Los Angeles Eviction Moratorium Upheld by Ninth Circuit; Uncertainty Continues

Update: To correct and clarify, the City of Los Angeles' residential eviction moratorium does not have a stated expiration date, but extends until the end of the "local emergency period" first established in March 2020 by mayoral order and subsequent City Council action. A separate moratorium applicable to unincorporated areas of Los Angeles County expires on Sept. 30, 2021, unless further extended.

A three-judge panel for the U.S. Court of Appeals for the Ninth Circuit on Aug. 25, 2021, upheld the City of Los Angeles' current residential eviction moratorium – first enacted by the City Council in 2020 as an emergency measure because of the COVID-19 pandemic – in the face of a challenge brought by the Apartment Association of Los Angeles County, a trade association of Los Angeles-area landlords.¹ On the limited case before it, the appellate panel upheld the trial court's refusal to grant injunctive relief against the moratorium on the basis that the landlords were unlikely to succeed on the merits of their Contracts Clause challenge. Other challenges to pandemic-related eviction moratoria will continue in state and federal courts across the country, providing little insight or foresight into when things will return to normal for residential landlords.

What this Opinion Means for Residential Landlords

The City of Los Angeles' eviction moratorium remains in place until the "local emergency" declared in March 2020 ends. A separate moratorium applicable to unincorporated areas of Los Angeles County expires on Sept. 30, 2020. The moratorium could be extended by City Council action, or in some cases by further emergency action by Mayor Eric Garcetti.

The moratorium arises from two ordinances enacted by the City of Los Angeles in spring 2020, which have since been codified in the Los Angeles Municipal Code at Sections 49.99. through 49.99.9. The moratorium bars landlords from evicting residential tenants under any of the following circumstances:

• Nonpayment of Rent. Residential tenants cannot be evicted for nonpayment of rent during the "Local Emergency Period"² and for 12 months after its expiration if the tenant's inability to pay rent is due to circumstances related to the COVID-19 pandemic.³ Circumstances related to the COVID-19 pandemic include: loss of income due to a COVID-19-related workspace closure, child care expenditures due to school closures, healthcare expenses related to being ill with COVID-19 or caring for a member of the tenant's household or family who is ill with COVID-19, or reasonable expenditures that stem from government-ordered emergency measures.⁴
• No-Fault. Tenants cannot be evicted during the Local Emergency Period for a "no-fault" reason, such as an owner intending to occupy the property; withdrawal of the property from the rental market; the owner's compliance with laws of governmental orders requiring vacating of the property; and intent to demolish or remodel the property.⁵
• Unauthorized Occupants, Pets or Nuisance. Tenants cannot be evicted during the Local Emergency Period based on the presence of unauthorized occupants, pets or for nuisance related to COVID-19.⁶

The moratorium does not leave landlords entirely without relief for unpaid rent. The moratorium does not forgive any rent payments, and landlords may pursue actions for nonpayment of rent once the 12-month period succeeding the Local Emergency Period ends.⁷ However, landlords may not charge interest or late fees on unpaid rent during the moratorium.⁸

The trial court in the Apartment Association's challenge noted that under the City's moratorium, "[l]andlords may continue to seek to evict tenants on their good-faith belief that the tenants are not protected under the eviction moratorium."⁹ However, the moratorium creates an affirmative defense for tenants in unlawful detainer actions.¹⁰ It also creates a private right of action for residential tenants against landlords under Section 49.99.7.¹¹ This may result in damages and a possible civil penalty of up to $15,000 per violation. Lastly, the court noted that the emergency protocols enacted by various governmental agencies, including within the City of Los Angeles, offer some assistance to landlords. This may include payment plans for utilities and penalty waivers for property taxes, although the monetary value of utility bills and penalties for late tax payments are in most cases far outweighed by unpaid rent amounts from COVID-19-impacted tenants.¹²

The Case

On June 11, 2020, the plaintiff-petitioner, Apartment Association of Los Angeles County (Apartment Association) sued the City of Los Angeles, Mayor Garcetti and the City Council (collectively, City), claiming that the eviction moratorium was an unconstitutional interference with the contractual agreements created in residential leases. The Apartment Association sought a preliminary injunction preventing enforcement of the City's residential eviction ban. The U.S. District Court for the Central District of California denied the Apartment Association's request. The Ninth Circuit upheld this decision in its Aug. 25 opinion.

The Ninth Circuit based its ruling upon the petitioner's likelihood for success on the merits, one of the essential requirements of injunctive relief. The panel found that the Apartment Association was unlikely to succeed on the merits of its Contracts Clause argument. The Apartment Association had argued that the moratorium violated the U.S. Constitution's Contracts Clause, which states that "No State shall…pass any…[l]aw impairing the Obligation of Contracts." U.S. Const. art. I, § 10, cl. 1. As the court notes in its opinion, the protections assured by the Contracts Clause are not absolute, and should be evaluated in light of the appropriateness and reasonableness of the law in question.

