Today, we have a guest post from Mark A. Jacobson, a partner at Cozen O’Connor. CDIA is opposed to state and local laws that jeopardize public safety but limit a landlord’s ability to check the credit, criminal, or eviction history of a prospective tenant. See, CDIA Files Amicus Challenging Seattle Criminal History Ban. Mark, and his colleague, Steven Katov, represent landlords in their suits challenging the fair chance ordnances in Minneapolis and St. Paul.

Mark’s guest post offers a summary of the litigation in both cities and the different paths the cases have taken in the federal courts there.

. . .

On March 14, 2022, the U.S. Court of Appeals for the 8th Circuit upheld a lower court decision denying an injunction against the enforcement of a new “tenants’ rights” ordinance by the City of Minneapolis.  This decision stands in contrast to a later decision by the same lower court judge granting an injunction against the other of the Twin Cities, the City of St. Paul, prohibiting St. Paul from enforcing any part of its own “tenants’ rights” ordinance.  After that decision, the St. Paul City Council rescinded the ordinance.

In the Minneapolis case, a group of owners of multi-tenant housing sued the City to challenge Ordinance No. 244.2030, which requires landlords to evaluate applicants for rental housing by either an “inclusive screening criteria” that prohibited consideration of most criminal, credit, and rental history or an extensive but vaguely defined “individualized assessment.”  301, 712, 2103, & 3151, LLC v. City of Minneapolis, No. 20-cv-1904 (PAM/BRT), D. Minn.  They claimed the Ordinance violated several of the landlord’s constitutional rights, including their right to substantive due process, and that it was an unconstitutional “taking” of their property.

In a decision issued in November 2020 in that case, U.S. District Court Judge Paul Magnuson denied the injunction, finding that plaintiffs had not demonstrated, based on the evidence presented, a likelihood of success on the merits and that, absent that likelihood, they had not established other factors that might weigh in favor of an injunction.  The 8th Circuit agreed, finding that the presence of the individualized assessment option for screening tenants meant that the ordinance did not impose a physical-invasion taking on landlords, that landlords had not fundamental constitutional substantive due process right to exclude others without following those individualized assessment screening procedures, and that the plaintiffs had failed to demonstrate that the balancing test established in the U.S. Supreme Court’s 1978 Penn. Central Transp. Co. v. New York City decision favored finding a taking.

After Judge Magnuson’s preliminary injunction decision in the Minneapolis case but before the 8th Circuit’s decision on appeal, landlords in St. Paul challenged St. Paul’s new “tenants’ rights” ordinance, Ord. 20-14, § 193.  Lamplighter Village Apts. LLP v. City of St. Paul, No. 21-cv-413 (PAM/HB). That ordinance was similar to the Minneapolis ordinance but did not contain an individualized assessment option and added restrictions on the sale of rental properties and made it difficult for landlords to terminate leases, even by non-renewal of the lease.  As in Minneapolis, plaintiffs moved for a preliminary injunction.

This time, Judge Magnuson granted the injunction.  He found that the landlords had established a likelihood of success on their “permanent physical invasion” takings claim, on their regulatory takings claim under Penn. Central, and on their substantive due process claim that the ordinance violated landlords’ right to exclude unwanted tenants.  Given the finding of likelihood of success on claims of a constitutional violation, he also found that landlords would be irreparably harmed by enforcement of the ordinance and prohibited the City from enforcing any part of the ordinance.  Following the decision, the St. Paul City Council repealed the ordinance, foregoing the opportunity to appeal.  In subsequent proceedings, Judge Magnuson ordered the City to pay plaintiffs’ attorneys fees and costs of just over $99,000.

While the Court of Appeals never had an opportunity to weigh in on the St. Paul ordinance and Judge Magnuson’s decision on that ordinance rejected the City’s comparison of the St. Paul ordinance to the Minneapolis ordinance, finding “Minneapolis’s ordinance is inapposite.”  The most striking differences between the two ordinances are the absence of an individualized assessment option and the presence of a “just cause” requirement for terminating a lease in the St. Paul ordinance.  Judge Magnuson’s decision to grant the injunction against the St. Paul ordinance after denying an injunction in the Minneapolis case was likely influenced by those differences.

– Mark A. Jacobson, a partner at Cozen O’Connor, and his bio is online.