FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

COLONY COVE PROPERTIES, LLC, a 

Delaware limited liability company,

Plaintiff-Appellee,

v.

CITY OF CARSON, a municipal 

corporation; CITY OF CARSON 

MOBILEHOME PARK RENTAL REVIEW 

BOARD, a public administrative 

body,

Defendants-Appellants.

No. 16-56255

D.C. No.

2:14-cv-03242-

PSG-PJW

OPINION

Appeal from the United States District Court

for the Central District of California

Philip S. Gutierrez, District Judge, Presiding

Argued and Submitted February 9, 2018

Pasadena, California

Filed April 23, 2018

Before: Susan P. Graber and Andrew D. Hurwitz, Circuit 

Judges, and Edward R. Korman,* District Judge.

Opinion by Judge Hurwitz

 * The Honorable Edward R. Korman, United States District Judge 

for the Eastern District of New York, sitting by designation.
2 COLONY COVE PROPERTIES V. CITY OF CARSON

SUMMARY**

Civil Rights

The panel reversed the district court’s judgment and 

remanded with instructions to enter judgment in favor of 

defendant in an action brought by the owner of a mobile 

home park who alleged that defendant, the City of Carson, 

engaged in an unconstitutional taking in violation of the 

Fifth Amendment when it approved a lower rent increase 

than plaintiff had requested.

Applying the factors set forth in Penn Central 

Transportation Co. v. City of New York, 438 U.S. 104 (1978) 

the panel first held that plaintiff did not present sufficient 

evidence to create a triable question of fact as to the 

economic impact caused by the City’s denial of larger rent 

increases. The panel then held that plaintiff failed to present 

sufficient evidence supporting its investment-backed 

expectations claim. Finally, the panel held that the character 

of the City’s action could not be characterized as a physical 

invasion by the government. The panel concluded that based 

on the evidence, no reasonable finder of fact could conclude 

that the denials of plaintiff’s requested rent increases were 

the functional equivalent of a direct appropriation of the 

property. Accordingly, the panel held that the district court 

should have granted the City’s motion for judgment as a 

matter of law. 

 ** This summary constitutes no part of the opinion of the court. It 

has been prepared by court staff for the convenience of the reader.
COLONY COVE PROPERTIES V. CITY OF CARSON 3

COUNSEL

Matthew Dwight Zinn (argued) and Andrew W. Schwartz,

Shute Mihaly & Weinberger LLP, San Francisco, California; 

Jeff M. Malawy, Stephen R. Onstot, June S. Ailin, William 

W. Wynder, and Sunny K. Soltani, Aleshire & Synder LLP, 

Irvine, California; for Defendants-Appellants.

Anton Matlitsky (argued), O’Melveny & Myers LLP, New 

York, New York; Adam P. Wiley, Thomas W. Casparian, 

and Richard H. Close, Gilchrist & Ruiter PC, Santa Monica, 

California; Daniel J. Tully, Dimitri Portnoi, and Matthew W. 

Close, O’Melveny & Myers LLP, Los Angeles, California;

for Plaintiff-Appellee.

Christine Van Aken, Chief of Appellate Litigation; Dennis 

J. Herrera, City Attorney; City Attorney’s Office, San 

Francisco, California; for Amici Curiae League of California 

Cities and California Chapter of the American Planning 

Association.

Navneet Grewal and Sue Himmelrich, Western Center on 

Law and Poverty, Los Angeles, California; Shirley Gibson, 

Legal Aid Society of San Mateo County, Redwood City, 

California; for Amici Curiae California Rural Legal 

Assistance Inc., California Coalition for Rural Housing, 

Community Legal Services of East Palo Alto, The Golden 

State Manufactured-Home Owners League Inc., Housing 

California, Legal Aid Foundation of Los Angeles, Legal Aid 

Society of San Mateo County, National Housing Law 

Project, Public Advocates, Public Counsel Law Center, The 

Public Interest Law Project, Tenants Together, Western 

Center on Law and Poverty, and Theresa L. Forsythe.
4 COLONY COVE PROPERTIES V. CITY OF CARSON

OPINION

HURWITZ, Circuit Judge:

The Takings Clause of the Fifth Amendment, made 

applicable to the States by the Due Process Clause of the 

Fourteenth Amendment, provides that “private property” 

may not “be taken for public use, without just 

compensation.” The issue in this case is whether a 

California city engaged in an unconstitutional taking when it 

approved a lower rent increase for a mobile home park than 

the park had requested.

