Court Opinion

ID: 4455781
Source: CourtListenerOpinion
Date Created: 2019-11-14 16:16:40.218293+00
Date Added: 2024-06-11T13:54:27.183300
License: Public Domain

yFTPEv
   IN CLERKS OFFICE X                                                 This opinion was
8UPRBE COURT,SHOE OF Va%SHHId.

After considering the committee's recommendations, the Seattle City Council

amended Seattle's Open Housing Ordinance, ch. 14.08 SMC. These amendments

included adoption ofthe FIT rule.

       The FIT rule provides that when a Seattle property owner seeks to fill a

tenancy, the owner must first "provide notice to a prospective occupant" of"the

criteria the owner will use to screen prospective occupants and the minimum

threshold for each criterion," as well as "all information, documentation, and other
Yim etal. v. City ofSeattle,Ylo. 95813-1

submissions necessary for the owner to conduct screening." SMC

14.08.050(A)(l)(a)-(b). Next, the property owner must "note the date and time of

when the owner receives a completed rental application" and "screen completed

rental applications in chronological order." Id. at (A)(2)-(3). "If, after conducting

the screening, the owner needs more information than was stated in the notice," the

owner must "notify the prospective occupant in writing, by phone, or in person of

what additional information is needed." Id. at(A)(3). Finally, the property owner

must "offer tenancy of the available unit to the first prospective occupant meeting

all the screening criteria necessary for approval of the application." Id. at (A)(4).

The first qualified applicant has 48 hours in which to accept the offer of tenancy.

Id. If the applicant does not accept,"the owner shall review the next completed

rental application in chronological order until a prospective occupant accepts the

owner's offer of tenancy." Id.

       There are a number of exceptions to these general procedures. No part of

the FIT rule applies "to an accessoiy dwelling unit or detached accessory dwelling

unit wherein the owner or person entitled to possession thereof maintains a

permanent residence, home or abode on the same lot." Id. at(F). In addition, an

owner does not have to offer tenancy to the first qualified applicant if the owner "is

legally obligated to" or "voluntarily agrees to set aside the available unit to serve

specific vulnerable populations." Id. at (A)(4)(a)-(b). The FIT rule also contains
Yim et al. v. City ofSeattle, No. 95813-1

procedures for potential occupants with disabilities to seek "additional time to

submit a complete rental application because ofthe need to ensure meaningful

access to the application." Id. at(B).

       The FIT rule became effective on January 1, 2017, although compliance was

not required until July 1, 2017. Id. at(A),(E). On August 16, 2017, the plaintiffs

filed a first amended complaint,"seeking a declaration that the City's [FIT]

rule . . . violates the Takings, Due Process, and Free Speech Clauses of the

Washington State Constitution, and also seeking a permanent injunction forbidding

the City from enforcing its unconstitutional rule." CP at 19. The plaintiffs

challenge the FIT rule only "on its face," not as applied. Id. at 30, 33.

       The parties filed cross motions for summary judgment based on a statement

of stipulated facts and a stipulated record. The trial court ruled in favor of the

plaintiffs on each of their claims, concluding that the FIT rule facially violates

article I, section 16 (the takings clause), section 3 (the due process clause), and

section 5 (the free speech clause) ofthe Washington State Constitution. The City

appealed, and we granted direct review. Order, No. 95813-1 (Wash. Nov. 28,

2018).

                                            ISSUES

       A.     Does the FIT rule facially effect a regulatory taking for purposes of

article I, section 16?
Yim etal. v. City ofSeattle,Y\o. 95813-1

       B.     If the FIT rule does facially effect a regulatory taking, is it for private

use in violation of article I, section 16?

       C.     Does the FIT rule facially violate the plaintiffs' article I, section 3

right to substantive due process?

       D.     Does the FIT rule facially violate the plaintiffs' article I, section 5

right to free speech?

                                           ANALYSIS

       This case presents two important questions of state constitutional law that

will have consequences far beyond the particular claims at issue here. First, we

must define when a law regulating the use of property crosses the line into a

"regulatory taking" for purposes of article I, section 16. Second, we must

determine the standard of review that applies to article I, section 3 substantive due

process challenges to laws regulating the use of property.

       As to the first issue, this court has always attempted to define regulatory

takings consistently with federal courts applying the takings clause ofthe Fifth

Amendment. U.S. CONST, amend. V. The federal definition of regulatory takings

has been substantially clarified since we last considered the issue, such that the

"legal underpinnings of our precedent have changed or disappeared altogether."

W.G. Clark Constr. Co. v. Pac. Nw. Reg'I Council ofCarpenters, 180 Wash. 2d 54,

66, 322 P.3d 1207(2014). It has not been shown that we should adopt a
Yim et al. v. City ofSeattle, No. 95813-1

Washington-specific definition as a matter of independent state law at this time,

and we therefore adopt the definition of regulatory takings set forth by the United

States Supreme Court in Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 125 S. Ct.

2074, 161 L. Ed. 2d 876 (2005), as discussed in more detail below. The following

precedent is disavowed to the extent that it defines regulatory takings in a manner

that is inconsistent with Chevron U.S.A.: Orion Corp. v. State, 109 Wash. 2d 621, 747

P.2d 1062(1987); Presbytery ofSeattle v. King County, 114 Wash. 2d 320, 787 P.2d

907(1990); Sintra, Inc. v. City ofSeattle, 119 Wash. 2d 1, 829 P.2d 765 (1992);

Robinson v. City ofSeattle, 119 Wash. 2d 34, 830 P.2d 318 (1992); Guimontv.

Clarke, 121 Wash. 2d 586, 854 P.2d 1 (1993); Margola Associates v. City ofSeattle,

121 Wash. 2d 625, 854 P.2d 23 (1993); and Manufactured Housing Communities of

Washington v. State, 142 Wash. 2d 347, 13 P.3d 183 (2000)(plurality opinion).

       Regarding the second issue, as analyzed in more detail in our opinion for

Chong Yim v. City ofSeattle, No. 96817-9(Wash. Nov. 14, 2019){Yim II), this

court has always attempted to apply a standard of review to article I, section 3

substantive due process claims that is consistent with the standard used by federal

courts applying the due process clauses of the Fifth and Fourteenth Amendments to

the United States Constitution. As with defining regulatory takings, it has not been

shown that we should depart from federal law at this time, and we therefore apply
Yim et al. v. City ofSeattle, No. 95813-1

rational basis review to the plaintiffs' substantive due process challenge to the FIT

rule.

