Opinion ID: 2631196
Heading Depth: 2
Heading Rank: 2

Heading: Excessive Procedural Costs

Text: The Gallands claim, and the trial court found, that they were damaged in the amount of $247,885 for costs incurred as a result of arbitrary and unreasonable administrative proceedings. Although difficult to pigeonhole, this claim is properly understood more as a substantive, rather than as a procedural, due process claim. A procedural due process claim possesses two components: first, that an individual has been deprived of a constitutionally protected liberty or property interest; and second, that this deprivation, while not necessarily unconstitutional in and of itself, was rendered unconstitutional because it was undertaken without according the individual the appropriate hearing. (See, e.g., Zinermon, supra, 494 U.S. at pp. 133-134, 110 S.Ct. 975.) In the present case, however, the Gallands contend that the rent control process was itself an independent source of injury, by imposing on them exorbitant costs for what the trial court termed Clovis's overly broad, unduly burdensome, arbitrary, unreasonable, and inconsistent requests for information in order to obtain legitimate rent increases. In other words, the source of their injury was not the lack of procedural protections that led to the denial of a fair rent increase, but the fact that Clovis made demands on them as a condition of obtaining a rent increase that, in addition to being costly, were intrinsically arbitrary and irrational. This is best understood as a claimed violation of substantive due process. The question, then, is whether Clovis's actions during the rent adjustment hearings of 1988 to 1990, independent of the outcome of those hearings (which was addressed in the previous part of this opinion), violated the Gallands' substantive due process rights. In order to answer this question, we must first understand in greater depth the nature of those rights. To do so, we begin with the recent clarification of the meaning of substantive due process in County of Sacramento v. Lewis (1998) 523 U.S. 833, 118 S.Ct. 1708, 140 L.Ed.2d 1043 ( County of Sacramento ). In County of Sacramento, the parents of a motorcycle passenger killed in a high-speed chase sued the county and the responsible officer for violations of substantive due process rights under section 1983. In rejecting their claim, the United States Supreme Court explained: Since the time of our early explanations of due process, we have understood the core of the concept to be protection against arbitrary action.... [¶] ... While due process protection in the substantive sense limits what the government may do in both its legislative [citation] and its executive capacities [citation], criteria to identify what is fatally arbitrary differ depending on whether it is legislation or a specific act of a governmental officer that is at issue. [¶] Our cases dealing with abusive executive action have repeatedly emphasized that only the most egregious official conduct can be said to be `arbitrary in the constitutional sense,' [citation], thereby recognizing the point made in different circumstances by Chief Justice Marshall, `that it is a constitution we are expounding,' [citations]. Thus, ... we [have] said that the Due Process Clause was intended to prevent government officials ``from abusing [their] power or employing it as an instrument of oppression.'' [Citations.] [¶] To this end, for half a century now we have spoken of the cognizable level of executive abuse of power as that which shocks the conscience. .... [¶] It should not be surprising that the constitutional concept of conscience shocking duplicates no traditional category of common-law fault, but rather points clearly away from liability, or clearly toward it, only at the ends of the tort law's spectrum of culpability. Thus, we have made it clear that the due process guarantee does not entail a body of constitutional law imposing liability whenever someone cloaked with state authority causes harm.... [W]e [have] explained that the Fourteenth Amendment is not a `font of tort law to be superimposed upon whatever systems may already be administered by the States,' and [citation] that `[o]ur Constitution deals with the large concerns of the governors and the governed, but it does not purport to supplant traditional tort law in laying down rules of conduct to regulate liability for injuries that attend living together in society.' We have accordingly rejected the lowest common denominator of customary tort liability as any mark of sufficiently shocking conduct, and have held that the Constitution does not guarantee due care on the part of state officials; liability for negligently inflicted harm is categorically beneath the threshold of constitutional due process. [Citations.] It is, on the contrary, behavior at the other end of the culpability spectrum that would most probably support a substantive due process claim; conduct intended to injure in some way unjustifiable by any government interest is the sort of official action most likely to rise to the conscience-shocking level. ( County of Sacramento, supra, 523 U.S. at pp. 845-849, 118 S.Ct. 1708, fn. omitted, some italics added.) The Gallands argue that County of Sacramento is inapposite inasmuch as it pertains to executive action, whereas Clovis's