Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_04-cv-03325/USCOURTS-cand-3_04-cv-03325-3/pdf.json

Nature of Suit Code: 440
Nature of Suit: Other Civil Rights
Cause of Action: 42:1983 Civil Rights Act

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

MHC FINANCING LTD PARTNERSHIP,

et al,

Plaintiffs,

v

CITY OF SAN RAFAEL, et al,

Defendants.

 /

No C 00-3785 VRW

ORDER

MHC Financing Limited Partnership and Grapeland Vista

(collectively “MHC”) together own the Contempo Marin mobilehome

park, located in the City of San Rafael. MHC initiated this suit

on October 13, 2000, alleging the City’s rent and vacancy control

ordinance (Mobilehome Rent Control Ordinance — San Rafael Municipal

Code, Title 20), which affects the Contempo Marin park, violates

the takings clause of the Fifth Amendment. Doc #1.

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Case 3:04-cv-03325-VRW Document 59 Filed 12/05/06 Page 1 of 33
United States District Court

For the Northern District of California

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In particular, MHC asserted that the ordinance did not

“substantially advance” a legitimate state interest. Id. In July

2001, the parties entered a settlement agreement, under which the

City agreed to “initiate” amendments to the ordinance that, inter

alia, would eliminate vacancy control. Doc #23, Ex 1, § 2. In

return, MHC would agree to drop the present suit and not challenge

the constitutionality of the amended ordinance. Id. After

encountering strong political opposition, the City declined to

eliminate vacancy control.

MHC then amended its complaint to allege, inter alia,

that the City had breached the settlement agreement. Doc #78. In

November 2002, a jury ruled in favor of the City on these claims

(Doc #350), and the court has since declined to disturb that

verdict (Doc #468).

The court also tried MHC’s other claims at the November

2002, trial but delayed its findings of fact and conclusions of law

pending the Supreme Court’s decision in Lingle v Chevron USA, Inc,

125 S Ct 2074 (2005). Doc #412. Lingle eviscerated the

“substantially advances” theory on which MHC’s takings claims

rested. Lingle, 12 S Ct at 2074. Accordingly, after Lingle was

decided, defendant-intervenor Contempo Marin Homeowners Association

(“the Association”) renewed its motion to dismiss the remaining

claims (Doc #446), and MHC moved to amend its complaint (Doc #450). 

On January 27, 2006, the court dismissed certain declaratory relief

claims while permitting MHC to amend its complaint to allege other

theories by which the ordinance violates the Fifth Amendment, and

to add a Fourteenth Amendment substantive due process claim. Doc

#468.

Case 3:04-cv-03325-VRW Document 59 Filed 12/05/06 Page 2 of 33
United States District Court

For the Northern District of California

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In the present second amended complaint (SAC, Doc #472), 

MHC alleges the ordinance is an unlawful taking and that it

violates substantive due process. MHC proffers four different

theories for its takings claim, alleging that the City has

performed:

(a) a regulatory taking under Penn Central Transportation Co

v New York City, 438 US 104 (1978);

(b) a physical taking under Loretto v Teleprompter Manhattan

CATV Corp, 458 US 419 (1982) and Yee v City of Escondido,

503 US 519 (1992);

(c) a private taking under Kelo v City of New London, 125 S

Ct 2655 (2005) and Armendariz v Penman, 75 F3d 1311 (9th

Cir 1996) and

(d) a land-use exaction under Nollan v California Coastal

Commission, 483 US 825 (1987) and Dolan v City of Tigard,

512 US 374 (1994).

SAC. Based on the SAC and the City’s opposition, it appears that

MHC is asserting each of these takings theories both facially and

as-applied.

After MHC filed the SAC, the City moved to dismiss, or in

the alternative, moved for summary judgment. Doc #475. The City’s

motion asserts the following grounds: (1) the takings claims are

barred by res judicata; (2) the takings claims are time-barred by

the statute of limitations; (3) the takings claims are not ripe

pursuant to Williamson County Regional Planning Commission v

Hamilton Bank, 473 US 172, 195 (1985); (4) the substantive due

process claim fails as a matter of law and (5) MHC’s Penn Central,

physical takings, private takings and exaction theories are

Case 3:04-cv-03325-VRW Document 59 Filed 12/05/06 Page 3 of 33
United States District Court

For the Northern District of California

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baseless. Doc #475. For reasons discussed below, the court GRANTS

the City’s motion for summary judgment on MHC’s physical takings

and exaction claims and DENIES summary judgment on all other

claims. 

I

In reviewing a summary judgment motion, the court must

determine whether genuine issues of material fact exist, resolving

any doubt in favor of the party opposing the motion. “[S]ummary

judgment will not lie if the dispute about a material fact is

‘genuine,’ that is, if the evidence is such that a reasonable jury

could return a verdict for the nonmoving party.” Anderson v

Liberty Lobby, 477 US 242, 248 (1986). “Only disputes over facts

that might affect the outcome of the suit under the governing law

will properly preclude the entry of summary judgment.” Id. And

the burden of establishing the absence of a genuine issue of

material fact lies with the moving party. Celotex Corp v Catrett,

477 US 317, 322-23 (1986). When the moving party has the burden of

proof on an issue, the party’s showing must be sufficient for the

court to hold that no reasonable trier of fact could find other

than for the moving party. Calderone v United States, 799 F2d 254,

258-59 (6th Cir 1986). Summary judgment is granted only if the

moving party is entitled to judgment as a matter of law. FRCP

56(c).

The nonmoving party may not simply rely on the pleadings,

however, but must produce significant probative evidence supporting

its claim that a genuine issue of material fact exists. TW Elec

Serv v Pacific Elec Contractors Ass’n, 809 F2d 626, 630 (9th Cir

Case 3:04-cv-03325-VRW Document 59 Filed 12/05/06 Page 4 of 33
United States District Court

For the Northern District of California

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1987). The evidence presented by the nonmoving party “is to be

believed, and all justifiable inferences are to be drawn in his

favor.” Anderson, 477 US at 255. “[T]he judge’s function is not

himself to weigh the evidence and determine the truth of the matter

but to determine whether there is a genuine issue for trial.” Id

at 249.

