This morning, the general counsel of Dirtlease came back from a seven-day drunk. The head of HR dropped by to have a word with him.
‘Knock, knock’, she said. Her heels took up most of the doorway. The GC was cradling his head in his elbows and had not yet turned on his computer.
‘Could you not to that so loudly’, he said.
‘Sorry. I just –‘
The GC looked toward her and then up, down and around. ‘You have a piece of tape on your ass’, he said. ‘Do you mind if I – ’
HR’s mouth tightened. ‘Yes, I do’, she said.
‘Sorry. I’m not usually like this. It’s just that the Supreme Court denied cert in 75 Pinehurst LLC.[1]’
HR softened her tone. ‘I am so, so sorry’, she said. ‘Take the rest of the day off.’
The GC looked up at her through lowered lids and said, ‘So, does that mean that we can –‘
‘Nope’, she said. Then, she pivoted on one of her heels and clacked off.
.
At four PM, after a squash game in the Dirtlease company fitness center, the GC and the COO sat in the steam room. The GC said, ‘That chick from HR wants me.’
‘You’re fooling yourself.’
‘You know, the Supremes denied cert in 74 Pinehurst LLC?’
‘Really?’
‘I thought that if I drank enough, it would go away.’
‘It doesn’t work like that.’
‘You mean it hasn’t worked like that yet. Just because the past 999,999 swans have been white doesn’t mean that –‘
‘You went to Yale, right?’
‘I won’t answer that question.’
‘You read Karl Popper?’
‘Yes.’
‘It fucking shows.’
.
By seven, the GC was back at the bar, speaking with a pink flamingo.
‘Did you hear that the Supreme Court denied cert in 74 Pinehurst’, the GC asked.
‘Seven days ago’, the flamingo said. ‘That kind of information ages like sushi.’
‘I can see my ass –‘
‘In a double whiskey glass’, the flamingo said. ‘Wipe your nose.’
‘But you know’, the GC said, ‘The surprising thing is that I take hope from the memo that Thomas wrote to accompany the decision.’
‘What – Clarence Thomas’, the flamingo said. ‘The porn collector?’
‘The very one.’
‘The harasser of women?’
‘Yup.’
‘The guy who’s in the pocket of the Koch brothers and Harlan Crow?
‘Yes.’
‘The guy who shares a house with a woman who wants to overthrow democracy and the rule of law?’
‘Uh-huh.’
‘The affirmative action baby who pulled up the ladder once he got on deck?’
‘That’s our man.’
‘The guy whose eyes go squizzy when he reads –‘
‘Yes! That Clarence Thomas.’
‘Go on.’
The GC downed a shot of bourbon and gestured to the flamingo to refill his glass. ‘He said that the constitutionality of the New York City rent stabilization law is an important and pressing question, and he noted that there is a split between circuits regarding the relevant issues.’ The GC looked up and around. A semi-circle of people had gathered to eavesdrop on the conversation.
‘Thomas said that the pleadings only raised general allegations about the plaintiffs’ circumstances and injuries.’, the GC continued. ‘To evaluate the as-applied constitutional challenges, the Court would need to consider whether specific regulations prevented the petitioners from evicting actual tenants for particular reasons. To evaluate the petitioners’ facial constitutional challenges, the Court would need a clear understanding of how New York City regulations coordinate to completely bar landlords from evicting tenants. It was almost as if he were coaching the litigants. I can’t pass you on this one, he’s saying, but here’s how you should do it next time.’
‘What is an as-applied constitutional challenge, and what is a facial constitutional challenge’, the flamingo asked.
The GC looked out at the crowd that had gathered. A woman who looked like a young Brigitte Bardot was smiling at him. I kind of like this place, he thought. ‘Fuck if I know’, he said. ‘I got a ‘B’ in con law.’
‘You didn’t go to Yale, did you?’
‘What do you think I am?’
‘I think you’re a drunk’, the flamingo said.
The GC drew himself up and looked the flamingo in the eye. ‘Fuck you’, he explained. ‘I’m a drunk, but I am a drunk who went to a real law school.’
.
A man in a white shirt, a dark tie and a dark suit with thin lapels approached the bar and asked the GC, ‘What did the case come out of?’ The GC looked at the flamingo and the flamingo nodded.