actions are what it characterizes as quasi-judicial. Of course, most executive or administrative agencies perform quasi-judicial functions. These functions, when carried out by such agencies, are more appropriately designated as executive rather than legislative functionsthey are implementing legislation, not legislating. The Gallands' argument is valid, however, insofar as it recognizes that the determination of when a substantive due process violation occurs is contextual. As the County of Sacramento court itself suggested, a less egregious government action than was committed in that case may shock the conscience if the executive or administrative actor had an opportunity to deliberate. Thus, for example, the court recognized that the most appropriate substantive due process standard for injury inflicted on a person in custody may be deliberate indifference, as it is under the Eighth Amendment, although the court rejected the deliberate indifference standard in the context of high-speed chases. ( County of Sacramento, supra, 523 U.S. at p. 851, 118 S.Ct. 1708.) Nonetheless, other cases both before and after County of Sacramento have affirmed in a variety of contexts, using a variety of verbal formulations, the principle that the arbitrary government conduct that triggers a substantive due process violation is not ordinary government error but conduct that is in some sense outrageous or egregiousa true abuse of power. (See, e.g., Fagan v. City of Vineland (3d Cir.1994) 22 F.3d 1296, 1306 [shock the conscience standard used for police pursuit, deliberate indifference standard for those in custody]; Natale v. Town of Ridgefield (2d Cir.1999) 170 F.3d 258, 263 [rejecting substantive due process claim regarding issuance of building and zoning permits and affirming that [s]ubstantive due process standards are violated only by conduct that is so outrageously arbitrary as to constitute a gross abuse of governmental authority]; Creative Environments, Inc. v. Estabrook (1st Cir.1982) 680 F.2d 822, 832-833 [ordinary state law error in land use planning process not a substantive due process violation]; Uhlrig v. Harder (10th Cir.1995) 64 F.3d 567, 574 [in the context of arguable government negligence leading to murder of therapist by criminally insane mental patient, court affirmed that substantive due process violation must be intentional or reckless and that the degree of outrageousness and a magnitude of potential or actual harm [must be] truly conscience shocking]; Rivkin v. Dover Tp. Rent Leveling Bd. (1996) 143 N.J. 352, 671 A.2d 567, 574-575 ( Rivkin ) [rejecting claim that errors in mobilehome rent review process amounted to substantive due process violation, and affirming that substantive due process is reserved for the most egregious governmental abuses against liberty or property rights]; Clark v. City of Hermosa Beach (1996) 48 Cal.App.4th 1152, 1186, 56 Cal. Rptr.2d 223 [zoning decision that violated state law in some respects but was not wholly irrational and did not shock the conscience was not a substantive due process violation].) The New Jersey Supreme Court in Rivkin, supra, 671 A.2d 567, a case like our own in some respects, concisely explained why the mere finding that a government decision is arbitrary or capricious is not sufficient to establish a substantive due process violation. In that case, a mobilehome park owner brought an action against a municipality for denying a requested rent increase in a proceeding that was tainted with the open bias and conflict of interest of one of its members. In rejecting the owner's section 1983 substantive due process claim, the court stated: It is a mistake ... to equate the concept of `arbitrary and irrational' governmental land use decisions with the substantive component of the Due Process Clause of the Fourteenth Amendment. In the land use context, the phrases `arbitrary and irrational' or `capricious' are often shorthand expressions for a standard of review that asks whether there are sufficient facts in the record to support the agency's action or whether the agency has followed its legislative mandate. [Citation.] [¶] ... `[Frequently in our law a court on an appeal from action of a public agency will determine if the agency acted arbitrarily or capriciously. Accordingly while the words arbitrary and capricious may sound harsh, they are simply the standard of appellate review in particular cases.' [Citation.] ... It is for this reason that ... substantive due process protections should be reserved for `truly irrational' governmental abuses that bear no relationship to the merits of the pending matter. ( Rivkin, supra, 671 A.2d at pp. 576-577.) Moreover, the notion that a cognizable section 1983 action is found only in circumstances of outrageous government abuse applies even when it leaves a person seriously injured by government action or inaction without a remedy, as when the government is protected from liability by state law statutory immunities. Thus, in Davidson v. Cannon (1986) 474 U.S. 344, 346-348, 106 S.Ct. 668, 88 L.Ed.2d 677, for example, a prisoner who was beaten by a fellow inmate after prison officials negligently failed to intervene, was denied any section 1983 relief, and was also unable to pursue a tort action due to state law immunity. Against this background, we must formulate more precisely