Court Opinion

ID: 9940222
Source: CourtListenerOpinion
Date Created: 2024-02-13 18:01:12.827715+00
Date Added: 2024-06-11T13:44:39.613310
License: Public Domain

FOR PUBLICATION

   UNITED STATES COURT OF APPEALS
        FOR THE NINTH CIRCUIT

PEACE RANCH, LLC,                         No. 22-16063

             Plaintiff-Appellant,            D.C. No.
                                          2:21-cv-01651-
 v.                                          JAM-AC

ROB BONTA, in his official capacity
as Attorney General of the State of         OPINION
California,

             Defendant-Appellee,

and

GAVIN NEWSOM,

             Defendant.

      Appeal from the United States District Court
          for the Eastern District of California
       John A. Mendez, District Judge, Presiding

         Argued and Submitted October 5, 2023
               San Francisco, California

                Filed February 13, 2024
2                  PEACE RANCH, LLC V. BONTA

    Before: M. Margaret McKeown, Richard C. Tallman, and
               Kenneth K. Lee, Circuit Judges.

                 Opinion by Judge McKeown

                          SUMMARY *

           Civil Rights/Pre-enforcement Standing

    The panel reversed the district court’s order dismissing
for lack of standing an amended complaint brought by Peace
Ranch LLC seeking to enjoin the enforcement of California
AB 978, a mobilehome-rent-control statute.
    Peace Ranch alleged that if it raises mobilehome rents
more than AB 978 allows, the California Attorney General
will enforce AB 978 against it and seek
sanctions. Alternatively, Peace Ranch alleged that AB 978
does not apply to its mobilehome park. In response, the
Attorney General argued that Peace Ranch cannot not state
a pre-enforcement injury if it also alleges that the statute is
inapplicable.
    The panel held that Peace Ranch adequately pled
standing based on a pre-enforcement injury.
    The panel determined that its analysis would be guided
by whether there was a substantial threat of enforcement and
not the likelihood of whether any such enforcement action
would ultimately lead to sanctions. Applying the pre-

*
 This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
                  PEACE RANCH, LLC V. BONTA                    3

enforcement challenge framework set forth in Susan B.
Anthony List v. Driehaus, 573 U.S. 149 (2014), and
construing the allegations in Peace Ranch’s favor, the panel
determined that Peace Ranch (1) specifically pled its
intention to raise rents and its ability to do so arguably
affected a constitutional interest, (2) plausibly alleged that it
refrained from raising rents because of the Attorney
General’s interpretation of AB 978, and (3) demonstrated a
substantial threat of enforcement given that the Attorney
General not only refuses to disavow its intent to enforce AB
978 but also admits that AB 978 targets Peace Ranch.

                         COUNSEL

Paul J. Beard, II (argued), FisherBroyles LLP, Los Angeles,
California; Peter S. Bauman, Callahan & Blaine APLC,
Santa Ana, California; for Plaintiff-Appellant.
Megan A.S. Richards (argued), Deputy Attorney General; P.
Patty Li, Supervising Deputy Attorney General; Thomas S.
Patterson, Senior Assistant Attorney General; Rob Bonta,
California Attorney General; California Attorney General’s
Office, Sacramento, California; for Defendant-Appellee.
4                  PEACE RANCH, LLC V. BONTA

                           OPINION

McKEOWN, Circuit Judge:

