A federal injunction that halted the City of Stockton's code enforcement crackdown on dilapidated residential hotels has been upheld by the Ninth U.S. Circuit Court of Appeals.

The Ninth Circuit modified the injunction but still determined that the plaintiffs - six hotel residents and a nonprofit advocacy group - demonstrated a strong likelihood that they would win a lawsuit alleging that the city had violated the federal Housing and Community Development Act. The Ninth Circuit ruled that city had to provide federally prescribed relocation assistance and replacement housing for people evicted from the hotels. The federal requirements came into play because Stockton used Community Development Block Grant funds for the code enforcement activity.

In 2001, the city began a new project to enforce health, building and safety regulations in downtown Stockton. The city inspected about 30 multi-family residential buildings, primarily single-occupancy residential hotels. Officials closed nine properties, including six that were vacated on an emergency basis. Inspectors found bat infestations, fire code violations, dangerous carbon monoxide emissions and other substandard conditions. The city shipped some of the evicted residents to a farm labor camp south of town, but that camp soon closed.

Six hotel residents and Stockton Metro Ministry (now known as Interfaith Council of San Joaquin) sued the city, alleging the city violated a variety of state and federal housing and redevelopment laws. In February 2002, U.S. District Judge Lawrence Karlton issued a preliminary injunction that prohibited the city from vacating, demolishing or converting downtown residential hotels until the city adopted and implemented an anti-displacement and relocation plan. The injunction also required the city to provide relocation assistance and replacement housing to everyone displaced by the code enforcement activities. Judge Karlton later amended the injunction to allow the city to close buildings that pose “an immediate and grave danger to the health and safety of occupants or the public.”

The city appealed the injunction to the Ninth Circuit. The city argued, in part, that the applicable provisions of the Housing and Community Development Act (42 U.S. § 5304(d)) did not confer individual rights upon a class a people. In other words, the plaintiffs in this case did not have the right use the Federal Civil Rights Act to sue, according to the city.

The Ninth Circuit disagreed. “Section 104(k) of the act clearly mandates … that 'each grantee shall provide for reasonable benefits to any person involuntarily and permanently displaced as a result of the use of assistance received under this chapter to acquire or substantially rehabilitate property,'” the court ruled. This section “requires that benefits be provided to particular persons displaced by federally funded redevelopment activities. This language evinces a clear intent to create a federal right.”

Section 104(d) spells out those benefits: reimbursement for actual and reasonable moving expenses and interim living costs, and relocation to “comparable replacement housing.”

However, the Ninth Circuit found that other provisions in § 104(d) do not convey individual rights. Those provisions require a housing plan that includes one-for-one replacement of all occupied and vacant occupiable low- and moderate-income units with other units having 10-year affordability protection.

The Ninth Circuit also considered the lower court's ruling regarding the plaintiffs' likelihood of success on the merits of their litigation, and a balancing of the hardships of an injunction. The likelihood of success is necessary for an injunction, and it exists here, the Ninth Circuit confirmed. Section 104(k) “on its face” requires the provision of certain benefits where displacement occurs as a result of the use of block grant funds “to acquire or substantially rehabilitate property,” the Ninth Circuit noted. In this case, the district court found that Stockton used block grant funding for code enforcement that led to the displacement. The lower court also determined that the city's redevelopment activities - which were partially funded by block grants - amounted to a single undertaking.

The Ninth Circuit refused to overturn the lower court's determinations, noting that the city moved to acquire two hotels through eminent domain after closing them for code violations.

As for hardships, the court wrote, “[I]t is a far more severe hardship for someone to be displaced from his or her home without assistance and without the certainty of knowing where to move.”

The Ninth Circuit concluded by narrowing the injunction “to protect only those individual rights that plaintiffs are permitted to enforce” and eliminating the requirement for a replacement housing plan.

The lawsuit is scheduled for trial at the U.S. District Court in Sacramento beginning in September.

The Case:
Price v. City of Stockton, No. 02-16155, 04 C.D.O.S. 10634, 2004 DJDAR 14439. Filed December 6, 2004.
The Lawyers:
For Price: Stephanie Haffner, California Rural Legal Assistance, (209) 946-0605.
For the city: Lee Rosenthal, Goldfarb & Lipman, (510) 836-6336.