        Turning to the specific claims presented in this case, the constitutionality of

the FIT rule is a question of law reviewed de novo. Amunrud v. Bd. ofAppeals,

158 Wash. 2d 208, 215, 143 P.3d 571 (2006). The plaintiffs' facial takings and

substantive due process claims cannot succeed unless the plaintiffs show that "no

set of circumstances exists in which [the FIT rule], as currently written, can be

constitutionally applied." City ofRedmond v. Moore, 151 Wash. 2d 664, 669, 91

P.3d 875 (2004). They cannot meet that burden on the record presented, while the

City has met its burden ofjustifying the FIT rule for puiposes ofthe plaintiffs'

facial free speech claim. We therefore reverse and remand with instructions to

grant the City's motion for summary judgment.

A.      The FIT rule does not facially effect a regulatory taking

        The takings clause of the Fifth Amendment provides,"[N]or shall private

property be taken for public use, without just compensation." U.S. CONST, amend.

V. Likewise, article 1, section 16 provides,"No private property shall be taken or

damaged for public or private use without just compensation having been first

made." WASH. CONST, art. 1, § 16. Both the federal and state takings clauses allow

for "[cjlaims of inverse condemnation by excessive regulation," otherwise known

as "regulatory takings" claims. Orion Corp., 109 Wash. 2d at 642.
Yim et al. v. City ofSeattle, No. 95813-1

       Regulatory takings claims are based on the premise that "while property may

be regulated to a certain extent, if regulation goes too far it will be recognized as a

taking." Pa. Coal Co. v. Mahon,260 U.S. 393, 415, 43 S. Ct. 158, 67 L. Ed. 322

(1922). When a regulation goes too far, it becomes "a de facto exercise of eminent

domain," even though the private individual still actually owns and possesses the

property. Orion Corp., 109 Wash. 2d at 645. Such regulatory takings, like traditional

exercises of eminent domain, require either just compensation (if the property is

taken for public use) or invalidation of the law (if the property is taken for private

use). Mfd. Hous., 142 Wash. 2d at 362.

       Regulatory takings may be either "per se" or "partial." A per se regulatory

taking is found where a regulation's impact is necessarily so onerous that the

regulation's mere existence is, "from the landowner's point of view, the equivalent

of a physical appropriation." Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1017,

112 S. Ct. 2886, 120 L. Ed. 2d 798 (1992). As a matter of federal law, such

categorical treatment is appropriate for only "two relatively narrow categories" of

regulations—regulations that "require[]an owner to suffer a permanent physical

invasion of her property" and "regulations that completely deprive an owner of'all

economically beneficial us[e]' of her property." Chevron U.S.A., 544 U.S. at 538
Yim et al. v. City ofSeattle, No. 95813-1

(second alteration in original)(quoting Lucas, 505 U.S. at 1019).' All other

regulations are susceptible of partial regulatory takings claims, which federal

courts decide based on a multifactor test (the Penn Central factors) applied on a

case-by-case basis. Id. at 538-39 (citing Penn Cent. Transp. Co. v. New York City,

438 U.S. 104, 124, 98 S. Ct. 2646, 57 L. Ed. 2d 631 (1978)).

       The plaintiffs here claim the FIT rule facially effects a per se regulatory

taking, but they do not contend that it fits into either of the per se categories

recognized by federal courts. Instead, they contend that Washington courts

recognize another category of per se regulatory takings, which includes any

regulation that "destroys one or more of the fundamental attributes of ownership

(the right to possess, exclude others and to dispose of property)." Mfd. Hons., 142

Wash. 2d at 355. The plaintiffs argue that the FIT rule falls into this per se category

"because it strips landlords of a fundamental attribute of property ownership—^the

right to choose to whom one will rent their property." Resp'ts' Br. at 1.

       We now clarify that none of our regulatory takings cases have purported to

define regulatory takings (either per se or partial) as a matter of independent state

law. Instead, we have always attempted to discern and apply the federal definition

      'There is another form of takings cases not relevant here that deals with "adjudicative
land-use exactions—specifically, government demands that a landowner dedicate an easement
allowing public access to her property as a condition of obtaining a development permit."
Chevron U.S.A., 544 U.S. at 546 (citing Dolan v. City ofTigard, 512 U.S. 374, 379-80, 114
S. Ct. 2309, 129 L. Ed. 2d 304 {\99Ay, Nollan v. Cat. Coastal Comm'n,483 U.S. 825, 828, 107
S. Ct. 3141, 97 L. Ed. 2d 677(1987)).
Yim et al. v. City ofSeattle, No. 95813-1

of regulatory takings. Since we last attempted to do so, the federal definition has

been clarified substantially and is now clearly inconsistent with the definitions set

forth in our precedent. Thus, the legal underpinnings of our precedent have

disappeared, and it has not been shown that we should now adopt a Washington-

specific definition of regulatory takings as a matter of independent state law.

       Therefore, we disavow our precedent, adopt the federal definition of

regulatory takings, and hold that the plaintiffs cannot show the FIT rule facially

meets this definition on the record presented. We express no opinion as to whether

the FIT rule effects a regulatory taking as applied to any particular property.