the appropriate substantive due process standard for determining when an administrative body charged with implementing a law acts erroneously in such a way as to injure an individual's economic and property interests. The shocks the conscience standard, although generally applicable, is not particularly helpful. As the County of Sacramento court recognized, that standard is no calibrated yard stick, but merely poin[ts] the way. ( County of Sacramento, supra, 523 U.S. at p. 847, 118 S.Ct. 1708.) The standard seems especially apt with regard to assaults on bodily integrity by government officialswhen, as Justice Frankfurter stated, government action moves too close to the rack and screw to permit of constitutional differentiation. ( Rochin v. California (1952) 342 U.S. 165, 172, 72 S.Ct. 205, 96 L.Ed. 183.) Is there a standard that can identify more precisely when the actions of an administrative body charged with implementing the law are arbitrary and conscience-shocking in a constitutional sense? We conclude that the court in Silverman v. Barry (D.C.Cir.1988) 269 App.D.C. 327, 845 F.2d 1072 has given the most satisfactory answer to this question. In that case, a series of arguably unjustifiable administrative delays led to the frustration of the plaintiffs plans to convert his building from a rental into condominium before a conversion moratorium was imposed. The court stated: To succeed in a § 1983 suit for damages for a substantive due process ... violation, a plaintiff must at least show that state officials are guilty of grave unfairness in the discharge of their legal responsibilities. Only a substantial infringement of state law prompted by personal or group animus, or a deliberate flouting of the law that trammels significant personal or property rights, qualifies for relief under § 1983. [Citation.] Inadvertent errors, honest mistakes, agency confusion, even negligence in the performance of official duties, do not warrant redress under this statute. ( Id. at p. 1080, italics added.) We conclude that the above standard is consistent with the Supreme Court's most recent pronouncements regarding substantive due process violations for executive action. Because substantive due process does not encompass negligently inflicted harm ( County of Sacramento, supra, 523 U.S. at p. 848, 118 S.Ct. 1708), but rather only the most egregious official conduct, wherein government officials are ``[abusing their] power, or employing it as an instrument of oppression'' ( id. at p. 846, 118 S.Ct. 1708), it cannot be said to encompass governmental mistakes and bureaucratic errors that are something less than an abuse of power. Roy v. City of Augusta, Maine (1st Cir.1983) 712 F.2d 1517, cited by the Barry court, illustrates this deliberate flouting of the law standard. In Roy, the Supreme Judicial Court of Maine decided that the city had wrongfully denied plaintiff the renewal of a license to operate a pool and billiard room that had met with some community opposition. In response to the resultant court order, the city clerk issued the license that the plaintiff had originally sought but that had expired in the interim. As a result, the plaintiff had to suspend his business activities, lost his property, and filed a section 1983 action against the city. The court reaffirmed the rule it had stated in Creative Environments, Inc. v. Estabrook, supra, 680 F.2d 822, that ordinary state law error does not amount to a substantive due process violation. Nonetheless, the court reversed the district court's dismissal of the complaint, concluding that the plaintiff would have a valid claim of a substantive due process violation if it could prove that his injury was due not merely to the law's delay and [the government's] errors but to defendants' deliberate disregard of the state's fundamental process. ( Roy v. City of Augusta, Maine, supra, 712 F.2d at p. 1524.) [6] This standard is consistent with the holding of a series of cases, some of which are cited by the Gallands, that find substantive due process violations when municipalities refuse to issue nondiscretionary building permits. (See Mission Springs, Inc. v. City of Spokane (1998) 134 Wash.2d 947, 954 P.2d 250 ( Mission Springs ); Bateson v. Geisse (9th Cir.1988) 857 F.2d 1300, 1303-1305; Bello v. Walker (3d Cir.1988) 840 F.2d 1124, 1129; Scott v. Greenville County (4th Cir.1983) 716 F.2d 1409, 1419.) For example, in Mission Springs, supra, 134 Wash.2d 947, 954 P.2d 250, a developer that had run the entire gauntlet of zoning and planning requirements was denied building permits by the city council, even though it was clear from applicable statutes and ordinances, and from the advice of the city attorney, that the city council had no discretion at that point to deny the permits. ( Mission Springs, supra, 954 P.2d at pp. 252-259.) Such refusal to issue clearly nondiscretionary permits is properly characterized as a deliberate flouting of the law. [7] (See also Cohan v. City of Thousand Oaks (1994) 30 Cal.App.4th 547, 561, 35 Cal.Rptr.2d 782 [denial of development permits after numerous violations of the city's own procedures as well as state law amounts to a cavalier ... disregard[ ] of developers' substantive and procedural due process rights].) [8] In cases such as the present, a deliberate flouting of the law may be said to have