After a jury trial, the district court entered a judgment 

finding an unconstitutional taking and awarding the park 

more than $3 million in damages. We reverse and instruct 

that the district court enter judgment in favor of the City.

I. Background

A. The Rent Control Ordinance

In 1979, the City of Carson adopted a “Mobile Home 

Space Rent Control Ordinance,” establishing a sevenmember Rent Review Board to “hear and determine 

applications of property owners for rent adjustments.” The 

ordinance directs the Board to grant property owners a “fair, 

just and reasonable” rent increase, one that both “protects 

Homeowners from excessive rent increases and allows a fair 

return on investment to the Park Owner.”

To balance these competing concerns, the ordinance lists 

several factors to be considered when evaluating a proposed 

rent increase, including changes in the Consumer Price 

Index (“CPI”), rent at comparable parks, capital 

improvements conducted since the last increase, and changes 
COLONY COVE PROPERTIES V. CITY OF CARSON 5

in operating and maintenance expenses. The listed factors, 

however, are neither exclusive nor dispositive.

To assist the Board, the City Council adopted 

Implementation Guidelines in 1998. The original 

Guidelines permitted, but did not require, the Board to 

conduct a “Gross Profits Maintenance Analysis” (“GPM 

Analysis”) in evaluating a rent increase application. A GPM 

Analysis “compares the gross profit level expected from the 

last rent increase granted to the park prior to the current 

application . . . to the gross profit shown by the current 

application.” The Analysis “provide[s] an estimate of 

whether a park is earning the profit estimated to provide a 

fair return, as established by the immediately prior rent 

increase, with some adjustment to reflect any increase in the 

CPI.” Acquisition debt service can be a relevant expense 

under the GPM Analysis “if the purchase price paid was 

reasonable in light of the rents allowed under the Ordinance 

and involved prudent and customary financing practices.” 

But the Guidelines expressly state that a GPM Analysis “is 

not intended to create any entitlement to any particular rent 

increase.”

In October 2006, the City amended the Implementation 

Guidelines to permit the Board also to conduct a 

“Maintenance of Net Operating Income Analysis” (“MNOI 

Analysis”) when considering applications for rent increases. 

The MNOI Analysis “compares the net operating income 

(NOI) level expected from the last rent increase granted to a 

park owner and prior to any pending rent increase 

application . . . to the NOI demonstrated in any pending rent 

increase application.” “[C]hanges in debt service expenses 

are not to be considered in the” MNOI Analysis.
6 COLONY COVE PROPERTIES V. CITY OF CARSON

B. Colony’s Purchase of the Mobile Home Park and 

Requested Rent Increases

On April 4, 2006, Colony Cove Properties, LLC 

(“Colony”) purchased Colony Cove Mobile Estates (“the 

Property”), a mobile home park in Carson, for $23,050,000; 

$18,000,000 of the purchase price was obtained through a 

loan. The annual debt service on that loan—$1,224,681—

far exceeded the prior owner’s annual profit of $718,240.

At the time of purchase, the Implementation Guidelines 

provided only for the GPM Analysis. Colony first filed an 

application for a rent increase in 2007, after the Guidelines 

were revised to also allow an MNOI Analysis. That 

application sought a rent increase of $618.05 per space; it 

was later amended to seek only $200 per space. The Board’s 

GPM Analysis suggested a rent increase of $200.93 per 

space, driven largely by the post-acquisition debt service. 

The Board’s MNOI Analysis, which did not account for the 

debt service, suggested a rent increase of only $36.74. The 

Board adopted the MNOI Analysis and approved the $36.74 

increase. In 2008, Colony requested a $342.46 rent increase. 

The Board again conducted both a GPM and an MNOI 

Analysis, adopted the latter, and granted an increase of 

$25.02.