    This appeal requires us to address a question of pre-
enforcement standing. Peace Ranch LLC (“Peace Ranch”)
sued the California Attorney General and Governor to enjoin
the enforcement of AB 978, a mobilehome-rent-control
statute. 1 Peace Ranch claims that if it raises mobilehome
rents more than AB 978 allows, the Attorney General will
enforce AB 978 against it and seek sanctions. This is the
prototypical posture of a pre-enforcement standing case, but
Peace Ranch adds one unusual wrinkle. The complaint also
alleges, in the alternative, that AB 978 does not apply to
Peace Ranch’s mobilehome park. The Attorney General
seizes upon this latter allegation, arguing that Peace Ranch
cannot state a pre-enforcement injury if it also alleges that
the statute is inapplicable. The parties dispute whether AB
978 applies to Peace Ranch, and resolution of that factual
and legal dispute awaits further litigation.
    This peculiar posture unearths a nuance of pre-
enforcement standing: Is a pre-enforcement injury the threat
of enforcement or the threat of successful enforcement? We
conclude that the substantial threat of enforcement, and not
the likelihood that any such enforcement action would
ultimately lead to sanctions, drives our analysis. Here, Peace
Ranch has a choice: raise rents and face a costly enforcement
action or forego a rent increase and conform to a law that
may not apply. Peace Ranch is indeed stuck between rock

1
 AB 978 treats “mobilehome” as a single word while the Supreme Court
and more common usage use “mobile home.” Because we are dealing
with the California legislation, we adopt “mobilehome.”
                     PEACE RANCH, LLC V. BONTA                         5

and a hard place—the precise dilemma that supports pre-
enforcement standing. Accordingly, we reverse the district
court’s dismissal for lack of standing.
                     FACTUAL BACKGROUND
    In 2019, Peace Ranch acquired the Rancho La Paz
mobilehome park, which straddles two cites in Orange
County, Anaheim and Fullerton. 2 Shortly after the purchase,
Peace Ranch attempted to raise rents on plots, but there was
significant tenant and political pushback. 3 As a result, Peace

2
 At issue is the Rancho La Paz park owned by Peace Ranch. For ease
of reference, we use the Peace Ranch moniker to refer to the park.
3
 The Supreme Court summed up the relationship between mobilehome
owners and mobilehome park owners in Yee v. City of Escondido:
         The term “mobile home” is somewhat misleading.
         Mobile homes are largely immobile as a practical
         matter, because the cost of moving one is often a
         significant fraction of the value of the mobile home
         itself. They are generally placed permanently in parks;
         once in place, only about 1 in every 100 mobile homes
         is ever moved. A mobile home owner typically rents a
         plot of land, called a “pad,” from the owner of a mobile
         home park. The park owner provides private roads
         within the park, common facilities such as washing
         machines or a swimming pool, and often utilities. The
         mobile home owner often invests in site-specific
         improvements such as a driveway, steps, walkways,
         porches, or landscaping. When the mobile home
         owner wishes to move, the mobile home is usually
         sold in place, and the purchaser continues to rent the
         pad on which the mobile home is located.
503 U.S. 519, 523 (1992) (citations omitted). This “peculiar
characteristic” puts mobilehome owners in a uniquely weak bargaining
position: If they wish to continue living in the home that they own, they
must pay whatever rental price the park owner sets. See Guggenheim v.
6                   PEACE RANCH, LLC V. BONTA

Ranch and its tenants renegotiated a phased-in schedule of
rent increases. Still, the rent increases garnered considerable
public controversy in Anaheim and Fullerton. Mobilehome
rent control ordinances were introduced in both cities but
were ultimately voted down.
     Following that defeat, a California state assembly
member for Fullerton took the matter to the state legislature.
Initially, she introduced a statewide mobilehome park rent
control statute, but the bill died in committee. In February
2021, she tried again, this time introducing a narrower bill:
AB 978. This effort succeeded, and AB 978 went into effect
in January 2022. Among other things, AB 978 prohibits a
“qualified mobilehome park” from raising plot rent more
than 3% plus the percentage change in cost of living or 5%,
whichever is lower. Crucially, the law narrowly defines
“qualified mobilehome park” as “a mobilehome park . . . that
is located within and governed by the jurisdictions of two or
more incorporated cities.”
    The amended complaint alleges that AB 978 targets only
Peace Ranch. The preamble of AB 978 reads, “In enacting
this legislation, it is the intent of the Legislature to protect
mobilehome owners in qualified mobilehome parks that
have been subject to rent increases that reside in counties
with populations between 2,500,000 and 3,250,000
according to the last census count.” Peace Ranch alleges that
Orange County’s population is 3,186,989 according to the
2020 census, and no other California county’s population
falls into that range. In Orange County, only Peace Ranch is
“located within and governed by the jurisdictions of two or
more incorporated cities.” Accordingly, Peace Ranch