       1.      We have never defined regulatory takings as a matter of independent
              state law

       The plaintiffs emphasize that their takings claim is based on the Washington

State Constitution and contend that "[t]he federal approach to takings therefore

does not offer a relevant comparison because this Court can interpret its own state

constitution as it sees fit—so long as its inteipretation does not go below the floor

of protection guaranteed by the Federal Constitution." Id. at 20-21. It is certainly

true that we have the authority to interpret article I, section 16 independently of the

Fifth Amendment's takings clause. However, it is incorrect to suggest that we

have already done so for purposes of defining regulatory takings. To the contrary,

for over 30 years, we have attempted to define regulatory takings in a manner that

is consistent with federal law. Unfortunately, for many years, federal regulatory

                                            10
Yim et al. v. City ofSeattle, No. 95813-1

takings cases were complex and occasionally inconsistent, making our task

extremely challenging and giving the inaccurate impression that this court was

attempting to set forth a Washington-specific doctrine based on independent state

law.

               a.     Our pvQ-Manufactured Housing cases did not define regulatory
                      takings based on independent state law

       Although we have never defined regulatory takings based on independent

state law, our precedent may appear to have done so. See, e.g., Laurel Park Cmty.,

LLC V. City ofTumwater, 698 F.3d 1180, 1191-93 (9th Cir. 2012)(analyzing state

regulatory takings claim separately from federal regulatory takings claim); Lemire

V. Dep't ofEcology, 178 Wash. 2d 227, 242, 309 P.3d 395 (2013)("The parties and

amici strenuously debate the framework on which this court should rest a taking

analysis, including whether and to what extent our state constitutional takings

provision may offer greater protection than its federal counterpart."); Roger D.

Wynne, The Path out of Washington's Takings Quagmire: The Casefor Adopting

the Federal Takings Analysis, 86 WASH.L. Rev. 125, 136(2011)(pointing to

"three unique elements" of Washington takings law). Regrettably, this court has

added to the confusion by occasionally characterizing our cases as setting forth a

"state 'regulatory takings' doctrine." Robinson, 119 Wash. 2d at 47. We resolve this

confusion now.

                                            11
Yim et al. v. City ofSeattle, No. 95813-1

       The reason our precedent appears unusual is because this court was

attempting to set forth "a doctrinally consistent, definitive test" for regulatory

takings, which "has proved an elusive goal, sometimes characterized as 'the

lawyer's equivalent of the physicist's hunt for the quark.'" Orion Corp., 109

Wash. 2d at 645 (internal quotation marks omitted)(quoting Williamson County Reg'I

Planning Comm'n v. Hamilton Bank, 473 U.S. 172, 199 n.l7, 105 S. Ct. 3108, 87

L. Ed. 2d 126 (1985), overruled in part by Knickv. Township ofScott, 588 U.S.

    , 139 S. Ct. 2162, 204 L. Ed. 2d 558 (2019)). It should not be surprising that

our pursuit of such an elusive goal left this court as something of an outlier.

However, our attempts to articulate a test for when regulations cross the line into

regulatory takings have always attempted to achieve consistency with federal law,

not to set forth an independent state law doctrine.

       Achieving consistency with federal regulatory takings law proved difficult

due to "unresolved tensions between divergent lines of authority." Id. Even

though the United States Supreme Court held in 1922 that a police power

regulation becomes a taking if it goes too far, the United States Supreme Court

(and this court, following its lead) continued to state that "an exercise of the police

power protective ofthe public health, safety, or welfare cannot be a taking

requiring compensation." Id. at 646(emphasis added)(citing Keystone Bituminous

Coal Ass'n v. DeBenedictis, 480 U.S. 470, 107 S. Ct. 1232, 94 L. Ed. 2d 472

                                            12
Yim et al. v. City ofSeattle, No. 95813-1

(1987); Miller v. Schoene, 276 U.S. 272, 48 S. Ct. 246, 72 L. Ed. 568 (1928);

Muglerv. Kansas, 123 U.S. 623, 8 S. Ct. 273, 31 L. Ed. 205 (1897); Cougar Bus.

Owners Ass'n v. State, 97 Wash. 2d 466, 647 P.2d 481 (1982); Markham Advert. Co.

V. State, 73 Wash. 2d 405, 427,439 P.2d 248 (1968)). Thus, it appeared that some

regulations of private property were categorically incapable of being regulatory

takings, but it was not clear which ones.

       Moreover, regulatory takings cases suffered from a "doctrinal blurring that

has occurred between due process and regulatory takings." Id. at 647. Federal and

state cases held that "a police power action must be reasonably necessary to serve a

legitimate state interest" to survive a substantive due process challenge. Id. at 646-

47(citing Goldblattv. Town ofHempstead, 369 U.S. 590, 594-95, 82 S. Ct. 987, 8

L. Ed. 2d 130 (1962); Lawton v. Steele, 152 U.S. 133, 137, 14 S. Ct. 499, 38 E. Ed.

385 (1894); W. Main Assocs. v. City ofBellevue, 106 Wash. 2d 47, 52, 720 P.2d 782

(1986); Cougar Bus. Owners, 97 Wash. 2d at 476). Meanwhile,"[a] regulatory

taking also hinges on whether the challenged regulation is 'reasonably necessary to

the effectuation of a substantial public purpose,' or 'does not substantially advance

legitimate state interests.'" Id. at 647 (citation omitted)(internal quotation marks

omitted)(quoting Penn Central, 438 U.S. at 127; Keystone, 480 U.S. at 485). It

was thus difficult to determine whether and to what extent substantive due process

principles were relevant to the regulatory takings analysis.

                                            13
Yim et al v. City ofSeattle, No. 95813-1

       As a result of such confusion, courts were left to determine when a

regulation crosses the line into a regulatory taking based on '"essentially ad hoc,

factual inquiries.'" Keystone, 480 U.S. at 495 (internal quotation marks omitted)

{(yyolmg Kaiser Aetna V. United States, 444 U.S. 164, 175, 100 S. Ct. 383,62

L. Ed. 2d 332(1979)). In an effort to bring some uniformity to the regulatory

takings analysis, this court "ventur[ed] where other courts had feared to go,[and]

began the painful process of developing coherent legal doctrine to supplant vague

or nonexistent principles and intuitive determinations." Richard L. Settle,

Regulatory Taking Doctrine in Washington: Now You See It, Now You Don't, 12

U.PUGET Sound L. Rev. 339, 341 (1989). After revising and clarifying our

analysis several times, we ultimately settled on the following multistep test:

                                           14
Yim etal. v. City ofSeattle, No. 95813-1

         Does the regulation
         compel the landowner to          Yes
         suffer a permanent                                                          Taking
         "physical invasion" of the
         property?

                  No

          Does the regulation deny
          all economically                Yes
          beneficial or productive                                                   Taking
          use of the property?

