Feature
by James M. Treppa and L. Jay Pedersen
In a decision that could have a major impact on how landlord-tenant wrongful eviction lawsuits are litigated in the future, a San Francisco Superior Court judge has ruled that the provision of the San Francisco Rent Stabilization and Arbitration Ordinance (SFRO) requiring the trebling of damages is unconstitutional.
Following a jury’s finding of liability against a San Francisco landlord for a wrongful owner-move-in eviction in a recent trial, the tenant’s attorney sought to treble both the actual and emotional distress damages under the mandatory provision of SFRO section 37.9(f). The landlord’s attorney, L. Jay Pedersen, of Bledsoe, Cathcart, Diestel & Pedersen, LLP, successfully argued that the application of the treble damage provision could not be applied where it results in a constitutionally excessive penalty.
In the case at issue, the plaintiff tenant sued the defendant landlord
for wrongful eviction in violation of the ordinance and related
claims. In a 10-2 verdict, the jury found that the landlord had
wrongfully evicted the tenant in violation of the SFRO. The jury
also found (10-2) that the landlord knowingly violated or acted
in reckless disregard of the SFRO. The jury awarded the tenant $45,000
in economic (out-of-pocket) damages, and $5,000 in non-economic
(emotional distress) damages. The tenant’s attorney then brought
a motion to treble both damage awards by relying on the mandatory
language of the SFRO itself. Further, the tenant argued that the
court in Kelly v. Yee (1989) 213 Cal.App.3d 336 required mandatory,
versus discretionary, trebling. The Kelly court had held that if
no ambiguity, uncertainty or doubt about the meaning of a statute
appears, the provision is to be applied according to its terms without
further judicial construction. The Kelly court noted the clumsy
draftsmanship of SFRO section 37.9 but determined it was unambiguous.
The
court here, however, was persuaded by the landlord attorney’s
interpretation of case law found in both Balmoral Hotel Tenants
Assn. v. Lee (1990) 226 Cal.App.3d 686, Hale v. Morgan (1978) 22
Cal.3d 388 and Cwynar v. City and County of San Francisco (2001)
90 Cal.App.4th 637. While the court recognized the mandatory language
of section 37.9(f), it accepted the landlord’s argument that
the regulation cannot be applied where an award for treble damages
clearly reveals constitutional defects. The court did not engage
in an analysis of the constitutionality of the regulation itself,
but questioned whether the impact of the regulation here was confiscatory,
and therefore, unconstitutional. The court noted that although treble
damages are generally vulnerable to constitutional attack, such
damages might produce constitutionally excessive penalties and violate
substantive due process. The court held that under the circumstances
of the case, an award of treble damages would be so clearly unfair
that it could not be sustained.
In reaching this determination, there was incontrovertible evidence that the landlord had purchased the building in 1999, sold it in 2001, and netted a profit of approximately $102,000. The evidence at trial further demonstrated that the landlord’s yearly income was $30,000. With a jury award of $50,000, and an award for attorney fees to the tenant’s attorney in the sum of $51,000, the total award reached $101,000, thereby eliminating entirely any profit obtained by the landlord. The court ruled that trebling the award itself to $150,000 would not only deprive the landlord of 100 percent of the acquired equity but would result in an excessive penalty, represent 150 percent of the landlord’s net profit from the building and represent five times more than the landlord’s yearly salary. The extremely harsh result was found to be both demonstrably and economically confiscatory and rendered the application of the statute unconstitutional.
A final judgment has yet to be entered in the case. Both sides are
expected to challenge certain aspects of the jury’s verdict
and rulings on post-trial motions.
The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of the SFAA or the SF Apartment Magazine. James M. Treppa and L. Jay Pedersen are partners at the law firm of Bledsoe, Cathcart, Diestel & Pedersen, LLP. Their principal areas of practice include the representation of property owners in landlord-tenant litigation, real estate litigation and transactions, and common interest development disputes. They can be reached at (415) 981-5411. © Copyright 2002.