II

As a preliminary matter, the court confronts MHC’s

argument that the City waived its statute of limitations and res

judicata defenses. Doc #479 at 7. In a March 19, 2002, order, the

court determined that the City had breached the settlement

agreement and as a remedy, deemed the City’s statute of limitations

and res judicata defenses to be waived. Doc #56 at 13. But after

the City moved to reconsider that decision, the court subsequently

determined that the agreement was ambiguous and that its

interpretation was an issue for further litigation. Doc #99. As

noted earlier, MHC then amended its complaint to allege that the

City had breached the settlement agreement. Doc #78. In November

2002, a jury ruled in favor of the City on these claims (Doc #350),

and in its January 27, 2006, order, the court declined to revisit

the jury’s verdict (Doc #468). Because the reasons why the statute

of limitations and res judicata defenses were deemed waived no

longer apply, the court concludes that the City is free to raise

those defenses here.

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United States District Court

For the Northern District of California

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A

The court first addresses the three procedural defects

asserted by the City, starting with the City’s argument that MHC’s

takings claims are barred by res judicata. 

After the City enacted the 1993 amendments, MHC’s

predecessor-in-interest, De Anza Assets, Inc, filed an action in

California state court challenging the ordinance. De Anza Assets,

Inc v City of San Rafael, Case No A063017. De Anza alleged that

the ordinance as a whole, which included vacancy control, was a

regulatory taking. Doc #475 at 6. The state court sustained a

demurrer to De Anza’s complaint, and on October 6, 1994, the court

of appeal upheld the facial constitutionality of the ordinance. 

Doc #476, Ex 5 at 1415. The court remanded one portion of the case

regarding whether De Anza detrimentally relied on the City’s

procedures under Palcio De Anza v Palm Springs Rent Review Com, 209

CalApp3d 116, 120 (1989) (providing that where a local rent control

ordinance sets forth “a specific procedure for establishing rent

increases and a landlord relies on those procedures, those

enactments create a property right which becomes vested.”). This

portion of the case was eventually dismissed for failure to

prosecute.

28 USC § 1738 requires federal courts to give the same

preclusive effect to state court judgments as they would be given

by another court of that state. See San Remo Hotel, LP v City &

County of San Francisco, 545 US 323, 338 (2005). Once there is a

final judgment on the merits in an action, res judicata generally

precludes a party or their privies from relitigating issues that

were or could have been raised in the previous action. Allen v

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McCurry, 449 US 90, 94 (1980). To determine the preclusive effect

of a state court judgment federal courts look to state law. 

Palomar Mobilehome Park Ass’n v City of San Marcos, 989 F3d 362,

364 (9th Cir 1993).

MHC contends that the 1994 state proceedings do not

preclude its current takings claims under the doctrine of res

judicata because (1) there was no final judgment on the merits in

the previous action, (2) MHC is not in privity with the plaintiffs

in the 1993 action and (3) the 1999 ordinance gave rise to new

facial and as-applied claims. Doc #479 at 7. For reasons

discussed below, only the third argument proves convincing. 

MHC asserts that because the court of appeal partially

reversed and remanded the trial court’s order dismissing the case,

there has been no final judgment on the merits for purposes of res

judicata. Doc #479 at 7. But this argument misstates the law. 

Although a decision that is reversed on appeal has no preclusive

effect, Ornellas v Oakley, 618 F2d 1351, 1356 (9th Cir 1980), under

California law, a judgment may be split into final and non-final

portions for purposes of res judicata. See Moore v Wood, 36 Cal 2d

621, 629 (1945) (“[T]he doctrine of res judicata applies to those

portions of a judgment which have become final.”). Here, the trial

court determined, and the appellate court affirmed, that De Anza

failed to state a claim that the ordinance was unconstitutional. 

Under California law, this determination is a final judgment for

purposes of res judicata.

MHC also argues that because it did not participate in

the 1993 action, it cannot be considered a privy for purposes of

res judicata. Doc #479 at 8. But this argument relies on an

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incorrect definition of privity. Under California law, a privy is

an individual who, after judgment, “has acquired an interest in the

subject matter affected by the judgment through or under one of the

parties, as by inheritance, succession, or purchase.” Rice v Crow,

81 Cal App 4th 725, 735 (2000) (citing Bernhard v Bank of America

Nat Trust & Savings Ass’n, 19 Cal 2d 807, 811 (1942). Here, MHC

acquired the mobilehome park from its prior owners in 1994. See

MVL Decl 6(b) 66:26-67:8. Accordingly, as a purchaser of the

property affected by the judgment, MHC is a privy to De Anza under

California res judicata law.

MHC next argues that the 1999 ordinance created new

injuries and new claims that could not have been raised in the 1993

action. Doc #479 at 8. Specifically, MHC contends that “[a] new

as-applied claim also accrues each time a home is sold and MHC is

denied market rent, as well as each year when the City enforces the

law * * *.” Id. But the Ninth Circuit has expressly rejected this

argument. In De Anza Properties X, Ltd v County of Santa Cruz, 936

F2d 1084 (9th Cir 1991), the court held that an action challenging

a mobilehome rent control ordinance accrued when the ordinance was

enacted and did not accrue anew “each time one of the appellants’

tenants sells a mobilehome to a new tenant and appellants are

precluded from raising the rent.” Id at 1087. The court reasoned

that the “action of the local government giving rise to a cause of

action for a taking was the government’s enactment of the ordinance

itself” and not the later sale of a mobilehome from one private

party to another. Id.

