Guggenheim, MHC ruled it 24 was erroneous for the district court to conclude the park owner “had no reason to expect that the City would amend the Ordinance, 25 transferring much of the park’s value to third parties” because “‘those who do business in the regulated field cannot object if the legislative 26 scheme is buttressed by subsequent amendments to achieve the legislative end.’” Id. (quoting Concrete Pipe, 508 U.S. at 645). 27 (Dkt. No. 33 at 14-15.) MHC squarely forecloses Plaintiff’s recycled argument: Plaintiff concedes 1 it purchased the park while Petaluma’s rent control ordinance was in effect–that is, Plaintiff began 2 “do[ing] business” in a “regulated field,” and therefore “cannot object” to Petaluma’s “subsequent 3 amendments to achieve the [ordinance’s] legislative end.” MHC, 714 F.3d at 1127-28 (quoting 4 Concrete Pipe, 508 U.S. at 645). And, Plaintiff alleges no facts that support a plausible inference 5 it had a reasonable expectation the City of Petaluma would not amend the ordinance to eliminate 6 the ability to charge market-rate rents upon sale of a mobilehome. Instead, Plaintiff relies solely 7 on the fact that when it purchased the park, Petaluma’s rent control ordinance permitted it to 8 charge market-rate rent after the sale of a mobilehome. Plaintiff’s argument is thus circular; the 9 amendment itself is insufficient to plausibly support an inference Plaintiff reasonably expected 10 vacancy control would not be enacted. Moreover, Plaintiff does not explain how such an 11 expectation could be reasonable given vacancy control provisions were not novel in 2024 when 12 Plaintiff purchased the park, and, in fact, the Ninth Circuit had already ruled vacancy control 13 amendments do not constitute a Fifth Amendment taking. See MHC, 714 F.3d at 1122. 14 Third, drawing inferences in Plaintiff’s favor, Plaintiff does not allege facts sufficient to 15 support an inference the ordinance’s character is functionally equivalent to a classic taking. 16 Plaintiff merely alleges the ordinance reduces the income it would receive in the absence of the 17 ordinance and that income is reallocated to other actors in Petaluma’s housing market. Drawing 18 inferences in Plaintiff’s favor, that is insufficient to support an inference the ordinance is 19 “functionally equivalent to the classic taking in which government directly appropriates private 20 property or ousts the owner from his domain.” Lingle, 544 U.S. at 539. As the Court’s previous 21 order explained, 22 The ordinance’s plain text demonstrates, among other things, its purpose is to limit rent increases for mobile home park tenants, who 23 are primarily low-income or elderly and who have limited bargaining power over park owners in negotiating rent increases. See generally 24 Petaluma Cal. Municipal Code Ch. 6.50.010. And the Supreme Court and Ninth Circuit have made clear, without reference to specific facts, 25 a rent control ordinance’s effects are not equivalent to a physical or per se taking. See Yee [v. Escondido, Cal., 503 U.S. 519, 528–29 26 (1992)] (“This Court has consistently affirmed that States have broad power to regulate housing conditions in general and the landlord- 27 tenant relationship in particular without paying compensation for all of petitioners’ property. Petitioners’ tenants were invited by 1 petitioners, not forced upon them by the government. […] [A] typical rent control statute will transfer wealth from the landlord to the 2 incumbent tenant and all future tenants. […] This effect […] has nothing to do with whether the ordinance causes a physical taking.”); 3 MHC, 714 F.3d at 1127–28 (noting the Penn Central inquiry is about how “the interference with property can be characterized” and ruling, 4 without reference to specific facts, “the Ordinance is much more an adjustment of the benefits and burdens of economic life to promote 5 the common good than it is a physical invasion of property”) (cleaned up)). 6 (Dkt. No. 33 at 15-16.) Accordingly, given Plaintiff’s allegations do not plausibly support an 7 inference any Penn Central factor is satisfied, Plaintiff does not plausibly state a Penn Central 8 claim. 9 Plaintiff’s arguments to the contrary are unavailing. Plaintiff first emphasizes “‘there is no 10 precise minimum threshold’ for satisfying the” economic impact factor. (Dkt. No. 36 at 14 11 (quoting Laurel Park Cmty., LLC v. City of Tumwater, 698 F.3d 1180, 1189 (9th Cir. 2012)).) To 12 the extent there is a “minimum threshold” of harm which satisfies the first Penn Central factor, 13 drawing inferences in Plaintiff’s favor, Plaintiff’s allegations of a 55% reduction in income do not 14 support an inference that threshold is met because MHC held an 81% diminution in a mobilehome 15 park’s value did not satisfy the first Penn Central factor. 714 F.3d at 1127–28. MHC’s holding, 16 plus two other holdings on which Plaintiff relies, cited Supreme Court cases finding 75%, 90% 17 and 92.5% diminutions in value did not constitute a taking. Id.; Laurel Park, 698 F.3d at 1189; 18 Colony Cove, 888 F.3d at 451 (“Not every diminution in property value caused by a government 19 regulation rises to the level of an unconstitutional taking. Government hardly could go on if to 20 some extent values incident to property could not be diminished without paying for every such 21 change in the general law. […] Thus, we have observed that diminution in property value because 22 of governmental regulation ranging from 75% to 92.5% does not constitute a taking.”) (cleaned 23 up). 