Fisher v. City of Berkeley

No. 24675. Dec. 1984.] [S.F. al., and Appellants,

ALEXANDRA FISHER et Plaintiffs al., et Defendants and Respondents. CITY OF BERKELEY Counsel Riess, Dobbs & Parrinello, Mueller, T. John E. Christiane

James R. Peter J. Donnici Nielsen, Nielsen, & Mueller and Parrinello Hodgson, Plaintiffs Appellants. Jones, Jones, & Smock, III, Stacey

Jon Wilbur L. D. H. Haines Stephen Hamilton, Babbe, & Austin, Biddle Tuttle & R. David B. Taylor, Joseph Reiner, (Los Claudia McGee Biddle, Attorney Angeles), W. Ira Craig City Woodward, City Deputy Assistant Michael S. Henry, City Attorney, Kimball as Watkins, and George Latham & L. Jones Attorney, Stephen Amici Curiae on behalf of Plaintiffs and Appellants. West, Moskovitz, Walter, E. City Natalie

Myron Jeffrey Ann A. Juergens, for Defendants and Attorney, Senior Attorney, Bray, City Frederick W. Respondents. Wiman, Grow, Heumann, Marsha

James R. Michael P. Jones Stephen Moutrie, Monica), S. (Santa Robert M. Myers, City Attorney Stephen Stark, Manheim, City Attorney, Assistant Karl City Deputy M. Attorney, Witt, (San Jose), Attorney Robert W. City J. John Logan, City Attorney Francisco), (San (San as Amici Diego), and George Agnost, City Attorney Curiae on behalf of Defendants and Respondents.

Opinion Plaintiffs, a in the MOSK, J. City who own property landlords group Court from a of the Alameda Berkeley, judgment County Superior appeal on its face. We defendants’ rent control ordinance constitutional holding affirm the substantially judgment. with, and hence is

Plaintiffs claim that defendants’ ordinance conflicts it a combination that unrea- federal antitrust law because is preempted by, commerce 1 of the Sher- restrains in violation of section sonably interstate U.S.C.) also (Act Act). (15 They man Antitrust Act or Sherman claim it in violation of constitutes or attempted monopolization, monopolization, en- {Ibid.) section 2 of the business fixing by private Act. Although price se, rule of illegality we hold that the se per terprises clearly illegal per ordinance does not to the defendants’ price-fixing apply municipal to the tra- Nor can be reviewed pursuant case. such municipal regulation reason, solely by ditional rule of would be validity judged under which Instead, that when effect we have determined regulation’s competition. laws, of an validity ordinance is under the federal antitrust challenged courts must traditional antitrust rules in order to accommodate mu- adapt economic and social nicipal governments’ legitimate interest enacting health, regulations local and welfare. We conclude that if concerning safety has a related to municipal regulation rationally local proper purpose, municipality’s legitimate exercise of its police power, operates manner, an evenhanded it must be a claim that it conflicts upheld against with section or of the Sherman Act unless the demonstrates plaintiff could be city’s achieved as means that would purposes effectively by have a less intrusive on federal antitrust No such means impact policies. have been Under the test the ordinance in has proposed. foregoing question not been shown to conflict with federal antitrust laws.

We also conclude that un- defendants’ ordinance is constitutional facially der both the federal and state due clauses: a rent control ordinance process investment; is valid if it each guarantees landlord a fair return on his it need Furthermore, a fair return guarantee on the value of the or- property. dinance on its face provides adjustment access reasonably prompt for those procedures landlords to increase rents. we seeking Additionally, conclude that the rent of the do not violate withholding ordinance provisions landlords’ due nor are process rights, by general such provisions preempted however, state law. Finally, we in- have determined that the ordinance is valid to the extent it to create an purports evidentiary affecting presumption evictions, burden of but that such a proof regard retaliatory pro- severable, vision is and does not affect the the remainder of the validity of ordinance.

Background and Procedure In D,” June Berkeley electorate enacted initiative “Measure Ordinance,” “Rent Stabilization (hereafter and Eviction for Good Cause ordinance). The 23,000 ordinance affects rental units. approximately

Section 3 sets out the “to of the ordinance: It is intended purpose regulate residential rent increases in the and to tenants from City Berkeley protect unwarranted rent increases and arbitrary, discriminatory, retaliatory evictions, in order to Berkeley community maintain the help diversity and to ensure with the rental of compliance legal obligations relating This housing. legislation is to address the hous- designed City Berkeley’s crisis, ing health and and advance the preserve public safety, peace, housing low and fixed income policies City regard persons, minorities, students, and the handicapped, aged.” units,

Section 5 from the ordinance transient exempts government-owned units, certain cooperatives, hospitals, owner-occupied buildings, small a rent stabilization all constructed Section 6 establishes newly buildings. duties, commissioners, rules (Board) out its powers, board of nine and sets if the city’s rent control as well as a means of ending procedures, landlords to register rate Section 8 vacancy requires surpasses percent. fee for Board, information, a registration with the furnish and pay specified each unit. not exceed may rent that landlords

Section establishes base ceilings1 12. Section under sections 11 and the Board permitted by except to cover increases for annual of rent ceilings provides general adjustment adjust- or decreases and taxes. In such making general utilities relating ment, formula based on the Board authority general is given adopt not satisfied with available data If a landlord is such relating expenses. increase, adjustment he the Board for an individual general may petition many must consider under section 12. In on this the Board ruling petition factors, costs, in no event individual but nonexclusive a landlord’s including a “fair return on it a rent to allow a landlord may deny increase needed ” investment. constituting enumerated factors Section evictions for prohibits except evictions, that any and states cause.” Section 14 “good retaliatory prohibits of the tenant’s as- eviction action taken a tenant within six months against retaliatory. to be sertion of under the ordinance shall be rights “presumed” a land- remedies, both for withholding, Section sets out rent including 16 is a sev- lord’s violation of rent and failure to Section register. ceilings of the ordinance clause. Section 17 declares that the erability provisions act of any review of judicial not waived. Section 18 provides the Board. re- declaratory injunctive

Plaintiffs filed suit in August seeking the ordinance is lief the ordinance. They alleged enforcement of against defend- court granted face and The trial unconstitutional on its as applied. consti- the ordinance ants’ motion for on the declaring judgment pleadings, amend to allege leave to tutional on its face. The court granted plaintiffs but plaintiffs is unconstitutional as applied, facts ordinance showing from Plaintiffs appeal of the complaint. dismissed this subsequently aspect on the pleadings. defendants judgment the trial court’s order granting for which Regarding rental units May 1980. ceiling 1The base rent is the rent as date, preceding that during the six months on that periodic there was no rent in effect date, rent in effect for com of the median ceiling “good the base rent is a faith estimate” City Berkeley May 1980. parable units us, sole therefore, before question is whether the ordinance invalid on its face.2

After the case was briefed on the fully merits the Court of but Appeal, before decision, that court rendered its the United States Court Supreme decided Community Communications Co. v. Boulder City (1982) 455 810, U.S. 40 835], L.Ed.2d 102 S.Ct. a home rule holding [70 municipality to federal subject antitrust scrutiny. We and soon thereafter granted hearing, Boulder, the issue of the effect of and antitrust law was raised generally, for the first time by amicus curiae. Both and additional amici curiae parties for both file, filed, were parties leave to and have granted supplemental briefs and the Boulder inter addressing alia antitrust issues generally, issue specifically.

Therefore, although claim the ordinance is invalid in plaintiffs facially whole or in on due part and process also assert that statutory grounds, they an conflict alleged between the ordinance and federal antitrust law presents a threshold issue dispositive appeal.

Defendants likewise that we and request address resolve antitrust plaintiffs’ contentions.3 Because of the extreme of the issues importance presented, we proceed analyze antitrust claims. plaintiffs’ 2WhiIe the pending case was appeal Berkeley on electorate enacted the “Tenants’ Rights 1982,” ordinance, revising Amendments Act of including certain sections of the two 11, 687-689, sections relevant to inquiry our quoted post pages this case: section at 44, 14, 693,

footnote quoted post section page Although footnote 54. amendment constitutional, was not before trial court facially any at the time it held the ordinance may issues that arise questions result of the amendments are of law and thus properly resolved this court in determining validity. facial Therefore we will review the regulation as amended. 3It is well settled that a court will appeal point consider on a new of law decided while (Claremont appeal 32, pending. (1948) is Imp. Buckingham Club Cal.App.2d v. 89 33 47].) P.2d Although prior [200 plausible alleging Boulder there existed a basis for municipal regulation to be in pursuant City Lafayette conflict with antitrust laws v. (1978) 364, Louisiana Light (dis Power & Co. 435 U.S. 389 98 S.Ct. [55 1123] 658-659), conduct, post, cussed pp. proprietary, that case involved regulatory rather than and hence such a claim could reasonably expected have been to survive demurrer. In a sense, therefore, real spectre scrutiny municipal regulatory of antitrust conduct first arose Boulder. It is also established appeal judgments that on granting denying injunction, from an applies court (Cal-Dak law that is current at the time of the decision. Co. v. Sav-On Drugs, (1953) 492, Inc. 40 [congressional Cal.2d P.2d amendment of [254 497] antitrust appeal laws while pending given exempt effect to a manufacturer from Sherman Restaurants, Act 1 charges]; § see also M Inc. v. San Francisco Local Joint Exec. Bd. Culinary (1981) 666, Further, etc. Union Cal.App.3d 124 Cal.Rptr. 673 we [177 have parties may held that advance new appeal posed purely theories on when the issue question facts, of law undisputed based on important questions public and involves (Frink policy. 893, 166, v. Prod 31 Cal.Rptr. (plu- Cal.3d 643 P.2d [181 476] decision); rality Carman v. Alvord Cal.Rptr. Cal.3d 644 P.2d UFITEC, 192]; S.A. Cal.Rptr. v. Carter Cal.3d fn.

I. Antitrust Issues In City Berkeley Cal.3d 129 Cal.Rptr. Birkenfeld 1001], 550 P.2d we held former rent control ordinance Berkeley’s were facially adjustment unconstitutional because its for rent procedures have due “inexcusably cumbersome” and would landlords of pro- deprived (Id. cess if permitted take that conclu- effect. Before reaching sion, however, we addressed the city’s threshold question power provide for rent We control. observed that our Constitution confers all cities counties the to “make and enforce within limits all power [their] local, police, and other not in sanitary, regulations ordinances and conflict Const., (Cal. XI, laws” general 7) noted that city’s art. and § “[a] under police power this can terri- provision only be within its own applied tory and is subject displacement by state law but otherwise is as general broad as the (17 exercisable police power itself.” Cal.3d Legislature 140.) there Although is extensive regulation various governing aspects relations, landlord-tenant “California has no state rent control statute.” (Id. 141.) We therefore that concluded ordinance was Berkeley within city’s police power: there was “no indication of ‘a legislative paramount state concern will not tolerate further or additional local [which] (Id. 142, 119, action.’” at p. In re quoting (1964) Hubbard 62 Cal.2d 128 393, Cal.Rptr. 809].) [41 396 P.2d that local

Conceding law, rent control is not by state preempted plaintiffs federal champion antitrust law in order to attack that premise Birkenfeld’s police power city is as broad as that exercisable power Legislature.

Plaintiffs observe that our state cities although Constitution grants police state, to that of the power equal we are under the duty-bound supremacy VI, clause of the (art. 2) federal Constitution cl. invalidate a municipal Inn, (Sail’er that on regulation its face violates federal law. Inc. paramount v. Kirby (1971) 1, 329, 529, 5 Cal.3d 10-11 485 P.2d 46 Cal.Rptr. [95 990]; (1963) 525, 532, 241, Wong P.2d v. Di Cal.Rptr. 60 fn. Cal.2d 9 386 [35 Grazia 817]; Tyre 399, 13, (1960) P.2d Aetna Cal.Rptr. Ins. Co. 54 405 353 Cal.2d P.2d [6 Life 725]; 720, (1959) Burdette v. Co. 52 Cal.2d 725-726 P.2d Construction [344 Rollefson Grazia, 307].) supra, Di rejected In we contention that because an issue re- defendants’ trial, garding against improper the rule it perpetuities had not been raised at would court, Tobriner, writing sug- this for the question appeal. court address the Justice event, gested meritless, any as to the that defendants’ contention that “in issue was interest; fully rule against perpetuities public argued it has been before considerable [is of] court; we, fn. accordingly, dispose of the on its merits.” Cal.2d issue 9.) validity municipal We believe law raises extreme- that rent controls under antitrust Goodrich, ly significant (See, public policy public e.g., The Limits issues interest. 26; Municipal (Mar. 1984) Power 4 Governments and the Terror Spiegel, Cal.Law. Local (1983) Antitrust 69 A.B.A.J.

656 ordinance, face,

A.L.R.3d They (1) on its argue con city’s Boulder, flicts law; with federal (2) antitrust under the ordinance from antitrust exempt (3) and hence defendants have no scrutiny, authority to enforce the regulation We have question. clearly jurisdiction (Rice 654, decide such (1982) claims. v. Norman Williams Co. U.S. 659-661 1042, 1049-1051, 3294]; L.Ed.2d see Rice v. Al [73 S.Ct. coholic Bev. etc. Appeals Bd. 21 Cal.3d 439-446 [146 Cal.Rptr. 579 P.2d 96 A.L.R.3d retail mainte price 613] [state nance Act]; scheme for distilled invalidated under 1 of the Sherman liquor § Aluminum, Midcal Inc. v. Rice 982-984 Cal.App.3d Cal.Rptr. enforcement of state [enjoining wholesale maintenance price 757] scheme Act], for wine as invalid under affd. sub nom. § California Aluminum, Retail Liquor Dealers Ass’n v. Midcal Inc. U.S. 97 937]; Capiscean S.Ct. v. Alcoholic Bev. etc. Corp. Appeals Bd. Cal.App.3d Cal.Rptr. 492] [in state validating retail Rice maintenance scheme under v. Alcoholic price Bd., Bev. etc. Appeals 431].)4 Cal.3d Action, Action,

A. State Law and Federal Antitrust Municipal In order to businesses from various anticom- prohibit private practicing commerce, petitive activities in the United interstate nearly century ago States Congress exercised its broad under the commerce clause authority (U.S. Const., I, 3) (Pub.L. art. 51- cl. to enact the Sherman Act. No. § 1-7; 26 (1890) Stat. 209 codified as amended at 15 U.S.C. see §§ Parker (1943) 315, 326, v. Brown 317 U.S. 351 63 L.Ed. S.Ct. [87 307], Sherman, citing (1890).) Remarks of 21 Sen. Rec. 2562 Cong, Two sections of the Act are relevant to the 1 case. Section declares present all contracts, combinations or in of interstate com- restraint conspiracies merce to be Section 2 declares that the act of or illegal. monopolizing, Quite attempting of interstate commerce is monopolize any part illegal. Act, further, if obviously, defendants’ ordinance conflicts with the and if it is not from exempt antitrust clause of the federal scrutiny, supremacy Constitution that we requires declare ordinance invalid. 4We are broadly jurisdiction aware that some decisions declare that “state courts have no (Classen (1983) construe or enforce Cal.App.3d the federal antitrust laws.” v. Weller 27, 34, counsel]; fn. 2 Cal.Rptr. by [192 Union Oil v. Chandler 914] [concession Cal.App.3d 756].) case, however, Cal.Rptr. in [84 Plaintiffs do not seek a private defendants; remedy against instead, they enjoin reg seek to enforcement of a local alleged facially ulation to be supremacy unconstitutional under the clause. It is clear that state courts both construe and “enforce” the purpose federal antitrust statutes for the ruling (Rice 654, 658, on such facial attacks. v. Norman Williams Co. 458 U.S. 1042, 1049, fn. revg. grounds L.Ed.2d on other Norman Williams [73 S.Ct. 3294] 563].) Co. v. Rice Cal.App.3d Cal.Rptr. fn. 2 We do not construe [166 Classen or suggest jurisdiction Union Oil to that state courts lack to review facial attacks

premised alleged conflict with federal antitrust laws. Parker, Over 40 in held this state’s Court years ago, Supreme and maintained raisin which restricted marketing program, competition market, in not to federal subject order to the local raisin was prices protect of the Sherman antitrust The court found scrutiny. “nothing language or Act in its which was to restrain state its history suggests purpose or its In a dual officers or from activities directed its agents by legislature. which, Constitution, sov system under the the states are government from their au ereign, save subtract only Congress may constitutionally an over its thority, a state’s control officers unexpressed nullify purpose and is not agents to be attributed to The Sherman Act lightly Congress, [f] such, makes no mention it was intended state as no hint that gives to restrain state action or official action directed a state. ... ^[1] There is no of a state action in the Act’s suggestion legislative restrain purpose The Parker court history.” 326].) U.S. L.Ed. at pp. at p. concluded that state in the . . . . . . program adopting enforcing “[t]he as a sovereign, the restraint as act of imposed government an which Sherman Act did not (Id. undertake to prohibit.” L.Ed. at

In a series cases over the last decade the United States Court Supreme has considered the extent to which private, nongovernmental, business enterprises may come under the conferred in Parker.5 protection And two 5In Virginia 2004], State Bar 421 U.S. 773 95 S.Ct. Goldfarb the court held lawyers subject minimum fee schedules for enforced the state bar scrutiny under the Act. The state agent bar’s status as an state did supreme court make its fee schedule “state action” such anticompetitive because conduct was not “com pelled by direction acting sovereign.” (Id. of the State a p. as at L.Ed.2d at [44 791 587].) p. again protection The court scrutiny denied from Cantor Detroit antitrust in v. 3110], Edison Co. 428 U.S. 579 In that state L.Ed.2d 96 S.Ct. case the [49 public utility approved commission anticompetitive pro an tariff to requiring the defendant vide its light customers “free” Rejecting utility’s argument bulbs. that the commission approval “compelled” operate to light despite it the bulb program distribution its anticom effects, petitive the court held that approval mere was to invoke state action insufficient protection (Id. signified because it only neutrality question. state conduct at toward the in p. 1146-1147].) 585 L.Ed.2d at pp. [49 following year, In the recognized the protection court state in Bates State Bar action v. 433 supreme Arizona U.S. 350 L.Ed.2d In the 97 S.Ct. Bates state [53 2691]. of court, acting law, the authority as state’s over practice promulgated ultimate the of American Association-sponsored Bar disciplinary banning lawyer advertising. The rules United States Supreme Court held “[although that the of plays part State Bar in the enforcement the rules, court; completely its role is by agent defined the the the acts as the [State Bar] (Id. 822].) court under its continuous supervision.” p. at at The court p. 361 L.Ed.2d [53 concluded that the affirmatively state’s anticompetitive policy “clearly expressed” was and (id. p. 822]), at 362 p. sufficiently L.Ed.2d at and that [53 the state bar’s conduct was compelled by the protection scrutiny. (Id. state to p. warrant from at 363 antitrust [53 822-823].) L.Ed.2d at pp. Fox, New In Motor Veh. Bd. v. Orrin W. Cal. Co. 439 U.S. 96 L.Ed.2d [58 Aluminum, 403], Liquor 99 S.Ct. and Retail Inc. Dealers Ass’n Midcal California 937], again U.S. 97 L.Ed.2d 100 S.Ct. the court addressed the state [63 exemption action applies as it private enterprises. business Orrin Fox the court held In that state-imposed scheme that restricted sale of new auto- competition intrabrand the decisions, local the conditions under which recent the court has addressed case, City Lafayette Parker The first may governments gain protection. L.Ed.2d (1978) 435 U.S. Light v. Louisiana Power & Co. 389 [55 1123], S.Ct. two that owned operated involved Louisiana municipalities that the munic- alleged their own electric Louisiana Power utility systems. had with their customers. illegal ipalities engaged tying arrangements laws the contention that antitrust majority rejected municipalities’ and are businesses only by private were intended abuses against protect (Id. not weal.” that “exist to serve the municipalities public applicable the that defendants at at The court observed p. L.Ed.2d p. [55 Instead, like were desire to benefit solely public. not motivated by (ibid.), by be motivated business their decisions “[e]very enterprise” without regard maximum benefits to goal “realizing [themselves] ” (Id. L.Ed.2d at extraterritorial efficiency. p. impact regional the two munic- 377].) A that argument at therefore p. majority rejected (id. of services” as owners and providers which ipalities—both “act[ed] scrutiny. 379]), were immune from antitrust L.Ed.2d at A contention that Brennan then plurality opinion by rejected Justice such, from as are exempt reason of their status municipalities, simply to ‘official action antitrust laws. “Parker’s limitation of the ... exemption state,’ for the action’ doctrine— directed arises from the ‘state basis [the] Constitution, which, that our under given system ‘dual government subtract the states are save may constitutionally sovereign, only Congress U.S., to subject from their congressional purpose authority,’ in- lightly will government antitrust control States’ acts be inconsistent ferred. To extend that would doctrine to municipalities all limitation. do not receive are not sovereign; they Cities themselves 411- U.S. them.” at pp. federal deference of the States create 382].) Still, a municipality the plurality suggested, at p. scrutiny program operated exempt was the antitrust laws because mobiles from under (439 U.S. at “clearly affirmatively expressed” legislative guidelines. under articulated and Midcal, hand, held p. p. 109 In the court that state- L.Ed.2d at on the other [58 whole- imposed price system, affecting producers maximum all wine and resale maintenance “ state, ‘clearly Although exempt salers in the scheme was was not from antitrust laws. ’ ” “ ‘actively supervised’ expressed policy, it was not affirmatively articulated and as state 243], Lafayette, supra, (445 p. quoting p. the State itself.” at 105 at U.S. L.Ed.2d [63 (plur. 435 410 opn.).) U.S. L.Ed.2d [55 381] 590,104 1989], recently, Most in Hoover v. Ronwin L.Ed.2d S.Ct. U.S. [80 court, vote, exempt the on a bar examiners from antitrust four-to-three found Arizona state itself, sovereign the action of scrutiny. majority The held the examiners’ actions constituted — (id. p. p. at L.Ed.2d at exempt scrutiny under Parker [80 and hence from antitrust Therefore, whether 1995]). unnecessary to consider p. majority found it S.Ct. at (Id. “actively supervised.” or anticompetitive policy “clearly articulated” alleged was — 599-600, 1995-1996].) p. pp. at at pp. at 104 S.Ct. [80 could policy come under the Parker if it to state pursuant acts exemption Deviating or service. displace public competition regulation monopoly business cases from the court’s in the slightly enterprise requirement private that the state must in order the activity have the conduct for “compelled” 657-658, 5), to come {ante, within Parker fn. exemption plu pp. con rality stated that state or direction authorization anticompetitive (Id. duct would be sufficient to trigger exemption municipalities. 385-386],)6 L.Ed.2d at pp. concurrence, In a Chief view the mu Justice his that Burger emphasized nicipalities’ busi constituted ownership operation utility companies ness (id. activities pursuant to their functions proprietary 388-391]), L.Ed.2d at meet and hence should pp. any exemption question the more stringent standard seek private “compulsion” applicable parties ing The Chief that protection suggest Parker. Justice appeared municipalities’ activities should from antitrust nonproprietary exempt scrutiny.