‘You can talk to him’, the flamingo said. ‘He’s good.’
‘It came out of The Housing Stability and Tenant Protection Act of 2019.[2]‘, the GC said. ‘The bill that we call the Nakba law around the Dirtlease office. It screwed mobile home park owners, but it really screwed New York City apartment owners.’
‘How?’
‘It capped the amount of units that property owners can recover for personal use to one per building, and only upon a showing of immediate and compelling necessity. It repealed the luxury decontrol provision, whereby an apartment would become market-rate when rent reached a certain value, and it removed means-testing. It repealed the vacancy provisions, which allowed owners to bump up rents between tenants. It made preferential rates permanent. It reduced the amount that can be recouped for capital improvements, it increased the fraction of resident consent needed to convert a building to a coop or condo, and it extended the period for which a housing court can stay an eviction regardless of the merits of the case from six months to a year.’
‘Who sued?’
‘A family of Greek immigrants who owned a building in Long Island City. Some investors who owned buildings in Chinatown. Some more investors who owned buildings in Washington Heights.’
‘Were they big players?’
‘’I do not believe so. The Panagouliases are mom-and-pops. The other named plaintiffs are legal entities, but they appear to be owned by small investors.’
Bridgitte Bardot pulled out a cigarette and stuck it in her mouth. The man in the thin lapels whipped out a lighter and lit it for her, then clicked the lighter shut.
‘They claimed that the law was a taking. The arguments are couched in a lot of legal gobbledegook, but they boil down to three factual claims. First, the petitioners claimed that the law reduced the value of their properties by twenty to forty percent. Second, the successor provisions in the law require that owners lease apartments, potentially in perpetuity, to residents who they might not want to lease to voluntarily. Third, the stay of eviction makes it impossible to evict residents who do not comply with their contractual obligations.’
‘Are these claims true?’
‘Of course they are true. The issue is whether the damage caused by the facts implicates constitutional issues.’
‘Do they?’
The GC felt a migraine coming on. ‘I know a guy who got a C in con law’, he said. ‘He’s head of Tax at a big investment firm in Boston now and on his second wife. He has three beautiful children, only one of whom hates him. A shitty grade in con law class is not, by any means, the end of the world.’
.
Later, on the subway platform, the flamingo dropped a ten dollar bill onto the tracks. ‘Leave it’, the GC said. ‘It’s not worth it.’
The flamingo put his palms on the edge of the platform, lowered himself onto the tracks, and picked up the bill. ‘You’re a moron for doing that’, the GC said. ‘You have some schmutz on your tail.’
‘I worked hard for this’, the flamingo said. ‘And anyhow, I am going to need it later in the evening.’
‘What do you do for a living, again?’
‘This is it. I talk to drunks.’
.
The GC wondered why he always got the stripper with the sleeve tattoo. Not that he disliked sleeve tattoos – he was just curious what a lap dance would be like from a woman who didn’t have ink all the way down her arm.
‘Your friend makes my friend work hard’, the woman on his lap said. The GC looked over and saw a blonde woman with clear white arms grinding away at the flamingo. The flamingo’s eyes were closed and his beak was fixed in a shit-eating grin. The GC wished that he could un-see the image.
‘Why’, the GC asked.
‘He doesn’t have a lap.’
The music changed and the GC wondered whether that meant he would be charged for another dance. If strippers had meters, like taxis or uber drivers, he thought – where would they wear them? ‘Did you hear that the Supreme Court denied cert in 74 Pinehurst LLC’, he asked.
The stripper stopped what she was doing and said, ‘Can you fucking believe it’, she said. ‘Heights Apartments, LLC v. Walz[3] held to the contrary’.
‘Not really’, the GC said. ‘Heights Apartments was a COVID eviction moratorium case. It was limited to the right to exclude. 74 Pinehurst is a rent regulation case.’
‘But the petitioners in 74 Pinehurst argued about the right to exclude, too’, the stripper said. ‘They argued that the Nakba law made it impossible to evict non-compliant tenants and forced them to rent to tenants they would not otherwise rent to. And the holding in Heights Apartments is very broad doctrinally. The Eighth Circuit said that the Minnesota eviction moratorium implicated the Contracts Clause of Article 1, as well as the Takings Clause of the Fifth Amendment. The court was open to a claim that the eviction moratorium was both a per se physical taking as well as a regulatory taking.’