C. Colony’s Previous Litigation

In 2008, Colony sued the City, asserting facial and asapplied takings and due process claims with respect to the 

Board’s 2007 decision. See Colony Cove Props., LLC v. City 

of Carson, 640 F.3d 948, 953–54 (9th Cir. 2011). The 

district court dismissed the facial attack as time-barred and 

the as-applied takings claim as unripe; we affirmed. Id. at 

956–57, 959.
COLONY COVE PROPERTIES V. CITY OF CARSON 7

The same day it appealed the first district court order, 

Colony also “filed a petition for writ of administrative 

mandate seeking review of the Board’s 2008 determination 

of its September 2007 rent increase applications” in state 

court; Colony later filed a similar second petition concerning 

the 2008 application. See Colony Cove Props., LLC v. City 

of Carson, 163 Cal. Rptr. 3d 499, 515 (Ct. App. 2013). The 

state trial court denied Colony’s petitions, and the California 

Court of Appeal affirmed, holding that state law allowed use 

of MNOI Analysis and that the Board’s failure to take debt 

service into account did not deprive Colony of a fair rate of 

return. Id. at 521–24, 530. The California Supreme Court 

denied review.1

D. The Current Litigation

Having exhausted its state-law claims,2 Colony returned 

to federal court, alleging that the 2007 and 2008 Board 

decisions were an unconstitutional taking and violated 

Colony’s substantive due process rights. The district court 

dismissed all of Colony’s claims except for an as-applied 

 1 The state trial court struck Colony’s England reservation of its 

federal takings claims, but the Court of Appeal reinstated the reservation. 

Colony Cove Props., 163 Cal. Rptr. 3d at 529–30; see England v. La. 

State Bd. Of Exam’rs, 375 U.S. 411, 421 (1964).

2 A “writ of administrative mandate” is a judicial avenue for relief 

from rent control decisions created by the California Supreme Court. See

Kavanau v. Santa Monica Rent Control Bd., 941 P.2d 851 (Cal. 1997). 

If the writ is granted, the property owner may seek a future rent 

adjustment “that takes into consideration past confiscatory rents.” Id. at 

866. “[T]he Kavanau adjustment process” satisfies the exhaustion 

requirements of Williamson County Regional Planning Commission v. 

Hamilton Bank of Johnson City, 473 U.S. 172, 195 (1985). See Equity 

Lifestyle Props., Inc. v. Cty. of San Luis Obispo, 548 F.3d 1184, 1192 

(9th Cir. 2008).
8 COLONY COVE PROPERTIES V. CITY OF CARSON

regulatory takings claim premised on Penn Central 

Transportation Co. v. City of New York, 438 U.S. 104 

(1978).

Over the City’s objection, the district court allowed a 

jury trial. At trial, Colony presented expert testimony that 

the Board’s use of the MNOI Analysis and the consequent 

failure to take debt service into account in setting the 2007 

and 2008 rents would cause Colony to lose rental income of 

approximately $5.7 million. Colony’s owner, James 

Goldstein, also testified that, when he bought the Property, 

he expected the Board to consider debt service in future rent 

increase determinations, and he would not have paid $23 

million for the park absent that expectation.

The City moved for judgment as a matter of law after 

both the close of Colony’s case and the close of evidence. 

After the district court denied the motions, the jury found 

that the Board’s 2007 and 2008 decisions were regulatory 

takings and awarded Colony $3,336,056 in damages. The 

City then filed a renewed Federal Rule of Civil Procedure 

50(b) motion for judgment. The court denied the motion and 

awarded Colony prejudgment interest, attorneys’ fees, and 

costs, entering a final judgment of $7,464,718.41.3

The City timely appealed. We have jurisdiction under 

28 U.S.C. § 1291, and we review de novo the district court’s 

denial of a motion for judgment as a matter of law. United 

States ex rel. Hopper v. Anton, 91 F.3d 1261, 1268 (9th Cir. 

1996). In doing so, “[w]e must view the evidence in the light 

 3 In the final judgment, the district court noted its agreement with 

the jury’s verdict: “Having independently weighed and considered the 

evidence, the Court agrees with the jury’s finding that a taking occurred, 

as well as the amount of damages that the jury awarded . . . .”
COLONY COVE PROPERTIES V. CITY OF CARSON 9

most favorable to the nonmoving party . . . and draw all 

reasonable inferences in that party’s favor.” Ostad v. Or. 

Health Scis. Univ., 327 F.3d 876, 881 (9th Cir. 2003). 

“Judgment as a matter of law is proper when the evidence 

permits only one reasonable conclusion and the conclusion 

is contrary to that reached by the jury.” Id.