Four years later the United States Court decided Community Supreme Boulder, Communications Co. v. City U.S. 40. supra, city, apparently acting its regulatory moratorium capacity, expan placed sion of cable plaintiff’s television service for three months order to allow competing companies to make bids to enter a new market under geographic a proposed moratorium, model ordinance.7 Plaintiff sued enjoin claiming inter alia that it constituted between the and a city conspiracy potential competitor, that it restrained trade violation of 1 of section the Sherman Act. The district court an granted injunction, rejecting city’s argument its actions were as a valid exercise of its protected police or power, that it was from antitrust under Parker. exempt scrutiny A reversed, divided Tenth Circuit Lafayette Court of Appeals distinguishing that, on the ground case, in contrast to the in that “no activity proprietary interest of the City (630 is here involved.” The United F.2d States reversed, Court in Supreme turn over the of Justice dissent holding that the Rehnquist city’s ordinance “cannot be from antitrust scru exempt tiny unless it constitutes the action of the State . . . itself in its sovereign Parker, capacity, see or it action in unless constitutes furtherance municipal implementation clearly articulated and state affirmatively expressed City (Boulder, see policy, . .” Lafayette . . U.S. Stewart, justices 6Four dissenting, applied exemption led Justice be maintained bodies, “petitioners governmental

cause are private and their are persons, actions ‘actfs] government’ which Parker subject v. Brown held are not to the Sherman U.S. Act.” p. 391].) at p. 426 at L.Ed.2d [55 revocable, assignee 7Plaintiff was 20-year, permit of a a cable nonexclusive to conduct (455 814].) television city business within the p. p. limits. U.S. at 44 L.Ed.2d at [70 660 810, 819].)

L.Ed.2d that merely The court rejected city’s argument state, amendment, because the under with city its home rule had vested the “ ‘ in local and “every power theretofore ... possessed by legislature (id. 819], affairs’”” at 52 italics in municipal origi L.Ed.2d at p. p. [70 “ nal), of cable television an ‘act of regulation government’ was therefore (Id. at as the state in local matters . . . .” performed by city acting 820], 53 L.Ed.2d at of home-rule p. p. Granting italics original.) [70 reasoned, the court the chal power, neutrality indicates merely respecting “ actions, lenged and does not articulation and affirmative ‘clear satisfy ” (Id. 55 at expression’ state L.Ed.2d policy requirement. [70 821].) The court view that the Parker reiterated the Lafayette plurality’s are is and because exemption premised municipalities sovereignty, 50-51 (Id. fall sovereign, they pp. outside the exemption. [70 818].) L.Ed.2d at p. been much of the in the case has

Accordingly, parties’ energy present directed toward defendants’ their views as to whether arguing respective ordinance Con- falls within or without the Boulder action exemption.8 state sideration of in our analysis, Boulder's standard at this exemption stage however, is of the state action premature. Application exemption principle becomes there a conflict necessary only “truly after we determine that is (First between the Sherman Act and the scheme.” challenged regulatory (8th American Title Co. South Dakota v. South Dakota Land Title Ass’n Co., 1983) 1439, 1452; Cir. 714 Williams F.2d see also Rice v. Norman Midcal, 1042, supra, 1052]; U.S. fn. supra, L.Ed.2d [73 97, Parker, 341, 233, 241]; 445 U.S. L.Ed.2d 317 U.S. supra, [63 Rice, 439-446; 315, 431, 325-326]; Lewis- L.Ed. 21 Cal.3d supra, [87 Westco & Co. v. Alcoholic Bev. etc. Bd. Appeals Cal.App.3d 552].) Cal.Rptr. Act

B. Facial the Ordinance Under the Sherman Validity Section with, ordinance, face, conflicts Plaintiffs contend that the on its ante, (See hence fn. section 1 of the Sherman Act. preempted by, Boulder, Rehnquist, writing correctly 8Justice that the Parker for the dissent noted (Parker, language supra, court cast its decision in the 317 U.S. preemption. Parker, statute, has enjoin L.Ed. which enforcement of a state was a suit to however, exemp Lafayette, establishing been characterized action Boulder and state 810, 814]; tion from 435 U.S. 394 [55 antitrust laws. U.S. L.Ed.2d Parker, 364, 371].) private antitrust suits Unlike both of these latter cases were area, damages, in this regulation. not invalidation of a In the court’s most recent case enjoin plaintiffs sought Rice v. Norman Williams Co. 458 U.S. Parker, framed Consistently enforcement of one of with the court liquor this state’s statutes. cases, agree plaintiffs analysis preemption. its In view these we terms with, question regulation amici conflicts present appeal in the is whether defendants’ by, preempted and hence is the Sherman Act. contract, That in section states: combination ... or conspiracy, “Every restraint trade is . . declared of or commerce the several States . . . . among to illegal.” U.S.C. § of

Defendants and amici no the Act was broadly that respond provision intended further local apply city ordinances or designed protect health, welfare, or safety, hence the ordinance in can- general question not violate the antitrust de- only legislation laws. that local They suggest to achieve signed commercial or interests—either from proprietary city ownership fees or taxes to franchise property through pursuant awards—are to antitrust properly subject scrutiny. defendants’ we

Although view has rational are bound the appeal, United States Court’s that Supreme theory Lafayette implicit rejection and Boulder. In both those the court the applicability cases addressed However, state action defendants. in order to reach exemption municipal laws, the question from exemption antitrust both decisions court assumed that necessarily each case a violation of antitrust laws. presented Co., First (E.g., American Title 1451-1452.) 714 F.2d While alone, standing Lafayette could be read to defendants’ view that support only commercial activities of are scru subject to antitrust municipalities tiny (Lafayette, 386-391], U.S. Burger, J., conc.), C. we must conclude that Boulder forecloses that any argument Act does not to a “noncommercial” activities. The apply municipality’s alleged anticompetitive activity that case concerned merely imposition aof three-month moratorium on expansion cable television petitioner’s franchise while the city studied the need for Whereas regulation. increased the facts of Boulder strongly suggest the moratorium was imposed pur suant to the city’s regulatory resolution of the authority, still court’s state action violation; issue assumed an antitrust exemption necessarily moreover, broader, the court did even mention the of a possibility pre liminary from exemption antitrust scrutiny municipal “nonproprietary” activity.9

Therefore, we must conclude United States Court nec- Supreme essarily and (McMahon, view implicitly rejected defendants’ in Boulder. 9In regard, reject attempt distinguish we must also defendants’ Boulder ground city that the Again, in that to acquire case stood revenues from its franchise awards. it must be noted challenged activity that the in Boulder concerned not collection of franchise fees, merely but city’s imposition, its regulatory powers, under of a three-month mor expansion petitioner’s atorium on majority, concurring, franchise. Nowhere in the court’s opinions or dissenting suggested it even that resolution of the case rested on defendants’ generating” “revenue theory. If in fact the Supreme United States Court had found the determinative, city’s apparent in collecting interest its fees for franchise awards to be we believe that court opinion. would have said so somewhere in its

Recent in Action” and Significant Developments Noerr-Pennington “State to Exemptions: From Boulder the “Sham” Exception 14 Toledo below, however, 531, defendants are 540-541.) L.Rev. As we explain shall chiefly correct that laws are aimed com- they when assert the antitrust below, And, must influence the mercial activities. this fact demonstrated how, extent, rules to apply and to what traditional antitrust question municipal defendants. Act. To

We turn under of the Sherman now claim section plaintiffs’ case, with 1 in the must plaintiffs facial conflict section prove present concert, in (a) matter acted establish as a of law that two or more “persons” commerce, (c) (b) and that that the activities of affect interstate complained A the action an restraint on commerce.10 constitutes unreasonable if mandates or court invalidate it “only an ordinance the abstract of the antitrust authorizes a violation conduct that constitutes necessarily cases, in all on a private party laws or if it irresistible places pressure (Rice violate with the statute.” v. the antitrust laws order to comply Co., 1042, 1051].) Norman Williams supra, 458 U.S. L.Ed.2d can in this case plaintiffs Both contest whether parties vigorously and on interstate com or cannot concerted action effect prove requisite that these suggestion merce. we do not Although agree plaintiffs’ “mere seeking “technical” in a facial attack should be requirements ignored {ante, not these 10), invalidation” we need address instead of fn. damages event, that, in can issues now11 because we have determined any plaintiffs restraint that the face an unreasonable ordinance on its mandates prove only law not federal argue preempted 10Plaintiffsand amici that a local enactment is statute, operation but also whenever its bring expressly when its would it within the federal (See legislation. Hines operation objectives would broad underlie federal frustrate the that (the 581, 586-587, 61 S.Ct. test 399] 312 U.S. L.Ed. Davidowitz accomplishment ... preemption whether law “as an obstacle to the is the state stands Posner, Proper Rela purposes Congress”).) generally, full and objectives the tionship See N.Y.U.L.Rev. Regulation State and Federal Antitrust Laws Between applied open competition can be (suggesting policy that the federal of free Sherman clearly transgresses “spirit of the prevent operation law that of state statute”). Act,” We language the federal express “even if the is not within the conflict Supreme or that the United States are not convinced such a broad view is warranted Indeed, plain it will not follow recently has it. indicated that Court embraced court has by the federal pre-empted approach: tiffs’ state is not court stated statute “[a] (Rice anticompetitive effect” have an simply might antitrust the state scheme laws because Co., 1049]) suggested v. Norman Williams 458 U.S. 659 [73 violation of “only if mandates ... legislation that it will in the abstract it invalidate state added.) 1051], (Id. p. italics p. in all L.Ed.2d at the antitrust laws cases . . . .” 661 [73 commerce and interstate necessary requisite it action prove Because concerted reasonably must prove the court’s statement elements order a violation of section such as this. proof in a facial attack require be construed to of those elements even Noerr/Penning or the “intraenterprise” unnecessary 11Itis therefore to discuss either the ton issues in the briefs. raised of trade and hence section 1 of the irreconciliably conflicts with Sherman 1051].)12 Act. U.S. at L.Ed.2d at

1. Unreasonable Restraint a. Application Traditional Antitrust Law to Defendants Municipal We at the onset that this us to wander off the recognize case forces map and travel cross country without the benefit of trail or compass. Although laws, Boulder clearly held the to antitrust court municipalities subject spe- declined cifically to address the an- the issue of of traditional applicability titrust or rules standards which defendants are be against municipal (Boulder, 56, 40, 810, 822].) 455 judged. U.S. fn. 20 L.Ed.2d supra, [70 however, Significantly, the Boulder court that munici- suggested strongly palities stan- private business be to different enterprises may subject “ dards: the court cer- repeated Lafayette's be that suggestion ‘[i]t tain activities which might when anticompetitive engaged by appear pri- vate take parties, different local when complexion adopted by (Ibid., 389, government.’” 417, Lafayette, 435 U.S. fn. 48 citing supra, 364, L.Ed.2d 385].) Similarly, the Boulder dissent observed that under [55 rule, majority’s courts “must now antitrust to ad- adapt principles judicate (455 Sherman Act regulation local challenges economy.” U.S. at 65p. 828].) L.Ed.2d at a mu- [70 conduct Anticompetitive in exercise of nicipality its is indeed a “different legitimate power police complexion” than similar conduct business engaged enterpris- private therefore, es and as the Boulder court must mod- courts suggested, adapt ify application traditional antitrust rules when the acts of reviewing municipal defendants.

The United States Court often noted Supreme has purpose antitrust law is the regulation business anticompetitive practices. “ ” Sherman Act relates to Co. Hosiery ‘business competition’ (Apex (1940) 469, 493, 1311, 1323, Leader 310 15 U.S. fn. L.Ed. 60 S.Ct. [84 982, 1044]) 128 A.L.R. of busi- designed “combinations regulate ness and . . .” capital organized competition commercial . suppress (United 533, States v. South-Eastern Underwriters U.S. Ass’n Parker, 1440, 1162]; L.Ed. 64 S.Ct. also supra, [88 see Kintner, 326]; U.S. L.Ed. Federal Law Antitrust (1980) 4.18 an exhaustive of the [summarizing analysis legislative history § Act]; Bork, cf. Intent and the the Sherman Act Legislative Policy of & 9 J.L. Court Econ. One commentator has observed that “[t]he Comment, 12Compare, Hospital Cases Sherman Act "Jurisdiction” in Exclusion Staff (1983) 132 U.Pa.L.Rev. 142. has been reluctant to are antitrust laws to the conduct of those who apply (Vanderstar, commercial engaged Liability Municipal activities.” ities Under Antitrust Laws: Litigation Strategies Indeed, 397-398.) Cath.U.L.Rev. said that the Act “is court has aimed primarily combinations commercial and is having objectives ap unions, to a limited extent like labor which plied only very to organizations, Stores, (Klor’s, have other normally Inc. v. objectives.” Broadway-Hale 207, 213, 741, 745, 79 Inc. 705].) U.S. fn. 7 L.Ed.2d S.Ct. Similarly, court noted in it Goldfarb, that would “unrealistic” . . . which “automatically to the antitrust apply professions concepts in other originated areas.” U.S. fn. 17 Traditional antitrust in the con- rules have been fashioned over the years text of business of the rules are private regulation. Many implic- premised sometimes itly, on about how rational business com- explicitly, assumptions behave in their petitors quest greater profit. Municipal governments, hand, the other most often Unlike a act on the basis of different motives. business, a private decision to municipal government’s displace competition health, motivated generally of local or purpose furthering safety welfare. When in its a local is both acting regulatory capacity, government with, authorized to act in accordance of duty and entrusted with serving, weal. Just public as courts should lest proceed cautiously they might interfere The unnecessarily City of local rights self-governance (Frug, (1980) 1059; Cirace, as a Legal An Economic Concept 93 Harv.L.Rev. Analysis (1982) Action” Antitrust Cases 61 “State-Municipal 50, 514; Tex.L.Rev. 1 in Amer- Democracy fn. DeTocqueville, ed., ica 1969) Lawrence too courts (Mayer trans. 90-91 and so pp. passim), must attentive and behind sensitive to the motives legitimate municipal Therefore, amici, and we regulations. to the contrary urging plaintiffs will not exclu- mechanically rules of law fashioned apply municipalities in the sively different context Such business standards private regulation. will no doubt be for the of antitrust helpful rules formulating application but if of traditional stan- principles municipalities, unbending application would dards too inflexible prove governmental to accommodate legitimate objectives that motivate we will not hesitate to cau- municipal regulation, (Shenefield, from traditional rules. The Parker v. Brown State tiously depart (1982) 51 Antitrust Action Doctrine and the New Federalism Antitrust 337, 346; Note, L.J. Laws to Activ- Application Municipal Antitrust 539-543; (1979) 518, Note, ities and the Sher- 79 Colum.L.Rev. Home Rule (1983) man Act Boulder: Cities Between a and a Hard Place 49 Rock After 259, Rule]; The Brooklyn Supreme L.Rev. cited Home [hereinafter Court, 268, (1982) 272-276.)13 1981 Term 96 Harv.L.Rev. 673, post, page

13See also authorities cited footnote 24. Reason, b. The Two the Rule of Standards: The Rule of Traditional Per Se Illegality contract, combination in section 1 of

Although prohibition “[e]very literally ... first conspiracy, restraint of trade” was at applied invalidate all Freight such restraints United v. Trans-Missouri (e.g., States 1023, Ass’n 166 U.S. L.Ed. 17 S.Ct. [“the [41 540] limited to that kind of plain ordinary . . . is not meaning [section 1] trade, contract alone which is an but all contracts unreasonable restraint of are included . re . .” within the the court soon section’s proscription]), Act, treated from this manichean view the it not intended to was holding strike down restraints or incidental to another merely ancillary legitimate (United (6th 1898) States 85 F. purpose. Addyston & Steel Co. Cir. Pipe 271, 282, mod. and affd. sub & Steel Co. v. United Addyston Pipe nom. 148-149, States In U.S. 20 S.Ct. L.Ed. [44 Standard Oil Co. v. United States 221 U.S. L.Ed. 502],

S.Ct. the court announced that the Act “evidenced the intent not to restrain the right to make and which unduly enforce contracts . . . did not commerce, restrain interstate or but that commerce from foreign protect interference,— being restrained . by methods . . which would constitute an is, an (Id. 645]; undue restraint.” L.Ed. see also United States v. American Tobacco Co. 221 U.S. L.Ed. 663, 693-694, 31 S.Ct. trade” only of covers those acts 632] [“restraint that “injuriously trade”].) under what become termed Today, has restraint] reason,” the “rule of restraints are in of their many analyzed light economic conditions, “reasonable,” i.e., effects on market and if may be if upheld the restraint “merely and regulates perhaps thereby competition” promotes instead of or Bd. v. suppressing (Chicago Trade destroying competition. (1918) United States 242].) 246 238 U.S. L.Ed. 38 S.Ct. [62 restraints, however,

Some types were never such given accommodating review. com- Cartels—agreements producers to set above the among prices se,” level petitive illegal declared lowering production—were early “per and the courts refused to consider set a cartel were arguments prices (Note, “reasonable.” A Fixing the Price Rule Reason Fixing Confusion: (1983) Con- Approach 92 Yale L.J. Price Fixing [hereinafter fusion].) Whereas these cases focused on cartel behavior United States (e.g., v. (1927) Trenton Potteries 47 Co. 273 U.S. L.Ed. S.Ct. 392 [71 989]; 38; 50 A.L.R. see fn. Com- Confusion, Price at Fixing supra, p. ment, Power, The Per Se Illegality or Price-Fixing—Sans Purpose, Effect 837, 855) 19 rea- U.Chi.L.Rev. refused to consider economic on sonableness erad- that cartels were themselves evils assumption Bork, icated (e.g., 11), J.L. & the United States Su- p. 9 Econ. at in Court preme the universe of significantly expanded price-related United to an In agreements illegality. irrebuttable subject presumption 1129, 60 States L.Ed. v. Oil Co. 310 U.S. Socony-Vacuum [84 811], court, the existence of S.Ct. Justice inferred Douglas, through however, cartel from the defendants’ oil. buy Socony, agreement surplus cartel; focused court stated itself than the inferred fixing rather price in was that whether the could or did fixing prices succeed parties actually irrelevant, conduct of fixing: characterized the broadly proscribed price “Under and with the Sherman Act formed for the purpose a combination the effect the price or raising, fixing, stabilizing depressing, pegging, (Id. at at L.Ed. ... is se. ...” commodity per p. illegal [84 (Ibid.) 1168].) “Any immaterial.” p. ... machinery employed “[T]he in unlawful which an engaged combination structures is tampers price (Id. 1167].) at at activity.” L.Ed. p. p. [84 have

The whether defendants focus of attention since has been on Socony if on a conduct the label any way “price course of agreed affecting prices: mechani found to fit the the courts have fixing” is conduct question,14 declared such “even no invidious cally purpose conduct illegal though established, harmful and even though economic have been consequences (Price economic be of to consumers.” results conduct net benefit 714; Fixing Maricopa at see v. Confusion, supra, Yale L.J. Arizona 48, 102 S.Ct. County Medical 457 U.S. 332 L.Ed.2d Soc’y maximum fees charged “foundations” to set physicians’ [member 2466] insurance se rule reflects se patients price fixing].) per plan illegal per that, an the conduct subject irrebuttable if the court were to presumption the tra be found under to a full-blown a violation would question inquiry, 58-59]; (Id. ditional Northern rule of reason. L.Ed.2d pp. 545, 549, 78 Ry. Pac. United States 356 U.S. S.Ct. adherents, as- and is se rule has its

Although price-fixing illegal per efficient,15it has also serted to economically administratively reliable and se, seemingly within illegal 14The conduct per court has at times declined to treat as Music, Socony’s Broad (E.g., Inc. Columbia price-fixing broad definition. Broadcast Sys., (1979) licenses casting 441 S.Ct. 1551] Inc. 20 L.Ed.2d 99 [blanket U.S. li prices, such illegal though license because per se even music associations “fixed” i.e., com individually licensed efficiency, product censes a market different from created “ given to more than a label positions].) suggested ‘price fixing’ It been is no has that Fixing (Easterbrook, Price arrangements Maximum per that have been found unlawful se.” (1981) 886, 887.) 48 U.Chi.L.Rev. (1959) Turner, page Legal Analysis 15E.g., Policy: An and Kaysen & Antitrust Economic efficient); Scherer, (rule clear, administratively Indus 142 relatively self-enforcing, and (2d 1980) (abandoning the page 510 trial Market Structure and Economic Performance ed. on courts and admin uncertainty, litigation, rule would and undue burdens complex lead to (1979) Redlich, 1 44 Alb.L.Rev. agencies); and the Per Se Rule Burger istrative Court Rahl, (rule independent judgments regarding price); protects competitors’ right make to

667 mechanical, suffered and steady growing criticism as an and arbitrary, often inconsistently rule of applied ignores the realities market and net power course, economic effects.16 Of we are not here concerned with the wisdom se rule it efficacy as to in the case per applies price fixing typical Nevertheless, against private business defendants. we whether the question rule should be extended to cover the in this defendants case. municipal Therefore, us to in- although plaintiffs urge declare the ordinance facially blatant, valid because it albeit vertical and represents government-imposed, horizontal17 of maximum to fixing we must first consider prices, pause whether these rule, defendants should be se municipal to the subject per reason, rule of or a more accommodating standard.

c. and of Purpose Applicability the Per Se Rule Price Against Fixing course,

Of “it is . . . to of an antitrust improper case dispose invoking a se per rule unless the fits the challenged really practice policy and (Elman, rationale of the rule.” and Opinions” Competitive “Petrified (1966) Boulder, Realities 625, 627; cf., 66 Colum.L.Rev. 455 U.S. 827], J., dis. Rehnquist, [questioning per whether se rules of will illegality apply defendants the same manner municipal as they apply private defendants].) business Because we determine below that the two for principal justifications rule’s busi application private ness enterprises—economic reliability and ease administration18—arenot us, implicated situation before we must conclude that the se rule per has no place in this case. Competition Price Fixing (1962) and the Price Perspective and Rule—Preface (rule provides Nw.U.L.Rev. guide a clear simplified ap- business conduct and a

proach cases); Adams, to resolving Competition The “Rule Reason”: Workable or Work- Monopoly? (1954) able rule); 63 Yale L.J. 348 (criticizing attacks on the Note Tulane L.Rev. (Maricopa properly per reaffirmed illegality price fixing se agree- ments). Easterbrook, 16E.g., Fixing (1981) (maximum Maximum Price price U.Chi.L.Rev. 886 fixing always consumers, is almost subject beneficial per and hence should not be se analysis); Elman, Opinions” Competitive Realities 66 Colum.L.Rev. “Petrified (per se rule should mechanically not be applied to price agree vertical maximum resale ments); Bork, The Rule Concept: Fixing Reason and the Per Se Price Market Division pt. (use II 75 Yale per L.J. 373 price-fixing se rules outside context of horizontal agreements destroys efficiency resources); Kalinowski, and misallocates von The Per Se Emerging Doctrine—An Philosophy (caution Antitrust Law 11 UCLA L.Rev. 569 ing against application mechanical rules); Levi, and adoption per se Director & Law and Regulation (1956) Future: Trade price fixing 281 (suggesting Nw.U.L.Rev. market); should not be per Tobriner, condemned illegal se unless it & affects the Jaffe Legality The Price-Fixing Agreements (1932) 45 (proposing Harv.L.Rev. 1164 abolition “arbitrary” per reason); against price se rule fixing, in favor of the rule Price Fixing Confusion, supra, 714, passim. 92 Yale & L.J. 17Plaintiffs assert that the ordinance creates a coercive vertical combination between the Board and individual landlords and furthermore it a that creates horizontal combination among all covered landlords.