                  No
                       '

          Does the regulation
          destroy one or more
          fundamental attributes of      Yes    Does the regulation
                                                                             No
          property ownership (the               substantially advance a            > Taking
          right to possess, to                  legitimate state interest?
          exclude others, or to
          dispose of property)?                         Yes

                  No                            Is the state interest
                                                outweighed by economic
                                                burden on the owner in
          Does the regulation seek
                                        Yes     light of the Penn Central
          less to prevent a harm than
                                                factors (economic impact,    Yes
          to require an affirmative                                                  Taking
                                                interference with
          public benefit?
                                                investment-backed
                                                expectations, and
                                                character of the
                  No                            goveimment action)?

                                                        NoI
                No taking                              No taking

Margola, 121 Wash. 2d at 643-46; Guimont, 121 Wash. 2d at 598-604; see also

Robinson, 119 Wash. 2d 34; Sintra, 119 Wash. 2d 1; Presbytery, 114 Wash. 2d 320; Orion

Corp., 109 Wash. 2d 621.

       By the time we settled on this framework in 1993, it had been suggested that

our test was "undermined by language in Lucas questioning harm versus benefit

                                                15
Yim et al. v. City ofSeattle, No. 95813-1

analysis." Guimont, 121 Wash. 2d at 603 n.5. However, we declined to address that

issue because "it would be premature to begin dismantling our takings framework,

carefully crafted in Presbytery, Sintra, and Robinson, without more definitive

guidance on this issue from the United States Supreme Court." Id.

       While we continued to await more definitive guidance, this court decided

Manufactured Housing, which forms the basis of the plaintiffs' regulatory takings

claim in this case.

               b.     Manufactured Housing did not define regulatory takings based
                      on independent state law

       Manufactured Housing's lead opinion cited only Presbytery to support its

holding that a regulation is "subject to a categorical 'facial' taking challenge"

when it "destroys one or more of the fundamental attributes of ownership (the right

to possess, exclude others and to dispose of property)."^ Mfd. Hous., 142 Wash. 2d at

355. The plaintiffs and allied amici contend that this category of per se regulatory

takings is based on independent state law and therefore cannot be disavowed

unless it is shown to be both incorrect and harmful. We clarify that this category

of per se regulatory takings is not based on independent state law.

       ^ The dissents challenged this holding as an incorrect application ofPresbytery. Mfd.
Hous., 142 Wash. 2d at 388 (Johnson, J., dissenting), 407-08 (Talmadge, J., dissenting). However,
because we hold that Manufactured Housing's legal underpinnings have disappeared, we assume
without deciding that it correctly applied Presbytery. We also assume without deciding that
Manufactured Housing's lead opinion was joined by a majority of the court on the issues
relevant to this case and that the facts of Manufactured Housing are not materially
distinguishable from the facts presented here.

                                                 16
Yim et al. v. City ofSeattle, No. 95813-1

       Presbytery unambiguously applied 'fhe 'taking' analysis used by the United

States Supreme Court and by this court," drawing no distinction between the two.

114 Wash. 2d at 333 (emphasis added). Presbytery's approach was entirely

consistent with our prior explicit holding that"we will apply the federal analysis to

review all regulatory takings claims." Orion Corp., 109 Wash. 2d at 658; see also

Margola Assocs., 121 Wash. 2d at 642 n.6; Guimont, 121 Wash. 2d at 604. Thus, by

relying solely on Presbytery to define a per se regulatory taking. Manufactured

Housing necessarily relied on federal law.

       Furthermore, when applying its definition to the facts presented.

Manufactured Housing's lead opinion cited Presbytery again, along with other

Washington cases, federal cases, and cases from other states. Mfd. Hous., 142

Wash. 2d at 364-68. Thus, it is clear from the range of authorities cited in

Manufactured Housing's lead opinion that its definition of a per se regulatory

taking was not based on independent state law but on an attempt to apply federal

law and, perhaps, to discern a national consensus.

       It may appear that Manufactured Housing was applying a Washington-

specific definition of regulatory takings because the lead opinion included a

GunwalP analysis. Id. at 356-61. However, the Gunwall analysis was unrelated to

the definition of regulatory takings. Instead,"[wjhat is key is article I, section 16's

        State V. Gunwall, 106 Wash. 2d 54, 61-62, 720 P.2d 808 (1986).

                                            17
Yim et al. v. City ofSeattle, No. 95813-1

absolute prohibition against taking private property for private use." Id. at 357.

The court therefore concluded that the Washington State Constitution is more

protective than the federal constitution on the basis "that 'private use' under

amended article I, section 16 is defined more literally than under the Fifth

Amendment, and that Washington's interpretation of'public use' has been more

restrictive," Id. at 361. Nevertheless, the conclusion that article I, section 16

defines public and private use more protectively than the federal constitution does

not also establish that article I, section 16 has a more protective definition of

regulatory takings. Those are two separate questions implicating two different

parts of the regulatory takings analysis.

       Regulatory takings cases involve a "remedial question of how compensation

is measured once a regulatory taking is established" and "the quite different and

logically prior question whether the . . . regulation at issue had in fact constituted a

taking." Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg'I Planning Agency, 535

U.S. 302, 328, 122 S. Ct. 1465, 152 L. Ed. 2d 517(2002). The definition of a

regulatory taking goes only to the initial determination of whether "'property' has

actually been taken." Mfd. Hous., 142 Wash. 2d at 363-64. Meanwhile, the

public/private use distinction goes only to the appropriate remedy once a taking

has been established—compensation or invalidation. See id. at 362.

                                            18
Yim et al. v. City ofSeattle, No. 95813-1

       Thus, none of our cases, including Manufactured Housing, defined

regulatory takings based on independent state law. Instead, we have always tried

to ascertain and apply a definition that is consistent with federal law. Our

regulatory takings cases appear state-specific only because, for many years, the

federal definition was difficult to understand. The United States Supreme Court

has since provided definitive guidance on that issue, which "[a]n overwhelming

majority of states" have followed. Phillips v. Montgomery County, 442 S.W.3d

233, 240(Term. 2014). We now do the same.

       2.      The legal underpinnings of our definition of regulatory takings have
               disappeared

       Because our prior definition of regulatory takings was not based on

independent state law, we need not decide whether it is incorrect and harmful.