Finally, MHC argues that a new facial claim accrued upon

enactment of the 1999 amendment, citing Levald, Inc v City of Palm

Case 3:04-cv-03325-VRW Document 59 Filed 12/05/06 Page 8 of 33
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Desert, 998 F2d 680, 687 (1993) for the proposition that a facial

claim accrues upon enactment. Doc #479 at 8. MHC notes that the

doctrine of res judicata only bars a cause of action where there is

an identity of claims between the prior and present actions. Id. 

MHC asserts that because its claims under the 1999 ordinance do not

arise from the “same nucleus of operative facts,” MHC’s present

claim is not the same as was previously adjudicated and res

judicata does not bar the instant action. Id. Although the City

also uses the “common nucleus” test in analyzing whether the claims

at issue constitute the same cause of action as those previously

litigated in the state court proceedings, it is evident to the

court that both parties are applying the wrong test.

California law differs from both federal law and that of

a majority of states in that its “same cause of action” aspect of

the res judicata doctrine is based not on a transactional analysis

but upon a primary rights theory. Manufactured Home Communites,

Inc v City of San Jose, 420 F3d 1022, 1031 (9th Cir 2005). Under

the primary rights theory, a cause of action consists of (1) a

primary right possessed by the plaintiff, (2) a corresponding

primary duty on the defendant and (3) a wrongful act done by the

defendant constituting a breach of that duty. Agarwal v Johnson,

25 Cal 3d 932, 954-55 (1979). The primary right is the plaintiff’s

right to be free of the injury suffered. Alpha Mechanical, Heating

& Air Conditioning, Inc, v Traveler Cas & Sur Cor of America, 133

Cal App 4th 1319, 1327 (2005). This right is distinguished from

both the theory of liability on which the injury is premised and

the remedy sought. If an action involves “the same injury to the

plaintiff and the same wrong by the defendant then the same primary

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right is at stake even if in the second suit the plaintiff pleads

different theories of recovery, seeks different forms of relief

and/or adds new facts supporting recovery.” Eichman v Fotomat

Corp, 147 Cal App 3d 1170, 1174 (1983); see also Mycogen Corp v

Monsanto Co, 28 Cal 4th 888, 897 (2002) (concluding that different

theories of recovery are not separate primary rights); Slater v

Blackwood, 15 Cal 3d 791, 795 (1975) (even where there are multiple

legal theories upon which recovery might be predicated, one injury

gives rise to only one claim for relief).

The City argues that MHC v City of San Jose compels

preclusion in the instant action. Doc #479 at 8. In City of San

Jose, the Ninth Circuit concluded that res judicata barred

plaintiffs’ second suit challenging a rent control ordinance

because both cases involved a single primary right, namely, “the

right [for plaintiffs] to receive a fair return on its investment

at [its mobilehome park].” 420 F3d at 1031. The lone material

difference between MHC’s instant action and the suit in City of San

Jose is that the present suit attacks an amended ordinance.

Accordingly, the essential issue is whether the amendment created a

new injury so that the current suit implicates a different primary

right from the one involved in the 1994 action. 

The rent control ordinance at issue was initially enacted

in 1989 and the City amended the ordinance in 1993 to include

vacancy control. Like the original ordinance, the 1993 amended

ordinance set annual automatic rent increases on a graduated

percentage of the consumer price index: 100% of CPI where CPI was

5% or less, 75% of CPI (but no less than 5%) where CPI was between

5 and 10% and 66% of CPI where CPI exceeded 10%. Doc #476, Ex 2. 

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In 1999, the City modified this automatic increase, changing from a

sliding scale to a flat 75% of CPI. Id, Ex 3. 

This amendment severs preclusion under res judicata

because it substantively changed the ordinance, and these changes

bear on MHC’s underlying claims. Namely, by imposing a flat 75%

CPI adjustment, the 1999 amendment allegedly compels an

exponentially expanding gap between permitted rental income and

fair market rent for the land. The 1999 ordinance also prevents

MHC from including capital improvements in the amount of the base

rent. As a result, even if MHC must invest capital to improve and

maintain the park, the ordinance prohibits MHC from gaining a

return on such investment. Hence, the present action does not

implicate the same primary right as that in the De Anza

proceedings; rather, it involves a different injury to MHC and a

different wrong by the City. Further, these differences affect

MHC’s takings and substantive due process claims. Accordingly, the

court declines to preclude MHC’s claims on grounds of res judicata.

B

The court turns to the City’s contention that MHC’s

takings claims are time-barred.

The applicable statute of limitations in this case is one

year (for § 1983 suits in California). The City asserts that MHC’s

suit is time-barred because vacancy control was added in the 1993

amendments. Doc #475 at 12. MHC argues, as it did for res

judicata purposes, that new as-applied claims accrued upon the sale

of each home and annual enforcement of the ordinance, and a new

facial cause of action arose when the 1999 ordinance was enacted. 

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Doc #479 at 9.

 The City cites De Anza Properties X, Ltd v County of

Santa Cruz, 936 F2d 1084, 1086-87 (9th Cir 1991), in support of its

contention that MHC’s claims are time-barred. In De Anza, the

plaintiffs attempted to circumvent the statute of limitations bar

by arguing their cause of action did not accrue until the county

amended the ordinance to remove the sunset provision contained in

the original ordinance. Id at 1086. The Ninth Circuit rejected

this argument, finding that “the reenactment of the rent control

ordinance * * * did not substantively change its impact upon

[plaintiffs].” Id at 1086. The court reasoned that because the

change “related to duration,” it only “affect[ed] damages,” not the

underlying claim. Id. 

The City’s reliance on De Anza is misplaced. Unlike the

amended ordinance in De Anza, which merely extended the time on an

existing ordinance, the 1999 amendment substantively changed the

law, adding statutory elements and inflicting new economic

injuries. The court De Anza emphasized this very distinction: it

rejected accrual of new claims because “the effect of the ordinance

upon plaintiffs has not altered.” 936 F2d at 1086. Without De

Anza’s limitation, the City could sequentially amend its ordinance,

eventually reducing the CPI adjustment to zero, and each ordinance

would be insulated from judicial review by the statute of

limitations. Hence, for purposes of the statute of limitations,

when a statute is substantively amended, as here, constitutional

attack need only comply with the date of amendment, not the

original date of enactment. Accordingly, MHC’s takings claims are

not time-barred. 