occurred if the city's demands for information and other procedural demands were so excessive and irrelevant to the regulatory task at hand as to lead a court to conclude that such demands were imposed not in order to obtain more information or increase the reliability of the eventual decision, but rather to obstruct or discourage landlords from either requesting or obtaining reasonable rent increases to which they are constitutionally entitled. We emphasize, however, that something more than mere bureaucratic bungling is required. Rent control boards, like other regulators, have need of information from those regulated, and the act of requesting information is itself a legitimate government activity. Even if, for example, the information requested is in retrospect excessive in relationship to the relevant inquiry, that does not of itself constitute a due process violation compensable under section 1983. Consistent with the deliberate flouting of law standard announced today, we hold as a prospective rule that, if faced with a situation similar to this case, a landlord who believes that a rent board's information request is arbitrary and overly burdensome must register an objection to the request and give some explanation for the objection. This then puts the board on notice that the request is considered overreaching, and gives the board the opportunity to respond. If the board nonetheless insists on the information, then the landlord has the option of either submitting the information under protest or refusing to fully comply with the information request. If the board then denies the application, either on the merits or based on the fact that not enough information had been provided, the landlord may then seek a writ of mandate overturning the decision. If the board based its decision on a failure to provide sufficient information, then the court would determine whether the information submitted was in fact sufficient. In making that determination, a court would look to analogous areas of law such as the law of administrative subpoenas. (See Connecticut Indemnity Co. v. Superior Court (2000) 23 Cal.4th 807, 817, 98 Cal.Rptr.2d 221, 3 P.3d 868; 2 LaFave, Search and Seizure (3d ed.1996) § 4.13(d), pp. 740-741 [in determining whether a subpoena's request for information is excessive, courts perform a balancing test, considering factors including: (1) the scope of the investigation; (2) the probability that the records will reveal evidence helpful to the investigation; (3) the financial or economic burden that compliance imposes on the subpoenaed party].) With the appropriate standard in mind, we review the trial court's determination that the Gallands suffered $247,885 in damages from substantive due process violations because of the arbitrary, unduly burdensome, and unreasonable actions of Clovis in requiring expensive and unnecessary audits and other data during rent adjustment proceedings. We observe at the outset that these proceedings were, at the very least, inefficient. Neither the Ordinance nor any implementing regulations made clear precisely how the Gallands were to obtain a rent increase. This regulatory vacuum was filled by an ad hoc proceeding marked by Clovis's shifting, costly, and at times ill-considered requests for information. As a result, the Gallands lacked a timely and affordable means by which to seek rent increases. But was the trial court correct in determining whether and in what amount damages were owed under section 1983? The amount of damages was based, as explained above, on a one-page document prepared by John Chamberlain, entitled Costs of Fair Proceedings, and on his testimony, that a fair rent adjustment proceeding should have cost no more than $2,325 per year. Multiplying that by the three years in question, the total comes to $6,975. That figure, subtracted from the $254,860 that the Gallands actually spent for the three years of rent proceedings, yielded the $247,885 damages figure. In light of the above discussion, the fallacy of the trial court's method of determining the existence and extent of the supposed substantive due process damages appears evident. Even assuming that the estimated cost of a fair proceeding were supported by substantial evidence, the fact remains that not every government action that fails to measure up to the ideal of a fair and Inefficient rent control proceeding inflicts a constitutional injury. Only those government actions that amount to a deliberate flouting of the law qualify for relief under section 1983 ( Silverman v. Barry, supra, 845 F.2d at p. 1078), not inadvertent errors, honest mistakes, agency confusion, [or] negligence ( ibid. ). [9] We observe that the determination of allowable increases under a rent control regime is a complicated calculation that often requires the production and analysis of extensive financial data. (See, e.g., Carson Mobilehome Park Owners' Assn. v. City of Carson (1983) 35 Cal.3d 184, 193, 197 Cal.Rptr. 284, 672 P.2d 1297 [mobilehome rent control ordinance includes review of complex financial and tax data]; see also Baar, Guidelines for Drafting Rent Control Laws: Lessons of a Decade (1983) 35 Rutgers L.Rev. 723, 815 [the requirements that expense and income information for several years accompany individual rent adjustment petitions is inherent in some methods of