Real Estate & Property Law

Can a City Bind Itself to Exercise Eminent Domain? Cert Petition in Ninth Circuit Case on Reserved Powers, Public Use, and Contracts Clause (Matsuda)

By Robert Thomas

As noted in this post, the City and County of Honolulu has sought US Supreme Court review of Matsuda v. City and County of Honolulu, 512 F.3d 1148 (9th Cir. Jan 14, 2008).  I've finally obtained a copy of the petition, which is posted here (2mb pdf).  The Supreme Court docket report is here (No. 07-1305).

After detailing the background facts, the petition advances a single Question Presented:

Several lessees of a residential condominium apartment complex ("Lessees") filed a lawsuit against the City and County of Honolulu (the "City") challenging Ordinance 05-001 (2005).  Ordinance 05-001 repealed the City's leasehold conversion ordinance, Chapter 38, Revised Ordinances of Honolulu ("ROH"), the statutory process by which leasehold condominium owners, including Lessees, could purchase the leased fee title to their units, through the use of the City's power of eminent domain.  Pursuant to Chapter 38, the Lessees executed contracts with the City for the acquisition of the leased fee interests in their condominium units.  However, Lessees never received City Council approval prior to the repeal of Chapter 38, and therefore they were unable under Ordinance 05-001 to complete their leasehold conversion.

The Ninth Circuit Court of Appeals departed from the longstanding policy of judicial deference to local legislative determinations of public use in the exercise of the power of eminent domain and held that the City's repeal of Chapter 38 may violate the Contracts Clause and/or the Due Process Clause of the Constitution of the United States.

Therefore, the question presented in this petition is as follows:

Whether the Ninth Circuit erred in concluding that the Honolulu City Council's repeal of the leasehold conversion ordinance may violate the Contracts Clause and/or the Due Process Clause, and whether after the repeal, the City can still be contractually bound to exercise its power of eminent domain to acquire property for the leasehold conversion?

Petition at i-ii. 

Chapter 38 was Honolulu's version of the Hawaii Land Reform Act at issue in Hawaii Housing Auth. v. Midkiff, 467 U.S. 229 (1984), and permitted conversion of condominium interests to fee simple, via a condemnation process. In Matsuda, apartment owners applied to the city to "convert" (condemn) their apartment leases, and entered into written contracts with the city, in which the apartment owners each agreed to pay the city $1,000, in return for which the city promised that after its acquisition of the lease, it would convey it to the apartment owner.  The owners subsequently received the city's approvals, but final approval by the City Council was withheld because the council was already considering repealing chapter 38, which it did in 2005. 

The ordinance repealing chapter 38 eventually contained a provision allowing any conversion proceeding which has been approved by the City Council to be completed, but because Matsuda's had not received final council approval, the taking was denied.  Matsuda and others filed suit against the city in federal court, alleging that the repeal of chapter 38 was a violation of the U.S. Constitution's Contracts Clause.  The district court dismissed the case since in the court's view, the plaintiffs had no legally enforceable contract with the City. 

The Ninth Circuit held that the district court should have viewed the repeal of Chapter 38 with "heightened scrutiny" because the repeal of Chapter 38 was the city voiding its own contracts, and remanded the case for further proceedings. A complete summary of the Ninth Circuit's opinion is posted here.

Download the complete Petition for Writ of Certiorari.

Full post as published by inversecondemnation on May 22, 2008 (boomark / email).