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C

The City’s final asserted procedural defect is that MHC’s

takings claims are not ripe.

The ripeness inquiry in the regulatory takings context

turns on two considerations: (1) whether plaintiff obtained a

final decision from the governmental authority charged with

implementing the regulations and (2) whether plaintiff pursued

compensation through state remedies unless doing so would be

futile. See Williamson County v Hamilton Bank, 473 US 172, 194-95

(1982). 

Before analyzing the two-prong test of Williamson County,

the court notes that the first prong only applies to MHC’s asapplied claims; the facial claims do not require a final decision

because, by definition, they “derive from the ordinance’s

enactment, not any implementing action on the part of governmental

authorities.” Ventura Mobilehome Communities v City of San

Buenaventura, 371 F3d 1046, 1052 (9th Cir 2004). The state

remedies prong, however, applies to MHC’s facial and as-applied

takings claims. 

MHC asserts its as-applied takings claims satisfy the

first Williamson prong on three grounds: (1) no further City

action is necessary to ascertain how the ordinance affects MHC’s

property; (2) the City made a decision to deny MHC discretionary

rent increases; and (3) the City declined to vary the ordinance

pursuant to the settlement agreement. 

In response, the City asserts that MHC has not sought a

final adjudication from the City Council because it has never

requested a discretionary rent increase since the 1999 amendment. 

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See MHC v San Jose, 420 F3d at 1036 (MHC’s challenge to homeowner

exemption is not ripe where MHC did not follow administrative

process); Ventura Mobilehome Communities Owners Ass’n, 371 F3d at

1053 (as-applied challenge not ripe where parkowner did not allege

a request for additional rent increase under the challenged

ordinance).

According to MHC, the first Williamson prong does not

require it to file for a discretionary rent increase; rather, all

that is required is that a landowner provide the City “the

opportunity to grant any variances or waivers allowed by law.” 

Carson Harbor Villages, Ltd v City of Carson, 353 F3d 824, 826-27

(9th Cir 2004). MHC’s argument would not suffice but for the

peculiar facts in this case. Unlike the several cases cited by

both parties concerning the ripeness of challenges to mobilehome

rent control ordinances, here the parties entered into a settlement

agreement, under which the City agreed to “initiate” amendments to

the ordinance that, inter alia, would eliminate vacancy control. 

Doc #23, Ex 1, § 2. In return, MHC would agree to drop the present

suit and not challenge the constitutionality of the amended

ordinance. Id. This settlement triggered strong political

opposition, to which the City acquiesced. As a result, the City

formally declined to eliminate vacancy control. Through this

exchange, MHC obtained a final decision from the City

notwithstanding MHC’s failure to request a discretionary rent

increase after 1999. 

Moreover, while a landowner must give a land-use

authority an opportunity to exercise its discretion, “once it

becomes clear that * * * the permissible uses of the property are

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known to a reasonable degree of certainty, a takings claim is

likely to have ripened.” Palazzolo v Rhode Island, 533 US 606, 620

(2001). In Palazzolo, because it was clear the state agency would

bar construction on the petitioner’s wetland, the Court found the

case ripe for review despite the petitioner’s failure to apply for

development of the particular residential subdivision. Id. 

Similarly, here, the restrictions imposed by the City’s ordinance

are sufficiently certain. The City’s conduct throughout the

dispute makes plain it intends to continue subjecting MHC to the

ordinance, a fact reinforced by City’s unwillingness to eliminate

vacancy control pursuant to the parties’ settlement agreement in

2002. 

Turning to the second prong of Williamson County —

whether MHC pursued compensation through state remedies unless

doing so would be futile — MHC contends it has alleged sufficient

facts for four reasons: (1) exhaustion is prudential and not

jurisdictional; (2) exhaustion does not apply to injunctive or

declaratory relief; (3) MHC exhausted state remedies through

litigation of state law claims and (4) further exhaustion is

futile.

That exhaustion is prudential rather than jurisdictional

is of little consequence as it does not mean the court should

exercise its prudential discretion to forego exhaustion here. See

Suitam v Tahoe Regional Planning Agency, 520 US 725 (1997). And in

any event, MHC has not identified — and the court has not found —

any cases in which a court declined to apply the Williamson County

test due to its prudential character.

//

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Second, MHC contends that exhaustion does not apply to

its claims for injunctive or declaratory relief. In response, the

City argues that compensation is the only remedy available for a

Penn Central or physical taking and, alternatively, that

unexhausted claims for injunctive and declaratory relief are not

ripe. Although the City correctly notes that MHC cannot circumvent

Williamson County by alleging only injunctive and declaratory

relief, see MHC v City of San Jose, 358 F Supp 2d 896 (ND Cal

2003), affd 420 F3d 1022 (9th Cir 2005), its assertion that

compensation is the only remedy for a Penn Central or physical

taking claim is mistaken, and requires the court’s clarification. 

The City reads Daniel v County of Santa Barbara, 288 F3d 375 (9th

Cir 2002), as flatly preventing injunctive relief for regulatory

takings. Doc #482 at 8. But that case did not sweep so broadly. 

The case concerned a plaintiff who sought exemption from the

Williamson County ripeness test for his injunctive relief claims,

as MHC does here. Hence, the court dismissed the injunctive relief

prayer but did so because plaintiff failed to exhaust state

remedies not because injunctive relief is never available for a

regulatory taking. 

The City also points to the text of the Fifth Amendment

to advance its contention that injunctive relief is unavailable,

noting that the text does not proscribe the taking of property; it

proscribes government taking without just compensation. But the

“just compensation” component of the Fifth Amendment does not bar

injunctive relief outright; it only bars such relief if the

government is willing and able to pay just compensation. In any

event, the court agrees with the City that MHC cannot circumvent

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Williamson County merely because it seeks injunctive and

declaratory relief.