City of Goleta, 638 F.3d 1111, 1114 (9th Cir. 2010) (en banc). In this
way, the park owner has each tenant “over a barrel.” Id.
                  PEACE RANCH, LLC V. BONTA                   7

concludes, “[The bill’s sponsors] wrote AB 978 in hopes of
ensuring that only Peace Ranch would be subject to the law.”
    Despite the targeted drafting, a controversy remains over
whether Peace Ranch is a single mobilehome park, as it is
referred to colloquially, or two separate parks. Peace Ranch
alleges, “While Peace Ranch believes [Rancho La Paz] is
actually two separate parks (one in Anaheim and the other in
Fullerton), both the Legislature and Defendant Attorney
General . . . believe that Rancho La Paz is a single park
straddling two cities and is therefore subject to AB 978.”
                PROCEDURAL BACKGROUND
     Peace Ranch brought an action seeking declaratory and
injunctive relief, nominal damages, and attorneys’ fees. The
initial complaint alleges violations of the constitutional
prohibition on Bills of Attainder, the Contracts Clause, the
Equal Protection Clause, the Due Process Clause, and the
Takings Clause. The Attorney General moved to dismiss
under Federal Rules of Civil Procedure 12(b)(1) for lack of
standing and 12(b)(6) for failure to state a claim.
    The district court granted the motion to dismiss,
reasoning that AB 978 does not apply to Peace Ranch
because, accepting the complaint allegations as true, Peace
Ranch does not own a “qualified mobilehome park.” Peace
Ranch LLC v. Newsom, No. 2:21-CV-01651-JAM-AC, 2022
WL 378264, at *3 (E.D. Cal. Feb. 8, 2022). There was,
therefore, no “realistic danger of sustaining a direct injury as
a result of the statute’s operation or enforcement.” Id.
(quoting LSO, Ltd. v. Stroh, 205 F.3d 1146, 1154 (9th Cir.
2000)).
    Peace Ranch then amended its complaint to emphasize
that its injury stemmed from the Attorney General’s position
8                 PEACE RANCH, LLC V. BONTA

that AB 978 applies to Peace Ranch. The district court
rejected this argument and granted the Attorney General’s
renewed motion to dismiss, this time with prejudice. Peace
Ranch LLC v. Bonta, No. 2:21-CV-01651-JAM-AC, 2022
WL 2670035, at *2 (E.D. Cal. July 11, 2022). The district
court reiterated: “Because Plaintiff continues to allege
[Rancho La Paz] is ‘actually two separate parks . . . ,’ it does
not meet the criteria of a ‘qualified mobilehome park.’
Plaintiff’s choice to comply with AB 978 is irrelevant.
Voluntary compliance with a law that does not apply does
not constitute an injury-in-fact.” Id. The district court did not
reach the merits under the Rule 12(b)(6) motion.
                         ANALYSIS
I. THE CONTOURS OF PRE-ENFORCEMENT STANDING
    The contours of standing have shifted and changed over
time, but the crux of the inquiry has not wavered: whether
“conflicting contentions of the parties . . . present a real,
substantial controversy between parties having adverse legal
interests, a dispute definite and concrete, not hypothetical or
abstract.” Railway Mail Ass’n v. Corsi, 326 U.S. 88, 93
(1945). To establish “the irreducible constitutional minimum
of standing,” Peace Ranch must establish “injury in fact,
causation, and a likelihood that a favorable decision will
redress the plaintiff’s alleged injury.” Lopez v. Candaele,
630 F.3d 775, 785 (9th Cir. 2010) (quoting Lujan v. Defs. of
Wildlife, 504 U.S. 555, 560–61 (1992)).
     Pre-enforcement injury is a special subset of injury-in-
fact. Typically, plaintiffs must allege an injury at the time of
filing. For pre-enforcement plaintiffs, the injury is the
anticipated enforcement of the challenged statute in the
future. One need not violate a criminal law and risk
prosecution in order to challenge the law’s constitutionality.
                        PEACE RANCH, LLC V. BONTA                   9

