Court Talk

Drouet v. City and County of San Francisco

by Clifford E. Fried

It is quite rare for the California Supreme Court to decide a case concerning residential evictions. Recently, however, the high court reviewed the issue of whether or not a tenant could defeat an Ellis Act eviction by asserting the defense of retaliatory eviction.

In Drouet v. City & County of San Francisco, the Supreme Court held that the statutory defense of retaliatory eviction will not defeat an Ellis Act eviction where the landlord has, in good faith, exited the rental business. This rule applies even if the landlord is exiting the rental market because the tenant exercised some legal right or complained to a government agency about defects at the premises.

The Ellis Act permits a landlord to evict all residential tenants in a building by withdrawing the rental property from the market. So long as the landlord complies with all of the Act’s technicalities, no local government can interfere with this specific landlord right.

In this case, the tenant claimed that a loophole in the Ellis Act permitted the statutory defense of retaliatory eviction. This defense arises out of state law (Civil Code Sec. 1942.5). If retaliatory eviction were an acceptable defense to an Ellis Act eviction, landlords would clearly have a more difficult time going out of business and recovering possession of their units.

Before the Drouet case was ever filed, landlords filed their Ellis Act lawsuits (when a tenant failed to vacate after receiving proper notice) and obtained judgments for possession by way of summary judgment motions. Landlords argued that if their Ellis Act paperwork was in order, they were entitled to possession as a matter of law. No jury trial was necessary because there were no factual issues to decide.

Tenants, on the other hand, knew that their only chance of staying in possession was to get the sympathy of a San Francisco jury. Tenant attorneys argued that some defenses existed to an Ellis Act eviction, including the retaliatory eviction defense. If true, a jury would have to decide if the landlord was evicting with a retaliatory motive. Most Law & Motion judges routinely ruled that there were no defenses to an Ellis Act eviction. In Drouet, however, the Law & Motion judge ruled in favor of the tenant. The decision was reversed by the Appellate Division of the Superior Court. In response to the tenant’s subsequent appeal, the California Court of Appeals ruled that retaliation was not a defense to the Ellis Act. The Supreme Court agreed to review the matter.

The Supreme Court decided the case by interpreting the retaliatory eviction defense found in Civil Code Sec. 1942.5. The court ruled that while the Ellis Act does not supersede Sec. 1942.5 (and versa visa), under Sec. 1942.5 a landlord’s bona fide intent to withdraw the property from the rental market under the Ellis Act will defeat the statutory defense of retaliatory eviction.

There is now a concern by some, that although the Supreme Court made it easier for landlords to defeat a claim of retaliation, landlords will now have to establish bona fide intent to withdraw the property.

Under the court’s ruling, if a tenant opposes or contests a landlord’s bona fide intent to withdraw units, the landlord must prove bona fide intent to withdraw by a preponderance of the evidence at a hearing or trial. If there is a factual dispute concerning intent, the jury must decide the issue. So does Drouet really help landlords who invoke the Ellis Act?

Since the Drouet decision, the Law & Motion Department of the San Francisco Superior Court has granted at least one motion for summary judgment in favor of the landlord where retaliation was raised as a defense. It remains to be seen how tenant attorneys will change their strategies after Drouet. Only after many more such motions will the true benefits of the Drouet decision become clear.

Landlord Joel Drouet was represented by SFAA member Andrew M. Zacks. Clifford E. Fried appeared for SFAA as amicus curiae.

Baba v. City and County of San Francisco Update

In the last “Court Talk” column, I reported on the lawsuit that led Judge James J. McBride to strike down several of the Daly Amendments to the Rent Ordinance. Since then, the City and County of San Francisco has decided to appeal the decision.

The Daly Amendments prohibited landlords from making certain communications to tenants that could be construed as threats or harassment. Another of the Daly amendments made it illegal to resolve a dispute with a tenant unless a lawsuit was filed, the tenant was represented by an attorney and a judge approved the settlement.
On a positive note, the plaintiffs in the case, a group of landlords, tenants and eviction lawyers, were awarded their attorneys’ fees as the prevailing party. The plaintiffs also asked the court to order the automatic “not applicable” during the pending appeal. The court granted the request on the grounds that important constitutional rights would be denied if the judgment were stayed pending an appeal.

Jaramillo v. JH Real Estate Partners

Many residential rental agreements attempt to steer tenant lawsuits away from judges and juries and into the arbitration arena. Court battles are expensive and jury verdicts favor tenants and are unpredictable.

In Jaramillo v. JH Real Estate Partners, the California Court of Appeals held that a residential tenant cannot validly agree, in a residential lease agreement, to binding arbitration to resolve disputes. The court left open, however, the question of whether a landlord and tenant may enter into a separate agreement to arbitrate that is entirely independent of any lease agreement.

At issue in Jaramillo was a lease arbitration clause that provided for binding arbitration for personal injury claims brought by the tenant for injuries that occurred on the leased premises. In small non-bold print, the clause provided that arbitration was to be conducted before three arbitrators of the American Arbitration Association, and that all fees were to be shared equally and paid in advance of the arbitration. In addition, the tenant was required to make his claim within 180 days of injury. The clause permitted the landlord to sue the tenant in court.

The court also ruled that the arbitration clause was unconscionable and invalid because fees had to be advanced before the arbitration hearing, there was no opportunity for the tenant to decline the arbitration provision, such as by initialing it, and the clause lacked sufficient bilaterality.

This case is important because the PPMA Tenancy Agreement, adopted by SFAA, contains an arbitration clause similar to the one in Jaramillo that could also be challenged in court. PPMA and SFAA are reviewing the Jaramillo decision to see if the Tenancy Agreement clause should be revised.

The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of the SFAA or the San Francisco Apartment Magazine. The information within this article is general in nature. Consult an attorney for any specific problem. Clifford E. Fried is with Wiegel & Fried, 415-552-8230. Copyright � 2003 by Clifford E. Fried.