Third, MHC claims that it exhausted state remedies via an

October 1996 petition to the City for a $18.37 per month capital

expense pass through under the terms of the ordinance. Although

MHC subsequently settled this proceeding with the tenants of the

park, a later dispute over the terms of the settlement led MHC to

counterclaim against the City in state court for inverse

condemnation. MHC’s claim for inverse condemnation asserted that

MHC was denied “just compensation” through the City’s conduct. 

City’s RJR, Ex 9, ¶ 32. A demurrer was sustained to this claim,

which was affirmed on appeal. Id, Ex 10. The City points out that

MHC’s complaint lacked specificity, i e, it did not make any

request based on its rate of return, the effect of rent control,

the effect of vacancy control or the effect of the CPI adjustment. 

Doc #475 at 7. But the failure to explicate each possible theory

of compensation does not render MHC’s inverse condemnation claim

inadequate. In Ventura, for example, the Ninth Circuit listed

various statutory avenues for exhausting available state court

remedies, including, as here, a rent adjustment based on capital

improvements. 371 F3d at 1053. Hence, through this state inverse

condemnation claim, MHC pursued compensation via state remedies in

satisfaction of the second prong of the Williamson County test. 

In sum, ripeness doctrine does not require a landowner

“to submit applications for their own sake”; rather, it imposes

obligations because “[a] court cannot determine whether a

regulation goes ‘too far’ unless it knows how far the regulation

goes.” Palazzolo, 533 US at 620; MacDonald, 477 US at 348. Having

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sued the City under state law in state and federal proceedings over

the course of 14 years, MHC has made clear the scope of the City’s

ordinance. Accordingly, MHC’s takings claims are ripe. 

III

MHC’s latest complaint includes a substantive due process

challenge to the ordinance. The City contends this claim runs

afoul of Ninth Circuit case law preventing substantive due process

challenges based on deprivations of property and also fails because

mobilehome rent and vacancy control is rational as a matter of law. 

MHC’s claim principally derives from Justice Kennedy’s

concurrence in Lingle, which states in part, “[t]his separate

writing is to note that today’s decision does not foreclose the

possibility that a regulation might be so arbitrary or irrational

as to violate due process.” Lingle, 125 S Ct at 2087 (Kennedy, J,

concurring). The City counters that the majority never reached

this issue and that a concurrence of one cannot sub silentio

overturn long-standing Ninth Circuit precedent indicating that a

deprivation of property cannot be challenged via substantive due

process. Armendariz v Penman, 75 F3d 1311 (9th Cir 1996); Ventura,

371 F3d at 1054; see also Crown Point Development v City of Sun

Valley, 2006 WL 288392 at *2 (D Idaho Feb 6, 2006) (“this Court

applies the current Ninth Circuit law and finds the complaint

should be dismissed as the law of this circuit does not allow

substantive due process claims * * * when the interest at stake is

real property.”). 

Yet, in addition to Justice Kennedy’s concurrence, the

majority opinion in Lingle plainly suggests the availability of a

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substantive due process challenge to a regulatory taking. See

Lingle, 125 S Ct at 2083 (“We conclude that [the substantially

advances] formula prescribes an inquiry in the nature of a due

process, not a takings test”). See also id (noting that “probing

the regulation’s underlying validity” is “logically prior to and

distinct from the question whether a regulation effects a taking,

for the Takings Clause presupposes that the government has acted in

pursuit of a valid public purpose”). 

More significantly, Lingle undercuts the Ninth Circuit’s

basis for barring substantive due process challenges to

deprivations of property. The reason for this bar was that claims

should rely on the explicit textual sources of constitutional

protection, if available, such as the takings clause, rather than

“the more generalized notion of substantive due process.” 

Armendariz, 75 F3d at 1324. But Lingle held that challenges

concerning the means-ends relationship of a statute do not

implicate the takings clause. 125 S Ct at 2083. Hence, after

Lingle, there is no explicit text for assessing whether a

regulation is effective in achieving a legitimate public purpose;

only the due process clause remains. See also Blaesser &

Weinstein, Federal Land Use Law & Litigation § 2:11 (noting that,

after Lingle, “[i]f a land use regulation furthers no public

purpose whatsoever then, although just compensation is no longer

available under the Fifth Amendment, the failure of the regulation

to substantially advance any legitimate public purpose in violation

of due process * * * would give rise to a cause of action for

damages under 42 USC § 1983"). Accordingly, the court concludes

that after Lingle, Armendariz and its progeny no longer preclude a

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substantive due process challenge to deprivations of property. 

The City contends that MHC’s substantive due process

challenge also fails because the ordinance is rational as a matter

of law. The City notes that rent control is pervasive and

“legislative determinations about the efficacy of economic

legislation cannot be second-guessed by the court.” Doc #475 at 10

(citing Kelo v City of New London, 125 S Ct 2655, 2661 (2005);

Lingle, 125 S Ct at 2085). 

But the premium the City’s ordinance confers to tenants

differs in kind from the effects of ordinary apartment rent

control. Apartment tenants typically do not sell the occupancy

interest in the apartment to their successors; hence, traditional

rent control transfers wealth from landlords to the incumbent

tenants and all future tenants. By contrast, the City’s ordinance

effects a one-time transfer of wealth to the incumbent mobilehome

owners, who retain the premium when they sell their mobilehome at

supracompetitive prices. The subsequent mobilehome owner obtains

none of the benefits of the City’s ordinance. According to the

Supreme Court, this distinction “may shed some light on whether

there is a sufficient nexus between the effect of the ordinance and

the objectives it is supposed to advance.” Yee v City of

Escondido, 503 US 519, 530 (1991). Additionally, several Ninth

Circuit cases question the propriety of rent control ordinances

that effect a premium transfer to incumbent tenants. See e g,

Richardson v City & County of Honolulu, 124 F3d 1150 (9th Cir 1997)

(“[The ordinance] regulates the use of the lessors’ property

interests in a manner that does not substantially further the goal

of creating affordable housing” due to “[t]he absence of a

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mechanism that prevents lessees from capturing the net present

value of the reduced land rent in the form of a premium”).