18Maricopa, supra, 57-65], pages 457 pages U.S. at L.Ed.2d at [73

668

(i) Reliability Economic because, courts be reliable economically The se rule per thought is and almost assume, effects anticompetitive has always almost fixing price it is un- Although virtue.” “redeeming never effects or has procompetitive viewed price Court has long that the United States Supreme questionable Monsanto Co. se illegal per (e.g., by business fixing private enterprises 775, 783, 752, L.Ed.2d (1984) 465 U.S. 761 v. Service Spray-Rite Corp. [79 addressed the 1464, 1469]), the court has never 104 we note that S.Ct. conduct by municipali- to the same whether the same rule applies question Moreover, in the has declined past apply as the Court just ties. Supreme unaddressed questions that pose previously se rule circumstances per (1963) 372 U.S. States (cf. effect White Motor Co. United economic 745, new 253, 738, [refusing per apply L.Ed.2d S.Ct. [9 696] 48, rule]; see, 457 U.S. L.Ed.2d supra, 61] se but Maricopa, [73 too are we industry]), rule to a “new” an established se per [applying of any the benefit to announce and without early stage, reluctant rent con- of locally imposed evidence the economic regarding consequences trols, necessarily pro- a local fixing government that price implemented redeeming or it lacks “any net effects that duces negative anticompetitive V, 433 U.S. Inc. (Continental Sylvania virtue.” T. Inc. v. GTE 670-671, fn. 2549]; see post, pp. 97 S.Ct. [53 is business defendants The court’s conclusion that fixing price private if are prices on fear that even is based “invariably anticompetitive,” would facili- set, such behavior the courts reasonable when by sanctioning 310 U.S. (Socony, supra, tate in the future. prices unreasonable fixing Potteries, 1129, 1167]; 273 U.S. L.Ed. Trenton [84 cartel, the 700, 705].) fixing by of price L.Ed. In context every price- result of Trenton Potteries observed that aim and court “[t]he effective, of one form of competition. if is the elimination agreement, fixing not, involves pow- or The to fix exercised reasonably whether power prices, The unreasonable arbitrary prices. er to control the market and to fix and business changes economic today may reasonable fixed price through established, it may Once become the unreasonable tomorrow. price by the secured competition because of the absence maintained unchanged (273 U.S. when fixed.” for a reasonable agreement price concern, 700, 705].) noting echoed this The court Socony L.Ed. effectively or dominate would control who controlled prices “'[t]hose would have it strategic the market. And those who were position system.” the competitive their destroy drastically impair power 1129, 1167].) U.S. L.Ed. activity grounded fear of such facilitating “predatory” court’s if given will act competitors how unrestrained business about

assumptions case, These opportunity. have in the how- assumptions no place present ever. There is nothing acting that the named defendants are for suggest their own selfish with a market control and purposes view toward securing Quite hence control in price the future. defendants’ sole and contrary, only legitimate is to serve the welfare as described in section purpose public 3 of exists—i.e., the ordinance. When that no when annual purpose longer average citywide rental vacancies exceed over a six-month percent peri- od—the ordinance for provides lifting of rent controls until the rate vacancy 6, falls below 5 again (§ percent. subd. We therefore conclude that (q).) neither the that presumption fixing is nor price invariably anticompetitive, the fear of facilitating concerns that have been “predatory” practices—both expressed by the United States Court in the context Supreme analyzing the conduct of business private defendants—justifies application per se rule to acting in their municipalities legitimate capacities. governmental

(ii) Ease of Administration se per rule is also justified said to be admin- judicial its ease istration. Both the Trenton Potteries and the Socony courts further explained refusal to into the inquire reasonableness of set prices ground such a review would necessitate constant detailed and analysis supervision by the government to assure reasonable remain reasonable as prices economic (273 392, 700, conditions vary. U.S. L.Ed. 705- 397-398 [71 706]; 150, 1129, 310 U.S. 1167].)19 L.Ed. Recently, Maricopa [84 court stated that the high costs associated with . . “elaborate into . inquiry reasonableness” was a major justification for maximum fix- analyzing price in the health ing care industry under the 343- se rule. U.S. per 57-58].) L.Ed.2d Certainly, the judicial task is easier when from question changed “does the conduct unreasonably restrain to “have defendants competition” engaged price fixing.” convenience, Resort to this rule of administrative however, can be rule, if justified only the costs “of and of formulating the overinclusiveness that it—are less than the at- inevitably accompanies tendant savings (Price administrative costs.” Confusion, Fixing 709; 92 Yale L.J. at see also United States v. Container Corp.

393 U.S. (Marshall, J., S.Ct. 510] dis.); Posner, Ehrlich & An Economic Analysis Legal Rulemaking 257, 264-273; J. Legal Stud. Easterbrook, Price Maximum Fixing, supra, 886, 909-910; 48 U.Chi.L.Rev. A Bohling, Simplified Rule Reason 19Likewise, long it has recognized judge been poorly that courts are suited to the reason (United ableness of prices Freight set businesses. States Trans-Missouri Ass’n 1007, 1024-1025, 166 U.S. L.Ed. 17 S.Ct. Goals, and Analysis, Syl- Economic

Vertical Restraints: Social Integrating 490-491.) vania 64 Iowa L.Rev. is Where- case apparent. in the present for overinclusiveness potential based Socony Potteries and

as the United Court in Trenton States Supreme had set reason- business defendants its refusal to consider whether private and on supervision able of administrative the absence prices largely case of the present of constant review such impracticality judicial prices, ordinance, it is By provision different situation. presents express and, rents in necessary, adjust if duty constantly the Board’s to review On the face on his investment.” order to assure each landlord a “fair return su- ordinance, “be to continuous administrative subject rents would (Socony, supra, conditions” readjustment light changed and pervision involve- 1167]) any without requiring U.S. L.Ed. right exercise his appeal ment the courts a landlord chooses to unless by Moreover, administering program his individual costs of adjustment. allow the Board are borne the local the ordinance is by designed agency: financially to be disputes to address and resolve efficiently adjustment self-supporting. of administra- of the “ease

We therefore must conclude that application case, would, improperly in the present tion” for the se rule justification per maximum remove from an judicial government-enforced elaborate scrutiny the court’s pre- not adjustment contemplated by control and scheme price Posner, The (See business defendants. vious cases with dealing private the Federal Antitrust Proper Between State Relationship Regulation 693, 706.) that say probable We cannot Laws 49 N.Y.U. L.Rev. of a harm, from absence per social costs resulting economic together rule, inquiry, detailed any the risk without outweighs condemning, se its exercise of legitimate police local presumed heretofore government’s 491.) view, max- In our (Cf. at p. 64 Iowa L.Rev. Bohling, supra, powers. simply local government, imum rents price fixing, implemented business defendants.20 among private of the same character as price fixing purpose with no restraint trade 20Surely, the issue here is not a naked ordinance at Note, 34 Case (See Boulder Crawling Out From Under except stifling competition. recognizes per rules 332-333.) regard, se In the dissent Western Res. L.Rev. 715; Continental (post, p. “any redeeming virtue” inapplicable challenged if has are restraint V., GTE Sylvania Inc. 433 U.S. T . Inc. v. 549]), but 2549], p. p. L.Ed.2d at Pacific, supra, quoting Northern 356 U.S. S.Ct. test, inquiry into whether subjective favor of its own proceeds ignore this established unprecedented This redeeming virtue. anticompetitive “override” its the ordinance’s effects analysis internally contradic Pacific-Sylvania renders the dissent’s modification of Northern against balancing policy local impropriety of recognizes the tory: at the same time the dissent balancing policy’s local 717), just do (post, plunges it head-on to policy antitrust thinly (Post, Thus—through the against effects. redeeming anticompetitive virtue its Loch- engage in the same dissent would guise its of review—the veiled revised standard we Because find neither the economic nor the ease reliability justification alleged administration defendants’ justification applicable municipal behavior, analysis we decline to defendants to anticompetitive subject these turn, instead, under the se rule.21 We the of reason. If this were per to rule a case determined in which it was that rule did not to typical a se per apply Act, a claim of facial conflict with the Sherman would end here inquiry our and the would be under parties left to their antitrust claims at trial litigate (Rice Co., the rule of reason. supra, Norman Williams 458 U.S.

661 in 1050].) L.Ed.2d We that course this cannot take appeal, [73 however, because, below, as we conclude the of presently rule reason as formulated is to review inapplicable of conflict between a alleged municipal and the regulation Sherman Act.

d. Applicability of the Rule of Reason In National Soc. v. U. S. Engineers 435 U.S. 679 of Professional L.Ed.2d 98 S.Ct. the held [55 court a association’s professional 1355] price conclusion, maintenance scheme se. Before that illegal per reaching however, the court reviewed the legal defendant’s claim that its conduct was under the rule of reason because it was aby motivated desire to forestall zzer-type analysis disclaim, that purports it to accomplish order to the desired result: judicial veto of regulation (Indeed, local economic deemed to be unwise. one need look no further than the objective.) titles of the dissent’s authorities to the see that is ultimate Furthermore, even if might balancing, the dissent be to somehow read avoid such its analysis plainly would be In per illegality circular. order to determine that the se rule of of price fixing—itself here, a presumption—applies apparently the dissent would create foun- a virtue”; presumption dational municipal price fixing “any that redeeming lacks in other words, dissent, according the municipal price fixing illegal to per per is se because it is se guts meritless. This effectively holdings presence Pacific-Sylvania Northern that of “re- deeming analysis virtue” per inapplicable. Finally, suggestion renders se the dissent’s that apply per failure to se rule policy would somehow violate is curious at The federal best. says nothing Sherman Act of per per procedural se rules. The se rule is a device created convenience; largely federal courts for their administrative it not a 549]; rule of substantive (Northern Pacific, law. supra, p. supra, 356 at 5 p. Maricopa, U.S. L.Ed.2d at [2 p. 457 U.S. at at p. policy by [73 L.Ed.2d A no state court violates federal declining per analysis to extend se unprecedented municipal regulation. to an on attack rules, possible justification 21Athird closely for application per of se related to the ease turn, justification, administration predictability. justification, relates to This assumes judicial clearly pronouncements assump defined on prohibited permissible conduct—an tion that has no respect question basis with potential the novel federal antitrust conflict with municipality’s police exercise of its powers. yet reason, For another per applicable per se rule The se is not in this case. rule is Note, dependent itself on the applicability (E.g., Standing, of the rule reason. Antitrust above, Inquiry, 1309, 1311.) Antitrust and the Per Se Standard 93 Yale L.J. As noted per that, se subject rule reflects presumption an irrebuttable if the were to court question conduct in to a inquiry, full-blown be a violation would found under the traditional If, below, rule of reason. as we conclude or traditional rule reason must modified rejected defendants, in order to municipal per accommodate se it follows that traditional analysis (Home Rule, applied cannot be supra, Brooklyn at those defendants. L.Rev. 294-296.) pp. harm, if was result there might and hence public decreased quality, court rejected among engineers. unrestrained competitive bidding name, its the Rule “[cjontrary [of defendant’s welfare public argument: favor argument does not of antitrust inquiry any field open Reason] Instead, of reason. restraint fall within the realm challenged con- it on the restraint’s challenged impact competitive focuses directly Trade, (Id. 648]; Bd. Chicago ditions.” Oil, 687]; supra, L.Ed. Standard U.S. rule 619, 644].) that under the The court made clear U.S. L.Ed. reason, is limited whether the conduct challenged promotes inquiry 650].) The L.Ed.2d at p. U.S. at 691 p. suppresses competition. [55 consider, a not whether not a will be heard to and court parties argue, 692 policy favoring competition public (Id. p. at interest. [55 at L.Ed.2d p. above, however, mechanically municipal not apply

As stated we will of determining in the context exclusively defendants rules of law developed business is motivated business antitrust Whereas private liability. private legitimate purpose chiefly by increasing only goal profits, health, If and welfare. courts safety action is municipal promotion public as it applies the rule of reason were conduct under judge municipal i.e., the restraint on the effect of solely business private enterprises, violate the law: be found to most actions would competition, municipal be- the interests that lie further does not and cannot “[cjompetition simply 40, 66 (Boulder, 455 U.S. supra, hind most social welfare legislation.” [70 810, J., least, would 828], dis.) such regulations L.Ed.2d At the Rehnquist, to treble void; worst, be might subject declared at local governments to flow We such results cannot believe that intended damages.22 Congress of its exercise legitimate police from a heretofore municipality’s presumed are per- (Id., municipalities at 67 L.Ed.2d at power.23 p. 829] [“If [70 with the procompetitive to enact are consistent mitted ordinances that only Act, economy power regulate of the Sherman policies municipality’s at Vanderstar, 32 Cath.U.L.Rev. supra, would be all but destroyed.”]; State 397-400; Handler, Parker v. Brown The Attack on the Current pp. Ar- 1, 15; Tying (1976) Hovenkamp, Action Doctrine 76 Colum.L.Rev. Law and Local Antitrust in the Real Estate Market: Federal rangements 325, 335.) L.J. Development Policy Hastings Land 33 (“we Boulder, 40, 56, do 20 L.Ed.2d supra, [70 822] 22See 455 U.S. footnote (but officials”) Rehnquist, municipal see appropriate against confront the issue of remedies J., 375- 2); 401-402 L.Ed.2d Lafayette, supra, at 435 U.S. dis. fn. Rule, 212.2b; Areeda, 1982) supra, 49 Brook (same); par. Home (Supp. Antitrust Law 376] 297-299; Comment, Applied Local Damages as lyn Trebel pages Antitrust L.Rev. Ariz.St.L.J. 411. 1980 the Punishment Fit Government Entities: Does Defendant? Birkenfeld, supra, 23See 17 Cal.3d 153-164. To unwarranted le prevent interference with municipal government’s exercise of gitimate its and to accommodate motives that police power, (cf. underlie local The Goals Anti government regulation e.g., Elzinga, trust Law: Other Than What Else Counts? Competition Efficiency, (1977) 1191), U.Pa.L.Rev. courts tests that must develop recognize public welfare “defense” to violation of antitrust laws mu alleged pp. (Boulder, nicipalities. supra, U.S. at pp. 828-829], Rule, J., dis.; Rehnquist, Home L.Rev. at Brooklyn 294-295; Note, The pp. Municipal Antitrust Laws to Activi Application of Court, 518, 539-543; ties 1981 Term Supreme Colum.L.Rev. 96 Harv.L.Rev. 275.)24 e. Facial of the Validity Ordinance Under a Modified Standard We do not mean to suggest rejection traditional rule reason test in this case harkens return to “the same stan- wide-ranging, essentially dardless into the inquiry reasonableness of local reminiscent regulation” Lochner v. New York 539], U.S. L.Ed. S.Ct. (Boulder, J., 455 supra, 829], U.S. at 67 L.Ed.2d at Rehnquist, dis.) Whereas the evil primary of the Lochner was an overly strict approach on the emphasis ends-means nexus that in turn allowed wide latitude judges their own impose of standards on reasonableness economic social legislation, such has no in of jurisprudence analysis our a place municipal regulation’s conflict potential with the laws.25 antitrust McMahon, 544-545; James, 24See also supra, pages 14 Toledo at Municipal L.Rev. De (1983) 290-296; Klitzke, Liability 273, to Antitrust 6 U.Ark. Little Rock L.J. Anti fenses Liability Municipal trust Corporations: The Per Se Rule The Rule vs. Reason—A Rea of of Compromise 253, 265-273; sonable al., Liability Ariz. St. L.J. Freilich et Antitrust Preemption Authority: Urban, Developments Trends and State and Local Govern of (1983) 705, 711-713; Feller, ment Law Immunity Urban Law. Brame & Local of (1982) Governments and Their City From Antitrust Claims Boulder Officials After 705, 715-717; Comment, U. Rich. L.Rev. Community City Communications Co. v. Boul 139, 159-160; der: Denial Exemption Parker to Home Rule Cities 1983 Utah L.Rev. Comment, Capital Corp. City v. Local Houston: Governments and Antitrust Affiliated (1983) 816-818; Immunity Levin, Baylor Challenge L.Rev. cf. The Antitrust Local (1983) Government Protection the Central Business District 55 U.Colo.L.Rev. 64-79; Note, Lafayette Municipal Liability Post Refusing Outlying Development to Zone for (1981) 485, 509-510; Chu, Liability Municipal Airport Op Wash.U.L.Q. Antitrust (1983) 280-282; Fly? Marticorena, erations: Will It 49 J. Air L. & Commerce Munic ipal Cable Regulation: (1982) Television Is There Boulder? 9 Western St.U. Life After L.Rev. 166-167. 25For the same reason we analyze municipal decline to conduct under a so-called “munic (See, ipal James, rule e.g., of reason.” supra, pp. 6 U.Ark. Little Rock L.J. 291-296 Comment, [proposing such an approach]; [same].) Baylor pp. L.Rev. 816-818 Whereas the rule of presently reason solely policy formulated promoting focuses on (Professional competition Engineers, supra), recognition municipal public policy of a “de fense” within the drastically framework of the rule of reason would alter the nature of a court’s rule of reason inquiry: apparently court would be called on to balance the “amount” of anticompetitive against restraint a municipality’s effectuating interest a de- actions municipal which to review

In an test articulating appropriate hand laws, we on the one seek federal antitrust conflict alleged of local gov- the interest accommodate that is flexible to sufficiently a test health, regu- programs and welfare safety ernment promoting public toothless; mere time, not standard that is we favor a lations. At same not should insulate welfare public incantation of a purpose promote Local clause. under the from invalidation regulations supremacy municipal va- will guarantee under a standard judged should governments mu- anticompetitive even for motivated or lidity implemented26 improperly undermine the or commercial nicipal enterprises plainly regulations laws. of the federal antitrust objectives com Court’s United States Supreme

We turn for initial to the guidance against will be upheld or local regulation merce clause cases. State discriminate (1) against does not attack if the regulation commerce clause local to a legitimate relationship commerce and bears a rational interstate on burdens addition, will permit In to which the court extent purpose. interest, and local on the nature interstate commerce depends interstate activities. it whether could be with a lesser impact promoted satisfied, balancing reg test: court applies Once these elements are commerce on interstate will be incidental burdens ulation unless its upheld Edgar (E.g., local benefits. clearly are excessive in relation to the putative 269, 283-285, MITE 643-646 L.Ed.2d Corp. 457 U.S. Con act]; Kassel v. down state business takeover [striking S.Ct. 2629] 450 U.S. Freightways solidated Corp. statute];

580, 587-592, length down state truck [striking 101 S.Ct. 1309] 456, (1981) 471-474 [66 Co. 449 U.S. Creamery Minnesota v. Clover Leaf law 659, 673-675, banning state plastic 101 S.Ct. [upholding L.Ed.2d 715] (1979) 441 U.S. containers]; v. Oklahoma Hughes and nonreturnable milk down 250, 261-263, [striking 99 S.Ct. 336-338 1727] L.Ed.2d [60 Church, Inc. 397 trade]; Pike v. Bruce state of minnow regulation modified, more than a it be no so would If the rule of reason were purpose. sired local Boulder, (See municipal actions. judges impose policy judgments their own means for dis.; J., Civiletti, 829-830], Rehnquist, pp. supra, pp. 455 at 67-68 L.Ed.2d at U.S. [70 Leg- Prospects a City Boulder: Community Co. v. The Fallout Communications from 386-387; Comment, Approaches Alternative Solution 32 Cath.U.L.Rev. islative Marticorena, 81-82; Liability (1982) LJ. cf. Municipal 11 Fordham Urban Antitrust 166-167.) reject a modified rule rea- therefore supra, pp. We 9 Western St.U.L.Rev. of local decisions to son; instead, second-guessing prevents judicial adopt we test that a 675-676, (See fn. post, pp. accomplish proper purposes. local from condem not be immune of interest should 26Certainly, official misconduct or conflict 538; compare, Note, at page Colum.L.Rev. supra, nation under the antitrust laws. See 79 exempt be should Cirace, (arguing municipalities that supra, page 61 498 Tex.L.Rev. scope of (a) competition no broader than scrutiny if is displacement from antitrust directed, (b) imple failure, is and instability at which it imperfection, or market substantial discrimination, interest). misconduct, conflict of or involves no official mentation state down [striking U.S. L.Ed.2d 90 S.Ct. [25 844] law on Dean Milk v. Madison Co. packaging cantalopes]; down 332-334, [striking U.S. L.Ed. 71 S.Ct. [95 295] local milk regulation].) modifications,

With we believe a test modeled after appropriate court’s commerce clause a workable standard for judging cases will provide conflict between the federal antitrust laws. alleged ordinances and municipal will, however, We com from the United States Court’s depart Supreme merce clause test one will not the wide- We significant respect. apply essentially cost-benefit ranging, analysis standardless employed (See, court’s recent MITE decisions. “balancing” e.g., Corp., supra, Kassel, 269]; 580]; U.S. 624 L.Ed.2d supra, U.S. L.Ed.2d Clover 659]; Creamery, 449 U.S. 456 see gener Leaf Eule, ally, Laying Dormant Commerce to Rest 91 Yale Clause L.J. 425 an al [criticizing court’s balancing proposing approach, standard]; Maltz, ternate How Much is too Much—An Exami Regulation nation Commerce Jurisprudence (1981) Clause Geo. Wash.L.Rev. 47 [same]; Tushnet, the Dormant Rethinking Commerce Clause 1979 125 [same].) Wis.L.Rev. a lo Balancing need for particular municipality’s health, cal safety and welfare often incom regulations against programs mensurable alleged effects is for which are not a task courts anticompetitive well hand, suited. On the other standard must applicable municipalities capable those economic factors that underlie considering efficiency federal antitrust policy.