Steffel v. Thompson, 415 U.S. 452, 459 (1974). This
principle applies equally in the civil context. See Lopez, 630
F.3d at 786 (“The threatened state action need not
necessarily be a prosecution.”).
   Courts have adopted various metaphors to encapsulate
the dilemma facing a pre-enforcement plaintiff—“the
rock . . . and the hard place,” 4 “the Scylla . . . and the
Charybdis,” 5 and the choice to comply or “bet the farm.” 6 In
2000, the Ninth Circuit articulated a three-prong test for pre-
enforcement standing:

           In evaluating the genuineness of a claimed
           threat of prosecution, we look to whether the
           plaintiffs have articulated a “concrete plan”
           to violate the law in question, whether the
           prosecuting authorities have communicated a
           specific warning or threat to initiate
           proceedings, and the history of past
           prosecution or enforcement under the
           challenged statute.

Thomas v. Anchorage Equal Rts. Comm’n, 220 F.3d 1134,
1139 (9th Cir. 2000) (en banc).
    Nearly fifteen years later, in Susan B. Anthony List v.
Driehaus, the Supreme Court articulated a different
framework, albeit incorporating part of the essence of the
Ninth Circuit test. 573 U.S. 149 (2014). A plaintiff must first
allege “an intention to engage in a course of conduct

4
    Bland v. Fessler, 88 F.3d 729, 737 (9th Cir. 1996).
5
    Steffel, 415 U.S. at 462.
6
    MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 129 (2007).
10                  PEACE RANCH, LLC V. BONTA

arguably affected with a constitutional interest.” Id. at 161
(quoting Babbitt v. United Farm Workers Nat’l Union, 442
U.S. 289, 298 (1979)). The intended future conduct must be
“arguably . . . proscribed by [the challenged] statute.” Id. at
162 (quoting Babbitt, 442 U.S. at 298). And finally, the
threat of future enforcement must be “substantial.” Id. at
164. We adopt the Supreme Court’s framework, although
we acknowledge that the Ninth Circuit has toggled between
these two tests. 7 Compare Arizona v. Yellen, 34 F.4th 841,
849 (9th Cir. 2022), with Clark v. City of Seattle, 899 F.3d
802, 813 (9th Cir. 2018).
II. APPLICATION OF THE DRIEHAUS TEST TO PEACE
    RANCH’S PRE-ENFORCEMENT STANDING
    We review de novo the district court’s order granting the
motion to dismiss for lack of standing. Southcentral Found.
v. Alaska Native Tribal Health Consortium, 983 F.3d 411,
416–17 (9th Cir. 2020). Because this case was dismissed at
the pleading stage, our analysis is based on the allegations of
the amended complaint, which we accept as true. See
Carrico v. City & Cnty. of San Francisco, 656 F.3d 1002,
1006 (9th Cir. 2011).

7
  The Attorney General argues that we ought to disregard any caselaw
analyzing standing for First Amendment claims due to the “unique
standing considerations” in that context. True enough, “when the
threatened enforcement effort implicates First Amendment rights, the
inquiry tilts dramatically toward a finding of standing.” LSO, 205 F.3d
at 1155. But this argument goes too far. We are mindful that a different
standard applies to First Amendment standing, but these precedents
remain instructive in understanding the principles of pre-enforcement
standing.
                  PEACE RANCH, LLC V. BONTA                  11