That Lingle has shifted the judicial assessment of

effectiveness from takings law to the realm of substantive due

process does not erase the significance of repeated judicial

skepticism of these premium-transfer rent control ordinances. To

the contrary, the reasoning developed under the now-defunct

“substantially advances” formula plainly bears on MHC’s due process

challenge, as both doctrines, in essence, assess the relationship

between the City’s means and ends.

Regarding the ordinance here, the City’s argument fails

to assuage the court’s concerns. Rather than defend the ordinance

on its merits, the City simply points out the existence of other

mobilehome rent control ordinances, which are said to “establish”

the ordinance’s rationality, “even if economists disagree.” Doc

#475 at 2. But following others does not ensure a sensible path,

especially given the City’s adamant effort to shield its ordinance

from judicial scrutiny. The court therefore declines to adopt the

City’s argument, as to do so would insulate even the most arbitrary

law from judicial review for the mere reason that two or more

cities were obtuse enough to enact it. Affordable housing may be a

reasonable end. But the City fails on the present record to

persuade that the ordinance’s one-time premium transfer as a means

of achieving that end cannot be analyzed for its rationality. 

Accordingly, the court denies the City’s motion for summary

judgment on MHC’s substantive due process claim.

// 

//

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IV 

Finally, the City’s summary judgment motion argues that

MHC’s Penn Central, physical takings, private takings and exaction

theories are baseless. For the following reasons, the court grants

the City’s motion on MHC’s physical takings and exaction claim and

denies the City’s motion on MCH’s Penn Central and private takings

claim. 

A

MHC argues that the ordinance “goes too far [and should]

be recognized as a taking.” Pennsylvania Coal Co Mahon, 260 US

393, 415 (1922). In Penn Central v New York City, 438 US 104

(1978), the Court set forth factors for evaluating whether a

regulation “goes too far”:

Primary among those factors are “the economic impact of the

regulation on the claimant and, particularly, the extent to

which the regulation has interfered with distinct

investment-backed expectations.” In addition, the “character

of the governmental action” -- for instance whether it

amounts to a physical invasion or instead merely affects

property interests through “some public program adjusting the

benefits and burdens of economic life to promote the common

good” -- may be relevant in discerning whether a taking has

occurred.

Lingle, 125 S Ct at 2081-82 (citing Penn Central, 438 US at 124). 

Courts almost universally describe the ad hoc review mandated by

Penn Central as involving a three-factor test, assessing the

economic impact, the property owner’s reasonable investment-backed

expectations and the character of the government action. Moreover,

this test is “informed” by the purpose of the takings clause, which

is to prevent the government from “forcing some people alone to

bear public burdens which, in all fairness and justice, should be

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borne by the public as a whole.” Palazzolo v Rhode Island, 533 US

606, 618 (2001) (quoting Armstrong v United States, 364 US 40, 49

(1960)).

The first Penn Central factor, the ordinance’s economic

impact on MHC, generally assesses “whether the interference with

the * * * property is of such a magnitude that ‘there must be an

exercise of eminent domain and compensation to sustain [it].’” 438

US at 136 (quoting Pennsylvania Coal, 260 US at 413). In this

inquiry a comparison of the value of affected property before and

after a regulatory action is relevant and probably essential; but

such a comparison, according to the Supreme Court, is by no means

conclusive. Keystone Bituminous Coal Assn v De Benedictis 480 US

490 (1987). Moreover, the Supreme Court has measured economic

effect in several different ways. See Hodel v Irving, 481 US 704,

714 (1987) (looking to the market value of the property); Keystone,

480 US at 493-96 (1987) (looking to whether the regulation makes

the property owner’s business operation “commercially

impracticable”); Andrus v Allard, 444 US 51, 66 (1979) (looking to

the possibility of other economic uses besides sale, which was

prohibited by the challenged regulation). 

According to the City, that Contempo Marin is currently

worth more than MHC’s purchase price is dispositive. The court

disagrees. As discussed below, within the context of Penn

Central’s second factor, the Supreme Court flatly rejected this

argument. Because land prices generally rise, especially in

California, the post-enactment transfer of title would effectively

foreclose any takings challenge. It would, as the Supreme Court

warned, “put an expiration date on the Takings Clause.” Palazzolo,

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533 US at 633-36. Further, MHC proffers sufficient evidence to

survive the City’s summary judgment motion. In particular, MHC

convincingly asserts that the ordinance’s flat 75% CPI adjustment

creates an exponentially expanding gap between permitted rental

income and fair market rent for the land. Doc #479 at 17-23. In

any event, this Penn Central factor implicates complicated factual

issues inappropriate for the court to resolve on summary judgment. 

Next, the court turns to the second regulatory takings

factor under Penn Central — the extent to which the challenged

regulation interferes with the private property owner’s distinct

investment-backed expectations. The Supreme Court has indicated in

Ruckelshaus v Monsanto Co that such expectations must be reasonable

and that failure to prove this second factor can defeat a takings

claim. 467 US 986, 1005-06 (1984). The City emphasizes that MHC

knew about the ordinance prior to purchase and notes “the windfall

profit [MHC] would receive from purchasing a rent controlled

property at a rent controlled price and then eliminating rent

control.” Doc #475 at 23.

Although regulatory notice may be a factor in assessing

whether the landowner’s distinct investment-backed expectations are

reasonable, it is by no means determinative. In Palazzolo, the

Supreme Court rejected a categorical notice rule because it would

bestow unlimited power to the states unilaterally to define which

property rights would receive constitutional protection. 