Adapting court’s commerce clause test this facial section attack on ordinance, a municipal rent if control we conclude that a municipal regulation has proper local related to the munici rationally purpose, pality’s legitimate exercise of even its in an police power,27 operates manner, handed it must be against a claim it conflicts with upheld section 1 of the Sherman Act unless the plaintiff city’s demonstrates that could be purposes achieved as that would effectively by means have less intrusive on federal antitrust impact policies.28 27This formulation would permissible anticompetitive municipal not rest determination of “traditional,” findings conduct on government engaged the local func “integral" in

tions, nor validity would an turn on “governmental” ordinance’s the distinction between as opposed to “proprietary” Framing permissible municipal activities. in terms of conduct a ity’s hand, legitimate police exercise of its powers, encompasses on the other all local Rule, health, rationally safety (Home actions related promotion of local and welfare. 191.) Brooklyn L.Rev. at fn. recognize 28We that this standard on difficult as to calls courts to make determinations proposed whether accomplishing legitimate alternative local do purpose means of a would so effectively challenged as as the and through means means that intrude less policies determinations, Regardless of the federal difficulty antitrust of laws. of the these case, that our this test to the we first observe

Applying present decision forecloses that the is not any regulation suggestion Birkenfeld There are no of conflict of supported by legitimate allegations purpose. interest or collusion in the enactment or of ordinance. illegal drafting

Moreover, has been settled that long [municipal police] power “[i]t morals, extends to in furtherance of the objectives safety, public peace, health and welfare and not a but is elastic ‘is circumscribed prerogative, and, in with the the belief in the of keeping growth knowledge popular mind of the need for to meet existing its of application, capable expansion ” conditions of modern life.’ Cal.3d

Nor can it be late date that rent control is not suggested this related to the of rationally exercise its municipality’s legitimate police pow case, that, er. We observed in in the charter present “[t]he Birkenfeld amendment rent control the includes its stated purposes imposing alleviation of the ill shortage by effects of the exploitation housing of exorbitant rents to the detriment of the health and welfare charging public The city its particularly underprivileged groups. [Citation.] amendment thus states on its face the of conditions in the city existence under which residential rent related to reasonably controls are promotion health and welfare and are therefore within public police power.” {Ibid.) Furthermore, that, even absent a establishes very clearly Birkenfeld so-called local of rents for the “housing purposes emergency,” regulation stated in section 3 of the exercise of the ordinance is a rational present 153-164; (Id. Park Carson Mobilehome municipality’s police power. at pp. Owners’ City Assn. v. Carson 35 Cal.3d fn. 672 P.2d Cal.Rptr.

Neither can fails to demonstrate that the plaintiffs regulation operate discriminatory an even handed treat- theory manner. only possible (f), of ment of situated section subdivision similarly landlords concerns When ordinance. was regulation provision exempted passed, units in a residential which is divided into a maximum property “[r]ental four units where one of such units is the landlord as his/ occupied residence,”29 her but limited the to “rental units principal exemption however, reason,” rule of because it preferable “municipal this standard is to a so-called (See incommensurable—policies. require competing—and would not a court to balance often ante, 673-674, 25.) Instead, pp. today prevents judicial second- fn. the standard we embrace However, guessing legitimate although may not invalidate local purposes. local a court for) (or purpose against local legislation by balancing propriety legitimate need achieving municipality’s means of a local policies, federal antitrust a court invalidate a means, discriminatory or irrational policy goal sought through if the local to be advanced likely intrude effectively by or if it could be can be demonstrated to achieved as means that policies. less on federal antitrust property divided exemption to rental 29This subdivision was amended in 1982 to limit the ante, 654, page into two units. See footnote 2.

677 would have been under the of this Ordinance had this exempt provisions 31, Ordinance been in effect on do not December 1979.” Plaintiffs challenge itself; instead, the (f), subdivision to the extent exemption they challenge that it excludes from the that became owner-occu- any exemption property after December pied 1979.

As out, however, defendants the exclusion from the ex- point challenged bears a emption debatable rational to the of the ordi- relationship purposes nance. The determined Berkeley electorate could have reasonably that the exclusion was desirable to some landlords from prevent avoiding application of the ordinance by tenants and evicting into their rental moving property after the Baar, provisions (See ordinance became proposed known. Guidelines Rent Control Drafting Laws: Lessons a Decade 35 Rutgers L.Rev. 758 & fn. 128 that in without [suggesting jurisdictions limitation, such abuse is exemption Because the widespread].)30 dispar- ate treatment afforded situated similarly landlords is a debat- supported basis, able rational aspect must also plaintiffs’ challenge rejected. (Clover Creamery, 659, 668]; U.S. L.Ed.2d Leaf New Orleans v. Dukes U.S. 2513];

S.Ct. Hale Morgan Cal.3d Cal.Rptr.

375, 584 P.2d

Finally, plaintiffs alternative, no suggest effective equally approach defendants’ achieving local legitimate means that would purposes by have a less intrusive Indeed, on federal impact antitrust such a policies. showing could be made after only extensive evidence has been taken in the trial court. We therefore hold that have failed to establish that the plaintiffs or- dinance on its face conflicts with section of the Sherman Act.

C. Facial Validity the Ordinance Under Section 2 the Sherman Act Plaintiffs also assert that the ordinance on its face violates section 2 of the Act. That section provides inter alia that who “[e]very shall person or monopolize, attempt or combine or monopolize, any conspire other person commerce persons, of the trade or monopolize any part among several States . . . shall be deemed guilty of . . . .” felony U.S.C. §

In the context of conduct, business reviewing legality private United States Supreme Court has established “offense” of mono- 30Although plaintiffs argue any disposed already landlords so would have taken such property measures because rental already exempt of four or fewer units was from rent (the Ordinance, control prior terms of a Temporary ordinance Rent Stabilization passed by Berkeley City 1979), ignores Council eff. Dec. this response the fact that question ordinance now in comprehensive is far more predecessor. than its recent

678 of “monopoly power” consists two elements:

polization possession market, (United in the relevant willful of that power. and acquisition Grinnell 384 U.S. States v. Corp. [16 785-786, 1698].) been defined as the 86 S.Ct. has “Monopoly power” du Pont (United States v. to control or exclude “power prices competition.” 1278-1279, (1956) & L.Ed. Co. U.S. fn. [100 994].) from a defend S.Ct. The existence of such be inferred power (Grinnell, 384 U.S. supra, ant’s share of the relevant market. predominant L.Ed.2d at of market is monopoly power]; p. p. percent 786] [87 American 328 U.S. L.Ed. Tobacco Co. v. United States of market is monopoly 66 S.Ct. to 80 percent 1125] [two-thirds the ordinance is “ob on these claim power].) Seizing plaintiffs principles, con viously” invalid because it a willful acquisition power represents 27,000 trol Berkeley—23,000 all covered rental units prices units in that city. if defendants were pri- claim would have merit

Although plaintiffs’ likely interstate com- vate business and if the restraint was to affect parties proved merce, to mu- will mechanically apply reasons discussed above we not defendants, in the context of pri- rules of law fashioned exclusively nicipal Instead, defendants’ vehement vate business over regulation. assuming, is not itself a that section 2 of the Act to a protestations, party applies we in the relevant it of monopolizing, market that is accused competitor ante, the test articulated 675. apply page indicate a

As of the ordinance objectives stated explained previously, ordinance was local that the Plaintiffs do contend legitimate purpose. interest, misconduct, or in order to affect conflict of implemented through claim of a discrimination—all factors that would tend to rebut defendants’ 498.) It is (See Cirace, at p. 61 Tex.L.Rev. legitimate purpose. supra, a rational defendants’ ordinance is established that means invoked by no evidence Plaintiffs have cited exercise municipality’s police power. situated com- similarly to show that the ordinance fails to tending regulate no they suggest equal- in a evenhanded manner. reasonably Finally, petitors local legitimate purposes effective alternative to these ly accomplish federal antitrust policies. means that would have a less intrusive impact that the ordi- We therefore have failed to establish conclude plaintiffs 2 of the Sherman Act. nance on its face conflicts with section not established a conflict Because we determine that have plaintiffs from Act, bemay exempt we do not address whether the ordinance Co., (Rice Williams antitrust under Boulder. v. Norman scrutiny analyze We L.Ed.2d at proceed U.S. at fn. 9 contentions. statutory additional constitutional plaintiffs’ II. Rent Control Issues31 A. Facial the Ordinance’s “Fair Return” Standard Validity of

The of the in the trial court and one primary primary dispute substantive a rent on this concerns whether control questions posed appeal ordinance is constitutional if it that a landlord is to receive facially provides a fair return on his investment rather than a fair return on the value of his issue, amici both of the property.32 parties, assisted curiae on sides have vigorously briefed and their We must stress argued views. respective outset, however, at the the limited of our in facial challenges scope inquiry such as this. As we made in Birkenfeld, clear whether rental are regulations fair or confiscatory ultimately on the result reached. Cal.3d depends 129, 165.) determination, course, That can be made only by analyzing challenge Nevertheless, we regulation as will declare applied. a regulation invalid on its face “when its terms will not those who permit administer it to avoid results in its to the confiscatory application complain (Id. 165; ing at parties.” see also Cotati Alliance Better v. p. Housing for City Cotati (1983) 280, 287, 148 825]; Cal.App.3d Cal.Rptr. [195 Hutton Park 1, Gardens v. Town Council 68 N.J. 543 A.2d [350 14-16].)

For decade, more than a rent control throughout this state and agencies the nation have a veritable employed of administrative stan- smorgasbord matter, preliminary 31Asa reject plaintiffs’ we procedural improper claim that it was for grant judgment court to pleadings on the opportunity because this denied them the present confiscation, evidence as to their claims of equal protection, denial of and unlawful restraint on alienation. On a judgment pleadings, alleged defense motion for on the all facts in the complaint (Sullivan County are deemed Angeles admitted. v. Los Cal.3d 241, 865]; fn. 3 Cal.Rptr. Colberg, 527 P.2d Inc. v. State ex of California Dept. rel. Pub. Wks. 67 Cal.2d Cal.Rptr. There was no need plaintiffs Further, for present any although they judgment evidence. claim that on the pleadings denied them a invalidity, judgment expressly declaration as to facial de clared the ordinance “valid on It judgment its face.” is well established that a motion for pleadings on the “may declaratory declaratory be used in an action for relief to obtain a judgment on the merits in plaintiff’s rather than a dismissal favor of defendant (4 Witkin, (2d 1971) Trial, suit.” Cal. Proceedings Procedure ed. Without § italics in original.) Finally, although plaintiffs they granted claim should have been leave to amend their complaint, any allegations only amendment to make further factual would applicable to the claim applied. They granted that the ordinance invalid was as were leave claim, to amend as to this but later complaint. dismissed amended reality, 32In employs setting defendants’ ordinance two administrative standards for max 687-689, imum post rents. As discussed pages provides section 11 ad annual rent justment, precludes but granting city adjustment the Board from wide rent except such is, essence, offset general certain increases in costs. This a variation on the so-called income,” (See Baar, “maintenance of operating passthrough” net approach. supra, “cost Rutgers 809-816.) hand, pp. (c), L.Rev. at Section subdivision provides on other factors, (but to): for individual rent including increases based on “all relevant not limited investment,” .... the landlord’s rate of return on as well landlord’s costs.

dards which to (Carson, determine rent 35 Cal.3d ceilings. Alliance, reasonable”]; fair [“just, Cotati supra, 148 Cal.App.3d investment”]; and reasonable return Palos Verdes Shores [“fair Estates, Mobile Ltd. v. City Angeles (1983) Los Cal.App.3d Cal.Rptr. [“just and reasonable return” based on the “main 866] tenance of profit” Gregory San Juan approach]; City Capistrano 142 (1983) 72, 86 “return on Cal.App.3d Cal.Rptr. [interpreting 47] [191 investment” as return on fair requiring “just and reasonable the market value Baar, of see also Rent property”]; Drafting Guidelines [landlords’] for 723, Control Laws: (1983) Lessons a Decade 35 781- Rutgers L.Rev. 817 and [describing (1) the cash flow/return analyzing following standards: rent; on (2) value; on gross (investment); (3) (4) return return on equity income; net percentage (5) in operating and maintenance of net operating ; Comment, Rethinking Rent Control: An “Fair Return” Analysis come] (1981) 617, 12 Return]; Rutgers L.J. 640-648 cited Fair Com [hereinafter ’ ment, Rent Control and Landlords The Return Property Reasonable Rights: Doctrine (1980) Revived 33 L.Rev. 165 cited Reason Rutgers [hereinafter Carson, able Return Doctriné].) weAs stressed in recently “[r]ent agencies control are not either or Constitution obliged the state federal by to fix (35 rents by Cal.3d application any method formula.” particular 191, at 575, p. (1942) Power Comm’n 315 citing Pipeline v. Co. U.S. 586 1037, 1049-1050, 736]; L.Ed. 62 Comm’n Gas Hope [86 S.Ct. Power v. Co. 320 281].) U.S. 601-602 64 L.Ed. S.Ct. [88

In view of this and we oft-followed oft-quoted principle, are not persuaded by and plaintiffs’ amici’s contention apparent the much return criticized on of its varia- any value standard33—or 33Whereas the return “just by on investment standard and reasonable return” determines investment, focusing the on landlord’s on fair return the return value standard determines by focusing on the value property. market of the landlord’s The fair market value return on by standard advocated plaintiffs by used Court in Supreme amici was the United States early case, Smyth an railroad rate v. Ames 18 S.Ct. 169 U.S. L.Ed. [42 418], mod., 888], decree 171 U.S. 361 court held L.Ed. 18 S.Ct. in which the [43 sufficient, that railroads were to deducting operating expenses, entitled rates after reasonable produce to a fair p. return the fair value at on market of their assets. U.S. 849].) p. L.Ed. at The Supreme changed approved Court use of an position, later its Gas, approach designed (Hope supra, ensure fair return on U.S. at investment. pp. 343-346]; at pp. Siegel, Understanding L.Ed. Era: see the Lochner Lessons Controversy Utility From the Regulation Over Railroad and Rate 70 Va.L.Rev. 215-259.) Rejecting the idea that be based by rates set Federal Power Commission must on present property, Hope “fair heart of value” Gas court observed: “[t]he matter is that upon going rates cannot be made to depend ‘fair value’ when the value (Id. enterprise depends earnings p. on at may anticipated.” under whatever rates be 601 [88 L.Ed. p. Implicit at is the on fair value suggestion statement that a return standard is circular and unworkable. “Value” is the worth of future benefits that current may be utility company, example, depends derived from an investment. The “value” Thus, part utility product. on rates that company charge for its set rates by company’s process. (Siegel, supra, reference “value” circular is a 70 Va.L.Rev. case. We in the present the Board to be tions34—is required employed to set rent which standard that selection of an administrative reiterate themselves— the voters this case a task for local governments—in ceilings defendants’ is whether in this Our concern only appeal and not the courts. who those face, standard, permit on its will fair return investment supra, 17 Cal.3d (Birkenfeld, results.35 confiscatory administer it to avoid 253.) 246 & fn. in the applied are concepts value when fair market circularity problem exists same A.2d N.J. 200 (See Borough Lee Helmsley Fort rent control context. 65, Doctrine, 798-803; Baar, Return 71-72]; Reasonable supra, Rutgers pp. L.Rev. capacity L.Rev.) building’s potential expression of a supra, Rutgers “Value is an during its useful ownership intangible benefits of generate income and incidental or rental Return, rental “value” of a (Fair The current Rutgers L.J. at life.” expected property is income the depends large part on the amount of rental property thus cases, determine what rental using value to utility process generate. As in the rate Alliance, supra, 148 (Accord, Cotati permitted becomes circular. income shall 362, 370-371.) Estates, 287-289; Cal.App.3d supra, 142 Cal.App.3d Palos Verdes is on value standard claim that a return rejected The Cotati Alliance court thus a landlord’s in the return on “The fatal flaw facially be constitutional: mandated for an ordinance to through capitalization commonly valued property that income most is value standard is Thus, the basis of a return adjustments on process making its individual rent income. by determined inevitably value is meaningless it circular: value standard is because income, a return on according to value. Use of in turn set rental amount of which is control, in- of uncontrolled the use thoroughly value standard would undermine rent since be which would rents as those potential come to determine value would result in the same rents) in a never- (and increase charged regulation. in the absence Value hence would 287; accord, pp. at 71- (148 Helmsley, supra, 394 A.2d ending spiral.” p. Cal.App.3d at 72; N.E.2d Mass.App. 6 135 [374 Niles v. Boston Rent Control Administrator 300-303].) standard,” utility investment suggests adoption “public for plaintiffs 34Amicus regulated which, with the value urged, it is would in a base rent commensurate result (Cf. Co. v. Public Cal. Gas imposed. Southern property at the time rent controls were Aside from the P.2d Cal.Rptr. Utilities Com. Cal.3d 474 [153 reg of local very different area questionable propriety utility law to the applying public transactions, housing “if there was a observed that private ulation of economic it has been value as the measure artifically prerent control shortage high, which caused rents to be use of utilizing control artifically rents. Rent calculating perpetuate fair will inflated [for return] 280, 287.) Alliance, (Cotati supra, Cal.App.3d this standard is no rent control at all.” problematic premature be apparently parties, 35Asis conceded both it would attack, against articulate, test the constitutional attempt us in the context of this facial judged. We will are to be specific standards applications which of various administrative plain applied particular challenge control as question face that when we review a to rent on investment standard fair return It is sufficient in this case to measure defendants’ tiffs. that it will must such against general proposition that an administrative standard confiscatory results. permit those who administer it to avoid on dictum in dispel suggestions based point, On a similar we also wish to Birkenfeld test, must established, that rent controls requirement previously we have as a constitutional at property.” Cal.3d “just return on their provide landlords a and reasonable legitimate exercise discussion of statement was made in the context of a broader This stan- a constitutional certainly intended to articulate police power, and most local was caution; be viewed with therefore “property” reference to the term should dard. Birkenfeld’s predict can be used suggest that the statement inappropriate it would be Birkenfeld challenge to rent review a we constitutional that we will articulate when specific standard applied. control as 165; Co., Power Comm’n Pipeline supra, U.S. at pp. Park, L.Ed. at Hutton 1049-1050]; supra, pp. 13-16.) 350 A.2d at pp. If we conclude that the fair return on investment standard affords the Board sufficient results, to avoid flexibility we confiscatory must ordi- uphold Alliance, (Cotati nance. 289-291.) Cal.App.3d pp.

Plaintiffs and amici a number of due posit obstacles and process practical difficulties that the Board face in the return on investment administering standard, but none will the Board prevent from re- avoiding confiscatory sults.