   A. Intention to Engage in a Course of Conduct
   Arguably Affected with a Constitutional Interest
    Peace Ranch must first establish that it has “an intention
to engage in a course of conduct arguably affected with a
constitutional interest.” Driehaus, 573 U.S. at 161. We have
no trouble concluding that Peace Ranch meets this prong of
the test.
    In Driehaus, plaintiffs challenged an Ohio election law
prohibiting “false statements” during political campaigns.
Id. at 151. They pleaded “specific statements [the plaintiffs]
intend to make in future election cycles” and arguably
“false” previous statements. Id. at 161. The Court held these
allegations were sufficient to meet the first prong of its pre-
enforcement standing test.
    Importantly, a plaintiff need not plan to break the law.
The concept of “intention” is more counterfactual than
practical. That is to say, courts must ask whether the plaintiff
would have the intention to engage in the proscribed
conduct, were it not proscribed. A good example of this
principle is found in Bland v. Fessler, 88 F.3d 729 (9th Cir.
1996). Bland used an automated dialing system in his
business, in violation of California law. Id. at 731. After
being issued a warning, he stopped using it, which “cut his
income by 50% and caused him to lay off three employees.”
Id. at 737. Instead of violating the law, he followed a course
much like Peace Ranch.

       Bland chose to obey both the civil and
       utilities statutes and to bring a declaratory
       action challenging their constitutionality,
       rather than to violate the law, await an
       enforcement action against him, and raise the
12                PEACE RANCH, LLC V. BONTA

       statutes’ constitutionality as a defense.
       Bland’s decision was altogether reasonable
       and demonstrates a commendable respect for
       the rule of law. Under the circumstances of
       this case, Bland should be allowed to test the
       law.

Id.
    Like Bland and the plaintiffs in Driehaus, Peace Ranch
specifically pleads its intent and alleges corroborating past
practice. Before the passage of AB 978, Peace Ranch raised
rents on its mobilehome plots more than five percent. Peace
Ranch alleges that after AB 978 went into effect, “to avoid
injury in the form of an action seeking to enforce AB 978
and associated penalties based on the [Attorney General’s]
belief that [Rancho La Paz] is a single park, Peace Ranch has
been forced to conform its conduct to the mandates of AB
978.” And so, it has adequately alleged an “intention to
engage in a course of conduct.”
    The “course of conduct” must also be “arguably affected
with a constitutional interest,” but this inquiry does not
require us to engage in a mini litigation of the claims. Rather,
“the Supreme Court has cautioned that standing ‘in no way
depends on the merits’ and has instructed us to take as true
all material allegations in the complaint and construe the
complaint in favor of the plaintiff.” Yellen, 34 F.4th at 849
(quoting Warth v. Seldin, 422 U.S. 490, 500 (1975)). Under
Peace Ranch’s theories, the ability to raise rents arguably
affects a constitutional interest. Thus, the allegations are
sufficient to meet the first Driehaus prong.
                  PEACE RANCH, LLC V. BONTA                    13

    B. Conduct Arguably Proscribed by the Statute
    Peace Ranch’s intended future conduct must be
“arguably . . . proscribed by [the] statute” it wishes to
challenge. Driehaus, 573 U.S. at 162 (quoting Babbitt, 442
U.S. at 298). This is where the unique quirks of this appeal
come into play.
    In an effort to preserve future arguments, both parties
dance around whether Rancho La Paz is a single
mobilehome park straddling two cities or two mobilehome
parks, one in each city. Hedging its bets, Peace Ranch
alternatively claims that it is a single park (and thus is subject
to AB 978) or two parks (and thus escapes the confines of
AB 978). The amended complaint describes Rancho La Paz
as a “park straddl[ing] two cities” and also alleges that
“Peace Ranch believes [Rancho La Paz] is actually two
separate parks (one in Anaheim and the other in Fullerton).”
In its opening brief, Peace Ranch explains that these
allegations “preserve an alternative argument for a future
enforcement or other proceeding.” For its part, Peace Ranch
is clear on one point—it wants to raise the rents.
    The Attorney General maintains that Peace Ranch’s
allegation of two parks destroys its standing. There can be,
the argument goes, no pre-enforcement standing if the
statute does not apply to Peace Ranch.
    The Supreme Court has provided some insight that
guides our analysis. In Federal Election Commission v.
Cruz, Senator Ted Cruz and his campaign entity, Ted Cruz
for Senate (“Committee”), filed suit against the FEC,
alleging that a particular campaign finance law (“Section
304”) was unconstitutional. 596 U.S. 289, 293 (2022). The
Court noted an “Alice in Wonderland air” about the parties’
arguments with “the Government arguing that appellees
14                PEACE RANCH, LLC V. BONTA