Were we to accept the State’s [notice] rule, the

postenactment transfer of title would absolve the State

of its obligation to defend any action restricting land

use, no matter how extreme or unreasonable. A State

would be allowed, in effect, to put an expiration date

on the Takings Clause. 

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Hence, although relevant, notice of the ordinance does

not foreclose MHC’s Penn Central claim. Of equal importance is

“the nature and extent of permitted development under the

regulatory regime vis-a-vis the development sought by the

claimant.” Palazzolo, 533 US at 633-36 (O’Connor, J, concurring). 

This factor presumably depends on whether the owner seeks to engage

in a use of land that is comparable to that which has been

permitted to neighboring landowners. Compare Lucas, 505 US at 1031

(“The fact that a particular use has been engaged by similarly

situated owners ordinarily imports a lack of any common law

prohibition”). That is, a landowner has a reasonable expectation

to use property in the same manner as similarly situated

landowners. Whether the ordinance interferes with reasonable

investment-backed expectations therefore also depends on several

unresolved factual issues. 

The final Penn Central factor — the character of the

government action — does not unambiguously weigh in the City’s

favor either. The Penn Central court did not define the

“character” factor except to mention it may depend on whether the

regulation amounts to a physical invasion. Courts now inquire

whether the regulation functions “like” a physical invasion after

Loretto v Teleprompter Manhattan CATV Corp, 458 US at 426, in which

the Court affirmed that a physical invasion is always a taking. 

This factor also depends on whether the property owner has been

“singled out” to bear a public burden, perhaps due to bad faith on

the part of the government, or has been called upon to provide a

public benefit rather than to avoid injury to other persons. See E

Enters v Apfel, 524 US 498, 537 (1998) (plurality opinion) (finding

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that the “character” factor weighed in favor of a taking because

the government had singled out the property to bear the substantial

burden of funding federally-mandated retirement benefits to coal

miners); Del Monte Dunes, 526 US at 722-23 (upholding a jury’s

finding of a taking whether the City rejected five successive

development plats, each one reduced to correspond to a new

government concern, for various, inconsistent reasons). 

The City urges the court to resolve this factor in its

favor on the basis that MHC has not been “singled out”; rather, the

ordinance applies to both mobilehome parks in San Rafael. Doc #475

at 24. But the court declines to interpret the “singled out” test

so narrowly. That the City has chosen two property owners to bear

the burden of providing allegedly affordable housing does not

prevent this factor from weighing in MHC’s favor. Further, this

evidence fails to demonstrate the City’s good faith in dealing with

MHC, especially in light of the City’s failure to abide by the

parties’ settlement agreement. Hence, this factor, like the

others, cannot be resolved on the present record. 

In sum, for cases involving partial regulatory takings

like the instant action, courts have “generally eschewed” any set

formula for determining how far is too far, choosing instead to

engage in an “essentially ad hoc factual inquir[y].” Tahoe-Sierra

Preservation Council, Inc, v Tahoe Regional Planning Agency, 535 US

302, 326 (2002). Due to the innumerable factual questions entailed

in this inquiry, the court declines to resolve MHC’s Penn Central

claim at the summary judgment stage. Accordingly, the court denies

the City’s for summary judgment motion. 

//

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B

MHC also asserts that the City’s zoning of Contempo Marin

creates a physical taking because the zoning requires MHC to

continue using Contempo Marin as a mobilehome park. Yee v City of

Escondido, 503 US 519, 528 (1992) (A physical takings case may “be

presented were [a] statute, on its face or as applied, to compel a

landowner over objection to rent his property or to refrain in

perpetuity from terminating a tenancy.”). 

The City argues that a physical takings claim is not

appropriate in this context because MHC is not required to submit

to the physical occupation of the land. Doc #475 at 17-18l; Yee,

503 US at 527-28 (“The government effects a physical taking only

where it requires the landowner to submit to the physical

occupation of his land.”).

According to MHC, the City’s zoning laws mandate physical

occupation because they cannot be changed, i e, it would be futile

for MHC to attempt to alter them. In particular, MHC asks the

court to “infer from rejection of [the settlement agreement] that

the City would reject closure of the park.” Doc #479 at 23. Yet

the court already declined to infer futility when it determined

that MHC could not seek declaratory relief for a right to change

the use of the park. Doc #468 at 24. Because MHC had never

attempted to change the zoning rules under state law, the court

concluded that declaratory relief would force the court to

“speculat[e] as to future events.” Id. That reasoning applies

here as well. The court cannot conclude the City’s zoning laws

require MHC to submit to the physical occupation of its land

without speculating whether the City would permit modification

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under state law. Should, of course, MHC seek to change the use of

the land on which Contempo Marin stands and be refused permission

to do so and compensation, a physical taking claim may well be an

appropriate remedy. But that is not the case now before the court. 

Accordingly, the court grants the City’s motion for summary

judgment on MHC’s physical takings claim. 

C

MHC also argues that the ordinance conferred a private

benefit on identifiable individuals — namely, the tenants of

Contempo Marin at the time the ordinance and its amendments were

passed — and thus violated the public use restriction of the Fifth

Amendment. See Kelo v City of New London, 125 US 2655, 2661 (“Nor

would [defendant] be allowed to take property under the mere

pretext of a public purpose, when its actual purpose was to bestow

a private benefit.”); Hawaii Housing Authority v Midkiff, 467 US

229, 245 (1984) (“A purely private taking could not withstand the

scrutiny of the public use requirement; it would serve no

legitimate purpose of government and would thus be void.”); Calder

v Bull, 3 US 386, 388 (1798) (noting that legislation is invalid if

it “takes property from A and gives it to B”). Considering whether

government action meets the public use requirement “is logically

prior to and distinct from the question whether a regulation

effects a taking, for the Takings Clause presupposes that the

government has acted in pursuit of a valid public purpose.” 

Lingle, 125 SCt 2074, 2084. 