‘Did you go to Yale?’
The stripper shifted her stance from side-saddle to astride, grabbed the GC’s shoulder with her left hand and slapped him, hard, with her right. ‘I’m a sex worker’, she said. ‘Not a Yalie.’
The GC rubbed his chin, fumbled for his glasses, and tried not to tear up. ‘Sorry’, he said. ‘It’s just –‘
‘Shut it.’
‘You know what I found most bizarre about the whole shit-show’, the GC said. ‘A bankruptcy case from 2015, Santiago-Monteverde v. Pereira[4], that is cited in the petitioner’s brief in 74 Pinehurst LLC.’
‘The one with the lady with the rent-stabilized lease’, the stripper asked. She rubbed the palm of her right hand in her left.
‘In Santiago-Monteverde, the court held that rights under a rent-stabilized lease held by a debtor in bankruptcy constituted a local public assistance benefit that had to be included in the bankruptcy estate.’
‘Well, duh’, the stripper said. ‘A lease is a stream of cash payments that has a present value. A reduction in future payments will reduce that present value. The difference is the value of the rent-stabilized lease.’
‘I know how to value it! It’s just that they say right out that that reduction in cash flow is a public benefit funded by the property owner! They admit that value is being transferred from the property owner to the resident by way of a public policy initiative! It means that the property owner is effectively paying for a public assistance program! Now, I’m all for redistribution of wealth, but it should be done through the tax and spending process. Tax the rich! If you think I’m rich, tax me! But I’m not the state! Don’t make me fund a public assistance program, and don’t hide Rawlsian-based public assistance policy in rent regulation! Why not just write, fuck you into the legislation while you’re at it?’
The stripper loosened the GC’s tie and undid the top three buttons of his shirt. ‘Easy there, big guy’, she said.
‘You turn on a dime’, the GC said.
‘That’s why I get the big bucks.’
.
The GC looked over to see the tail of the flamingo and the woman with the clear arms walking toward the VIP lounge, near the back of the club. ‘I’d take you there, baby’, the GC said, ‘But I’m kind of short. The rat bastards in HR have docked my pay.’
‘Short?’
‘Oh, fuck off.’
‘Hee, hee.’
.
‘Do you think that Thomas wants to relitigate Yee v. City of Escondido,[5]’ the stripper asked. ‘The case that held that rent control regulations are not a physical taking?’
‘You know, that case was about manufactured housing’, the GC said. ‘John and Irene Yee owned two mobile home parks in Escondido, CA. They brought the suit in 1988 when a local ordinance brought lot rents back to 1986 levels and prevented any lot rent increases absent explicit local government approval. Park owners had to apply to the city council every time they wanted to increase lot rents. This included lot rent increases consistent with CPI.’
‘Yes, I know’, the stripper said. ‘It is ripe for re-litigation. O’Connor refused to examine the issue of whether rent control could be a regulatory taking on procedural grounds. That was, like, the whole issue. The Court punted in 1992, and should re-examine it.’
‘Richard Epstein wrote an article about the case when he taught at Chicago.’[6], the GC said. ‘He said that the Court missed the issue on physical taking. He also noted that rent control in manufactured housing communities is different than in apartments, because of the hybrid nature of mobile home ownership.’
‘You know, Professor Epstein comes in here sometimes.’
‘For real? He’s like, ancient. What is he like?’
The stripper smiled. ‘That information is subject to stripper-client privilege’, she said.
‘Epstein takes issue with what the Second Circuit called ‘acquiescence theory’ in 74 Pinehurst. The idea is that a landlord can never suffer a physical taking from a tenant because the landlord acquiesces to the tenant’s entry into her property when he leases it to her. He says that that does not make sense because in many cases rent regulations and eviction moratoria allow tenants to invade landowners’ property in ways to which the landowner does not acquiesce. For example, in Yee, park owners were not allowed to evict a tenant who purchased a home from an existing tenant. That happens all the time in mobile home parks – we require that new residents be approved by the park before purchasing a home from a tenant, but the rule is impossible to enforce, if holdover evictions are prohibited. Under the New York City rent stabilization rules, family members, domestic partners, and even close friends can inherit rent-stabilized leases. That means that City landlords can often be forced to rent to people who they never agreed to rent to. Nobody agrees to lease to someone who doesn’t pay, breeds pitbulls, or cooks meth, but rent regulations allow people who do things like that to inhabit property without property owners’ permission. Acquiescence happens at a given point in time. It is limited by conditions and it has a limited term. No landlord acquiesces unconditionally to permanent tenancy. Epstein’s argument makes a lot of sense to me.’