II. Discussion

“The Takings Clause of the Fifth Amendment provides 

that private property shall not ‘be taken for public use, 

without just compensation.’” Murr v. Wisconsin, 137 S. Ct. 

1933, 1942 (2017). Although the paradigm of an 

unconstitutional taking is the direct appropriation of 

property, the Supreme Court has long acknowledged that “if 

regulation goes too far it will be recognized as a taking.” 

Penn. Coal Co. v. Mahon, 260 U.S. 393, 415 (1922).

“[T]he Court for the most part has refrained from 

elaborating . . . definitive rules” about when regulation goes 

so far as to become a taking. Murr, 137 S. Ct. at 1942. 

Judicial decisions considering regulatory takings claims are 

typically “characterized by essentially ad hoc, factual 

inquiries, designed to allow careful examination and 

weighing of all the relevant circumstances.” Tahoe-Sierra 

Pres. Council, Inc. v. Tahoe Reg’l Planning Agency, 

535 U.S. 302, 322 (2002) (internal quotation marks and 

citations omitted). The goal is to determine whether 

regulatory actions “are functionally equivalent to the classic 

taking in which government directly appropriates private 

property.” MHC Fin. Ltd. P’ship v. City of San Rafael, 

714 sF.3d 1118, 1127 (9th Cir. 2013) (quoting Lingle v. 

Chevron U.S.A. Inc., 544 U.S. 528, 539 (2005)).

The Penn Central factors ground our regulatory takings 

analysis. Penn Central instructs us to consider “[1] the 
10 COLONY COVE PROPERTIES V. CITY OF CARSON

regulation’s economic impact on the claimant, [2] the extent 

to which the regulation interferes with distinct investmentbacked expectations, and [3] the character of the government 

action.” MHC Fin., 714 F.3d at 1127. The question is 

whether Colony presented sufficient evidence on these 

factors to allow a reasonable finder of fact to conclude that 

the Board’s denials of Colony’s requested rate increases 

were the functional equivalent of the direct appropriation of 

the Property. We address each factor in turn.

A. Economic Impact 

In considering the economic impact of an alleged taking, 

we “compare the value that has been taken from the property 

with the value that remains in the property.” Keystone 

Bituminous Coal Ass’n v. DeBenedictis, 480 U.S. 470, 497 

(1987). Penn Central stresses that, “[i]n deciding whether a 

particular governmental action has effected a taking, this 

Court focuses rather both on the character of the action and 

on the nature and extent of the interference with rights in the 

parcel as a whole.” 438 U.S. at 130–31. If “an owner 

possesses a full ‘bundle’ of property rights, the destruction 

of one ‘strand’ of the bundle is not a taking, because the 

aggregate must be viewed in its entirety.” Andrus v. Allard, 

444 U.S. 51, 65–66 (1979).

The jury concluded that Colony would have received 

approximately $3.3 million in additional income over an 8-

year period if the Board had adopted the alternative GPM 

Analysis and factored debt service into the 2007 and 2008 

rent increases. But the mere loss of some income because of 

regulation does not itself establish a taking. Rather, 

economic impact is determined by comparing the total value 

of the affected property before and after the government 

action. See MHC Fin., 714 F.3d at 1127. Projected income 

streams can contribute to a method for determining the post-
COLONY COVE PROPERTIES V. CITY OF CARSON 11

deprivation value of property, but the severity of the loss can 

be determined only by comparing the post-deprivation value 

to pre-deprivation value. Id.

Not every diminution in property value caused by a 

government regulation rises to the level of an 

unconstitutional taking. “Government hardly could go on if 

to some extent values incident to property could not be 

diminished without paying for every such change in the 

general law.” Penn. Coal Co., 260 U.S. at 413. Although 

no litmus test determines whether a taking occurred, we start 

from the premise that the Penn Central factors seek “to 

identify regulatory actions that are functionally equivalent to 

the classic taking in which government directly appropriates 

private property or ousts the owner from his domain.” See 

Lingle, 544 U.S. at 539. Thus, we have observed that 

diminution in property value because of governmental 

regulation ranging from 75% to 92.5% does not constitute a 

taking. MHC Fin., 714 F.3d at 1127–28. The Federal 

Circuit has noted that it is “aware of no case in which a court 

has found a taking where diminution in value was less than 

50 percent.” CCA Assocs. v. United States, 667 F.3d 1239, 

1246 (Fed. Cir. 2011). Nor are we.