Instead,"we can reconsider our precedent not only when it has been shown to be

incorrect and harmful but also when the legal underpinnings of our precedent have

changed or disappeared altogether." W.G. Clark, 180 Wash. 2d at 66. We do so now

because two United States Supreme Court cases decided after Manufactured

Housing establish that the federal legal underpinnings of our precedent have

disappeared, and it has not been shown that there is a principled basis on which to

depart from federal law at this time.

       First, in 2002, the United States Supreme Court held that categorical rules

are rarely appropriate in regulatory takings cases. Tahoe-Sierra, 535 U.S. 302.

                                            19
Yim et al. v. City ofSeattle, No. 95813-1

The regulations at issue in Tahoe-Sierra were two temporary development

moratoria "that, while in effect, denie[d] a property owner all viable economic use

of her property." Id. at 320(emphasis added). A number of property owners

brought a facial takings claim, arguing that the regulations "g[ave] rise to an

unqualified constitutional obligation to compensate [them] for the value of its use

during that period." Id.

       The United States Supreme Court rejected their claim, cautioning that"we

still resist the temptation to adopt per se rules in our cases involving partial

regulatory takings." Id. at 326. Instead, categorical rules for regulatory takings

claims are appropriate only in an "'extraordinary circumstance,'" such as when a

permanent regulation provides that '''no productive or economically beneficial use

of land is permitted.'" Id. at 330(quoting Twcaj', 505 U.S. at 1017).

       In such extraordinary circumstances, there is no need for a case-specific

inquiry because the regulation will "always force individuals to bear a special

burden that should be shared by the public as a whole." Id. at 341 (emphasis

added). However, absent extraordinary circumstances,"the default rule remains

that, in the regulatory taking context, we require a more fact specific inquiry." Id.

at 332. To determine whether there were extraordinary circumstances requiring a

categorical rule, Tahoe-Sierra considered "the concepts of'fairness and justice'

                                            20
Yim et al. v. City ofSeattle, No. 95813-1

that underlie the Takings Clause" and held that the temporary moratoria at issue

could not be deemed per se regulatory takings. Id. at 334.

       Tahoe-Sierra thus deeply undermines Manufactured Housing''s view that a

categorical rule is appropriate whenever a property owner is deprived of any part

of"the 'bundle of sticks' representing the valuable incidents of ownership." Mfd.

Hous., 142 Wash. 2d at 366. Instead, according to Tahoe-Sierra, categorical rules for

regulatory takings claims are appropriate only in extraordinary circumstances.

       It is unlikely that Tahoe-Sierra would recognize extraordinary circumstances

are present whenever a regulation limits "the right to choose to whom one will rent

their property." Resp'ts' Br. at 1. If that were so, every antidiscrimination law that

prohibits a landlord from rejecting a tenant based on protected characteristics

would be a per se regulatory taking requiring either compensation or invalidation.

E.g., RCW 49.60.222(l)(f); SMC 14.08.040(A). Tahoe-Sierra would likely not

allow such a holding because it "would render routine government processes

prohibitively expensive," if not impossible. 535 U.S. at 335.

       Although Tahoe-Sierra cautioned that categorical rules are rarely

appropriate in regulatory takings cases, it left open the question of when

regulations present such extraordinary circumstances that categorical rules are

appropriate. That question was resolved in 2005, when Chevron U.S.A.

definitively held that there are only "two relatively narrow categories" of

                                            21
Yim et al. v. City ofSeattle, No. 95813-1

"regulatory action that generally will be deemed per se takings for Fifth

Amendment purposes." 544 U.S. at 538.

       One per se category applies "where government requires an owner to suffer

a permanent physical invasion of her property." Id. The other "applies to

regulations that completely deprive an owner of'all economically beneficial us[e]'

of her property." Id. (alteration in original)(quoting        505 U.S. at 1019).

Any other alleged regulatory taking must be analyzed on a case-by-case basis

according to the Penn Central factors. Id. at 538-39. The United States Supreme

Court has since consistently applied these standards when defining regulatory

takings, such that Chevron U.S.A. is clearly the Court's final, definitive statement

on this issue at this time. See Murr v. Wisconsin, 582 U.S.     , 137 S. Ct. 1933,

1942-43, 198 L. Ed. 2d 497(2017); Home v. Dep't ofAgric., 576 U.S.           , 135

S. Ct. 2419, 2429, 192 L. Ed. 2d 388 (2015); Ark. Game & Fish Comm 'n v. United

States, 568 U.S. 23, 31-32, 133 S. Ct. 511, 184 L. Ed. 2d 417(2012); Stop the

Beach Renourishment, Inc. v. Fla. Dep't ofEnvtl. Prot., 560 U.S. 702, 713, 130

S. Ct. 2592, 111 L. Ed. 2d 184(2010)(partial plurality opinion).

       Chevron U.S.A. nan"owly defines per se regulatory takings that trigger

categorical rules. By contrast. Manufactured Housing''s, definition of per se

regulatory takings broadly applies a categorical rule to any regulation that destroys

any fundamental attribute of ownership. Tahoe-Sierra strongly indicates such a

                                            22
Yim et al. v. City ofSeattle, No. 95813-1

categorical rule would be rejected by the United States Supreme Court and

Chevron U.S.A. confirms it. Therefore, Manufactured Housing's definition of per

se regulatory takings is no longer a valid application of the federal law on which it

was based. And because it has not been shown that we should now depart from the

federal definition of regulatory takings as a matter of independent state law, we

disavow Manufactured Housing's definition."^

       In addition. Chevron U.S.A. clarified the Penn Central factors for evaluating

partial regulatory takings claims that do not fit within either per se category. Those

factors are intended to shed light on "the magnitude or character ofthe burden a

particular regulation imposes upon private property rights" and to provide

"information about how any regulatory burden is distributed among property

owners." Id. at 542. The factors explicitly do not ask "whether a regulation of

private property is effective in achieving some legitimate public purpose." Id.