‘What did he say about the disparate effect of rent control on owners of manufactured homes and apartment residents’, the stripper asked.
‘Because mobile home park residents own their homes, only park residents who own their homes on the effective date of the applicable rule benefit. Park residents who buy their homes after that date do not benefit. That is because the value of below-market lot rents and limited eviction rights will be baked into the price of homes sold in place once information about rent regulation becomes available. New buyers will pay a premium for the chance to pay below-market lot rents. In a perfectly efficient market, this premium will be equal to the present value of the reduction in lot rents. The net effect is a transfer of wealth from the park owners to residents in place on the effective date of the rule, and only to them. Residents who buy after that date are not affected.’
‘Epstein would focus on that’, the stripper said, ‘since he does law and economics. He’s a sweetheart.’
‘It’s a point a law-and-economics professor would find more interesting than would a park owner. A park owner would just note that he has been hosed. He wouldn’t care how his wealth has been re-allocated throughout the community. He would just care that it has been allocated away from him.’
‘Did Epstein speak to the constitutional issues, as well as the economic issues’, the stripper asked.
‘He made another point about O’Connor’s treatment of physical takings’, the GC said, ‘One that is relevant to 74 Pinehurst. The distinction between a per se taking, or a physical taking, and a regulatory taking is important because a claim of regulatory taking is subject to a more stringent level of review than a claim of physical taking. So – if the government can argue successfully that its action is a regulatory taking, rather than a physical per se taking, that is more than half the government’s argument. Epstein said that it was fatuous to limit per se takings to instances where the right to possession is invaded. A per se taking, he says, can occur when a sufficient number of any of the rights that make up the bundle are infringed.’
‘To protect bare possession’, the stripper quoted, ‘while excluding use and disposition from serious constitutional protection, leaves landowners subject to massive regulatory risk without any offsetting social gain’.[7]
The GC opened his eyes and looked at the stripper more closely. ‘You really do know him well’, he said.
‘Yes, I do’, the stripper said. ‘And that is all I am going to say on the subject.’
‘The right to use rental property includes the right to, well, rent it. A mobile home park or an apartment building is, after all, just a bond with a septic field. By Epstein’s definition, if you invade the right to collect rents, you have a taking. Effectively, if you reduce the present value of a stream of rental payments, you have invaded the right to use that property. Make that substantial and you have a per se taking under Epstein’s definition.’
‘The Second Circuit cited a string of cases that it said explicitly rejected the idea that a reduction in value due to regulatory changes can be a taking’, the stripper said.
‘That is fucked’, the GC said. ‘If a regulation takes away value, isn’t that a taking?’
‘I agree’, the stripper said, ‘but that’s the law. See, e.g. Park Ave Tower Associates v. City of New York,[8] holding that a reduction in value due to regulatory changes is not a taking. The Second Circuit in 74 Pinehurst cited a string of cases holding that a reduction of up to 90 percent of a property’s value due to regulatory changes is not a taking, because, I dunno, stare decisis.’[9]
‘Eat shit, trillions of flies can’t be wrong.’
‘Now, now.’
‘I think that most of those cases can be distinguished from 74 Pinehurst because they are not rent regulation cases. Most are zoning cases. A case in which a ceiling height requirement, or a minimum setback, is changed in a way that could alter the value of an investment is fundamentally different from a rent regulation.’
‘How’s that? Both affect the value of a landowner’s investment.’
‘True, but a zoning regulation is a regulation with broad public consequences whose effect on property value is an epiphenomenon. By contrast, rent regulation is an involuntary transfer of value from one party to another whose effect invades the owner’s core use of his or her property.’