There was no evidence before the district court allowing 

a comparison of the pre-deprivation and post-deprivation 

values of the Property. Colony purchased the Property for 

approximately $23 million, and we assume that this number 

establishes the pre-deprivation value. But Colony presented 

no evidence, expert or otherwise, about the Property’s postdeprivation value. Rather, the only evidence concerned the 

amount of rent claimed to be lost over an 8-year period 

because of the Board’s refusals to approve higher increases. 

Even assuming that the lost rental income asserted by 

Colony—$5.7 million—equates to diminution in property 
12 COLONY COVE PROPERTIES V. CITY OF CARSON

value, that reduction would only be 24.8% of the assumed 

$23 million pre-deprivation value of the Property, far too 

small to establish a regulatory taking.4

Colony argues that post-deprivation “sale value is not the 

only permissible basis to consider economic loss.” We 

agree—for example, the discounted future cash flows 

produced by an income-producing property can provide an 

appropriate valuation methodology. See, e.g., Cienega 

Gardens v. United States, 503 F.3d 1266, 1282 (Fed. Cir. 

2007) (determining economic impact by “compar[ing] the 

lost net income due to the restriction (discounted to present 

value at the date the restriction was imposed) with the total 

net income without the restriction over the entire useful life 

of the property (again discounted to present value)”). But 

Colony presented no evidence, by virtue of analyzing 

diminished income streams or otherwise, of the postdeprivation value of the Property.

Colony also asserts that the Board took its property 

because it suffered annual operating losses in 2007 and 2008. 

But those losses resulted directly from Colony’s decision to 

incur a large debt when purchasing the property and cannot 

alone establish a taking. Even if Colony’s decision to 

borrow was commercially reasonable, it serves only to 

establish that the purchase price of $23 million is the predeprivation value. The post-deprivation value of the 

Property cannot be dictated by debt service; otherwise, two 

identical mobile home properties would have different 

values, depending on how their owners chose to finance the 

acquisitions. See Colony Cove Props., 163 Cal. Rptr. 3d at 

 4 The jury, whose award Colony does not challenge on appeal, found 

that the lost rental income was only $3.3 million, which would equate to 

a 14.3% reduction in the Property’s value.
COLONY COVE PROPERTIES V. CITY OF CARSON 13

521 (praising the MNOI Analysis “for its fairness and ease 

of administration” in contrast to the GPM Analysis, which 

can be “problematic to administer, because an owner’s 

equity can be greatly affected by individual differences in 

methods and costs of financing” (internal quotation marks 

omitted)).

Thus, on the first Penn Central prong, Colony did not 

present sufficient evidence to create a triable question of fact 

as to the economic impact caused by the City’s denial of 

larger rent increases. We therefore turn to the second prong.

B. Distinct Investment-Backed Expectations

Colony argues that, when it acquired the Property, it had 

a distinct investment-backed expectation that the Board 

would use the GPM Analysis and account for debt service in 

determining future rent increases. It is this expectation, 

Colony argues, with which the City interfered, and the jury 

therefore properly awarded Colony the rent increases it 

expected. Even accepting Colony’s argument that we should 

focus only on the lost rental income, rather than the postdeprivation value of the Property as a whole,5 the argument 

fails.

To form the basis for a taking claim, a purported distinct 

investment-backed expectation must be objectively 

reasonable. See CCA Assocs., 667 F.3d at 1247; see also 

Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1035 (1992) 

(Kennedy, J., concurring in the judgment) (noting that 

investment-backed “expectations protected by the 

 5 Cf. Penn Cent., 438 U.S. at 130 n.27 (stating that in determining 

whether a regulatory taking occurred, the government’s action is 

measured against “the parcel as a whole”).
14 COLONY COVE PROPERTIES V. CITY OF CARSON

Constitution are based on objective rules and customs that 

can be understood as reasonable by all parties involved”); 

Chancellor Manor v. United States, 331 F.3d 891, 907 (Fed. 

