Opinion ID: 2631196
Heading Depth: 1
Heading Rank: 9

Heading: further proceedings after remand

Text: Finally, I offer a few comments so that the error of the majority opinion is not further compounded after remand. The majority does not in principle bar recovery of all the amounts the trial court awarded, including costs associated with Clovis's unfair rent adjustment procedure, lost rental income (to the extent rents did not provide a fair return), prejudgment interest, postjudgment interest, and costs and fees associated with the judicial proceedings. All these losses are theoretically recoverable under the majority's opinion if adequately proved. The majority merely holds that the trial court must apply the deliberate-flouting-of-the-law standard and that lost rental income (including associated interest) must be recovered through future rent adjustments. Significantly, the majority's rule requiring writ proceedings to remedy future abuses in rent adjustment procedures (maj. opn., ante, 103 Cal.Rptr.2d at p. 737, 16 P.3d at p. 153) is prospective only. Therefore, the trial court in this case can still award section 1983 damages, interest, and attorney fees if it concludes Clovis's unfair rent adjustment procedure deliberately flouted the law (maj. opn., ante, at p. 739, 16 P.3d at p. 155), which I think it didthe law in question being the constitutional right to a rent adjustment procedure that is not prohibitively burdensome or fraught with unreasonable delays. ( Birkenfeld, supra, 17 Cal.3d at pp. 169-171, 130 Cal.Rptr. 465, 550 P.2d 1001.) In this regard, we must consider that the rent adjustment procedure at issue here cost significantly more than the rent increases the Gallands were seeking, and its costs are still mounting. Because these costs can be passed through to tenants (maj. opn., ante, at pp. 729-730, 739, 16 P.3d at pp. 147, 155), Clovis's actions merely generated future rent increases bigger than the ones under consideration. That sort of senseless regulatory conduct can only be explained as a deliberate flouting of the law, and an award of section 1983 damages is appropriate. Having won compensation for the high cost of the rent adjustment procedure, the Gallands can then petition for future rent increases that will not only assure a fair return in the year of the petition but also fully compensate them (including interest if necessary) for lost income resulting from the confiscatory rent ceilings the trial court already identified. The majority discusses flaws it perceives in the trial court's measure of damages (maj. opn., ante, 103 Cal.Rptr.2d at pp. 736-738, 16 P.3d at pp. 153, 155), arguing that a rent adjustment procedure may be inefficient and expensive without being unconstitutional, and therefore damages should not be determined by comparison to the cost of an ideal procedure. ( Id. at p. 737, 16 P.3d at p. 154.) First, I note Clovis did not raise this issue in its petition for review. Furthermore, all this discussion is, in a sense, beside the point. The Gallands are entitled under the Constitution to a fair return over and above their costs, including the cost of the unfair rent adjustment procedure. (Id. at pp. 729, 730, 739, 16 P.3d at pp. 147-156.) Therefore, whatever portion of this cost they do not recover as a damage award, they can recover through future rent adjustments. ( Id. at p. 739, 16 P.3d at p. 156.) Moreover, I think the majority is wrong as a legal matter to limit damages as it does. The exacting constitutional standard for establishing a due process violation should not serve to restrict damages once the high threshold is met. Rather, once the threshold is met, damages should be sufficient to compensate the plaintiff fully for the constitutional wrong, as well as to create the appropriate disincentive for the state. Would the majority argue in a tort case that the damages for negligence are not the full amount necessary to compensate the plaintiff for the injury, but rather some discounted amount that accounts for injuries the defendant might have inflicted without acting negligently? Obviously not. Accordingly, I think the difference between the actual cost of the unconstitutional proceeding and the projected cost of a reasonably efficient proceeding was an appropriate measure of economic damages for the trial court to apply. Because the issue was not raised in the petition for review and in light of the majority's decision to remand on the question of liability (maj. opn., ante, 103 Cal. Rptr.2d at p. 738, 16 P.3d at p. 155), I take its discussion of the measure of damages ( id. at pp. 736-738, 16 P.3d at pp. 153-155) to be dictum, despite the majority's assertions to the contrary. ( Id. at p. 737, fn. 9, 16 P.3d at p. 154, fn. 9.) I do not see how the majority can remand on the question of liability and nevertheless have its discussion of damages be necessary to [its] holding. ( Id. at pp. 737, fn. 9, 16 P.3d at 154, fn. 9.) The majority also questions the trial court's assumption that 20 to 25 percent per year represented a fair return in this case. (Maj. opn., ante, 103 Cal.Rptr.2d at pp. 728-730, 16 P.3d at pp. 145-147.) While much of this discussion is valid, I disagree that a confiscatory taking occurs `only when the owner has been deprived of substantially all reasonable use of the property.' ( Id. at p. 729, 16 P.3d at p. 146 quoting Fisher v. City of Berkeley (1984) 37 Cal.3d 644, 686, 209 Cal.Rptr. 682, 693 P.2d 261.) That statement has been repudiated by subsequent decisions of the high court, as well as this court. (See, e.g., Kavanau, supra, 16 Cal.4th at p. 774, 66 Cal.Rptr.2d 672, 941 P.2d 851.) Moreover, even for a regulated industry, a return of 20 to 25 percent is not per se excessive. Rather, it may be appropriate if the business enterprise is particularly risky or a high return is otherwise necessary to attract capital. ( Hope Gas, supra, 320 U.S. at p. 603, 64 S.Ct. 281.) A seemingly high return may also be appropriate if, as occurred here, the trial court defines initial investment as down payment absent borrowed capital, rather than as total investment from all sources. On the other hand, a return matching the return of readily available certificates of deposit would presumably be confiscatory, because it would not compensate investors for the comparatively greater uncertainty, aggravation, and lack of liquidity associated with renting residential property. Because of these complexities, I would defer to the trial court's resolution of this factual question. Finally, I think it important to emphasize that Clovis must change its behavior or risk an even larger damage award. If, in the course of future rent adjustment proceedings, Clovis continues to interpose unfair procedural obstacles or does not permit adequate rent increases to assure a return that will offset any confiscatory returns the Gallands already suffered (including, if necessary, interest), or if market forces will not permit the Gallands to recoup their losses within a reasonable period of time, they can return to the courts and allege both section 1983 and takings claims. (Maj. opn., ante, 103 Cal. Rptr.2d at pp. 730-731, 16 P.3d at pp. 147-148; see also Kavanau, supra, 16 Cal.4th at pp. 782-783, 785, 66 Cal.Rptr.2d 672, 941 P.2d 851.)