The stripper looked to her left and the GC followed her gaze. The flamingo had emerged from the VIP room with two strippers, one on each wing. The GC noted, petulantly, that neither of the two women had sleeve tattoos. ‘I don’t know how he does it’, he said. ‘Some birds have vestigial penises, but he doesn’t have any. When it comes time to have kids, he tells me, he will shoot sperm from his cloaca, but he tells me he is not ready to settle down yet.’
‘You were talking about zoning restrictions’, the stripper said.
‘The only value-reduction case that the Second Circuit cited that involved rent control was MHC Fin. Ltd.[10] That was a California mobile home park case, same as Yee. And in that case, the Ninth Circuit actually did not hold that a reduction in value can’t be a taking. It stated it in dicta. It held that the petitioner in that case could not claim that the loss of a reasonable return on its investment due to rent control was a taking because it had bought the park after the rent control rule was in effect. Since the law was in effect when the petitioner bought the property, it could not claim that the law upset its investment expectations.’
‘So that means that a property owner who owned applicable property on the date the Nakba law went into effect –
‘Yeah, if the court were being rational. But I think that, in that case, the Ninth Circuit would hold that an 81% reduction in value is not a regulatory taking, instead of just saying it. But that’s where I think you need to distinguish between a zoning rule and a rent regulation rule.’
The stripper shifted her weight. ‘Mansplain’, she said.
‘Rent regulation differs from zoning in two ways. First, zoning benefits broad groups of society, while rent regulation benefits a very narrow tranche. Rent regulation is a transfer of wealth from one person to another. That is crazy. If you want to subsidize housing, subsidize it through a transparent tax-and-spend process. Don’t dress up income redistribution in housing regulation drag.’
‘You’ve already said that.’
‘Sorry. The second difference is that rent regulation invades the primary use of rental property. Remember, a mobile home park is a bond with a septic field. At Dirtlease, we don’t own our parks to live in them, to house our in-laws, or to shoot horror movies in them. We own them for one purpose, and one purpose alone; to rent them out. If you invade that right, you have taken away the most important right in the bundle. Remember Horne v. Department of Agriculture?’[11]
‘The raisin case?’
‘Yeah the raisin case. In Horne, the Supremes held that the taking clause can apply to personal property as well as to real property. The case arose out of a California law that required grape growers who wanted to participate in the raisin market to hand over a portion of their crop to the state department of agriculture. The Court held that there was a physical taking because there was, well, a physical taking of raisins from raisin growers. I got the feeling that if the state merely taxed raisin growers, the Court would not have ruled that a taking, even though the economic effect would be identical to a physical taking of a portion of the raisin-growers’ crop. Anyhow, rents are our raisins. A mobile home park is a stream of cash flows and nothing else. Those cash flows are our property. If you make us increase septic capacity, say, or increase lot size, that might reduce the value of our property, but if you reduce rents, you have invaded the thing itself.’
‘Don’t you think that’s cutting the baloney rather thin?’
‘That’s what I do.’
‘At least I earn an honest living.’
.
When the GC looked at his left wrist, he saw that his watch was gone. His phone had dropped out of his pocket. He looked toward the bar, but couldn’t see the flamingo. The night seemed to be winding down; as far as he could tell, the only people left in the place were him, the stripper, and a bald guy behind the bar, blurry and in the corner of his field of vision. ‘What do I owe you’, he asked.
‘You can’t afford it’, she said.
‘You stay in the game when you’re –‘
‘Too broke to fail. Wipe your nose.’
‘You know what else pissed me off about 74 Pinehurst?’
‘Tell me.’
‘Well, first it was the way the court said that the plaintiffs had no standing to rely on pre-Nakba law in setting their investment goals. Effectively, they said, ‘There has been rent regulation in New York since 1969. The rules have changed several times since then. You should have expected a rule change when you made your investment’. That seems to me to be like a mafioso saying, ‘You have no standing to complain about having to pay protection money. We have been charging your family u pizzu since your father was little’. The fact that an unjust law has been in place for a long time does not make it just.’
‘But isn’t that what the Ninth Circuit held in MHC Fin LTD?’
‘I don’t think so. In MHC Fin, the plaintiff argued that the law upset its reasonable investment expectation. In 74 Pinehurst, the plaintiff argued that its property had been taken away. One argument goes to expectations, and the other to substantive justice. And anyhow, nobody expected the law to change as drastically as it was changed by the Nakba legislation.’