Cir. 2003) (holding that courts must use “an objective 

analysis to determine the reasonable investment-backed 

expectations of the Owners”). Colony claims that, when it 

purchased the Property, it reasonably expected that debt 

service would be recognized in future rent increases because 

(1) the existing Implementation Guidelines then provided 

only for a GPM Analysis; (2) the Board had always 

recognized debt service as a factor when granting rent 

increases on another mobile home park owned by Goldstein; 

and (3) two California Court of Appeal opinions—Palacio 

de Anza v. Palm Springs Rent Review Commission, 257 Cal. 

Rptr. 121 (Ct. App. 1989), and Carson Gardens, L.L.C. v. 

City of Carson Mobilehome Park Rental Review Board, 

37 Cal. Rptr. 3d 768 (Ct. App. 2006)—required 

consideration of debt service. We address each argument in 

turn.

1. The Implementation Guidelines—even before the 

2006 Amendment allowing MNOI Analysis—clearly could 

not have formed the basis for an objectively reasonable 

expectation that the Board would always account for debt 

service in considering future rent increases. The Guidelines 

plainly stated that “[n]o one factor in the Ordinance is 

determinative and the facts must be considered together and 

balanced in light of the purposes of the Ordinance and all the 

relevant evidence.” More importantly, the Guidelines 

stressed that the GPM Analysis “is not intended to create any 

entitlement to any particular rent increase.” Indeed, Colony 

concedes that “Carson does not permit an automatic rent 

increase based on a set formula.”
COLONY COVE PROPERTIES V. CITY OF CARSON 15

2. Goldstein’s experience as an owner of another 

mobile home park in Carson in the two decades before his 

purchase of the Property did not establish a reasonable 

expectation that the Board would consider debt service in all 

rent increase applications. As a general matter, an investor 

must account for “the burden of rent control” in its 

expectations about future increased rental income. 

Guggenheim v. City of Goleta, 638 F.3d 1111, 1120–21 (9th 

Cir. 2010) (en banc). And, the Implementation Guidelines, 

adopted in 1998—long before the purchase of the 

Property—made plain that use of a GPM Analysis created 

no expectation to a particular rent increase. Moreover, the 

Board did not consider acquisition interest expenses in 

Goldstein’s first application for a rent increase at his other 

park. Goldstein initially applied for a $57.85 rent increase 

for that park, $41.38 of which related to increased debt 

service. The Board, however, granted only a $12 rent 

increase, which did not account for the debt service. Thus, 

an objectively reasonable person could not have expected 

that all future rent increase applications seeking increases 

because of debt service would be granted. 6

3. Colony’s contention that the two California Court of 

Appeal decisions require “the City to take debt service into 

account in considering rent-increase applications, and . . . 

preclude[d] the City from . . . using MNOI,” misreads both 

opinions. Neither mandates that a rent control board account 

for debt service in determining rent increases. Rather, both 

merely hold that a Board must conduct the analyses it 

 6 Colony’s purported expectation of a $200 increase in 2007 would 

have resulted in a 49.5% per-space rent increase for Colony Gardens. 

Such an increase would have been twice as large as the largest increase 

ever previously granted by the Board and significantly larger than the 

largest increase Goldstein’s other properties ever received—$58.70.
16 COLONY COVE PROPERTIES V. CITY OF CARSON

represented it would conduct, without requiring the adoption 

of a particular method of analysis.

Palacio de Anza simply required a rent control board to 

apply its guidelines when considering a rent increase 

application. 257 Cal. Rptr. at 124. There is no contest that 

the Board did so here. And, in Carson Gardens, the Court 

of Appeal expressly held:

[N]othing in the [City of Carson’s] ordinance 

requires the Board to apply any particular 

formula or methodology without deviation. 

Indeed, the city’s Guidelines specifically 

state that the [GPM] analysis ‘is an aid to 

assist the Board in applying the factors in the 

Ordinance and is to be considered together 

with the factors in [the ordinance], other 

relevant evidence presented and the purposes 

of the Ordinance,’ and is not intended to 

create any entitlement to any particular rent 

increase.

