Ninth Circuit Court of Appeals Finds City Did Not Violate Developer’s Substantive Due Process and Equal Protection Rights

In 2006, the City of Mountain View conditionally approved Teresi’s plans for a development project to demolish the low-income housing complex on the Property and replace it with a larger condominium complex. By the summer of 2008, Teresi had run into difficulty obtaining financing and began to pursue reactivating residential use of the Property. Teresi objected to the City’s requirements that to do so, it must (1) repay the $127,000 spent by the City to relocate the previous tenants at the Property and (2) submit to Development Review. In 2010, Teresi Investments III, a California building developer, brought an action against the City pursuant to 42 U.S.C. § 1983 for actions of the City related to Teresi’s attempt to complete a rezoning and development project at one of its properties. Teresi contended that certain actions of the City violated Teresi’s rights under the Due Process and Equal Protection Clauses of the Fourteenth Amendment to the U.S. Constitution.

To establish a violation of its substantive due process rights, Teresi needed to prove that requiring it to undergo Development Review was “clearly arbitrary and unreasonable, having no substantial relation to the public health, safety, morals, or general welfare.” Teresi contended that the City’s asserted bases for requiring Development Review were pretexts to “legitimize a scheme to extort” the $127,000 in relocation funds from Teresi and “preclude the property from being occupied by low-income tenants.” Teresi’s substantive due process challenge did not impinge on a fundamental right, so the court did not require that the City’s action actually advance its stated purposes, but merely looks to see whether the City could have had a legitimate reason for acting as it did. Teresi did not presented evidence adequate to permit a reasonable fact finder to decide that the City’s motivations for requiring Development Review did not include any legitimate concern for safety and habitability. Conversely, because the evidence showed that the City was motivated in substantial part by health and safety concerns any ulterior motive the City may have had was irrelevant.

Lastly, because Teresi had not presented any evidence of “similarly situated property owners” who were treated differently, the “class of one” equal protection claim was dismissed. Accordingly, the court affirmed the district court’s holding in favor of the City.

Teresi Investments III v City of Mountainview, 609 Fed. Appx. 928 (9th Cir. CA (CA) 5/1/2015)