Unpublished Disposition, 889 F.2d 1095 (9th Cir. 1988)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 on October 6, 1987 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's dismissal of Kime's claim for impairment of contract, but we REVERSE the dismissal of Kime's takings claims.

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 on September 12, 1985 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, on May 12, 1987 the County re-zoned the land to make it impossible for the property to be used as a wind power facility or, Kime alleges, any other economically feasible use. 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, 480 U.S. 470, 502 (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 (1978). 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 (9th Cir. 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, 480 U.S. at 505. Kime has accordingly failed to state a claim for violation of the Contracts Clause.

TAKINGS ISSUES

The district court construed Kime's first and second causes of actions as essentially alleging a regulatory taking of his property rights. The court held that such a claim was unripe because Kime had not sought to obtain compensation from the state through an action for inverse condemnation. The court pointed out that although California courts had rejected such actions in the case of regulatory takings²  the Supreme Court's decision in First Evangelical Lutheran Church v. City of Los Angeles, 482 U.S. 304 (1987) had now made it available.

It is true that a taking claim in federal court is not ripe until the plaintiff has received a final decision as to the application of the regulations to their property, and pursued all avenues of relief available to obtain compensation from the state. Only then is the claim that the taking was without just compensation properly presented. See Williamson County Regional Planning Comm'n v. Hamilton Bank, 473 U.S. 172, 186 (1985); Lai v. City and County of Honolulu, 841 F.2d 301, 303 (9th Cir.), cert. denied, 109 S. Ct. 560 (1988).

Yet the determination of what state remedies are available must be made with respect to the date of the alleged taking, not the date at which the district court is considering the complaint. Hoehne v. County of San Benito, 870 F.2d 529, 534 (9th Cir. 1989); Sinaloa Lake Owners Ass'n v. City of Simi Valley, 864 F.2d 1475, 1479 (9th Cir. 1989). It is difficult to determine from Kime's complaint precisely when the alleged taking took place. The two strongest possibilities are September 12, 1985, the date of the meeting between REV and the County,³  or May 12, 1987, the date on which the County allegedly changed the zoning in a way that prevented economically feasible uses. Neither date falls after the decision in First English Evangelical Church, supra, which was announced on June 9, 1987. It was therefore improper to dismiss for failure to seek compensation from the state.

Appellees contend that Kime's claim is nevertheless unripe because there has been no final decision by the County regarding how Kime will be allowed to develop his property. See Williamson County Regional Planning Comm'n, 473 U.S. at 190 (1985). Kime alleges, however, that the property has been zoned to prevent its intended use as a wind farm, and that he sought alternatives or variances to permit other uses, which he was denied. He alleges that the present zoning prohibits all economically feasible development of the property. On their face, these allegations are sufficient to state that the County has "reached a final decision regarding the application of the regulations to the property at issue," Hoehne, 870 F.2d at 532, and that submission of further development plans would be futile. See Kinzli v. City of Santa Cruz, 818 F.2d 1449, 1454-55, amended, 830 F.2d 968 (9th Cir. 1987), cert. denied, 108 S. Ct. 775 (1988). We cannot conclude at this stage of the proceedings that Kime's claim is unripe.

CONCLUSION

The district court correctly dismissed Kime's contract clause claim. The district court, not having the benefit of the Hoehne decision, erred in dismissing the taking claims for lack of ripeness. We reverse the judgment of dismissal and remand for further proceedings on the takings claims.

REVERSED and REMANDED.