1. Adjustment Amount, of Landlords’ Frozen Profit May 1980 Con- sideration of the Effect of Inflation

One of plaintiffs’ primary is that section 11 of the ordinance complaints locks landlords into the fixed dollar they amount of earned in profit May 1980,36 and that in order for the Board to avoid those confining landlords who invested long ago to their preinflation dollars May profit amount, it must be free under section of the ordinance to take into con- sideration the effect of inflation on individual landlords’ investments37 and award fair returns based on “adjusted” investment figures.38 36Plaintiffs demonstrate point following May hypothetical: In a land gross $10,000; $9,000, lord’s rental income is operating expenses his total as follows: $6,000; mortgage payment $1,000; $2,000. property utility taxes of bills of Thus his net $1,000. (profit) return is May In expenses except utility 1982 his remain same that $1,500, $500 by costs increase $500. thereby reducing his net return to Under these circumstances the general adjustment section annual mechanism allows the Board to provide rent, percent $10,500, for a 5 increase in profit so that landlord’s amount would ($1,000) However, be the same number of years dollars as it was two no earlier. relief provided is or can be erosionary years under section 11 for the effect of two of inflation $1,000 income, on the base purchasing power of which has been diminished. 37The “effect of inflation” issue apparently argument was raised for the time first at oral in the Appeal. Court of July On appellate court vacated submission of case in order to receive July defendants’ written concession of that the term “fair return on (c) (i), investment” in section may reasonably subdivisions and be interpreted permit the Board to any consider and allow purchasing power decrease in the of the by letter, landlord’s return caused inflation. Both the court’s order and defendants’ well as plaintiffs’ thereto, response part are appeal. of the record before us on been issue has responses briefed and have been filed. point 38Plaintiffs’ explained can best be hypothetical example. Assuming a that the Board were to landlords, fix a “fair return on investment” 10 percent following at for all might $70,000 occur: Recent investor A has profit invested since and he earned a $6,000 in In petitions 1980. 1984 he the Board under section 12 for an increase in his return on standard, percent investment. Under its 10 may grant return on A investment Board $1,000, $7,000. an increase of profit so his 1984 amount of Additional contributions could, course, capital yield also percent a 10 return. contrast, In long-term $40,000 he, too, investor B has invested since earned a $6,000 profit However, in 1980. petitions when in he the Board under section investment, for an increase in his mechanically return on he will be turned down if the Board $40,000 multiplies Hence, his percent investment a 10 B return. would be limited to his if Clearly, the fixed amount a year landlord’s remains same profit after return year his will in time in real value: it is obvious that a diminish $1,000 in 1990 will have a much lower value than the same dollar “profit” Furthermore, amount of in 1980. a fixed amount profit although profit a produce reasonable or fair return on for low-risk investment investments bonds, such as we must that investment in rental units agree plaintiffs hence, risk and inflation and when contemplates higher times of high term, viewed in the long demands more than mere maintenance of an ex- Alliance, isting (Cotati 295; amount. profit supra, Cal.App.3d Council, Hutton Park Gardens v. Town supra, A.2d just [a reasonable return on investment is one that is commensurate with generally returns risks].) investments in other enterprises having comparable Therefore, although defendants’ ordinance restrict landlords’ may properly on their profits investments, rental it may indefinitely the dollar freeze amount of those (Co- without profits eventually causing confiscatory results. Alliance, tati the net of a landlord operating profit [“If dollars, continues to the identical number of there is in time a real dim- inution to the landlord which eventually confiscatory.”].) becomes

In the facial determining validity ordinance claim against plaintiffs’ that it must be interpreted the Board to account for the effect of require inflation on investment in amount of determining landlord’s or re- profit turn, we adhere to the stressed, rule earlier that whether a regulation pro- duces a return that is result, or fair confiscatory on the depends ultimately and that we will invalidate an ordinance on face if its only its terms preclude avoidance of confiscatory results.

First, it is not apparent that the ordinance face on its alternative precludes means of adjusting Moreover, landlords’ frozen May 1980 amounts.39 profit even assuming arguendo confiscatory result occur a future might individual if case the Board fails to invoke measures necessary adjust dollar amount of a landlord’s May 1980 this would still us profit, provide no ordinance, basis which to invalidate the entire or its administrative “fair return on investment” standard. in Birkenfeld, Unlike which we de- May return—$6,000. (as frozen Only amount of plaintiffs suggest mandatory) if is investment, Board takes into account the “adjusts” effect of inflation on his his invest- (as 12, figure 683, ment accordingly, (c)(8), (see or if post, p. § subd. seems to allow fn. 39)) return, assigns Board him higher rate of he secure an increase in the amount profit he received in 1980. example, 39For nothing in the precludes adjusting (per ordinance the Board from the rate centage) Indeed, of return on investment in profit. order to increase a landlord’s amount of the ordinance contemplate seems to adjustment ad hoc of return individual landlord’s rates 12, in (c)(8), order to reach this result: provides making section that in individ subdivision adjustments ual the Board shall consider landlord’s rate of return on investment.” “[t]he (Italics added.) 12, (c), 689, See section post, subdivision out page set footnote 46.

termined that inherent de inevitably defects unnecessary procedural all prived landlords of due for a few” lucky process “except perhaps 172), case, contrast, Cal.3d at in this it unknown what percentage of landlords be able if the might unconstitutional confiscation Board prove fails to consider the effect of in inflation on dollars invested order adjust a landlord’s frozen evidence any amount. Nor do we have before us profit that when suggest faced with such a the Board will decline to prospect, invoke measures within its individual amounts. powers adjust profit In this we observe the board will regard is tó be presumed “[i]t Constitution; exercise its in powers with the of the conformity requirements and if it does act the fault not the statute.” unfairly, lies with the board and (Butterworth v. 126 A.L.R. Boyd Cal.2d P.2d 838].) Until we are to the to review a required specific challenge ordinance, that, Board’s we note as defendants application simply {ante, themselves 37), concede is not drawn so fn. the ordinance as to narrowly consideration the effect of inflation on a land preclude lord’s investment in necessary those cases in which the Board deem it might to take that factor into in a confiscatory account order to avoid causing result.40

2. Irrational Discrimination Plaintiffs also that the argue investment standard denies equal protection because it will rental result different rent valued ceilings comparably Alliance, units. This issue was raised and decided in Cotati properly which the court observed that such treatment bears a debatable disparate rational could have to a the voters relationship legitimate public purpose: standard, reasonably concluded that the than a effectively investment more standard, noninflated, value-based ensures reasonable rents for citizens Alliance, 280, 292; times of (Cotati inflation. high Cal.App.3d see Hale Morgan Cal.3d Cal.Rptr.

P.2d only 40Nothing in the on his requires ordinance the Board to fix a landlord’s return based Further, (c), “actual” of “rel although investment. contains a list section subdivision evant determining appropriate factors” to be amount of a considered the Board in rents, perhaps significant, landlord’s most expressly these factors are nonexclusive. And (c), subsection of in permits subdivision the Board to consider “all relevant factors” (c), determining the “landlord’s rate of return on investment.” See section subdivision post page set out at footnote 46. merely today. We read Cotati That case Alliance to be consistent with our determination suggests necessary “may” doing that a rent if so board consider the effect of inflation is result, (148 return, confiscatory specific assure a landlord in a case. a fair and hence avoid a 289.) Cal.App.3d p. at 3. the Extent of a “Investment” Ascertaining Landlord’s Plaintiffs next investment to land standard predict problems applying who, reasons, lords for various have made little or no cash investment. However, those who no purchased payment, improved property with down dollars,” through with or who obtained years ago “preinflation property inheritance, gift need not be of a fair return because deprived simply not made no initial The ordinance does confine they monetary investment. therefore, Board, not “investment” to such restrictive is definition. “investment,” cases, from as a land precluded, considering appropriate Alliance, (Cotati lord’s labor in supra, his personal improving property. 148 Cal.App.3d at Nor is the Board from pp. precluded imputing “investment,” the transferor’s adjusted necessary, as to landlords might Return, who obtained Fair (Ibid.; or inheritance. property gift 645.) Furthermore, L.J. at Rutgers p. ordinance does preclude Board from such as considering mortgage “forms investment payments toward cash in the principal, invested later improvements property” [or] Alliance, (Cotati or, 287), at with certain Cal.App.3d exceptions,41 fact, terms a landlord’s individual In the ordi obligations. financing nance directly for such flexible of the investment provides stan application (i) dard. Subdivision of section that this provides provision “[n]o Ordinance shall be so an applied Board from prohibit granting individual rent that adjustment is demonstrated landlord necessary by provide landlord a fair on return investment.” 4. Deprivation of Full Long-term Appreciation

Finally, amicus for that the in- plaintiffs appears argue ordinance’s vestment standard is unconstitutional on its face because it unfairly deprives landlords full on the value of their long-term appreciation regulated prop- that, The thrust of erty. aimed contention at apparently establishing as a matter of due rent control must all process, ordinances land- guarantee lords a fair return the full market value their This issue was property. Alliance, also raised in Cotati in which the court observed “[s]ome control, lessening any is a rent appreciation necessary consequence since future is to a extent a function of appreciation significant increased rental income. It is sources of long-term one very appre- [Citation.] ciation—inflated rents—that rent control are intended to measures restrict.” 290.)42 Cal.App.3d (e), (d) post, page

41See section subdivisions set out footnote 53. unfairly long 42The further argue court noted: also the ordinance denies “[landlords any appreciation time landlords acquisition from the time of when were date rents controlled, enacted, thus, first but the reduce did ordinance did not rents when it was preordinance (italics pp. not affect appreciation.” original).) {Id. 686 Any price-setting is readily apparent. contention fallacy plaintiffs’ has rights, regulations property like other power most

regulation, police But it has the value of regulated properties. the inevitable effect of reducing render does not itself in value been held that reduction property such long in a results legislation Police a power unconstitutional. regulation of substan been owner has deprived when the confiscatory “taking” only (1979) Tiburon City v. (Agins all reasonable use of the tially property. 25], (1980) 447 372, affd. 266, P.2d 277 598 Cal.3d Cal.Rptr. [157 diminution 106, significant Even L.Ed.2d 100 S.Ct. U.S. [65 Ambler (Euclid v. taking. confiscatory insufficient to establish a value is 114, 54 A.L.R. 47 S.Ct. L.Ed. Co. 272 U.S. Realty [71 law insufficient zoning because of reduction in value percent 1016] [75 L.Ed. U.S. 394 (1915) 239 [60 Hadacheck v. Sebastian taking]; establish of use value because reduction [nearly 36 S.Ct. 90 percent 143] States Supreme the United As taking].) restriction insufficient to establish Co., L.Ed. 320 U.S. at page noted in Gas Hope supra, [88 Court pow 344], police like other applications fixing prices, page “[t]he But the is er, being regulated. which reduce the value of property invalid.” is regulation mean that the the value reduced does not fact that is 438 U.S. City York Co. v. New (Accord, Transp. Penn. Central property 104, 131 98 S.Ct. L.Ed.2d 2646] [diminution Basin Area Permian value, alone, a “taking”]; cannot establish standing 312, 337, 88 S.Ct. 1344] Rate Cases U.S. prices of maximum from the imposition constitutional arises objection [“No a conse reduced as is the value of regulated property because ... merely of regulation.”].) quence facial attack the

Thus, in this we need not articulate although rent control standards administrative constitutional standard that all precise a rent (ante, 35), certainty can must meet fn. we state a land the value of a fair return on control ordinance need not provide We conclude a facial challenge. lord’s in order to survive property the Board will not preclude defendants’ fair return on investment standard standard results, the administrative and hence confiscatory from avoiding (Cal. face. on its valid constitutionally established in the ordinance is v. Park Owners’ Assn. Const., I, 7; accord, art. Oceanside Mobilehome § Cal.Rptr. (1984) 157 City Cal.App.3d Oceanside 288-289, Alliance, and cases 239]; Cotati Cal.App.3d at pp. cited.)43 authorities determination, City Capistrano Gregory San Juan contrary extent it to this 43To the is disapproved. Cal.Rptr. Cal.App.3d 85-86 [191 47] Procedures

B. Facial the Ordinance’s Rent Validity Adjustment Carson, an rent ceilings we in recently As observed “[when] for established, grant indefinite must be provided duration are a mechanism re landlords a and reasonable just those increases ing necessary permit if it is only turn. ‘The mechanism is sufficient for the required purpose a substantially in rents without maximum capable providing adjustments ” (35 necessary.’ incidence and than is greater delay degree practically 169.) As Cal.3d at 17 Cal.3d at Birkenfeld, p. plain p. quoting supra, observe, tiffs taken effectively by long-continued as “[pjroperty by unreasonable in an end to rates as an delay confiscatory express putting (Smith affirmance them Co. 270 U.S. . . . .” v. Illinois Bell Tel. L.Ed. 46 S.Ct. But, course,

Of some control scheme. delays are inherent rent any “only those which are than to achieve delays longer necessary practically of the are legitimate purposes legislation constitutionally proscribed.” (Carson, 192; 35 Cal.3d at 17 Cal.3d at Birkenfeld, supra, p. 169, 173.) pp.

The test used to review the facial of defendants’ validity adjustment is the same adminis procedures one used above to review the ordinances’ trative standard for under 12. individual maximum rent section adjustments We will declare the if the ordinance on adjustment only invalid procedures its face will not the Board to avoid results. permit confiscatory Although we found former ordinance unconstitutional Berkeley’s facially Birkenfeld because, terms, on this basis its it action reasonably prompt precluded cases, in most the ordinance before us now contains none problems found in the former regulation.

The prior ordinance had no rental for “general adjustments provision all or class of any rental units based on factors such generally applicable property (Birkenfeld, recently taxes.” 17 Cal.3d at we Although p. in Carson

recognized that a rent control ordinance need not have a general 194), adjustment constitutional muster Cal.3d provision p. pass such a to be job mechanism will be when the “magnitude required 169) done” decided (Birkenfeld, so demands. Since we Birkenfeld number of rental has increased to units to rent control Berkeley subject 23,000. However, the exact found in 1976 is wanting present mechanism in the ordinance scheme before us now in section 1144—acomprehensive ante, (see 2), (deletions are provides 44Section as amended in in full fn. line; italics): stricken with a horizontal additions are in year, ceiling for all setting adjusting “a. Once each the Board the rent shall consider general particular categories rental units covered of rental units this Ordinance in and/or that provides for annual45 the board across based on “cost” adjustment factors. for all adjustment under section 11 is landlords to allow designed

landlords to retain the of in same dollar amount generally profit subsequent years that received they In rent May 1980. order to increases acquire by covered by this' Ordinance deemed Board least appropriate the Board. The shall hold at public two hearings prior to making any general adjustment ceilings. of the rent The annual October-31, 1980, first public hearing such shall be later and conducted-no than thc-first general annual adjustment shall be made no later than December 1980. The Board shall time, publish date, publicize public and place hearings notices the and the at least of of thirty days prior hearing required public hearings to the con- date. two shall be general ducted and 31, adjustment September the annual shall be set between and October year. each adjustment following The annual January become shall the 1. of effective making general “b. In adjustments annual the Board ceiling, rent shall: “(1) Adjust ceiling granting the rent upward by pay those who for a landlords utilities utility adjustment Berkeley for increases in of City the for utilities. “(2) Adjust tax, ceiling the rent upward by granting property landlords a maintenance and operating (exclusive utilities) expense adjustment City increase of for increases in the of Berkeley property expenses. for taxes operating and maintenance and “(3) Adjust by ceiling requiring any the rent downward landlords to decrease rents for City decreases in the of Berkeley for property taxes. “ (4) Adjust ceiling by requiring pay the rent downward landlords who utilities to for any decrease City Berkeley rents decreases in the utilities. for of for subsection, “In adjusting ceilings rents adopt under the shall or this Board a formula general formulas of application. upon a-survey-or This formula will be the annual based registration rent forms, surveys, hearings, public presented testimonies information and other data indicating expenses relating available or the increases decreases the housing rental City Berkeley market in the of set forth in For this subsection. maintenance and operating expense adjustments, survey surrounding data from the Board also use appropriate. adjustment communities where of The Board shall make no more than one annual ceilings rent per per year. rental units “Adoption greater (45%) a forty-five percent than the increase in the Con- of formula of sumer Price ending previous require Index the twelve June 30 months shall for (6) Commissioners, provisions vote six notwithstanding. Adoption other such affirmative of of a specific exception shall be special requirement only a to the formula five affir- subsection, mative votes to make a purposes decision. For Price this Consumer Index shall mean the Consumer Price Index all urban in San consumers Francisco— for Oakland, 100), all equals reported by items Labor Statistics Bureau of Labor, Department U.S. pertains City Berkeley. as it upward “c. An general adjustment automatically ceilings provide in rent does not for rent adjustment increase. Allowable rent be- pursuant general upward increases to a shall come only thirty effective after gives days the landlord the tenant written at least notice of period such rent increase and expires. the notice “d. If the Board makes a general adjustment ceilings, downward in the rent landlords of rental adjustment units to which applies give shall such rental units written tenants of notice of they the rent decrease to which entitled. Such rent decreases shall take effect are thirty days later than after date set the Board for the downward the effective (Fn. general adjustment. page.) 44 continued on next 45We are general adjustments past informed amicus that 11 in the four under section years (6.21 have been percent provided space heating); as follows: if the landlord percent; percent; (apparently of the low no increase because inflation Baar, 1983). rate for See L.Rev. at Rutgers pages 779-780. in order generally, reflect cost increases not on other landlords imposed (i.e., the dollar amount to seek an increase in dollar of return amount to section must secure individual profit), adjustment pursuant landlord an 682-684, ante And, unless land- c.46 subdivision as observed pages unit is specified “e. If the Ordinance for a rental maximum allowable rent under this specified greater specified agreement, than the rent unit in the the lower rent such rental agreement agreement the rental rent until the rental shall be the maximum allowable expires. If unit is specified the maximum allowable this Ordinance for a rental rent under specified specified less than the rent agreement, rent for such unit in the rental lower under this Ordinance shall be the maximum allowable rent. ceiling shall be pursuant upward general adjustment “f. No rent increase of a rent an effective if the landlord: “(1) Board, any Has comply, provisions continued fail to after order of the thereunder, this Ordinance regulations and/or orders or issued or “(2) bring warranty Has to compliance implied failed the rental unit into with the habitability, or “(3) by City repairs Housing Inspection Has to make the as ordered the Services failed Berkeley, or “(4) by completely register September except provided Has to in Subsection as failed ll.g. below. “g. adjustment The upward general eligible amount an which a landlord shall for shall percent beyond decrease per ten month each December which month for for register. the landlord to fails “h. A ineligible upward landlord who is general adjustment to raise rents under an for year eligible an entire particular general calendar shall to not be raise rents under that ” adjustment years. in future c, 46Section provides making subdivision adjustments full: “In individual of the rent ceiling, the or hearing purposes Board the examiner shall the of this consider Ordinance factors, (but to): and specifically shall including consider all relevant not limited “(1) taxes; Increases or in property decreases “(2) Unavoidable any expenses; increases or operating decreases in and maintenance “(3) planned (as The cost of or completed capital improvements to the rental unit distin- guished ordinary from repair, maintenance) replacement improve- and capital where such necessary ments are bring to property the into or with compliance compliance maintain applicable requirements local affecting code safety, capital health im- and and where such provement properly costs are improvement; amortized over the life of the “(4) unit, Increases or decreases in the occupying living number of the tenants rental furniture, space, furnishings, equipment, occupancy or other housing provided, services or rules; “(5) Substantial deterioration of the controlled rental unit other than of normal result tear; wear and “(6) services, part Failure on the of the provide housing comply landlord to adequate substantially applicable laws, housing housing, safety state rental local health codes, agreement; or the rental “(7) pattern decreases; The of recent rent increases or “(8) return, The landlord’s rate of determining return on investment. In such all relevant factors, including but not following limited to the shall be considered: the landlord’s actual cash payment, financing down any method of tax property, and federal or state benefits accruing to landlord as a ownership property; result of “(9) property acquired Whether or long-term was or is held as a or short-term investment; and “(10) Whether or not the landlord has received rent in violation of the terms of this Ordinance or comply has otherwise failed to with the Ordinance. “It is the intent upward adjustments ceilings Ordinance individual rent on only units be made when adjustments necessary the landlord such demonstrates that are provide the landlord with a fair return investment.” the ordinance

lords have reasonable access to such individual adjustments, for unconstitutional results. has potential producing In to the for adjustment Berkeley’s individual comparison procedures said, former in a strait we Board regulation—which, “put procedural jacket” (Birkenfeld, 171)—the 17 Cal.3d at ordinance before us now is solicitous of The studied apparently due initiative drafters process. and took it that we noted Birkenfeld, major failing to heart: every procedural addressed, in the former ordinance procedural pro- has been and additional tections not mentioned have been included. previously did not ordinance found invalid in previous Berkeley Birkenfeld it was accom- allow a landlord to file for rent unless adjustment a petition panied city’s building a certificate of code from building compliance code the Board no to consolidate department; gave power petitions consented; in the same gave units unless the tenants building, (five $2,400 no Board members a maximum of year) power each paid per officers, or even members delegate holding hearing of hearings 170-171.) or As defendants point Board. Cal.3d panels pp. out, no none of these in the ordinance: there is “defects” new appear that a be a certificate from by landlord’s requirement accompanied petition else;47 (2) Board is expressly the or from the building department, anyone units in the the landlord’s for same given petitions consolidate a power consent;48 ex- or and the ordinance building—whether not the tenants to hold hear- the Board officers pressly gives appoint hearing the power decisions that are and the are authorized to issue ings,49 hearing officers receipt petition by 47Section subdivision of a a provides Upon in full: “Petitions. tenant, adjusted units be ceiling landlord and/or the of individual controlled rental rent in this procedures the forth elsewhere Section. upward or downward accordance with set may set a petition by be on the the The Board reasonable provided shall form Board. by petitioner the per upon paid the to be expenses processing petition unit fee based Notwithstanding filing. petition No before 1980. September at the time of shall be filed Section, may refuse any provision hearing other of this examiner to hold a the Board if adjustment rental unit an individual hearing grant ceiling and/or an individual rent for a ceiling for such unit within hearing regard been held and rent has decision made previous months.” six b(9) petitions All landlord provides 48Section subdivision in full: “Consolidation. hearing, petitions and all pertaining in the for building to tenants shall consolidated same hearing there for unless building shall be occupying filed tenants the same consolidated petitions.” showing good cause such not to consolidate b(l) hearing “Hearing A examiner provides 49Section subdivision full: Examiner. petition for individual ad hearing upon the Board to act appointed shall conduct and justments ceilings power to administer oaths affirmations.” of rent have shall final unless to the Board.50 the new ordinance im- appealed Additionally, a time limit poses of 120 on all landlord days decisions on petitions.51 Defendants’ new ordinance clearly avoids the inherent confiscatory delays in the former It for regulation’s unit-by-unit general procedure. provides costs, wide city increases to cover common individual adjustment its are procedures to assure of land- designed reasonably consideration prompt lords’ claims.52 These are related to achievement of procedures reasonably of, alia, the ordinance’s stated inter excessive rents. purpose preventing By terms, its own the ordinance will the Board to avoid permit confiscatory results; we ordinance, face, therefore conclude that the on its guarantees (Cal. Const., I, 7; due Birkenfeld, plaintiffs process. art. 17 Cal.3d § pp. C. Unreasonable Restraint on Alienation

