74 Pinehurst LLC v. State of New York
59f4th557
2d Cir.2023Background
- Plaintiffs ("Pinehurst") are trade associations and owners/managing agents of New York City apartment buildings subject to the Rent Stabilization Law (RSL); they challenged the 2019 HSTPA amendments.
- Pinehurst asserted facial and as-applied claims: physical takings, regulatory takings, and Fourteenth Amendment due process violations.
- The District Court dismissed the complaint under Rule 12(b)(6); Pinehurst appealed to the Second Circuit. The appeal was considered alongside Community Housing Improvement Program v. City of New York.
- The Second Circuit affirmed dismissal: facial takings claims fail under the Salerno standard; most as-applied takings claims are either unripe (for failure to seek available administrative hardship exemptions) or fail on the merits under Penn Central.
- The court held that the Due Process Claim fails under rational-basis review and that Eleventh Amendment sovereign immunity bars Pinehurst’s takings claims against the State and DHCR (except limited prospective relief against officials).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Facial physical taking | RSL permanently compels landlords to allow tenants; per se physical taking | Rent regulation of voluntary landlord-tenant relationships is permissible; Yee and Loretto distinctions | Dismissed — facial physical-taking claim fails under Salerno; not a per se taking |
| As-applied physical taking | For certain owners, RSL compelled renewals/successor rights and prevented repossession — forced to rent to unwanted tenants | Plaintiffs fail to allege compelled physical invasion; eviction/remedies remain; no exhaustion shown | Dismissed — insufficient pleading of a compelled physical invasion; claim fails |
| Facial regulatory taking | RSL restricts use of property so severely it is unconstitutional in all applications | Impact varies by property; cannot show statute invalid in all applications | Dismissed — facial regulatory-taking claim fails under Salerno |
| As-applied regulatory taking (ripeness & merits) | Specific owners suffered severe value loss and impaired investment-backed expectations | Plaintiffs did not seek available hardship exemptions (unripe); Penn Central factors (economic impact, expectations, character) do not favor plaintiffs | Dismissed — claims unripe for failure to pursue exemptions; even if ripe, Penn Central analysis rejects the claims |
| Due process | RSL deprives owners of property interests without due process | Takings Clause is the proper framework; if due-process applies, rational basis suffices because RSL advances housing stability | Dismissed — substantive due process claim fails; rational-basis satisfied |
| Sovereign immunity | Takings Clause abrogates state sovereign immunity so state defendants are liable | Eleventh Amendment bars suit absent waiver; Takings Clause does not abrogate; Ex parte Young allows only prospective relief against officials | Dismissed — Eleventh Amendment bars monetary takings claims against the State and DHCR; only limited prospective relief against officials remains |
Key Cases Cited
- Cedar Point Nursery v. Hassid, 141 S. Ct. 2063 (2021) (per se physical taking where government-authorized third-party access invades property)
- Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982) (statute requiring installation on property constituted per se physical taking)
- Yee v. City of Escondido, 503 U.S. 519 (1992) (landlord who rents takes regulatory risk; landlord-tenant regulations generally not per se takings)
- Penn Central Transp. Co. v. City of New York, 438 U.S. 104 (1978) (multi-factor test for regulatory takings: economic impact, investment-backed expectations, character)
- Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922) (regulatory takings occur when regulation goes "too far")
- Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 535 U.S. 302 (2002) (ad hoc, factual inquiry in regulatory takings analysis)
- Knick v. Township of Scott, 139 S. Ct. 2162 (2019) (takings claim accrues when government takes property without compensation)
- Pakdel v. City and County of San Francisco, 141 S. Ct. 2226 (2021) (ripeness: plaintiffs must pursue administrative variances/exemptions before federal takings suit where available)
- United States v. Salerno, 481 U.S. 739 (1987) (facial-challenge standard: plaintiff must show no set of circumstances under which statute is valid)
- Concrete Pipe & Prods. v. Constr. Laborers Pension Trust, 508 U.S. 602 (1993) (mere diminution in property value, however severe, is insufficient alone to establish a taking)
- Park Ave. Tower Assocs. v. City of New York, 746 F.2d 135 (2d Cir. 1984) (diminutions in value do not necessarily establish regulatory taking)
- Rent Stabilization Ass’n of the City of N.Y. v. Dinkins, 5 F.3d 591 (2d Cir. 1993) (facial challenges to NYC rent-regulation statutes have routinely failed)
- Will v. Michigan Dep’t of State Police, 491 U.S. 58 (1989) (Eleventh Amendment bars suits against states in federal court absent waiver)
- Pennhurst State School & Hospital v. Halderman, 465 U.S. 89 (1984) (Eleventh Amendment jurisdictional bar applies regardless of relief sought)
- Ex parte Young, 209 U.S. 123 (1908) (narrow exception permitting prospective injunctive relief against state officials)