determining fair return].) Nor is information comparing rental income and other data between mobilehome parks irrelevant to the task of adjusting rent levels. Indeed, the Gallands' own expert at trial used such data to argue that the permitted rental increases had been insufficient, Clovis's inquiries into the financial arrangements between the Gallands, Chamberlain, PMS, and the Rose Trust were also legitimate, allowing Clovis to understand whether certain transactions should be classified as income rather than expenses or investment. Moreover, the fact that some of the requested information proved not to be determinative of the rent regulators' ultimate decision does not establish constitutional injury. Nor, unlike the building permit cases cited above, is it clear from the record that Clovis abused its authority by refusing to fulfill a clearly established, nondiscretionary duty toward the Gallands. On the contrary, the rate-setting process involves the exercise of considerable discretion and is, as we have recognized, `often hopelessly complex.' ( Kavanau, supra, 16 Cal.4th at p. 778, 66 Cal.Rptr.2d 672, 941 P.2d 851.) Moreover, the Gallands themselves were not blameless. As discussed, their attempt at a rent increase in 1985 was rebuffed for failure to specify the cost increases that would justify such an increase, and they were sanctioned for frivolously appealing the trial court's decision. In spite of that fact, and in spite of the fact that the Clovis mobilehome rent control ordinance clearly provides that rent increases were to be justified by evidence of cost increases for such items as utility rates, property taxes, insurance, advertising, governmental assessments, cost of living increases attributable to incidental services, normal repairs and maintenance, capital improvements, etc. (Ord., § 5-13.06(i)), the Gallands were initially not forthcoming in providing such specific financial data. All that being said, we conclude that we need not and should not decide whether any of the many information requests and other administrative requirements that the Gallands contend were arbitrary and burdensome violated their substantive due process rights. Rather, all we decide is that the trial court did not employ the proper standard of gauging constitutional injury. On remand, the court must consider in context, against the overall background of Clovis's dealings with the Gallands, each of the administrative expenses that the Gallands contend inflicted such injury to determine whether any such expenses were imposed in deliberate violation of the law. In defense of the trial court's decision, the Gallands cite Birkenfeld, supra, 17 Cal.3d at page 169, 130 Cal.Rptr. 465, 550 P.2d 1001. There, we held that one of the necessary components of a constitutional rent control ordinance is that it provide a mechanism to adjust rents to reflect changed conditions without a substantially greater incidence and degree of delay than is practically necessary. ( Ibid. ) We invalidated in part an ordinance that failed to contain such a mechanismit provided no means of across-the-board rental adjustments in a city with more than 20,000 units under rent control, required an apartment-by-apartment consideration with no means by which a landlord could consolidate rent adjustment requests, and precluded the rent board from delegating adjustment hearings to staff. ( Id. at pp. 169-172, 130 Cal.Rptr. 465, 550 P.2d 1001.) With such an inadequate mechanism, many or most rent ceilings would be or become confiscatory. ( Id. at p. 169, 130 Cal.Rptr. 465, 550 P.2d 1001.) The Gallands argue in effect that a rent-setting process that falls below the standard suggested in Birkenfeld is unconstitutional, and any costs incurred in complying with this substandard process should be recoverable in a section 1983 action. Birkenfeld, however, is inapposite. There is no claim that Clovis's rent control ordinance is unconstitutional on its face. The issue is not whether Clovis's failure to adjust rents in a timely fashion has led to a confiscatory resulta question we addressed in the previous part of this opinion. Rather, we are concerned in this part with whether the trial court was correct in awarding the Gallands $247,885 in damages resulting from administrative and legal expenditures during the rent-setting process itself. In determining whether a constitutional injury has taken place, we follow the path of the United States Supreme Court and other courts in asking whether government agents have deliberately committed obstructive and unlawful acts designed to interfere with the Gallands' property rights. [10] Finally, we note that even if Clovis's actions do not rise to a deliberate flouting of the law, the Gallands are not necessarily without a remedy. As explained above, Clovis cannot in this case arbitrarily exclude the administrative expenses it has imposed on the Gallands in calculating whether they are receiving a fair ROI. Thus, in determining whether a Kavanau adjustment is appropriate under the rent control regime in Clovis, the city must consider all such expenses. But administrative expenses can be charged directly to Clovis in the form of section 1983 damages only when the city imposes them in deliberate contravention of the law to obstruct the Gallands' constitutionally based property rights.