At the same time that mechanical of the fair return on application invest- ment standard may have the potential results in produce confiscatory (ante, some individual 682-684) cases it pp. is also that the stan- recognized dard has the potential windfall returns to recent awarding investors whose purchase and interest are prices rates If this latter were high. aspect unregulated, use of the investment standard defeat the of rent might purpose b(ll) provides “Finality 50Section subdivision full: of Decision. The decision of hearing examiner shall be the final decision of the Board in the event of appeal no to the hearing however, Board. The decision of the stayed pending examiner shall appeal; not be in the event that the panel Board or hearing reverses or modifies decision of the exam iner, the Board shall order the appropriate party payments to make retroactive restore parties position they to the would occupied hearing have had the examiner’s decision been the same as that of the Board’s.” b(12) 51Section provides subdivision in full: “Time for Decision. The rules and regulations adopted by any the Board provide shall for final Board action on individual rent adjustment petition twenty days following filing within one hundred and the date of of the individual ceiling adjustment petition, rent petitioner the unless conduct of the or good out, other responsible delay.” cause is for the point As defendants it is clear that the 120-day rule applies petition also appealed determinations that are to the Board. Carson, 105-day 52Likethe provision recently that we reviewed in we do not believe that limit, the time allowed for review under 120-day section is excessive. Within the time “the Board must review all provided by applicants, including complex information the data, (2) tenants, financial and tax review hearing comments received from hold a at which parties the interested permitted testify. are Careful review of the information [H] provided to the Board important. is by applicant The financial and tax data submitted the decreased, reveals whether profits the owner’s have property increased or whether the taxes decreased, operating or costs [property] associated with the have increased or and whether any capital improvements have supplied by been made. Review of the the information tenants helps the Board any determine whether there has been increase or decrease in the services provided 193-194.) by the pp. Cal.3d at [landlord].” only We stress that the validity currently facial of the ordinance is before the court. Whether individual might prove landlords process delays a denial of due because of exceed- concern, ing 120-day time limit question great is a but it is not before us at this time. ordinance, result, like To defendants’ others regulation. price prevent Baar, 249), (see L.Rev. fn. contains the state Rutgers considering from cer- two clauses that Board “antispeculation” prohibit tain increases in when those increases occur interest mortgage payments (Id. Thus, 788, 792.) of the when except after ordinance. adoption pp. or in cases indi- necessary is to make refinancing capital improvements e,53 d and buyers, preclude vidual section subdivisions hardship Board from rent because increased authorizing an individual increase of rental interest or other from sale expenses refinancing prop- resulting if the landlord could have foreseen that such increased erty, reasonably could not be rent schedule. expenses by “existing” covered

Plaintiffs do not the constitutional reasonableness challenge restrictions; instead, these classification created claim by they provi these will inhibit they sions constitute unreasonable restraints on alienation in that Civil sales of rental at a fair market value in violation of Code property alienation, 711. That restraining section section states simply, “[c]onditions created, contention, when to the are Plaintiffs’ interest void.” repugnant cautions, however, i, which ignores ordinance section subdivision of this as to Board prohibit Ordinance shall so provision applied “[n]o from an individual rent demonstrated granting necessary is adjustment the landlord to with a return on investment.” by the landlord fair provide valve This overrides all other of the ordinance averts safety provisions from e any might purchaser subdivisions d and danger prevent return, restraint alien any a fair and thus unreasonable realizing prevents (See Bank 21 Cal.3d ation. America generally Wellenkamp 582 P.2d Cal.Rptr. Furthermore, if to create an even subdivisions were assumed the two restraint, that Civ contention by unreasonable we are defendants’ persuaded upward adjustment ceiling of a rent provide 53These subdivisions in full: “d. No individual by expenses resulting shall be authorized the Board reason of increased interest or other refinanced, if, from the landlord’s unit at the time the landlord refinancing the rental reasonably not be covered expenses landlord could have that such increased could foreseen existence, necessary for refinancing rent then in except schedule where such 12.c.(3). capital improvements meet the in Section landlord to make which criteria set forth resulting from paragraph only expenses the apply portion This shall to that of increased refinancing the rental unit refinancing reasonably that were at the time of of foreseeable Ordinance, only apply adoption to after the of this shall rental units refinanced date of Except 12.i. of this Ordi hardship e. for cases of individual as set forth in Subsection [f] nance, by the upward adjustment ceiling no individual rent be authorized Board of a shall of expenses resulting from the sale because of the landlord’s interest or other increased have reason property, property, if at the time the the landlord could acquired landlord ably by not be the rent schedule then expenses foreseen that such would covered increased (12.e.) the date only apply acquired This after of effect. Subsection shall rental units adoption of this Ordinance.” to, not, il to municipal Code section 711 does and was never intended apply ordinances. Our and the cases that many apply review of that statute alienation, and not it reveals that it addresses restraints on only private Witkin, (8th Law (Cf. of Cal. ed. government Summary regulations. 1973) Real rule restraints on aliena Property, p. against § [the tion “is directed or It has conveyances. contracts against provisions statute.”]; no by express restraints established application disabling Rest., 2377, 2381.) of the cases cited or Property, by plaintiffs None pp. amici a view. supports contrary Retaliatory

D. Eviction Presumption rent control controls that require schemes include eviction Typically, cause” in order for a an eviction action. Without “good landlord to bring controls, such “the rent control laws could of tenure of security objectives be undermined and the nullify threat of eviction could used oper- (Baar, ation of rent regulations.” L.Rev. Rutgers p. section 14 of the ordinance54 this court’s established

Accordingly, restates that a landlord’s retaliation tenant the tenant’s assertion holding a against or exercise of Court rights Superior a defense to eviction. (Schweiger Cal.3d The section 476 P.2d Cal.Rptr. that, then in an or in provides action the landlord to recover by possession an affirmative action taken the tenant for “evidence of the by damages, assertion or exercise the tenant of under this Ordinance within six by rights months to the prior act of retaliation shall create a alleged presumption enacted, the landlord’s act was As the section retaliatory.” originally pro- “ ‘ vided that find the of means that the Court must existence [pjresumption’ the fact presumed unless and until evidence which would sup- is introduced of in this port finding its nonexistence.” After the trial court’s judgment ante, (see 2) case latter sentence was amended in 1982 fn. ante, (see (deletions 2), provides 54As amended in 1982 are fn. the section stricken line; italics): may bring, with a horizontal or additions are in “No landlord threaten to bring, possession, involuntarily, an action to recover quit cause the tenant to the unit serve any quit notice tenancy, any or notice or increase the termination decrease services rent where the or against landlord’s intent is retaliation the tenant for the tenant’s assertion rights exercise under this Such shall be a defense to an action to Ordinance. retaliation possession, may by recover or it serve as the for an affirmative action the tenant for basis tenant, punitive damages injunctive against actual and In or evi relief. an action dence of the within six rights assertion or exercise the tenant of under this Ordinance prior alleged presumption months to the that the landlord’s act of retaliation shall create a retaliatory. act ‘Presumption’ was find of the fact means that the Court must the existence

presumed support a-finding of non unless and until evidence is introduced which would its existence its A assert proven by preponderance nonexistence is the evidence. tenant affirmatively pre retaliation the aid of the or as a defense to the landlord’s action without regardless sumption period elapsed between the tenant’s assertion time which has of under ” rights alleged exercise act retaliation. this Ordinance and the “ read, the means that the Court must find existence ‘[pjresumption’ a by fact unless and until its nonexistence is presumed proven preponder- ance of the evidence.”

Questions are the regarding presumption legality preamendment Nevertheless, to avoid clearly analysis moot. it would be imprudent those to the amended at this time. plaintiffs’ challenges Clearly, language of section 14 the amendment are by prop- that were reenacted parts simply 649, 651 P. (Carter before us now. v. Stevens 208 Cal. erly [284 217].) The one of the effect of the amendment is question purely regarding (Carman law Alvord Cal.3d Cal.Rptr. 192]); moreover, from

P.2d arises in a facial attack appeal question an order an resolved denying and therefore is injunction, properly court at this time. San Med. Soc. (Complete Diego Service Bureau v. 497]; Sav-On Inc. Drugs, Cal.2d P.2d Cal-Dak Co. v. 40 Cal.2d P.2d

1. Classification of the Presumption Plaintiffs claim that to create a affecting section purports presumption the burden or- and that such created by municipal proof, presumptions Code, (Evid. dinance are Defendants ap- state law. preempted § affecting that section 14 creates parently respond merely presumption evidence, that, burden of even if it forward with producing going 500 and does create a burden of section presumption affecting proof, other relevant of the Evidence Code allow such a presumption. sections Evidence

a. the Burden of Presumption Affecting Producing to intro- The burden of evidence to a obligation refers producing party’s words, case, or, duce in other evidence sufficient to establish facie prima (Evid. Code, 110.) “A affecting sufficient to avoid nonsuit. presumption § to implement burden of evidence is a established producing presumption no other than to facilitate the determination of public particular policy Code, 603.) The code action in (Evid. which the is presumption applied.” § solely relates makes clear that the of such a rebuttable presumption purpose to the extrinsic judicial efficiency, and does not rest on any public policy the burden of pro- action in which it is invoked. A affecting presumption that the evidence inference pre- is based on an ducing underlying logical fact; the is sumed fact follows from the very likely proved presumption true if not to avoid of facts to be designed likely disputed. unnecessary proof case, a rebuttable presumption relevant to the such Especially present of cer- the nonexistence designed place establishing responsibility California tain facts on the most able to do so. As observed party Law Revision Commission’s comment on section presumptions “[t]he described in of are expres- are not expressions policy; they [that section] sions of eliminate the need for the are intended to experience. They solely trier of fact to reason from fact to the presumed the or established proven fact and to the fact when forestall over the existence of argument presumed there is no evidence of the presumed to the nonexistence tending prove fact.”

If the in the burden of established section 14 affects presumption produc- evidence, ing a tenant an or exercise of under rights who shows assertion the ordinance within six of an have months eviction will estab- proceeding (and lished either a facie defense to will hence avoid prima eviction nonsuit), or (2) a facie for unless the landlord rebuts prima case damages, the by evidence presumption its nonexistence a supporting preponderance (Evid. Code, 604.) evidence. noted in Assembly As the §§ Committee on the a on Judiciary’s comment section presump- “[s]uch tion is merely a absence of evi- preliminary contrary the assumption dence.”

b. Presumption the Burden of Proof Affecting hand, burden of on proof, obligation the other refers a party’s establish by evidence a fact in degree of belief a requisite concerning mind of Code, (Evid. 115.) trier fact. Unlike presumptions affecting § evidence, the burden of which producing exist resolution merely expedite of disputes, the burden of is a presumption affecting proof presumption “[a] established to some than the de- implement other to facilitate public policy termination of the is particular action which the presumption applied, such as the in favor of relation- policy establishment of a child parent ship, titles to . . . .” validity marriage, stability of property (Evid. Code, 605.) The of such a rebuttable relates purpose presumption § to public “other or in to the policy goals than addition policy facilitating Code, the trial (Cal. actions.” Law Revision Com. com. Evid. § As the observes, Law California Revision Commission “[frequently, pre- sumptions affecting burden of are determi- proof designed facilitate therefore, nation of the action which are such they applied. Superficially, burden presumptions may appear merely affecting presumptions evidence. What one the burden producing makes affecting presumption of proof is the fact that there always policy is some further reason of the establishment of the It is the existence this further basis presumption. in policy that from distinguishes affecting burden of presumption proof (Ibid.) the burden of evidence.” presumption affecting producing

If a burden of section established presumption affecting proof 14, a tenant the ordi- who shows an under rights assertion exercise

nance within six months of the eviction will shift to proceeding effectively the landlord the burden of the or disproving tenant’s defense case for dam- ages, by the fact, landlord requiring to the trier of a prove by prepon- derance evidence, of the that (Evid. Code, eviction was not retaliatory. 115, 606.) words, In other unlike §§ the burden of presumptions affecting evidence, which producing nonsuit, would a tenant merely protect against a presumption the burden of affecting would shift the ultimate re- proof of sponsibility persuasion to the landlord.

c. Created Presumption by the Amendment Defendants concede that it is difficult to the created classify presumption section 14. Plaintiffs the implicitly recognize same problem: although they characterized the amended in earlier briefs as a valid presumption pre- sumption evidence, the burden affecting of in recent briefs producing they claim it is an invalid presumption the burden of affecting proof. the

Viewing section’s in the language context of the entire ordi nance, and in version, of the earlier light preamendment we must agree that the plaintiffs amended section 14 affects the burden of presumption proof. first, the latter Regarding we note point that the lan preamendment guage paralleled Evidence Code section 604’s of the effect of a description presumption the burden of affecting evidence: producing former section 14 specified that “the Court must find the existence of the fact unless presumed and until evidence is introduced which would a of its non support finding existence.” Evidence Code section 604 that a similarly provides presump tion the burden affecting of evidence the trier of fact producing “require[s] to assume the existence of the fact unless and until evidence presumed is introduced which would a of its support finding nonexistence.”

It thus seems clear that the reasonably former section established a pre- the sumption affecting burden of evidence. It would also be rea- producing sonable to assume that the amendment was intended to rather than change, simply restate or clarify, First, the original the amendment presumption. specifically omitted reference to introduction of evidence that would support of the finding fact’s presumed nonexistence—and therefore it from departs the express Moreover, of language Evidence Code section extent 604. the the amendment was intended to clarify restate the previous presumption that evidence, affected only burden of the new section would producing quite be a obviously failure—because its that kind describes language even less did presumption than its clearly predecessor. suggestion the amendment was intended to implement pre-

sumption affecting burden of and not one merely affecting proof, evidence, own burden is further defendants’ de- producing supported claim the amended Defendants scription purpose presumption. retalia- against is intended further

presumption municipality’s policy evictions exercise tory tenants to promote encouraging policy their under the In view the section’s subse- rights ordinance. previous because, admit, amendment—and quent designed as defendants section to, to, to further extrinsic policies addition policy facilitating determination eviction actions—we must conclude particular amended section creates the burden of affecting proof. presumption Direct

2. Preemption by Evidence Code

Although have municipalities enact ordinances power creating 129, substantive 149), defenses to eviction (Birkenfeld, 17 Cal.3d such legislation is invalid to the extent it conflicts with state law. general 152; (Id. Const., at p. XI, Cal. 7.) art. Plaintiffs claim that § 14, amended, section 500, conflicts with Evidence Code section directly states; which law, “Except provided by as otherwise has the burden party as to each proof fact the existence or which nonexistence of is essential to the claim for relief or defense that he is note that under asserting.” They 14, section of retaliation proof is “essential” to the tenant’s establishing relief; therefore, defense claim for Evidence Code section they argue, that the requires tenant the fact prove of retaliation. Defendants respond that Evidence Code section 500 its own terms does not apply Plaintiffs, situations “otherwise law.” provided [for] turn, maintain that this does exception not local ordinances or contemplate charter amendments. “law,” term as used in Evidence Code section is defined as “constitutional, Code,

including (Evid. and decisional law.” statutory, 160.) Defendants contend that was exclude § section 160 not intended to “law,” local ordinances as a source of but was intended to make merely clear the term (See “law” Revi- judicial includes decisions. Cal. Law sion Com. com. to therefore invite us to They “statutory” construe § as including ordinances.

Indeed, there have been cases in which that the suggested courts have term “statute” embraces local (City Angeles Belridge ordinances. Los v. Oil Co. 5]; Cal.2d 833-834 P.2d Co. King Mfg. v. Augusta 801, 804-810, U.S. L.Ed. S.Ct. cases, however, Neither those In Belridge assists defendants. we observed that a city ordinance be statute licensing could construed as a limitations; under the statute of United Court King the States Supreme of satisfying jurisdiction. an ordinance as a for the construed statute purpose But, remotely approaching in neither did the court issues case address deemed a “statute” whether a local ordinance can be question posed here: rules of evidence relating the established purposes deviating from burden of proof. that, like other firm

The answer to this would seem so settled question law, occasion to address issue. recently rules few courts have had 500 and we sug before enactment of Evidence Code sections Long from the authority depart have no gested governments municipal Cal. (Orena Barbara City common law of evidence. Santa it the extent that void ... P. “ordinance is 268] [an [to .”].) . commentators lay Similarly, down rules of evidence . . purports to] that, evi rules of authority have maintained express general “[w]ithout cor dence or ordinance changed by by municipal procedure 27.45, 1978) (3d McQuillin, ed. poration” Municipal Corporations § 643, 670; (5th 1911) Dillon, ed. see also 2 p. Municipal Corporations § 983), that, “[ujnlike of a munic body the the legislature, governing for the guidance no of evidence ipal has rules corporation power prescribe Therefore, of the burden of concerning courts. a ordinance . . . municipal Cal.Jur.3d, Evidence, 37.) See Cohen (31 also proof void].” § [is (1916) Mo.App. v. St. Louis Merchants’ Terminal Ry. Bridge (“ in wise any change S.W. ‘the cannot ordinance city by 1081-1082] ”); or in Fitch v. the rules this court’ alter of evidence ordinary applicable (“[T]he 72, 81) [municipal] corpo Pinckard 4 Scam. Ill. deed should ration exceeded in that the collector’s declaring its powers, ordinance. The evidence of a the with all prerequisites compliance make, alter the rules of or change, alone the legislature possesses power (in evidence.”); cf., (S.C. 1821) 1 McCord City Council v. Dunn not may depart of to the an ordinance contrary, absence statutory provision evidence). the from common law rules of when it the Legislature,

Given this we cannot believe that background, intended munic- in ever enacted Evidence Code 500 and 160 sections Evidence Code sec- clause of ipal exception ordinances to come within the by preempts tion or directly implication 500. Whether the Evidence Code the burden of shifting a presumption local ordinance that to create purports (See issue, decision. we reserve evidence is a on which producing separate now, the Code, (b).) Legislature Evid. For we conclude subd. § that may change law excluded ordinances from those sources deliberately the and that presumption burden of proof, the traditional allocation the face, with conflicts directly its the burden of on shifting proof, section extent, is invalid. (§ 500.) the ordinance the Evidence Code. To that Due E. Process and to the Ordinance’s Rent Preemption Challenges Provisions Withholding

Section sets out remedies for violations the ordinance— landlords’ 8,56 failure to to section or of rents above e.g., register charging pursuant provides Ceilings Register. 55Thissection or Failure to full: “a. For Violation of Rent Ordinance, register If a landlord fails 8 of in accordance with Section this or if landlord demands, accepts, any receives or payment retains in excess of the maximum allowable rent permitted by Ordinance, may any following this a tenant take or all of the actions until compliance is achieved: “(1) Board, may petition A tenant appropriate the Board for relief. If the after the land- lord proper wilfully has notice and a hearing, after that a landlord has determines register knowingly provisions failed to by a rental unit violated the covered this Ordinance or Ordinance, may Sections 11 and of this the Board authorize tenant such rental unit to all portion withhold or a of the rent unit such time for the until rental brought unit compliance brought is into with this After a rental unit is Ordinance. into compliance, the portion, any, Board shall is determine what if of the withheld rent owed to the landlord for the period in which the unit not in or compliance. rental was Whether withholding, Board allows such comply no who landlord has failed the Ordinance any shall at time increase brought compliance. rents for a until unit rental unit such is into “(2) A tenant may up periodic withhold to the full amount his or her rent which charged or provisions any demanded the landlord under of this Ordinance. In action rent, possession nonpayment recover based on possession granted not be shall where the tenant has withheld rent good faith under this Section. “(3) may injunctive A tenant seek relief behalf of herself or himself to restrain the demanding landlord from receiving any or complied rent on the until landlord unit has with the terms of this Ordinance. “(4) A tenant damage file a against damages suit landlord actual when the landlord receives any or retains rent in excess of the rent under maximum allowed Upon Ordinance. proof further of bad faith claim landlord landlord’s retention of Ordinance, rent in excess of by the maximum rent allowed this the tenant receive shall a judgment of up to ($750.00) seven fifty any hundred and dollars in to addition actual dam- ages. “b. For Violation Eviction If Proceedings. it is in the that the appropriate shown court event 13.a.(7), which the grounds landlord possession claims as to recover under Subsection 13.a.(8), 13.a.(9), 13.a.(10) Subsection Subsection or Subsection is not initiated within two unit, months after the tenant vacates the is or it shown the landlord’s claim false or in was faith, bad the damages. tenant shall be entitled to regain possession and to actual If the willful, $750 landlord’s conduct was the tenant be in damages shall entitled to an amount or sustained, three times the actual damages greater. whichever is City Attorney may bring “c. The injunctive City an for action relief on behalf of the or on seeking behalf tenants compliance by landlords this Ordinance. with may “d. The Board injunctive enjoin any seek to relief restrain or violation this Or- rules, dinance or of the regulations, orders and decisions Board. “e. If tenant bring a fails to twenty a civil or administrative within hundred and action one (120) days Ordinance, from the date of the first occurrence of a violation Board may Thereafter, either settle arising bring the claim from the violation or such action. tenant on whose against behalf the bring Board acted not an action the landlord regard same violation brought for which the has an Board made settlement action. In the event the any payments Board settles the claim it shall entitled retain from made landlord, by settlement, the costs it aggrieved by incurred tenant the violation shall be entitled to the remainder.” alia, provides, 56This section file specified inter that date landlords must a rent registration form showing prior rents in effect on certain dates for each rental unit covered by the ordinance. (a), pro- subdivision

those under sections 11 and 12. Section permitted subdivision, (1) of that for remedies: under subsection vides tenant-initiated rent until the for to withhold the Board may petition tenant permission (2) with- same landlord with the ordinance. Subsection complies permits a defense to and provides even without Board holding remedy, permission, that the landlord has if faith good unlawful detainer the tenant believes a tenant sue Subsection ordinance.57 complied permits landlord relief, a tenant sue the and subsection injunctive permits for money damages. for injunctive sue landlords (c) attorney

Subdivision permits city relief, Subdivision to do the same. (d) and subdivision the Board permits of tenants. (e) the Board to settle claims on behalf permits (a), sub- of subdivision on the rent withholding provisions Plaintiffs focus law. Addi- (2), which claim are state sections they preempted them due process denies tionally, assert subsection plaintiffs claims first. We address due process numerous grounds. plaintiffs’ 1. Due Process to withhold the “full (a), (2),