The Ninth Circuit embraced the U.S. Supreme Court's two-part test to determine whether a law violated of the Contracts Clause, as identified in Sveen v. Melin, 138 S. Ct. 1815 (2018). The Sveen test looks first to whether a state law poses a "substantial impairment" to the contractual relationship. If so, the court must then determine whether the law was written in an "appropriate" and "reasonable" way to advance a "significant and legitimate public purpose." The Ninth Circuit reasoned that the moratorium's provisions constituted an appropriate and reasonable way to advance a significant and legitimate purpose because "[t]he City fairly ties the moratorium to its stated goal of preventing displacement from homes, which the City reasonably explains can exacerbate the public health-related problems stemming from the COVID-19 pandemic." Given its finding of reasonableness under the second prong of the Sveen test, the court found it unnecessary to answer whether the moratorium presented a "substantial impairment" on a landlord-tenant contractual relationship, because the reasonableness finding would sustain the moratorium even if a substantial impairment had occurred. The panel noted that the Sveen test represented a more modern application of Contracts Clause jurisprudence than more expansive cases that found legislative interference nearly 100 years ago. The cases proffered by the Apartment Association suggesting a wider restraint on legislative interference spoke to a more robust interpretation of the Contracts Clause that has fallen from favor in more recent cases.

Conclusion

Although the Apartment Association's injunction request was denied, its case is not over. Nor, is the eviction uncertainty that residential landlords face any clearer. Both the City's eviction moratorium, and the statewide moratorium imposed by Gov. Gavin Newsom, are set to expire at the end of September. Prospects for further extension are uncertain. While the Ninth Circuit panel remarked on its powerlessness to opine further than on the limited Contracts Clause challenge before it, other challenges to eviction moratoria continue. Claims alleging, inter alia, unconstitutional takings, due process violations and other defects continue to work their way through various courts. The case will also continue on its merits in the district court. In another widely noticed case, a prominent Los Angeles apartment developer and repeated litigant/opponent of the City brought a case in early August that seeks more than $100 million in damages as a result of the City's moratorium.¹³ These and other cases, as well as the fate of the various emergency measures, will need to play out a bit longer before residential landlords obtain much certainty about how their future management efforts should proceed.

For more information or questions on City of Los Angeles' eviction moratorium or the Ninth Circuit's ruling, contact the authors.

Notes

¹ Apartment Association of Los Angeles County, Inc., DBA Apartment Association of Greater Los Angeles, v. City of Los Angeles, et al (9th Cir. Aug. 28, 2021, No. 20-56251) ___ F.4th ___.

² The "Local Emergency Period" is defined as the period of time from March 4, 2020, to the end of the local emergency as declared by the mayor. §49.99.1(C).

³ Los Angeles Municipal Code §49.99.2 (A).

⁴ The City's eviction moratorium does not require tenants to document or prove COVID-19 pandemic hardship. Interestingly, this issue, described in some media as "self-certification," was recently declared invalid by the U.S. Supreme Court in a challenge to a similar eviction moratorium in New York state. The Apartment Association's challenge to the Los Angeles moratorium did not raise a claim like the one endorsed by the Supreme Court. Chrysafis v. Marks,594 U.S. ­­­___, No. 21A8 (Aug. 12, 2021).

⁵ Los Angeles Municipal Code §49.99.1(D).

⁶ Los Angeles Municipal Code §49.99.1(C)

⁷ Recent statewide legislation has increased the Small Claims Court jurisdictional limits for recovery of unpaid rent amounts covered by COVID-19 eviction relief. Landlords statewide may not evict residential tenants for nonpayment of these deferred amounts, but may seek relief in Small Claims Court. See AB 3088 and Holland & Knight's West Coast Real Estate Webinar, "California Tenant Workouts: Commercial, Retail and Residential Rent Abatement and Eviction Practices," Oct. 28, 2020

⁸ Los Angeles Municipal Code §49.99.2(D).

⁹ Residential evictions may also continue for lease defaults other than those specifically enumerated in the moratorium, although some landlords have described hardships that have gone largely unanswered by local governments. The City of Los Angeles announced on Aug. 25, 2021, an expanded relief program starting Sept. 1, under which both tenants and landlords can seek assistance for COVID-19-related rent shortfalls.

¹⁰ Los Angeles Municipal Code §49.99.6.

¹¹ Los Angeles Municipal Code §49.99.7

¹² The amount of aid available to small-scale residential landlords could potentially far surpass the landlord-focused assistance noted by the Ninth Circuit panel.

¹³ See "Landlord sues L.A. for $100 million, saying anti-eviction law caused 'astronomical' losses," Los Angeles Times, Aug. 9, 2021.

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