       By contrast, our prior regulatory takings cases allow a regulation to be

"insulated from a 'takings' challenge" if it "protects the public from harm" and

require courts to consider whether the challenged "regulation substantially

         Some amici appear to contend that we should now adopt Manufactured Housing'?,
definition of per se regulatory takings as a matter of independent state law. However, amici's
arguments are all based on Washington's more protective definitions of public and private uses,
which, as discussed above, are relevant only to the appropriate remedy once a taking has been
established. No party or amicus performs a Gunwall analysis or provides any other principled
basis on which to define regulatory takings broadly as a matter of independent state law. See
Gunwall, 106 Wash. 2d 54. We therefore decline to do so.

                                              23
Yim et al. v. City ofSeattle, No. 95813-1

advances legitimate state interests." Presbytery, 114 Wash. 2d at 330, 333; see also

Margola Assocs., 121 Wash. 2d at 645-46; Guimont, 121 Wash. 2d at 603-04; Robinson,

119 Wash. 2d at 49-50; Sintra, 119 Wash. 2d at 14-17; Orion Corp., 109 Wash. 2d at 658.

That precedent can no longer be valid because it may provide less protection for

private property rights than the federal constitution does. See Orion Corp., 109

Wash. 2d at 652, 657-58.

       In sum,today we continue our long-standing practice of following federal

law in defining regulatory takings and explicitly adopt the definition set forth in

Chevron U.S.A. Pursuant to Chevron U.S.A., there are only two categories of per

se regulatory takings:(1)"where government requires an owner to suffer a

permanent physical invasion of her property" and (2)"regulations that completely

deprive an owner of'all economically beneficial us[e]' of her property." 544 U.S.

at 538 (alteration in original)(quoting Lucas, 505 U.S. at 1019). If an alleged

regulatory taking does not fit into either category, it must be considered on a case-

by-case basis in accordance with the Penn Central factors. Id. at 538-39.

       3.     The plaintiffs do not show that the FIT rule facially effects a
              regulatory taking

       The plaintiffs do not argue that the FIT rule fits into either of the per se

categories set forth in Chevron U.S.A., and it clearly does not. On its face, the FIT

rule does not require any property owners to suffer any permanent physical

invasion of their properties, and the plaintiffs do not contend that the FIT rule

                                            24
Yim et al. v. City ofSeattle, No. 95813-1

deprives them of any economically beneficial uses of their properties, let alone

every economically beneficial use. The plaintiffs also do not contend that the FIT

rule is a regulatory taking pursuant to the Penn Central factors.^ We therefore

reverse the trial court and hold that the plaintiffs have not shown the FIT rule

facially effects a regulatory taking of their property.

B.     Because the plaintiffs have not shown that the FIT rule effects a taking, we
       do not reach the issue of whether it is for private use

       The plaintiffs contend that the regulatory taking effected by the FIT rule is

for private use, rather than public use, and is therefore invalid. Because we hold

that the plaintiffs do not show the FIT rule effects a taking at all, we decline to

consider the public/private use distinction. As discussed above, that distinction is

relevant only to the appropriate remedy where a taking has been shown, and no

taking has been shown here.

C.     The FIT rule does not facially violate substantive due process

       The plaintiffs next claim that the FIT rule facially violates their article I,

section 3 right to substantive due process, contending that the FIT rule is subject to

heightened scrutiny because it regulates a fundamental attribute of property

ownership. We hold that the applicable standard is rational basis review, which the

FIT rule survives.

       ^ We express no opinion on whether application of the Penn Central factors would show
that the FIT rule effects a regulatory taking as applied to any particular property.

                                                 25
Yim et al. v. City ofSeattle, No. 95813-1

       1.      The FIT rule is subject to rational basis review

       As discussed in more detail in our opinion in Yim II, we have never held that

independent state law requires a heightened standard of review for substantive due

process challenges to laws regulating the use of property. Instead, we have always

looked to federal law to discern the appropriate standard of review, and it has not

been shown that we should adopt a heightened standard now as a matter of

independent state law. We therefore hold that the plaintiffs' article I, section 3

substantive due process claim is subject to the same standard that would apply if

their claims were based on the due process clauses of the Fifth and Fourteenth

Amendments. That standard is rational basis review.

       We recognize that some United States Supreme Court precedent might

suggest heightened scrutiny is required by stating that laws regulating the use of

property must not be '"unduly oppressive'" on the property owner, or must have a

'"substantial relation'" to a legitimate government purpose. Goldblatt, 369 U.S. at

595 (quoting Lawton, 152 U.S. at 137); Nectow v. City of Cambridge, 211 U.S.

183, 187, 48 S. Ct. 447, 72 L. Ed. 842(1928)(quoting Village ofEuclid v. Ambler

Realty Co., 272 U.S. 365, 395, 47 S. Ct. 114, 71 L. Ed. 303 (1926)). However,the

United States Supreme Court does not interpret this language as requiring

heightened scrutiny. Instead, the "unduly oppressive" test has been interpreted as

"applying a deferential 'reasonableness' standard." Chevron U.S.A., 544 U.S. at

                                            26
Yim et al. v. City ofSeattle, No. 95813-1

541 (internal quotation marks omitted)(citing and quoting Goldblatt, 369 U.S. at

594-95; Lawton, 152 U.S. at 137). Likewise, it has long been acknowledged that

"the use of property and the making of contracts are normally matters of private

and not of public concern," but "[ejqually fundamental with the private right is that

of the public to regulate it in the common interest." Nebbia v. New York, 291 U.S.

502, 523, 54 S. Ct. 505, 78 L. Ed. 940 (1934).

         Therefore, a law regulating the use of property violates substantive due

process only if it "fails to serve any legitimate governmental objective," making it

"arbitrary or irrational." Chevron U.S.A., 544 U.S. at 542; see also Kentner v. City

ofSanibel, 750 F.3d 1274, 1280-81 (11th Cir. 2014), cert, denied, 135 S. Ct. 950

(2015); Samson v. City ofBainbridge Island, 683 F.3d 1051, 1058 (9th dr.), cert,

denied, 568 U.S. 1041 (2012). This test con-esponds to rational basis review,

which requires only that "the challenged law must be rationally related to a

legitimate state interest." Amunrud, 158 Wash. 2d at 222. We therefore apply

rational basis review to the plaintiffs' substantive due process challenge to the FIT

rule.^

         ® Appended to our opinion in Yim II is a nonexclusive list of this court's precedent that
can no longer be interpreted as requiring heightened scrutiny in substantive due process
challenges to laws regulating the use of property.