would not violate the statute by repaying Cruz, and [Cruz
and the Committee] arguing that they would.” Id. at 299–
300. While the parties in Cruz squabbled over niche
jurisdictional issues, the Court outlined a much simpler
theory of standing: “[T]his case has unfolded in an unusual
way. After all, Cruz and the Committee likely would have
had standing to bring a pre-enforcement challenge (as they
do now) to Section 304 in a much easier manner—by simply
alleging and credibly demonstrating that Cruz wished to loan
his campaign an amount larger than $250,000, but would not
do so only because the loan-repayment limitation made it
unlikely that such amount would be repaid.” Id. at 300
(citing Driehaus, 573 U.S. at 158–59).
    We are faced with similarly “unusual” facts. In order to
establish standing, the would-be sanctioned party, Peace
Ranch, must argue that the law does apply, while the would-
be enforcing party, the Attorney General, could defeat
standing by conceding that the law does not apply. But there
is no need to go “further down this rabbit hole.” Id. at 301.
We can avoid this pickle—an inquiry that seems to
unavoidably tangle standing with the merits. One purpose of
pre-enforcement standing is to ensure that no law is
practically unchallengeable. The risk of being sued by the
state will deter many plaintiffs from testing their luck. Thus,
the relevant question is whether Peace Ranch plausibly
alleged that it refrained from raising rents because of the
Attorney General’s interpretation of AB 978. The answer is
yes and the second Driehaus prong is met.
     C. Substantial Threat of Enforcement
    Finally, Peace Ranch must demonstrate a “substantial
threat” of enforcement. Driehaus, 573 U.S. at 164. This final
prong often rises or falls with the enforcing authority’s
                  PEACE RANCH, LLC V. BONTA                  15

willingness to disavow enforcement. See LSO, 205 F.3d at
1154–56 (“While we cannot go so far as to say that a plaintiff
has standing whenever the Government refuses to rule out
use of the challenged provision, failure to disavow ‘is an
attitudinal factor the net effect of which would seem to
impart some substance to the fears of [plaintiffs].’” (quoting
Am.-Arab Anti-Discrimination Comm. v. Thornburgh, 970
F.2d 501, 508 (9th Cir. 1991))); California Trucking Ass’n
v. Bonta, 996 F.3d 644, 653 (9th Cir. 2021) (“Here, the
state’s refusal to disavow enforcement . . . is strong evidence
that the state intends to enforce the law and that [the
plaintiffs] face a credible threat.”).
     Here, the Attorney General not only refuses to disavow
its intent to enforce but also admits that the law targets Peace
Ranch. To be sure, the Attorney General stops short of
stating its intention to enforce AB 978 against Peace Ranch,
and his briefing diligently avoids taking a stance. But at oral
argument, the Attorney General’s counsel was asked, “Are
you able to commit that the state won’t enforce the law
against Peace Ranch, if Peace Ranch raises the rents more
than five percent?” Tellingly, she replied, “No.” By the
Attorney General’s own admission, the Legislature had
Peace Ranch “in mind” when it enacted AB 978. We cannot
ignore the Legislature’s clear targeting of Peace Ranch and
the Attorney General’s answer at oral argument. This is
enough to substantiate the threat and satisfy the final
Driehaus prong.
                        CONCLUSION
    In sum, Peace Ranch has adequately pled standing based
on Driehaus. Because we hold that Peace Ranch has
standing under a pre-enforcement injury theory, we decline
16              PEACE RANCH, LLC V. BONTA

to reach Peace Ranch’s alternative standing theory based on
the cost of compliance with AB 978.
     REVERSED.