Subdivision allows a tenant subsection with the ordi- compliance amount” of his rent until the landlord’s periodic action to recover pos- It any nance achieved. further provides “[i]n rent, not be where granted session based on shall nonpayment possession Section.” the tenant has withheld rent in faith under this good of the Ordinance a. Reasonable to the Relationship Purpose ” of subsection ‘remedy’ “extreme Plaintiffs first contend that the it is the ordinance because (2) is not to the reasonably purpose related rents, but also when charges available not when a landlord excessive only observe, however, land ensuring a landlord fails to As defendants register. ordinance, because without of lord is crucial to the registration purpose ordinance cannot enforced. registration remedies listed

Moreover, note other enforcement defendants that all serious (2), same (a), subsection suffer the above for subdivision except either to money, of substantial amounts weakness: to invoke them can cost time, of the ordinance At the structure or to the Board. the same tenant effective, might be more remedy point the subsection although 57Defendants out that take such who would hesitate to remedy available those tenants the subsection prior agency. approval without of an official action makes question (n),58 crucial. Section subdivision funding provides that funding for the Board’s shall be from annual landlord expenses regis- fees,59 Therefore, tration and not from the city’s fund. defendants general observe, the Board is essentially on landlords’ fees dependent registration (i) to the staff it pay needs to its rent gather adjust- information for general 11; ment hearings (ii) under section individual rent examiners to handle pay 12; adjustment under hearings (iii) section and counsel to bring suits employ (c) under section (d), subdivisions and landlords who refuse against or who register charge rents On beyond the maximum allowed. the other hand, remedies, defendants argue, tenant-initiated with the exception (a), subdivision (2), subsection cannot be relied on to enforce ordinance. (a), subdivision Although (1), subsection a tenant to seek Board permits rent, authorization to withhold if landlords fail to the Board register, may lack funds hire examiners and on hearing other staff to hold such hearings And, petitions. (a), (3), whereas subdivision subsection tenant permits relief, sue for injunctive there is no certainty many tenants will expend the time or money to (a), that course. pursue subdivision subsection Finally, (4), permits tenant to sue for when the landlord damages receives more than the ordinance; maximum rent allowed by (b) and subdivision allows a tenant to sue for when damages the landlord violates certain restrictions evictions; on but neither section gives for the failure any remedy landlord’s Other register. f, provisions—section (l),60 subdivision subsection f, and section (l),61 subdivision subsection landlord has forbid a who failed to register—“after order of the Board”—from taking advantage general individual rent increases allowed the Board. But if landlords fail to register in significant numbers, the Board be unable to hire the might staff needed to assist in the “orders” issuing these two subsec- required by tions. provides 58That subdivision part: necessary “The Board shall finance its reasonable expenses for operation its City without the use of Berkeley General Fund monies of the subsection, except as stated charging registration landlords an annual fee of twelve unit, ($12.00).per per year year dollars in the of operation. year, first After the first upon

request by City the Board the may adjustments Council make reasonable annual in the fee. empowered Board is also request funding necessary, and receive if when and from source, any available except Fund, City Berkeley’s General for its reasonable and necessary expenses, including operating but not limited to expenses.” salaries and all other registration 59The annual year city $12 fee for the first operation per was unit. The council, Board, request (Ibid.; adjustments make reasonable annual in the fee. Baar, see Rutgers provisions L.Rev. at [comparing funding table 5.1 ordinances].) rent various control ante, 687-689, 60See pages footnote 44. 61That subdivision and provide: adjustment subsection upward “f. No of an individual ceiling rent shall be authorized the Board under this Section if the landlord: “(1) Board, Has continued to comply, fail to any provisions after order of the

this Ordinance and/or regulations orders or issued thereunder the Board . . . .” 15, subdivision of the section

Defendants thus proclaim importance the “weak- it none of (a), (2), suffers withholding provision: subsection rent direct, and self-enforc- above; is claimed to be simple, nesses” discussed it reasonably is provision We conclude that defendants’ rent withholding ing. ordinance. to purposes related achieving legitimate b. Vagueness (2), (a), subsection

Plaintiffs next that section subdivision complain We will subsection uphold is and overbroad. unconstitutionally vague avoided, to be (1) practice if it fair notice challenge against gives (Con enforcement. guide standards provides reasonably adequate L.Ed. 385, 391 General Co. 269 U.S. nally v. Const. Doctrine in the 126]; Note, Void-for-Vagueness

46 S.Ct. see generally 67; Note, Due Process Require Court 109 U.Pa.L.Rev. Supreme (1948) 62 Harv.L.Rev. ments in Statutes of Definiteness (i) Fair Notice notice, the sub- only that Fair to the inquiry, requires applied present so that of certainty with a reasonable degree section’s terms be described is his proscribed part, an understand what conduct landlord can ordinary will be afforded and under tenant rent-withholding what conditions his (Cf. Court Burg Municipal to an defense unlawful detainer action. cited.) and cases 673 P.2d 35 Cal.3d Cal.Rptr. 732] basic “as to the most is ambiguous Plaintiffs contend that the subsection action, take remedial may who components right remedy: the tenant’s the word “tenant” We believe that in what amount and for how long”? has been lessee, charged who or sublessee limited clearly assignee Plaintiffs also rent, apartment. or who lives in an unregistered excessive the land- whether as to who is to determine claim the subsection is unclear landlord when the ordinance, determine and who is to lord has violated the the trial is obvious: believe the answer has achieved But we compliance. evict for issues, landlord sues to if court will determine these and when does not the subsection further claim that of rent. Plaintiffs nonpayment withheld, its face the be but on provision amount rent that specify rent. periodic full of the tenant’s allows to the amount” withholding “up harsh, successfully cannot full withholding may plaintiffs such Although with the achieving compliance rationally contend that it is not related ordinance. landlord an “condemns the the subsection

Finally, claim that plaintiffs when, ever, if the withheld it does not indefinite sentence” because specify rent be paid. (2), conjunction shall To the subsection read with contrary, (subd. its that the withhold- introductory (a)), clearly establishes provision is the ing allowed until the landlord ordinance remedy only complies by and the registering abiding maximum rent schedule applies him.62 Nor do we contention that the word accept plaintiffs’ “register” word, provides notice to landlords. That as well as the above inadequate and terms is certain to inform landlords of both the provisions, sufficiently conduct needed to with the subsection’s and the cir- comply requirements, cumstances that will afford his tenant a defense to an unlawful detainer action.

(ii) for Standards Enforcement Plaintiffs also make a that the cryptic allegation subsection’s withholding and the provision defense qualified it confers are dangerously susceptible arbitrary “enforcement” those who have the to invoke it—the power concern, tenants. Their is the apparently, with fact that application subsection hinges on a faith belief” ultimately tenant’s that a land- “good lord has failed to with the comply ordinance. however,

Contrary plaintiffs’ suggestion, question applica- bility subsection is not on the contingent arbitrary personal pre- dilections of the tenant. Smith v. 415 U.S. (E.g., Goguen 94 S.Ct. faith belief” “good Although required invoke the standard, is measurable provision precisely neither is it incapable reasonably exact The determination determination. of whether a tenant had the he faith belief at the time withheld requisite good rent tenant; is not to made by the it is instead a the trial question court, to be decided for the narrow only establishing defense purpose to a landlord’s context, eviction Thus suit. viewed in proper provision little poses threat of and arbitrary hence is not application, subject properly to facial invalidation on this ground.

c. Procedural Due Process and Confiscation Plaintiffs finally claim that the ordinance no “due them provides process protection” before their rents (a), are “confiscated” to subdivision pursuant (2). subsection Viewing in the application withholding provision context, however, proper discloses the false assumptions underlying plain- 62Indeed, regulation the record following adopted by contains the Board on September remedy 15(a)(1) 15(a)(2) 1980: “The withholding of rent provided tenants under shall not be obligation construed to pay relieve tenant of the whatever rent subse quently lawfully deemed period owed for the time was withheld. for which rent This rule be publicized promulgated shall immediately.” and noted, withholding provision tiffs’ concern. As the the applicability landlord it after the defense confers comes into qualified question only affords the landlord has initiated a detainer action. The wrongful provision sole effect normally; no less due than he would have its process protection if of rent is to create a substantive to eviction for nonpayment defense to a faith good tenant’s is found have been made withholding pursuant to Similarly, belief his not with the ordinance. that landlord had complied not the landlord no result: it does confiscatory deprive provision produces because, in due, good withheld of rent even if is found that the tenant it faith, back as soon and full amount of rent may landlord sue recover the has been the ordinance court is that with persuaded compliance hand, withholding that tenant’s was achieved. On the other if it is found faith, detainer not in in unlawful the landlord recover good may possession the ordi- also in amount consistent with and sue full back rent an may ordinance, and that, withholding nance. We conclude on the face of the (2), de- (a), neither defense subdivision subsection qualified provisions results. confiscatory landlords of due nor do they produce prive process, Const., most, I, a substantive (Cal. 7.) At the subsection creates art. § with defense to unlawful as means of ensuring compliance detainer actions the ordinance.

2. Preemption to “make enforce city general power California Every possesses local, and regu- within and other ordinances its limits all police, sanitary, XI, 7.) In (Cal. Const., art. lations not in general § conflict with laws.” addition, have exclusive greater authority: they charter cities have even Const., XI, (Cal. art. to over affairs.” legislate § power “municipal in that (a).)63 subd. Similar concession to the defendant city’s Birkenfeld would “rent a charter provision control is not a affair as to which municipal 141), now do defendants over state law” Cal.3d prevail general (a), in subdivision withholding claim for rent section provision Instead, law. defendants is a overrides state general affair that municipal based on the assert withholding provision their the rent power implement Thus, with laws. of all cities to matters not in conflict right regulate general withholding rent provisions without that the ordinance’s assuming deciding affair,” defendants’ reg- do not relate turn to whether to a we “municipal (Hiscocks & with, state law. ulation is in conflict and hence preempted by, XI, (a) any city charter competent “It be provides: 63Article section subdivision shall all ordinances and city governed and enforce provide that the thereunder make affairs, pro subject only and limitations regulations respect municipal to restrictions general they subject respect vided to other matters shall in their several charters and any existing supersede chart City adopted pursuant laws. charters to this Constitution shall ” er, laws inconsistent therewith. respect supersede shall all municipal affairs Backes, Charter “Statewide City Financing in Con- Growing California—A cern”? 613-614.) U.S.F. L.Rev.

Plaintiffs first directly claim that law conflicts with the general rent withholding provisions (a). they of subdivision insist Alternatively, rent is of three withholding by statutes preempted implication light contentions, are asserted to of the field “when is due.” For both occupy rent rely plaintiffs exclusively Civil Code section which provides the if timing of rent there is no or contract to the payment usage 1161,65 Code contrary;64 of Civil Procedure section which describes the detainer; circumstances under which a is of tenant unlawful and Civil guilty 1942,66 Code section which identifies which circumstances under a tenant may withhold rent and utilize funds rendering those to deficiencies repair the premises untenantable.

Defendants respond that these to sections have do local rent nothing control; withholding provisions to designed enforce local rent that the with- due, of holding provisions the do not is ordinance when rent but regulate instead establish a detainer; substantive defense to unlawful and that plain- tiffs’ cited address, statutes cannot be to even fully much less interpreted Furthermore, that field. occupy, they claim establishes that these Birkenfeld are not provisions by state preempted law.

a. Direct Conflict In we responded to three The preemption arguments. plaintiffs Birkenfeld in that case “rent,” claimed of the preemption field of the field of 64That section states: contrary, “When there is usage no or contract to the rents are payable at the termination of holding, year. holding the when it does not exceed one If the week, month, is day, the quarter, year, payable or rent is at the termination of the respective periods, it successively becomes due.” When he nants of the lease continues continues 65Thatsection continues in possession possession provides: . . . possession .” . . . after a . . “A . after default in the tenant of real . . after the expiration neglect . or property failure to payment ... perform of the term . . . . guilty rent .... other conditions or cove of unlawful detainer: 1. ^[1] [fl 3. When he 2. When he “(a) provides: 66Thatsection If within a reasonable time after written or to oral notice the agent, landlord or (a) his as defined in dilapidations subdivision of Section render ing premises untenantable which ought repair, neglects the landlord the landlord so, do may repair the tenant repairs require same himself where the cost of such does not expenditure an more premises than one expenses month’s rent and deduct the of such repairs due, from the rent when or the premises, tenant vacate the in which case discharged tenant rent, shall payment from further performance or of other conditions as of the date of vacating the premises. remedy This shall not be available to the tenant more any (d) than twice in period. remedy 12-month . . . provided by this section [f] any is in addition remedy other provided by chapter, agreement, the rental or other applicable statutory or common law.” a landlord eviction, defenses to the field of requisites procedural re- ordinance’s an eviction We determined that the previous action. filing control board before of a certificate of the rent eviction quirement was in- detainer proceedings landlord was allowed to commence unlawful intended summary would “nullify valid because such requirement however, 129, 151.) contrast, we remedy.” By nature Cal.3d many legislation governing found that there is “extensive state although of which pertain specifically of landlord-tenant some relationships, aspects alia, Code, Civ. rent” inter (citing, the determination or payment nor content of Code, 1947), 1942 and Civ. “neither quantity § § munic- intent to exclude these statutes any legislative establishes implies (Id. at on local conditions.” of the amount rent based ipal regulation 141-142; (1969) 70 Cal.2d see Galvan v. Court pp. Superior 642, 930].) 452 P.2d Cal.Rptr. [76 claims

More we the rejected plaintiffs’ the significant present question, The law. by general that the field of suits is preempted defenses eviction to specific bases for eviction former ordinance limited Berkeley permissible evict to ter- merely enumerated but landlord’s grounds, right omitted a of tenant “who eviction a minate the The ordinance thus tenancy. prohibited the the unless premises at the of expiration tenancy good standing [was] market or the landlord’s to be withdrawn the rental housing from [were] 148.) Ad- of Cal.3d at p. offer a renewal lease been refused.” [had] issue, “Code of Civil we that the state law relevant to the observed dressing a of tenant’s Procedure section subdivision makes the continuation which of unlawful detainer for after of the term a form possession expiration under Code in summary proceedings the landlord recover possession However, statutory provisions of Civil Procedure et these section 1164 seq. for- not amendment’s provision are in conflict the charter necessarily if of tenancy a landlords to recover bidding upon expiration possession amend- that of the charter is distinct from statutes purpose sufficiently Court, 859; People (See ment. Galvan v. Cal.2d Superior supra, v. Mueller, ^[1970] Cal.App.3d Cal.Rptr. 157].) The imple- statutes of the unlawful statutes is procedural. detainer purpose possession him to recover ment the landlord’s rights by permitting property In an end. contrast occupancy once the consensual basis for tenant’s is a eviction particular grounds the charter amendment’s elimination for of giving power, under rights police limitation the landlord’s upon property detainer proceedings. to a rise substantive ground unlawful of defense creates such police power city’s The mere exercise of fact Thus statutory state’s scheme. not it into with the bring does conflict defense rent unpaid recovery possession remedies statutory ... of for Code, 1159-1179a; do not (see Proc., seq.) 1951 et Civ. § Code Civ. §§ enacted pur- rent control legislation based on preclude municipal defense the grounds and limiting suant to the rent police power imposing ceilings ceilings.” those rent enforcing eviction purpose {Id. for for Fort Lee Borough (italics added)), Inganamort citing pp. City Philadelphia 62 N.J. 521 and Warren v. A.2d 307] Pa. A.2d We believe that from disposes the above-quoted language Birkenfeld directly claim of the ordinance rent plaintiffs’ withholding provision It is true that the conflicts with Code of Civil Procedure section 1161. (2), (a), tenant’s faith subsection good defense conferred under subdivision eviction, in Bir- eliminates one but as we observed effectively ground kenfeld, bring this exercise of the does municipality’s police power law, into for re- remedy conflict with state because the provision statutory for eviction covery does not limitations on possession grounds preclude for the a local rent control purpose enforcing regulation.

Furthermore, we with Civil are not that the ordinance conflicts persuaded Code sections 1942 or Neither the field of defenses 1947. statute involves eviction, or enforcement of Section local rent control ordinances. is this state’s allows rent with- deduct statute.” It “repair specifically circumstances, under holding, certain to make needed order for a tenant Section repairs. 1947 to the date at which merely establishes rules relating due, rent is on the term of a We find depending holding. nothing tenant’s in either section that conflicts with the at issue directly municipal legislation conclude, here. We as did the Jersey Court of New a similar Supreme context, that restraints merely because defendants’ ordinance “imposes not, which the State law does between State does not out a conflict spell and local On law. the contrary the absence of a restraint is the statutory occasion for very is vested in local initiative. The municipal police power government end that the be restrained very may right property when it to be ought because of {Inganamort, supra, a sufficient local need.” 303 307.) A.2d at p.

b. Preemption by Implication

We will be reluctant to infer intent to a field covered legislative preempt by when there interest to be served municipal regulation is a local significant (Gluck differ from may County one to another. v. Los An locality (1979) 121, 435]; Comment, geles 93 133 Cal.App.3d Cal.Rptr. [155 City (1966) versus 17 L.J. Preemption by Implication Hastings California 603, Furthermore, 610.) the mere fact that all three of cited stat plaintiffs’ utes concern “rent” field cannot does not assist them because properly “[a] (Galvan, consist of statutes unified 70 supra, common noun.” single 851, 862.) Cal.2d A “field” of state regu- potentially preemptive of the local the subject

lation is “an area of which includes legislation court, or a local so that a and is related sufficiently logically legislation, {Ibid.) subject.” to the can detect a legislative body, patterned approach 393, 809], P.2d (1964) Cal.Rptr. In In re Hubbard 62 Cal.2d 119 chartered cities circumstances we articulated three tests to determine in what in regard to legislate of their exclusive might power deprived supposed XI, 5 of our Constitution. to article section affairs” “municipal pursuant Hubbard's to follow (Id. we declined at p. Although subsequently San Jose City v. (Bishop affairs approach municipal questions Galvan, 137]), supra, 460 P.2d Cal.3d fn. Cal.Rptr. which to three tests as standards 70 Cal.2d we Hubbard's adopted to article pursuant exercise of judge police powers preemption municipal as a XI, factors, reincarnated preemption section The Hubbard 7. Galvan,67 defendants’ infer intent to preempt test in establish that we an “ ‘(1) folly if has been so completely matter legislation only subject exclusively that it has become covered law as to indicate by general clearly concern; matter has been partially the subject a matter state [or] indicate that a clearly terms as to covered law couched such by general action; local or additional concern will not tolerate further state paramount law, and the by general matter has been covered subject partially ordinance on effect of a local is of such a nature that the adverse subject benefit to the mu the transient citizens of the state outweighs possible ” Hubbard, 859-860, 62 Cal.2d supra, Cal.2d at nicipality.’ pp. quoting 128; Mendocino County Deukmejian see also ex rel. People 1150]; Palos 683 P.2d 36 Cal.3d Cal.Rptr. Estates, and follow 373-374 [quoting Verdes supra, Cal.App.3d follow 72, 82 Galvan]; Gregory, [quoting ing Cal.App.3d Hubbard]; (1982) Cal.App.3d Bamboo Brothers v. ing Carpenter Four, (1980) Barnet [same]; Plus Inc. v. Music Cal.Rptr. 748] [same]; Mueller 113, People 114 Cal.App.3d Cal.Rptr. 419] follow and 949, Cal.Rptr. [quoting 953-954 Cal.App.3d 157] Guns, Money: and Comment, Galvan]; Lawyers, both Hubbard and ing Of 137, 150- Davis L.Rev. (1982) 16 U.C. and Control Preemption Handgun used widely the most approach that the Hubbard tests are [asserting Steel, the New Forging & the issue of cf. Rossmann implied preemption]; Rights Groundwater Law: Regulation “Proprietary” Water Public under the implied preemption L.J. Hastings [analyzing tests].) three Hubbard!Galvan footnote Sato, 60 Cal.L.Rev. "Municipal 67See California Affairs” municipal af relating to (Galvan’s Hubbard analysis part on that preemption relies fairs). tests, there these alternative we must conclude that is

Applying no full so as to and state of the field of rent complete coverage withholding indicate” a matter of state “clearly exclusively that the field “has become concern.” Neither the nor the cited statutes content quantity plaintiffs’ intent to the field of rent suggests Legislature’s withholding occupy the exclusion of created to unlawful detainer actions. defenses municipally Nor do the three clearly statutes that the field of rent is suggest withholding subject state interest that cannot tolerate local involve paramount any Indeed, ment. we fail to discern how defendants’ withholding provisions would frustrate state schemes that relate to unlawful detainer statutory pro cedures, remedies, and deduct repair or that define the duration rental periods.

Finally, existence of defendants’ are to have little provisions likely very citizens, effect on transient much less an effect that the local outweighs benefit be First, derived from the transients withholding many provisions.

will not be ordinance, “hotels, affected by the it does not because apply motels, inns, homes, tourist and houses” in which rooming boarding “transient guests” Second, for 14 stay (§ (b).) or less. subd. to the days extent that affected, transients would might withholding provision effect, have a likely positive because it would assure new- help prospective comers that established maximum rents will be enforced. housing

We therefore (a), conclude that section subdivision subsections (2), and are not state law. The ordinance’s preempted by autho- provision rent rizing withholding defense to unlawful de- establishing qualified tainer actions regulates a field of great effective importance operation of defendants’ rent scheme, control and one which is distinct from other any state regulation. Even that state touch on rent with- assuming regulations we holding, discern no intent to defendants’ legislative preempt regulation. judgment affirmed. The 1982 amendment to section purporting to create a presumption burden is invalid. This affecting proof, pro- vision is clearly (§ 16.) severable. All other of the ordinance are provisions valid and enforceable. Each shall bear its own costs. party J., Grodin,

Reynoso, J., J.,* Mills, J.,* concurred. Cooperman, BIRD, C. J. with II I agree Part I also majority opinion. agree the However, substantive analysis of the antitrust in I issues Part I. write to separately raise a concern the unusual manner in which regarding highly the antitrust issues came before this court.

*Assigned by Chairperson of the Judicial Council.

No in the trial court or litigants mention of antitrust law was made by might in the federal antitrust law Court of below. The that Appeal argument render rent was raised defendants’ control ordinance invalid first court, hearing. made to a only and then the decision had been grant after Moreover, that issue was an curiae rather than a to party raised amicus by the appeal.