                                                 27
Yim et al. v. City ofSeattle, No. 95813-1

       2.      The FIT rule survives rational basis review on its face

       Rational basis review requires that "the challenged law must be rationally

related to a legitimate state interest." Id. Rational basis review is highly

deferential because "a court may assume the existence of any necessary state of

facts which it can reasonably conceive in determining whether a rational

relationship exists between the challenged law and a legitimate state interest." Id.

       The purpose of the FIT rule is to mitigate the impact of implicit bias in

tenancy decisions. The plaintiffs appear to suggest this is not a legitimate

government interest because "implicit bias can be both positive and negative."

Resp'ts' Br. at 41. However, the fact that implicit bias may work to some people's

advantage some of the time does not mean that mitigating its impact is an

illegitimate purpose. Indeed, this court has recognized the importance of

mitigating implicit bias in the context ofjury selection with the enactment of GR

37. The plaintiffs do not show that implicit bias must be allowed to continue in the

rental housing context.

       The FIT rule's requirements are also rationally related to achieving its

purpose. A rational person could believe that implicit bias will be mitigated by

requiring landlords to offer tenancy to the first qualified applicant, rather than

giving landlords discretion to reject an otherwise-qualified applicant based on a

"gut check." Verbatim Report of Proceedings (Feb. 23, 2018) at 36. It is precisely

                                            28
Yim et al. v. City ofSeattle, No. 95813-1

in such gut-check decisions where implicit bias is most likely to have influence

because bias is "often unintentional, institutional, or unconscious." State v.

Saintcalle, 178 Wash. 2d 34, 36, 309 P.3d 326(2013)(plurality opinion), abrogated

on other grounds by City ofSeattle v. Erickson, 188 Wash. 2d 721, 398 P.3d 1124

(2017).

       Indeed, the FIT rule's requirements are based on best practices

recommended by industry associations, who advise that "[ujsing a set criteria also

helps show that you are screening all applicants alike and can help avoid claims of

discrimination by applicants not granted tenancy." CP at 315. Landlords are

therefore advised to offer tenancy to the first qualified applicant "as a best practice

when confronted with multiple, equally valid applications as a 'tie breaker.'" Br.

of Amicus Curiae Rental Hons. Ass'n of Wash, at 3. Appearing as amici, several

rental housing associations emphatically state that they do not support the FIT rule.

Nevertheless, the procedures required by the FIT rule are consistent with industry-

recommended best practices. Amici object only to making those practices

mandatory, contending that doing so is unwise and will prove ineffective.

       Rational basis review does not invite a demanding inquiry by this court into

whether the FIT rule is good policy. Instead, our task is limited to deciding

whether mandating industry-recommended best practices for avoiding

                                            29
Yim et al. v. City ofSeattle, No. 95813-1

discrimination in tenancy decisions is rationally related to reducing the influence of

implicit bias in tenancy decisions. The answer is clearly yes.

       The plaintiffs further suggest that the FIT rule fails rational basis review

because it is overbroad, given that "non-legal approaches" could be used instead

and the FIT rule applies "even where a protected class is not among the landlords'

applicant pool." Resp'ts' Br. at 41. However,"[t]he overbreadth doctrine may not

be employed unless First Amendment activities are within the scope ofthe

challenged enactment." City ofSeattle v. Montana, 129 Wash. 2d 583, 598, 919 P.2d

1218 (1996)(plurality opinion); U.S. Const, amend. I. Thus, any assertion of

overbreadth is irrelevant to the plaintiffs' facial substantive due process claim. The

plaintiffs' free speech claim is addressed separately below.

       It may well be that the FIT rule will prove ineffective or unwise as a matter

of policy. However,the plaintiffs do not carry their "'heavy burden'" of showing

that it facially violates substantive due process as a matter of law. Amunrud, 158

Wash. 2d at 215 (quoting Larson v. Seattle Popular Monorail Auth., 156 Wash. 2d 752,

757, 131 P.3d 892(2006)). We therefore reverse the trial court and hold that the

FIT rule survives rational basis review on its face.

D.     The FIT rule does not facially violate free speech rights

       Finally, the plaintiffs claim that the FIT rule facially violates their article I,

section 5 right to free speech. It is undisputed that the speech at issue here

                                            30
Yim et al. v. City ofSeattle, No. 95813-1

(advertisements for vacant tenancies) is "commercial speech," that is,'"speech

proposing a commercial transaction.'" Zauderer v. Office ofDisciplinary Counsel,

471 U.S. 626, 637, 105 S. Ct. 2265, 85 L. Ed. 2d 652(1985)(quoting Ohralikv.

Ohio State Bar Ass'n, 436 U.S. 447, 455-56, 98 S. Ct. 1912, 56 L. Ed. 2d 444

(1978)). It is also undisputed that article I, section 5 and the First Amendment

provide identical protections for commercial speech. Bradburn v. N. Cent. Reg'I

Library Dist., 168 Wash. 2d 789, 800, 231 P.3d 166 (2010).

       The main focus of the parties' dispute is the level of scrutiny that we must

apply to the FIT rule. The trial court agreed with the plaintiffs that the FIT rule is

subject to intermediate scrutiny and "cannot survive." CP at 520. We reverse.

The FIT rule is subject to, and survives, deferential scrutiny.

       1.     The FIT rule is subject to deferential scrutiny

       "'[Cjommercial speech' is entitled to the protection of the First Amendment,

albeit to protection somewhat less extensive than that afforded 'noncommercial

speech.'" Zauderer, 471 U.S. at 637. The level of scrutiny applied to laws

governing commercial speech depends on whether the law at issue actually

restricts commercial speech or merely requires commercial speakers to include

factual disclosures. Id. at 650.

       Where a law restricts truthful commercial speech proposing a lawful

transaction, the law is subject to intermediate scrutiny. Cent. Hudson Gas & Elec.

