Unpublished Disposition, 872 F.2d 428 (9th Cir. 1988)

MEMORANDUM^* 

INTRODUCTION

Plaintiff Wellesley Kime appeals the dismissal with prejudice of his complaint for failure to state a claim under which relief may be granted. Fed. R. Civ. P. 12(b) (6). Kime brought this action under 42 U.S.C. § 1983 against the County of Riverside, a number of named Riverside County Supervisors (hereinafter the County), and several private entities, Renewable Energy Ventures, Inc., Control Data, Inc., and Earth Energy Systems, Inc, (REV hereinafter). Kime alleged that the County and REV had entered into an unlawful agreement the effect of which was to impair Kime's constitutionally protected contract rights, to effect a taking of those contract rights, and to deprive him of property rights in that contract without due process of law.¹ 

The district court granted the County's motion to dismiss the complaint, but granted leave to Kime to amend his complaint. Kime filed an amended complaint to which one additional cause of action was added against the County, charging that through unlawful contact with a California Superior Court Judge, the County had denied him access to the courts. On March 25, 1988, the district court granted defendants' motion to dismiss the amended complaint, without leave to amend. Kime filed a timely appeal. This court has jurisdiction under 28 U.S.C. § 1291.

Kime contends that the district court erred on four points: first, in dismissing his claims for impairment of contract; second, in dismissing his claims for taking of his rights in a contract and for destruction of a business enterprise on the ground that Kime failed to pursue an action for inverse condemnation in state court; third, in dismissing the same claims because Kime had failed to appeal the denial of a petition for mandate in California state court; and fourth, in dismissing all his claims with prejudice. We affirm the district court on all points.

STANDARD OF REVIEW

Where an action is dismissed without leave to amend we review the pleadings de novo, and take a favorable view of the facts alleged to support jurisdiction. Whittington v. Whittington, 733 F.2d 620, 621 (9th Cir. 1984).

FACTS

Kime purchased certain land in Riverside County California for development of a wind power facility. The property had been zoned so as to permit that development, and conditional use permits had been issued for the facilities. These permits, however, specified particular types of equipment that would be permitted. Defendants REV leased the property from Kime for purposes of developing the wind power facility, agreeing to pay Kime both monthly rent, and a share of the profits. Kime alleges that, after the contract had been entered, officials of Riverside County and REV met and agreed to change the type of wind power equipment, subject to issuance of new conditional use permits. Kime alleges that he was not provided with any notice of this meeting in violation of California state law. The County then declined to issue use permits for the different equipment. As a result, REV withdrew from the contract. Finally, the County rezoned the land to make it impossible for the property to be used as a wind power facility in any event. Kime sought mandamus against the County in state court, but his petition was denied. Kime did not appeal. Kime now argues that he was deprived of property and contract rights.

CONTRACTS CLAUSE

Kime contends that the agreement between the County and REV, of which he had no notice, impaired the obligation of the contract between REV and Kime. REV's agreement with the County, however, does not constitute a law or regulation; it has no legislative or regulatory effect on Kime or his contract with REV. If REV's actions in agreeing with the County constitute a breach of REV's contract with Kime, then Kime has a state law remedy on the strength of his unimpaired contract.

Kime's allegations that the County withdrew existing conditional use permits and refused to issue new ones do allege legislative or regulatory action. That action may have had an adverse effect on Kime's contract with REV. That does not mean, however, that the Contracts Clause, U.S. Const. Art. I, Sec. 10, has been violated.

[I]t is well-settled that the prohibition against impairing the obligation of contracts is not to be read literally.

Keystone Bituminous Coal Ass'n v. DeBenedictis, 107 S. Ct. 1232, 1251 (1987). So long as the County is not a party to the contract between Kime and REV, it may exercise its police power in a manner that has a negative impact on that contract.

In fact, Kime has not alleged that the denial of new conditional use permits altered the terms or enforceability of his contract with REV. REV canceled the contract, but Kime has not alleged that the cancellation was other than according to the terms of the contract itself.

[T]he first inquiry must be whether the state law has, in fact, operated as a substantial impairment of a contractual relationship. The severity of the impairment measures the height of the hurdle the state legislation must clear. Minimal alteration of contractual obligations may end the inquiry at the first stage.

Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 244-5 (1977). Because Kime has not alleged a direct interference with the contractual obligations of REV, his Contracts Clause claim lacks force. See Northwestern National Life Insurance Co v. Tahoe Regional Planning Agency, 632 F.2d 104, 106 (1980). Moreover, even if there is significant interference, Kime has alleged nothing to establish that the County acted beyond its police power. " [C]ourts should properly defer to legislative judgment as to the necessity and reasonableness of a particular measure." Keystone Bituminous Coal Ass'n, 107 S. Ct. at 1253. Kime has accordingly failed to state a claim for violation of the Contracts Clause.

TAKINGS ISSUES

Kime's second and third charges of error both run afoul of the rule that actions for taking of property require full exhaustion of state law remedies.

We cannot rule definitively on the merits of any of plaintiffs' theories, however, because the plaintiff must pursue all avenues of relief before presenting a "taking" claim in federal court ... [A] plaintiff's claim is not ripe until "the government entity charged with implementing the regulations has reached a final decision regarding the application of the regulations to the property at issue." ... A plaintiff must also "seek compensation through the procedures the State has provided."

Lai v. City and County of Honolulu, 841 F.2d 301, 303 (9th Cir.), quoting Williamson Planning Comm'n v. Hamilton Bank, 473 U.S. 172, 186-88, 194 (1984), cert. denied, 109 S. Ct. 560 (1988).

Kime contends that pursuit of a state law claim for inverse condemnation would be futile because California law is unlikely to sustain such an action on the facts presented here. But, as the district court pointed out, this conclusion is highly speculative. The Supreme Court's decision in First English Evangelical Catholic Lutheran Church v. City of Los Angeles, 107 S. Ct. 2378 (1987), expanded the scope of inverse condemnation proceedings for regulatory takings in California. Kime paradoxically minimizes the strength of his takings case for purposes of demonstrating that state law remedies are unattainable, while seeking a remedy from the district court on the same facts. A party need not pursue remedies that are not "reasonable, certain, and adequate," but the party bears the burden of establishing that state remedies are inadequate. Austin v. City and County of Honolulu, 840 F.2d 678, 680 (9th Cir. 1988). Especially in light of First English Evangelical, Kime has not met that burden.

Kime contends that he satisfied exhaustion requirements by seeking mandamus in state court. Mandamus, however, is a writ designed to require an official to perform an act required by law. Cal.Code.Civ.P. Sec. 1085. It is quite different from an inverse condemnation action, which may seek damages for a taking. Cal.Code Civ.P. Sec. 1245.260. Moreover, Kimes did not appeal the denial of mandamus by the state court.

DISMISSAL WITH PREJUDICE

A decision to dismiss without leave to amend should not be affirmed "... unless it is clear that the complaint could not be saved by any amendment". Kelson v. City of Springfield, 767 F.2d 651, 656 (9th Cir. 1985). We agree with the district court that, in light of Kime's failure to seek inverse condemnation remedies to state court, the defects of his complaint could not be cured by amendment.² 

AFFIRMED.