A that this court any note should be sounded to belief cautionary dispel will in this manner. to address issues routinely agree presented note,

As the the issue whether a regulation majority correctly municipal Communi- Community first arose might subject scrutiny antitrust 810, 102 S.Ct. cations Co. v. Boulder 455 U.S. 40 835], 13, 1982, month Boulder was decided on a January plaintiffs’ after cannot, there- brief had been in the Court of Plaintiffs closing filed Appeal. fore, be trial in their for that in the court or faulted to raise issue failing in the Court of opening closing briefs Appeal.

However, July the Court of did not hear oral until argument Appeal 1983, a entire year During and a half the Boulder decision. that period, after neither case to the lower court’s nor call the plaintiffs amicus attempted briefing additional court’s attention—despite willingness permit evidenced of brief amicus by its as late as June a acceptance (See Court, 14(b).) for The Court of curiae defendants. Cal. Rules rule thus an to rule on that issue. Appeal was deprived opportunity The on October 1983. Court of filed its now-vacated Appeal opinion for court on December Defendants’ was filed in this petition hearing Plaintiffs’ answer two full after Boulder was decided. nearly years later, or Boulder filed some no mention petition, two weeks made Hence, when law to this case. possible application antitrust of federal either this court not been it had granted petition hearing, apprised words, would which, that the in the majority’s case issues party presented without country force court to and travel cross “wander off map ante, 663.) The antitrust benefit of or at p. trail compass.” (Maj. opn., later when issues several weeks were first to the court’s attention brought amicus curiae leave to file brief requested support plaintiffs. neverthe- assert that of the antitrust issues majority consideration note correctly less They under several well established proper principles. review- an injunction, that on from a judgment denying appeal granting (Cal- its is filed. court will it stands the time ing opinion law as apply P.2d Dak Co. Inc. Cal.2d Drugs, v. Sav-On raise on recite the familiar rule which permits party also They

711 (Claremont a while the is pending. new of law decided appeal point appeal 32, 47].) 33 P.2d (1948) Club v. Imp. Buckingham 89 Cal.App.2d [200 where, However, do not the same rule should they why apply explain here, Nor do they the new not a but an amicus. by by issue raised party to file a the failure of and amicus explain request permission plaintiffs brief in the new of law. This the Court of supplemental Appeal raising point court, held under similar circum another Court of has overriding Appeal, brief “a satis stances that the a of a filing by provides party supplemental raised for the factory basis for the unusual a considering point practice (Meier first time after Ross General briefs have been filed.” v. opening 420, 423-424, 903, 445 (1968) 1 P.2d Hospital 69 Cal.2d fn. Cal.Rptr. [71 519].) held

Finally, cite several decisions in which this court has majority law, party that a strictly raise new issue on if it is one of appeal based on facts and undisputed involving important questions public pol- ante, 654-655, icy. (Maj. 3.) at fail to opn., they fn. pp. Again, explain the same why rule should to an More amicus curiae. apply importantly, fail to they address the to be ramifications of new issues raised permitting by nonparties has been in this court.1 hearing granted after

“' rule is that an court will con universally recognized appellate “[T]he sider those only raised Amicus questions properly by parties. appealing curiae must the issues made and accept urged by propositions appealing parties, any additional in a brief filed an amicus questions presented by ’ ” will State (Younger curiae not considered v. [citations].” California White, 310]; (1982) 806, see E. L. 137 813-814 Cal.App.3d Cal.Rptr. [187 497, Inc. v. City (1978) 21 510-511 Huntington Beach Cal.3d [146 majority 1None of the attempt by cases cited involved an an amicus curiae to raise a new appeal, appear hearing issue on nor does it after a that the new issues were first raised (Frink (1982) 166, 893, granted. had been Cal.Rptr. v. Prod 31 170 643 P.2d Cal.3d [181 476]; (1982) 318, 506, 192]; Carman Cal.Rptr. v. Alvord 31 Cal.3d 644 P.2d [182 UFITEC, 279, 238, 249, S.A. Cal.Rptr. v. Carter 20 Cal.3d 571 P.2d fn. [142 990]; 241, Wong Cal.Rptr. v. Di 535-541 Cal.2d fn. Grazia 817]; Tyre Cal.Rptr. P.2d v. Aetna Ins. Co. P.2d Cal.2d Life 725]; Burdette v. Construction P.2d Co. Cal.2d Rollefson Alvord, joined urging In Carman parties 31 Cal.3d several amici 324.) However, {Id., this court to appeal. p. resolve an issue first the issue had raised at {Id., city Appeal. been raised responsive defendant in its brief in the Court of exception This court properly concluded that the issue was before it under an {Id., the rule appeal litigant may argue that “on the first time theories for [].” added.) italics 712 614, 505]; States & L. Co. 579 Eggert v. S.

Cal.Rptr. P.2d Pacific 239, 57 251 P.2d Cal.App.2d 822],)2 [136

In Younger, the in his in the brief Court of appellant attempted reply to Appeal as his own an issue adopt first an amicus curiae. by presented The of issue, Court to Appeal refused address the that amicus reasoning had no to and standing raise it that the had failed to show appellant good reason for his failure to brief. (Younger v. the in his present point opening State California, 812-814.) supra, 137 Cal.App.3d pp. of case present presents striking similarities. While cannot be plaintiffs faulted for to failing raise the antitrust in their brief in the issues opening Court of their failure to raise them in a brief or in Appeal, supplemental oral is argument unexcused. Nor do to their failure raise the they explain point the answer to the for even the though legal grounds petition hearing, for so had doing by then existed for two years. nearly

On the of answer, basis the in the the arguments presented petition this court voted to grant a amicus curiae hearing. requested Subsequently, leave to file its brief the did antitrust issues. then presenting Only plaintiffs on time, course, too late jump bandwagon. By of it was for the court to consider on its possible of the additional issues deter- bearing mination whether or not to a grant hearing.3 know,

I do course, whether the on the hearing vote petition case present might have been different had the court been apprised exceptions recognized, 2Several have applicable setting been which is in the none of (See White, Beach, present City Huntington case. E. L. 21 Inc. v. Cal.3d at because, by 511 raised appeal judgment amicus curiae [issue considered from amend, following general dismissal of a sustaining demurrer without leave to court was required judgment to affirm any theory; appeal presented question if correct on also jurisdictional dimension]; 18, People Cal.App.2d cf. v. Coleman P.2d general [“ignoring” jury permit objection 309] rule to amicus raise new instruc curiae appeal].) tions in criminal exception presented Another judgment imposing penalty an automatic from a appeal statutory duty death. In an automatic appeal, complete this court has a to examine (People record to determine whether a fair given the defendant was trial. v. Stanworth 1239, 889]; Code, (b).) Cal.Rptr. Cal.2d Pen. subd. P.2d § Accordingly, bearing question. an amicus will new on that permitted be to raise a issue (People Easley (1983) Cal.Rptr. 671 P.2d Cal.3d 813] [re- hearing granted consider raised curiae after decision filed but issues amicus initial final].) opinion before the became 3In respect, problem confronting presented here from the one Court of differs Appeal Younger. which exceptions, With certain has discretion cases it this court will again duly hear. The Courts of on all Appeal, exceptions, with minor must rule filed (See Const., VI, §§11, 12; appeals judgments appealable from final orders. Cal. art. Court, Witkin, 29; Proc., Cal. (2d seq.; Rules rules Code 901 et Cal. Procedure Civ. § 1971) 4045.) Hence, Appeal, insisting ed. has an additional basis for this court § upon timely posed by appeal. notification of the issues an However, in the I submit that in lurking additional issues were shadows. influenced many heavily cases the or deny hearing might decision grant issues—and rightly the court’s lack of awareness of such by awareness or so.

This court for filed of the grants only percentage hearing a small petitions each make year. faced with that fact to naturally every attempt Petitioners the their favorable issues in the Trou- present light. most posed appeal blesome or time were issues which secondary argued consuming below courts be or omitted from the for entirely deemphasized petition hearing. court is able in these the briefs filed in the instances review identify Court and the lower court’s such hidden issues Appeal opinion and consider them in whether a advisable.4 deciding hearing

Where, here, as raised in the an issue could have been Court of is not raised until that court its and after a Appeal after has filed opinion has been hearing this court is hindered in two from granted, important ways First, its performing most court is denied responsibilities effectively. opportunity consider whether be denied in light should hearing Second, additional issue. that a have been assuming granted would hearing event, in any the court is of the lower views on the issue. deprived court’s Accordingly, both and amici5 a heavy should bear burden in this parties when court they a hearing after has been raise an issue attempt, granted, which they could have raised earlier. The burden should especially great where the issue could been have raised before the decision of the Court of cases, became final In Appeal as to that court. all but the rarest this court should refuse to consider a new issue that been raised in such a belated has Otherwise, manner. amici control the issues this court considers and de- cides—a most curious method appellate review.

LUCAS, J. dissent. I respectfully view,

In my and without of the other substantial considering any objec- landlords, tions raised control by plaintiff rent ordinance is Berkeley May problem considerably 4On particular recently this will be when a lessened (Cal. Const., VI, approved amendment to the California Constitution takes effect. art. § court, alia, adopted 1984.) Nov. inter permit only The amendment will to review issues which important those it in a intact the lower considers most case and leave court’s (See on all Legislative Analyst’s Analysis, Pamp., Proposed decision Amend, other Ballot issues. Const., Decisions, to Cal. Review Supreme Court: Transfer of Gen. Causes (Nov. 6, 1984) 28.) Elec. 5The burden satisfying requirements timely presentation issues should be overcoming general added that of raising the well established rule which bars amici from ante, 711.) appeal. (See new issues

invalid because it for the calls of maximum rents in violation of fixing (Sherman Act, 1). Indeed, federal law antitrust Antitrust U.S.C. § ordinance would to constitute a se scheme appear illegal per price-fixing condemned routinely the federal should courts. we declare Accordingly, the ordinance a nullity, as mandated of the clause United supremacy VI, (Art. States Constitution. cl.

As I demonstrate, in, of, will municipality’s approval participation price-fixing scheme If scrutiny. should shield it from antitrust such a Act, scheme indeed constitutes se Antitrust per violation Sherman then an irreconcilable conflict exists ordinance and between municipal federal antitrust which policy voids the ordinance under princi- supremacy (See Rice v. ples. (1982) Norman Williams 458 Co. U.S. 659-661 [73 1042, 1049-1050, L.Ed.2d 3294].) 102 Such a S.Ct. conflict presented here.

I. Scrutiny Antitrust Municipal Activity: Background

Not state or every local governmental activity ef- having anticompetitive Thus, fects is invalid under the Sherman Act. in Parker v. Brown Antitrust (1943) 317 U.S. 341 307], L.Ed. 63 S.Ct. the United States Su- [87 preme Court held that the federal laws do not anticom- antitrust preclude and petitive enforced the states programs adopted as a matter state (Id., at policy. 326].) at This action” ex- pp. L.Ed. “state p. [87 extend, however, does not emption to a state’s local subdivisions political (such as Berkeley) unless the state has articulated and “clearly affirmatively expressed” the local en- anticompetitive policy implemented by being tity. (Community Communications Co. v. Boulder 455 U.S. 54 Boulder]; L.Ed.2d 102 also Lafay- [70 S.Ct. see 835] [hereafter ette v. Louisiana Power & 435 Light Co. U.S. L.Ed.2d [55 364, 381, 98 short, established, S.Ct. In as Boulder [plurality opn.].) 1123] “ ” cities, entities, like private ‘must at the antitrust laws.’ U.S. obey 822], L.Ed.2d p. Lafayette p. quoting plurality.) It is uncontradicted directly that the California has not spoken Legislature control, subject rent much and affirma- less articulated “clearly tively expressed” any Berkeley’s. local ordinances such as policy favoring Defendants assert that the requisite by legisla- “state is evidenced policy” tion upon local “decent home calling assist governments providing (Health suitable environment & living California every family.” Code, 50003, 50005.) Saf. has that qualified §§ Legislature expressly however, state in the which con- policy, nothing division declaring tains the of rent foregoing “shall authorize the provisions imposition regu- (with here). (Id., lations or controls” exceptions applicable § Similarly, Code, “local (Gov. of the state 65100- planning” policy §§ 65761) provides in this article shall be construed to be a “[n]othing of or a grant repeal any which exist of a local authority government rent impose (Id., controls . (b).) . . .” subd. Such neutrality § on the part state is plainly insufficient to insulate ordinance Berkeley’s from (Boulder, antitrust scrutiny. U.S. L.Ed.2d at II. Antitrust Scrutiny Berkeley’s Ordinance

The Berkeley rent control ordinance is an unquestionably anticompetitive scheme—it price-fixing maximum imposes on rents ceilings charged by pri vate landlords. And had landlords to fix maxi Berkeley’s privately agreed rents, mum their scheme would have been severely speedily punished, for maximum pricing by entities has been private consistently condemned se per illegal under the (Arizona so-called se” rule. v. “per price-fixing Maricopa County Medical Society U.S.

102 S.Ct. Albrecht Herald Maricopa]; 2466] [hereafter Co. 145 U.S. 998, L.Ed.2d 869]; 88 S.Ct. [19 Co. v. Seagram Kiefer-Stewart & (1951) Sons 340 219, U.S. 211 487].) L.Ed. 71 it S.Ct. Does make [95 a difference that the scheme price-fixing attacked here is municipally spon sored?

Some that, cases indicate in whether se determining apply “per illegal” label to a scheme, particular restraint or we should undertake a limited inquiry into the virtues,” “pernicious effects” and if “redeeming any, V, inherent in the (Continental challenged program. T. Inc. v. GTE Sylvania (1977) Inc. 433 2549]; U.S. 50 L.Ed.2d 97 S.Ct. [53 Northern Pac. R. Co. (1958) v. United 5 States 356 U.S. L.Ed.2d [2 545, 549, 514]; 78 S.Ct. see also Broadcast Music Inc. v. CBS U.S. 19-20 L.Ed.2d 1551].) Other [60 S.Ct. cases seem to the idea support that such an where inquiry is a maximum unnecessary scheme price-fixing (See is involved. generally Maricopa, supra, se [per rule applied to invalidate maximum in arrangement health care pricing event, In plan].) any Ias explain, rent control ordinance Berkeley’s clearly has “pernicious” anticompetitive effects without any overriding “redeeming virtues.”

A. Anticompetitive effects

Economists are in virtually unanimous their condemnation of rent control Baird, laws. (E.g., 54-78; Rent Control: Perennial Folly pp. Control, Rent A (The 1975) Paradox Popular Fraser Institute edit. [essays economists]; Muth, nine Redistribution Income Through Regulation of 698; Rabin,

in The Revolution L.J. see also Housing Emory 517, Residential Landlord-Tenant Law 69 Cornell L.Rev. fix von Mises’ [quoting Ludwig governmental attempts conclusion worse].) the view of most make conditions In price commodity economists, these Court rent control cause what a Supreme plural- schemes (See Lafayette, called ity supra, has “serious economic dislocation.” 382-383].) U.S. 412-413 at L.Ed.2d pp. at pp. Friedman, in collaboration

For Professor Milton example, writing therefore, “Rent cause Professor observed that George Stigler, ceilings, retar- use of allocation of inefficient haphazard arbitrary space, space, rent or dation new ceilings, construction and indefinite continuance residential subsidisation new construction and a future depression Formal make matters would building. rationing by public authority probably (Friedman Housing & The Current worse.” or Stigler, Ceilings? Roofs Problem, Control, Paradox, in Rent A supra, p. Popular addition, have In rent evils that very control measures about the bring max- the United condemnation private States Court’s prompted Supreme economic freedom arrangements. Rent control laws imum-price cripple housing landlords and restrain accordance thereby ability their sell (See with their best conditions. own exercised in of market judgment light Moreover, Kiefer-Stewart, at at U.S. L.Ed. even land- permit, maximum rents be fixed too low encourage, their lords to furnish or desirable by services or deemed necessary facilities Albrecht, (See tenants. supra, 390 U.S. pp. a control 1004].) under rent

pp. Where is the incentive competitive scheme? indicated,

As and services as of just pricing goods maximum previously U.S. (see supra, 457 generally discourages Maricopa, into the market entry on 61]), negative at rents have a impact L.Ed.2d at maximum [73 “Em- (Hirsch, Thought” of new From “Food production housing for (1984) 69 Evidence” Landlord-Tenant Laws pirical About Consequences of 609-610; Redistribution Cornell L.Rev. on Commentary Siegan, of 721, 723), L.J. Emory Income Through Housing, supra, Regulation increases. on as demand thereby inevitably an putting upward price pressure sum, In are many, apparent, on market effects pernicious competitive and long-standing.

B. Redeeming Virtues would override which

Does rent control have virtues” any “redeeming features welfare its to alleged public effects? anticompetitive Berkeley points above, which if rent As I indicated landlords supposedly justify control. rents, to fix their would privately agreed unquestionably maximum scheme be struck down se fea socially “redeeming” asserted per illegal despite tures, as, such In the the financial boon to their tenants. example, private sphere, is limited to a of “redemption” showing offsetting procompetitive on gains—effects are the sole and consideration in competition governing (National such cases. Soc. v. U. S. Engineers Professional 1355]; U.S. 637, 649-653, 690-696 see L.Ed.2d 98 S.Ct. also V., Continental T. supra, 433 U.S. at 584- pp. pp. landlord, Does it amake difference that a city, a rather than is claim ing features redeeming unrelated to I can see no certainly competition? logic in such a proposition.

To a allow local governmental scheme entity excuse a on price-fixing health, basis asserted public safety welfare considerations would enmesh in an courts task of social impossible weighing “apples” Boulder, welfare with the (See “oranges” antitrust policy.

U.S. at 67p. J.].) L.Ed.2d at p. opn. Rehnquist, 829] [dis.

Municipalities very well bemay able to their anticompetitive justify pro- grams under certain limited circumstances not involved here. Perhaps city can to a factor such point as the existence of a “natural monopoly” (e.g., harbor) resource such unique as a natural regulation. which requires price (See Turner, 3 Areeda 621b, 50-51; & Antitrust Law see pp. H also Omega Satellite (7th 1982) Products v. City Cir. Indianapolis F.2d television].) in cable Other monopoly justifications [natural doubtless exist. But dissatisfaction with the attained through level law- price ful i.e., and open of the free competition, normal through operation system, enterprise cannot justify restraints kind anticompetitive price Otherwise, imposed here. there would exist no whatever limits practical authority with the structure established municipality tamper price by the open market.

Price is the “central competition nervous system [free market] (U. economy.” 150, 226, S. Socony-Vacuum Oil Co. U.S. fn. L.Ed. 60 S.Ct. Price whether fixing, privately or publicly thus the free economic to which inspired, endangers system 38,500 has Congress entrusted the the If our entire nation. prosperity Census, county, (Bureau of the Sta municipal township governments tistical 294) Abstract of the their United States with broad p. authority for general . governance “were free to make economic choices . . effects, without regard to their chink in the armour anticompetitive serious of antitrust would protection be introduced odds with the comprehensive

national policy (Lafayette, supra, established.” U.S. at Congress omitted].) L.Ed.2d at fn. p. pp. [plurality opn., 379-380] view, then, that, essence, In my City Berkeley’s belief rents were too in relation to the tenants’ would not “high” ability pay city’s mechanism, constitute an excuse for free market nor tampering would the resultant virtue” over- decreased rents amount to a “redeeming riding effects of rent control. the ordinance anticompetitive Accordingly, was se under the Sherman Act and should be declared per illegal Antitrust invalid on that basis.

III. The Majority’s Four-part Test ordinance se

Although challenged per illegal price- contemplates under fixing invalidity scheme I observe its foregoing analysis, test, would be even an under the own novel apparent majority’s approach a “more than the se rule would involving standard” accommodating per (Ante, 667.) require. ordinance would be unac- majority Berkeley’s acknowledges if means were effective” and “less intrusive” alternative

ceptable “equally available to (Ante, the same result. Yet isn’t it evident accomplish (and mothers) that such alternative indeed exist? If the fathers city means believe mind that rents are too several solutions come to Berkeley, high which would be more consistent with the of the free market sys- operation tem. Rent housing proj- subsidies be tenants. Public may needy provided ects afford be ac- may municipally additional rental units. Property (See, condemnation. Gov. quired through negotiated purchase e.g., Code, common and hold real for [city may purchase property §§ Code, benefit]; domain]; 37350.5 Health & Saf. [eminent §§ for [programs low-income rental housing].) short, alternatives,

In be- should given why competition foregoing tween wel- in order to social Berkeley’s provide landlords stifled intrusive,” fare of effec- tenants? the “less Berkeley’s Surely “equally tive” method the financial this end would be to accomplishing spread burden all among city taxpayers.

IV. Conclusion the free

The federal have been Carta of Magna antitrust laws called (United market 405 U.S. States v. Associates system. Topco 1126].) These laws are as important 92 S.Ct. is to the protec- to the of market freedom as the Bill of preservation Rights tion of individual {Ibid.) liberties. Consistent with overriding principle VI, (U. Const., 2), law we should de- supremacy federal S. art. cl. clare null and void the here.1 Berkeley rent control law issue

I would reverse the remand case for judgment and further proceedings addressed to antitrust issue.2 1Plaintiffs herein seek declaratory judgment enjoin injunctive operation relief to Although ordinance. the issue of available remedies in federal court action left was Boulder, open supra, 822], page U.S. at footnote 20 L.Ed.2d at I assume

that relief in state court declaratory cases such as limited injunctive this is relief and (See Co., preclude would recovery damages. Rice v. Norman Williams 458 U.S. p.at fn. L.Ed.2d at 2Application of the requires legal regarding antitrust laws factual and determinations existence activity” of “concerted upon and a substantial effect interstate commerce. Al here, though my suggests view of the object record that both exist elements I would a remand limited these issues.

Case Details

Case Name: Fisher v. City of Berkeley

Court Name: California Supreme Court

Date Published: Dec 27, 1984

Citation: 693 P.2d 261

Docket Number: S.F. 24675

Court Abbreviation: Cal.