                                            31
Yim et al. v. City ofSeattle, No. 95813-1

Corp. V. Pub. Serv. Comm 'n, 447 U.S. 557, 564, 100 S. Ct. 2343, 65 L. Ed. 2d 341

(1980). Meanwhile, if the law merely requires factual disclosures by commercial

speakers, review is deferential because a person's "constitutionally protected

interest in not providing any particular factual information in his advertising is

minimal." Zauderer, 471 U.S. at 651. Therefore,"an advertiser's rights are

adequately protected as long as disclosure requirements are reasonably related to

the State's interest in preventing deception of consumers." Id. The government

has the burden of proving its disclosure requirements are "neither unjustified nor

unduly burdensome." Nat'llnst. ofFamily & Life Advocates v. Becerra, 585 U.S.

   , 138 S. Ct. 2361, 2377, 201 L. Ed. 2d 835 (2018)(NIFLA).

       The plaintiffs contend that the FIT rule is a restriction on their commercial

speech because the FIT rule provides that "[IJandlords cannot decline to

communicate a minimum threshold or communicate a flexible standard and then

weigh the credit history against other positive or negative factors in the

application." Resp'ts' Br. at 43. Nothing in the text of the FIT rule supports the

plaintiffs' contention.

       Washington law already provides that "[pjrior to obtaining any information

about a prospective tenant, the prospective landlord shall first notify the

prospective tenant" of the "types of information [that] will be accessed to conduct

the tenant screening" and "[wjhat criteria may result in denial of the application."

                                            32
Yim et al. v. City ofSeattle, No. 95813-1

RCW 59.18.257(1)(a)(i)-(ii). The validity of that statute is not challenged here.

The FIT rule merely provides that if property owners have additional rental criteria

beyond what may result in a denial, they must "at the same time" give prospective

tenants notice of what those criteria are and how they may be met. SMC

14.08.050(A)(1).

       On its face, the FIT rule does not impose any restrictions on what the

landlord's additional criteria may be or how they must be worded, and, contrary to

the trial court's finding, it does not facially preclude advertisements for vacant

tenancies from including phrases such as '"call to learn how to apply' or 'email me

for further details.'" CP at 518. If the FIT rule is interpreted to impose such

restrictions in the future, a property owner may bring an as-applied challenge that

might be subject to heightened scrutiny. However, on its face, the FIT rule

requires only that landlords disclose factual information about their own rental

criteria. It is therefore subject to deferential scrutiny in accordance with Zanderer.

       2.     The FIT rule survives deferential scrutiny

       The plaintiffs analyze their free speech claim only in accordance with

intermediate scrutiny. However, it is still the City's burden to prove that the FIT

rule survives deferential scrutiny. NIFLA, 138 S. Ct. at 2377. We hold the City

has met its burden because on its face, the FIT rule is a justified disclosure

requirement that does not unduly burden the plaintiffs' free speech rights.

                                            33
Yim et al. v. City ofSeattle, No. 95813-1

       To prove that the FIT rule is justified, the City must show that it addresses

"a harm that is 'potentially real not purely hypothetical.'" Id. (quoting Ibanez v.

Fla. Dep'tofBus. & ProfI Regulation, 512 U.S. 136, 146, 114 S. Ct. 2084, 129

L. Ed. 2d 118 (1994)). The City has shown that the problem of implicit bias in

Seattle's rental housing market is (at least) potentially real, based on a 2014 study

that "showed evidence of differential treatment in over 60% of the tests" based on

"race, national origin, sexual orientation and gender identity." City of Seattle's

Opening Br. at 7; CP at 57. This differential treatment included subjecting

different applicants to different rental criteria:

       African American and Latino testers were told about criminal
       background and credit history checks more frequently than the white
       testers. They also were asked more often about their spouses'
       employment history (especially with Latino testers). They also were
       shown and told about fewer amenities, provided fewer applications
       and brochures, were shown fewer vacant units. In some cases, the
       prices quoted were higher for the same unit.

       Testers for sexual orientation and gender identity were shown fewer
       amenities, provided fewer applications and brochures, and were
       shown fewer vacant units. In some cases, the prices quoted were
       higher for the same unit.

CP at 57. This is sufficient justification for the FIT mle's enactment.

       To prove that the FIT rule does not "unduly burden[]protected speech," the

City must show that it does not impose "a government-scripted, speaker-based

disclosure requirement that is wholly disconnected from [the Cityj's informational

interest." NIFLA, 138 S. Ct. at 2377. It clearly does not. The landlords are

                                            34
Yim et al. v. City ofSeattle, No. 95813-1

required to disclose only the rental criteria they set for themselves, so the FIT rule

does not impose any type of script. In addition, requiring landlords to disclose

their rental criteria is directly connected to the City's interest in ensuring that the

same rental criteria are applied to all applicants rather than subjecting some

applicants to more demanding criteria due to the influence of implicit bias.

       We therefore reverse the trial court and hold that the FIT rule survives

deferential scrutiny on its face.

                                       CONCLUSION

       The FIT rule is unquestionably an experiment. This is clear from the rule

itself, which requires "the City Auditor to conduct an evaluation ofthe impact of

the program described in subsections 14.08.050.A-C to determine if the program

should be maintained, amended, or repealed." SMC 14.08.050(D). There is room

for substantial debate about whether such an experiment is likely to succeed.

However, the plaintiffs' facial challenges ask only whether the FIT rule is an

experiment that Seattle is constitutionally prohibited from conducting. It is not.

       We clarify that Washington courts have always attempted to define

regulatory takings consistently with federal law, and we continue to do so now.

Therefore, we adopt the definition of regulatory takings set forth in Chevron U.S.A.

for purposes of article I, section 16 and hold that the plaintiffs have not met their

burden of showing the FIT rule facially meets this definition. We also clarify that

                                            35
Yim et al. v. City ofSeattle, No. 95813-1

rational basis review applies in substantive due process challenges to laws

regulating the use of property and hold that the plaintiffs have not met their burden

of proving that the FIT rule fails rational basis review on its face. Finally, we hold

that on its face, the FIT rule requires only factual disclosures and the City has met

its burden of showing the FIT rule survives deferential scrutiny.

       We therefore reverse the trial court and remand with instructions to grant the

City's motion for summary judgment.

                                            36
Yim, etal., v. City ofSeattle,Y\o. 95813-1

WE CONCUR:

                                                  H2^('e-7

                                             37