Opinion ID: 2631196
Heading Depth: 3
Heading Rank: 2

Heading: Was a Kavanau Adjustment Inadequate as a Matter of Law?

Text: If the trial court reaffirms that the rent ceilings were confiscatory to some extent, then the matter would generally be remanded to the Clovis City Council to attempt a Kavanau adjustment. The Court of Appeal held that a Kavanau adjustment would be inadequate as a matter of law. Its conclusion was based primarily on the substantial sum of damages accruing from lost rents$236,806in part because of Clovis's long delay in reaching a final decision and preparing the administrative record, which postponed the Gallands' mandamus remedy. As discussed, we generally presume that a landlord has the means to obtain judicial intervention to prevent large financial losses. But in the present case, although the parties argue over the length of Clovis's unjustifiable delay in preparing the administrative record, even Clovis concedes that there was some period of unnecessary delay that may have retarded the Gallands' ability, through judicial intervention, to prevent their losses from accumulating. Although the trial court did not address this question precisely, it found, in the context of rejecting Clovis's statute of limitations defense, a delay in providing the administrative record for 1988, 1989 and 1990, and the co-extensive delay in issuing final decisions for the 1989 and 1990 administrative proceedings.... On the other hand, the Ordinance allowed the Woods rent increases to go into effect and did not require the Gallands to rescind them until the city council's decision was final in 1992. The Gallands voluntarily rescinded at least a portion of their rent increases after the Commission's decision. The trial court must determine on remand whether, under the circumstances, the Gallands reasonably used the available legal machinery to prevent a constitutional injury from occurring. Even if it is concluded that the Gallands suffered undue delay, the question whether a Kavanau adjustment is adequate is in large part a factual one, and not for the speculation of an appellate court. Here, we note that although the amount of the alleged lost rent is fairly substantial, the Woods has 260 units, and it is therefore within the realm of possibility that lost rents could be recouped over a relatively short period of time with realistic rent increases. In any case, both Clovis's decisions and those of the trial court predated our decision in Kavanau. Assuming that the Gallands are able to demonstrate the rent ceilings were confiscatory, as discussed above, it is for Clovis to attempt on remand to adjust rent ceilings to compensate for lost rents, and for the trial court to review whether such adjustments are adequate to meet the constitutional standard for a fair return. This remand avoids putting a reviewing court in the position of declaring the appropriate regulated rent ceiling for a particular apartment in order to measure damages ( Kavanau, supra, 16 Cal.4th at p. 784, 66 Cal.Rptr.2d 672, 941 P.2d 851), and places the rate-setting function first and foremost in the hands of the government agency ( ibid. ). If, however, a Kavanau adjustment proves to be inadequate in this case to reestablish an average reasonable rate of return, then the Gallands would be free to pursue their section 1983 action on the grounds that state equitable remedies have failed to prevent the constitutional injury from occurring. [5] It is conceivable there might be a case when it is clear that resort to a Kavanau adjustment will not prevent a constitutional injury from occurring. For example, there may be an instance when, despite a landlord's reasonable efforts, confiscatory rent regulations sustained over a long period of time have caused the enterprise to fail. Under such circumstances, a section 1983 damages remedy may well be available. But nothing of that sort is evident in the record of the present case.