24 Next, Plaintiff relies on several cases to argue its expectation that the Vacancy Control 25 Amendment would not be enacted is reasonable, but those cases are inapposite. First, Kaiser 26 Aetna v. United States, 444 U.S. 164 (1979) addressed a government action outright denying 27 access to waters that were historically considered private property, i.e., an action resulting “in an 1 actual physical invasion.” Id. at 167–70, 176–80. Kaiser expressly distinguished its facts from 2 those here, stating “[t]his is not a case in which the Government is exercising its regulatory power 3 in a manner that will […] devalu[e …] private property.” Id. at 180. Kaiser is therefore 4 inapposite. Second, Plaintiff cites Bridge Aina and Pakdel v. City & Cnty. of San Francisco, 636 5 F. Supp. 3d 1065 (N.D. Cal. 2022) to suggest it is “possible for a new regulation enacted in a 6 heavily regulated industry to be challenged under Penn Central.” (Dkt. No. 36 at 17.) But neither 7 case supports Plaintiff’s position because both cases held its plaintiffs’ asserted expectations were 8 not reasonable as a matter of law. See Bridge Aina, 950 F.3d at 635 (relying on MHC’s reasoning 9 a plaintiff “had even less reason to expect that the rent control would disappear altogether”); 10 Pakdel, 636 F. Supp. 3d at 1075–76 (noting “Plaintiffs’ decision to purchase a [property] and 11 subsequently rent it out represented a choice to enter a highly regulated field” and Plaintiffs “d[id] 12 not adequately allege why” the challenged ordinance “depart[ed] from […] past or conceivable 13 regulatory developments” to an “extreme level”). To the extent a rent-control ordinance can be 14 amended in a manner that interferes with landlords’ reasonable investment-backed expectations, 15 Plaintiff cites no authority finding an amendment did so. And, even if Plaintiff has satisfied the 16 second factor since vacancy control was new to Petaluma, Plaintiff still does not state a claim 17 given the other two factors are not satisfied. 18 With respect to the third Penn Central factor, Plaintiff asserts the ordinance does not 19 “merely adjust[] the benefits and burdens of economic life” because it “compel[s] Capri to convey 20 property to an ex-tenant–i.e., the person who sells his or her home and thereby pockets a massive 21 windfall.” (Dkt. No. 36 at 18.) Not so. Plaintiff’s argument is a non-sequitur. A park resident 22 who “pockets a massive windfall” due to the ordinance is not receiving that windfall because 23 property was conveyed to them. Plaintiff expressly alleges that “windfall” occurs because the 24 ordinance “artificially suppresses” rent, which “artificially increase[s]” mobilehome prices. (Dkt. 25 No. 34 ¶ 15.) That is not a conveyance of property; rather, the ordinance is a quintessential 26 attempt to reallocate the “benefits and burdens of economic life to promote the common good.” 27 MHC, 714 F.3d at 1128 (quoting Penn Central, 438 U.S. at 124). ] Plaintiff asserts the ordinance (1) “does not serve its stated purposes,” (2) “restricts only” rents 2 || instead of mobilehome sales, (3) “does nothing to curb housing costs for future renters,” and (4) 3 “places a high burden on a few private property owners [...] instead of apportioning the burden 4 || more broadly among members of the public.” (Dkt. No. 34 4 34; Dkt. No. 36 at 18.) Plaintiff's 5 first three criticisms pertain to the ordinance’s effectiveness. Plaintiff cites no authority 6 || suggesting those criticisms, if accepted as true, dictate whether a regulation is “functionally 7 || equivalent to the classic taking in which government directly appropriates private property or 8 ousts the owner from his domain.” Lingle, 544 U.S. at 539. Plaintiffs fourth criticism relies on a 9 || selective quote from Armstrong v. United States, 364 U.S. 40 (1960), which stated the takings 10 || clause “was designed to bar Government from forcing some people alone to bear public burdens 11 which, in all fairness and justice, should be borne by the public as a whole.” Jd. at 49. Armstrong 12 || addressed a forced transfer of title of property, which made the challenger’s liens on the property 13 unenforceable. /d. at 41. The Court held “[t]he total destruction by the Government of all value 14 || of these liens [...] has every possible element of a Fifth Amendment ‘taking.’” Jd. at 48. 3 15 || Armstrong is therefore inapposite; Plaintiff merely alleges a 55% reduction in rental income from a 16 || its mobilehome park, not a “total destruction [...] of all value” in the park. 17 Accordingly, the Court grants Defendant’s motion to dismiss. 18 CONCLUSION 19 As explained above, the Court grants Defendant’s motion to dismiss. Drawing inferences 20 || in Plaintiffs favor, Plaintiff does not allege facts sufficient to support an inference its as-applied 21 takings challenge is ripe or an inference Petaluma’s ordinance is a Penn Central regulatory taking. 22 || As Plaintiff has had the opportunity to amend its claims, and further amendment would be futile, 23 dismissal is without leave to amend. A separate judgment will be entered. 24 This Order disposes of Docket No. 35. 25 IT IS SO ORDERED. 26 || Dated: August 11, 2026 Std 27 JACQUELINE SCOTT CORLE 28 United States District Judge