Under the takings clause of the Fifth Amendment, a state

may transfer property from one private party to another if future

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“use by the public” is the purpose of the taking. Kelo, 125 S Ct

at 2661. This claim therefore turns on whether the City’s

ordinance serves a “public purpose” — a concept the Supreme Court

has defined broadly. For example, in Hawaii Housing Authority v

Midkiff, 467 US 229 (1984), the Supreme Court upheld a statute

whereby fee title was taken from lessors and transferred to lessees

in order to break up a land oligopoly. Id at 241-42. The Supreme

Court unanimously rejected the landowners’ arguments that the

statute violated the public use requirement of the takings clause,

concluding that “[t]he ‘public use’ requirement * * * is

coterminous with the scope of a sovereign’s police powers.” Id at

240. 

The ordinance’s purpose in the present action — providing

affordable housing — is a public purpose. MHC disputes, however,

whether the City’s ordinance achieves such a purpose. But under

the standards set out in Mitkiff and Kelo, courts defer to

legislative judgments of this kind: the court must accept the

public purpose of the ordinance unless the City’s findings are

“palpably without reasonable foundation.” Midkiff, 467 US at 241.

Despite the deference to a legislature’s determination

compelled by Kelo and Mitkiff, the Supreme Court maintains that

“[a] City would no doubt be forbidden from taking petitioners’ land

for the purpose of conferring a private benefit on a particular

private party. * * * Nor would the City be allowed to take

property under the mere pretext of a public purpose, when its

actual purpose was to bestow a private benefit” Kelo, 125 S Ct at

2661. In Kelo, the City of New London offered a “carefully

considered development plan,” which particularly described how the

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regulation would “revitalize the local economy by creating

temporary and permanent jobs, generating a significant increase in

tax revenue, encouraging spin-off economic activities and

maximizing public access to the waterfront.” Id at 2663 & n6. 

Whereas here, the City proffers no such evidence, thereby inviting

the court’s inference that the ordinance simply confers a private

benefit on the incumbent tenants. 

Moreover, in his concurrence, Justice Kennedy — the

deciding vote in Kelo — further clarifies that judicial deference

regarding the public use clause has limits: 

A court applying rational-basis review under the Public

Use Clause should strike down a taking that, by a clear

showing, is intended to favor a particular private

party, with only incidental or pretextual public

benefits * * * * A court confronted with a plausible

accusation of impermissible favoritism to private

parties should treat the objection as a serious one and

review the record to see if it has merit. Kelo, 125 S

Ct at 2669.

The trial court in Kelo satisfied Justice Kennedy’s

standard through “careful and extensive inquiry into whether, in

fact, the development plan is of primary benefit to the developer *

* * [and] only incidental benefit to the City.” Id. Such an

inquiry will likewise be necessary in the present action. 

Accordingly, the court denies the City’s motion for summary

judgment on MHC’s private takings claim. 

D

MHC also contends that the ordinance constitutes a landuse exaction under Nollan/Dolan. See Nollan v California Coastal

Commission, 483 US 825 (1987) (finding a taking when there was no

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“essential nexus” between a legitimate state interest and a public

easement exacted for a building permit); Dolan v City of Tigard,

512 US 374, 391 (1994) (finding a taking when a required public

dedication lacks “rough proportionality” to a proposed

development). 

This claim fails because the ordinance cannot be

construed as a land-use exaction without upending takings law. In

City of Monterey v Del Monte Dunes, the Supreme Court restricted

the scope of the Nollan/Dolan rule: “we have not extended the

rough-proportionality test of Dolan beyond the special context of

exactions — land-use decisions conditioning approval of development

on the dedication of property to public use.” 526 US 687, 702

(1999). MHC argues the ordinance constitutes an exaction on the

theory that it conditions MHC’s use of the land subject to

perpetual rent control. The court rejects this novel theory. 

Every land-use regulation subjects the property-owner’s use to a

limitation of some kind. To characterize these regulations as

exactions would flatly undermine Lingle’s rejection of the

“substantially advances” test within takings law, especially

considering Lingle itself concerned a rent-control statute. MHC

has not sought to develop property in San Rafael; hence, no landuse exaction has occurred. See Del Monte Dunes, 526 US at 702

(1999) (defining “exactions” as “land-use decisions conditioning

approval of development on the dedication of property to public

use.”). Accordingly, the City’s motion for summary judgment on

MHC’s exaction claim is granted. 

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United States District Court

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V

Finally, the City requests the court adjudicate its

pending motion to dismiss, or alternatively, for summary judgment

in MHC Financing Limited Partnership et al v City of San Rafael et

al, C-04-3325 (MHC II), a second suit MHC filed against the City of

San Rafael on August 16, 2004. See Doc #40, C-04-3325. 

The court finds that MHC waived the damages it now

asserts in MHC II during proceedings in MHC I (C-00-3785) when MHC

waived its claims for past and future constitutional damages and

proceeded to trial on its constitutional claims seeking only

declaratory and injunctive relief. 

Absent the waived damages, MHC II (C-04-3325) involves

the same subject matter as the claims brought in MHC I (C-00-3785). 

Because a litigant “has no right to maintain two separate actions

involving the same subject matter at the same time in the same

court and against the same defendant,” Barapind v Reno, 72 F Supp

2d 1132, 1145 (ED Cal 1999), the court dismisses MHC II (C-04-3325)

with prejudice.

VI

In sum, the court GRANTS the City’s motion for summary

judgment on MHC’s physical taking and exaction claims and DENIES

the City’s motion for all other claims. Additionally, the court

GRANTS the City’s motion to dismiss proceedings in case number 04-

3325. 

//

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United States District Court

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The parties are DIRECTED to appear for a pretrial

conference on January 9, 2007, at 9:00 am, or such other date as

they mutually agree and arrange with the court’s courtroom deputy,

Cora Delfin, who may be reached at (415) 522-2039. 

IT IS SO ORDERED.

 

VAUGHN R WALKER

United States District Chief Judge

Case 3:04-cv-03325-VRW Document 59 Filed 12/05/06 Page 33 of 33