‘What else?’
‘I appreciate the road-map that Thomas has left us, but I am curious how a plaintiff can do what he suggests. Any claim about a rent control rule will be a claim about missed opportunities. There will have to be some discussion of missed opportunities and theoretical pricing. Proving actual, tangible harm is an awful lot like proving a negative. That can be hard.’
‘Several mobile home parks in New York State are deteriorating because of Nakba-related rent control. Maintenance has been deferred, infrastructure is crumbling, but it is impossible to pay for upgrades without an increase in lot rents. Could the residents of one of those parks sue?’
‘Sure, but good luck getting park residents to sue to increase their lot rents.’
‘Anything else’, the stripper asked.
‘Yeah, one last thing. In reviewing the takings claim, the Second Circuit said that, for there to be a regulatory taking, the plaintiff would have to prove that ‘no set of circumstances exists under which [the law] would be valid.’[12] That is crazy. It is like asking, ‘What color is a gallon?’ Any rule, anywhere, will always impact differently-situated parties differently. A rent control rule is no different. At Dirtlease, our lot rents were near market when the Nakba rules came into effect, and we have increased them annually to the extent allowed by law since. We took a hit, but the hit was moderate. For a mom-and-pop who have kept their lot rents at, say $250 a month since the nineties, the law is a knockout blow. A law that everyone has to wear a down parka when he or she goes outside is not a big deal for people who live in Alaska, but it is terrible for people who live in Florida – but it is still an unjust law. The fact that a law has disparate impact should not mean that the law is, somehow, just.’
‘You never really understood con law’, the stripper said.
‘Nope.’
‘Did you go to Yale?’
The GC put his elbow under the Stripper’s knee and placed both her feet on the ground next to him. The erection that had been bothering since he entered the place disappeared. ‘I have behaved like a gentleman until now’, he said. ‘I think it’s time we settled up’.
.
When the stripper poured the GC out of her car in front of the GC’s house, the head of HR was waiting in the doorway with a rolling pin. ‘I don’t know if my wife left me because of my drinking’, the GC was mumbling, ‘Or if I started drinking because she left me.’
‘I have something for you’, the stripper said to HR. She handed the GC to HR the way the DEA hands a captive to the CIA, blindfolded, drugged, bound.
‘Better you than me’, HR said.
‘We discussed 74 Pinehurst LLC, the stripper said.
The lines around HR’s mouth tightened. ‘Excuse me’, she said. ‘You did what with my husband?’
’74 Pinehurst, LLC’, the stripper said. ‘The rent control case that was denied cert.’
‘I know the case’, HR said. She flipped the rolling pin once, the way a cop flips a billy club. Then she said, ‘I’ll take it from here’, and guided the GC through the doorway.
[1] 59 F.4th 557 (2d Cir., 20234).
[2] State of New York 2019-2020 S.6458.
[3] 30 F. 4th 720 (CA8 2022).
[4] 24 N.Y.3d 283 (2014).
[5] 503 U.S. 519 (1992).
[6] Richard A. Epstein, Yee v. City of Escondido: The Supreme Court Strikes Out Again, 26 Loy. L. A. L. Rev. 4 (1992-1993).
[7] Id.
[8] 746 F.2d 135 (2d Cir., 1984).
[9] Concrete Pipes & Prods. Of Cal. Inc. v. Constr. Laborers Pension Trust for S. Cal., 508 U.S. 602 (1993); Village of Euclid v. Ambler Realty Co., 272 U.S. 365 (1926); Hadacheck v. Sebastian, 239 U.S. 394 (1915); William C. Haas & Co. Inc. v. City & Cnty of S.F., 605 F.2d 1117 (9th Cir., 1979); Pulte Home Corp. v. Montgomery County, 909 F.3d 685 (4th Cir., 2018); MHC Fin. Ltd. P’ship v. City of San Rafael, 714 F.3d 1118 (9th Cir., 2013).
[10] Id.
[11] 576 U.S. 351 (2015).
[12] Id, quoting Rent Stabilization Ass’n of the City of New York v. Dinkins, 5 F.3d 591 (2d Cir., 1993).