37 Cal. Rptr. 3d at 777 (fourth alteration in original). At 

most, Carson Gardens compels the Board only to consider

a GPM Analysis, see id. at 776–77, and in affirming the trial 

court’s dismissal of Colony’s petition, the Court of Appeal 

here expressly acknowledged that the Board did precisely 

that in evaluating both the 2007 and 2008 Colony 

applications, see Colony Cove Props., 163 Cal. Rptr. 3d at 

504–11.7

 7 The Court of Appeal also noted that “the MNOI approach has been 

upheld by every court to have considered it.” Colony Cove Props., 

163 Cal. Rptr. 3d at 522.
COLONY COVE PROPERTIES V. CITY OF CARSON 17

In Carson Gardens the plaintiff sued the Board, claiming 

in part that the Board did not conduct a GPM Analysis. 

37 Cal. Rptr. 3d at 770–76. A trial court ordered the Board 

to conduct the analysis and remanded the case, but the Board 

failed to conduct the GPM Analysis on remand. Id. at 772–

73. On the second challenge, the trial court granted the 

plaintiff’s proposed rent increase based on its GPM 

Analysis, but the Court of Appeal reversed. Id. at 774–75, 

777. Although the initial trial court’s order required 

consideration of debt service costs, the Court of Appeal 

remanded the case “so that the Board c[ould] exercise its 

discretion on the question of whether passing through the 

entire amount of debt service costs was necessary to provide 

a fair return.” Id. at 776.

No objectively reasonable person confronted with this 

evidence in 2006 could have expected that the Board would 

always account for debt service when determining rent 

increases.8 Colony failed to present sufficient evidence 

supporting its investment-backed expectations claim under 

Penn Central’s second prong.

C. Character of the Government Action

Penn Central instructs that “[a] ‘taking’ may more 

readily be found when the interference with property can be 

 8 Colony also claims that its expectations were reasonable because 

a former City employee testified that the Implementation Guidelines 

were “more important, at least for day-to-day operation[s]” than the 

ordinance. But the Guidelines, even before their amendment, made clear 

that a property owner had no right to a rent increase based on the GPM 

Analysis. And Colony does not contend that it relied on this statement, 

which was made in a deposition in this litigation, in determining whether 

to purchase the Property.
18 COLONY COVE PROPERTIES V. CITY OF CARSON

characterized as a physical invasion by government than 

when interference arises from some public program 

adjusting the benefits and burdens of economic life to 

promote the common good.” 438 U.S. at 124 (citation 

omitted).9 The City’s rent control ordinance is precisely 

such a program, striving to “protect[ ] Homeowners from 

excessive rent increases and allow[ ] a fair return on 

investment to the Park Owner.” This central purpose of rent 

control programs “counsels against finding a Penn Central

taking.” MHC Fin., 714 F.3d at 1128.

Citing Lingle, 544 U.S. at 539, and David Hill 

Development, LLC v. City of Forest Grove, No. 3:08-CV266-AC, 2012 WL 5381555 (D. Or. Oct. 30, 2012), Colony 

argues that the 2006 amendment to the Guidelines should be 

characterized as a taking because it targeted Colony’s 

acquisition of the Property and the consequent large debt 

service. But these cases are inapposite. Lingle simply held 

that a plaintiff could not claim that a regulation constituted a 

taking merely because it did not substantially advance a 

legitimate state interest. 544 U.S. at 547–48. And David 

Hill dealt with an express exaction. 2012 WL 5381555, at 

*9–12. More importantly, government action is legitimately 

prompted by changes in regulated areas. Even assuming that 

the 2006 Amendment to the Guidelines was prompted by the 

large amount of debt service involved in Colony’s

acquisition and the City’s realization that a more 

sophisticated analysis than the GPM might be needed to 

 9 The Supreme Court also stressed that the first two Penn Central

factors are the most important. See Lingle, 544 U.S. at 538–39 (“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.” (internal 

quotation marks and brackets omitted)).
COLONY COVE PROPERTIES V. CITY OF CARSON 19

address requests for rent increases, the character of the 

government regulation remains the same. The third Penn 

Central prong therefore is not satisfied.

III. Conclusion

On the evidence in this case, no reasonable finder of fact 

could conclude that the Board’s denials of Colony’s 

requested rent increases were the functional equivalent of a 

direct appropriation of the Property. Accordingly, the 

district court should have granted the City’s motion for 

judgment as a matter of law. We therefore REVERSE the 

judgment of the district court and REMAND with 

instructions to enter judgment in favor of the City.10

 10 We therefore need not consider the City’s alternative argument 

that a district court, not a jury, is the appropriate finder of fact in 

regulatory takings cases.