In the Supreme Court of the United States PETITION FOR WRIT OF CERTIORARI

Transcription

1 NO. In the Supreme Court of the United States STAR NORTHWEST, INC., a Washington corporation d/b/a Kenmore Lanes and 11 th Frame Restaurant & Lounge, Petitioner, v. CITY OF KENMORE, a Washington municipal corporation, and KENMORE CITY COUNCIL, the legislative body of the City of Kenmore, Respondents. On Petition for Writ of Certiorari to the Court of Appeals of the State of Washington PETITION FOR WRIT OF CERTIORARI PAUL J. DAYTON Counsel of Record LESLIE C. CLARK Short Cressman & Burgess PLLC 999 Third Avenue, Suite 3000 Seattle, Washington Telephone: (206) pdayton@scblaw.com December 6, 2011 Counsel for Petitioner Becker Gallagher Cincinnati, OH Washington, D.C

2 i QUESTION PRESENTED FOR REVIEW Star Northwest, Inc. d/b/a Kenmore Lanes and 11 th Frame Restaurant & Lounge ( Star Northwest ) operated a card room, bowling alley, and restaurant in Kenmore, King County, Washington, for more than 30 years. Its card room, the sole card room in Kenmore, had been continuously licensed by the State of Washington since In December 2005, the Kenmore City Council adopted an ordinance banning all card rooms in the City of Kenmore. The ordinance provided a mere 10-day effective date and offered no amortization period or compensation for the loss of Star Northwest s legally-established and legallyoperating card room. Pursuant to Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, 473 U.S. 172 (1985), the United States District Court ruled that Star Northwest must pursue its Fifth Amendment takings claim in state court. There, employing due process-grounded considerations of the vice-like character of the business the Court of Appeals of the State of Washington refused to apply this Court s guidance on takings claims stated in Lingle v. Chevron U.S.A., Inc., 544 U.S. 528 (2005), and affirmed dismissal of Star Northwest s takings claim. 1 Pursuant to this Court s Rule 10(c), the question presented is 1. Whether the Washington Court of Appeals erred when it refused to apply Lingle v. Chevron U.S.A., Inc., 544 U.S. 528 (2005), based on the erroneous premise 1 The Washington Supreme Court declined to grant review of the state court s appellate decision. Appendix (hereinafter App. ), infra, 27a-28a.

3 ii that the vice-like character of Star Northwest s statelicensed, lawfully-operating business foreclosed Star Northwest s takings claim under the Fifth Amendment. 2 2 When the United States District Court for the Western District of Washington was presented with the same question, it also concluded that Star Northwest lacked constitutional protection because of the claimed vice-like character of its business. App., infra, 66a-67.

4 iii PARTIES TO THE PROCEEDING AND RULE 29.6 STATEMENT The caption contains the names of all parties to the proceeding below. Pursuant to this Court s Rule 29.6, undersigned counsel state that Star Northwest, a Washington corporation, has no parent and no publicly held company owns 10% or more of the corporation s stock.

5 iv TABLE OF CONTENTS QUESTION PRESENTED FOR REVIEW... i PARTIES TO THE PROCEEDING AND RULE 29.6 STATEMENT... iii TABLE OF CONTENTS... iv TABLE OF CITED AUTHORITIES... viii INTRODUCTION... 1 OPINIONS BELOW... 1 BASIS FOR JURISDICTION... 1 CONSTITUTIONAL PROVISIONS, TREATIES, STATUTES, ORDINANCES, AND REGULATIONS... 2 STATEMENT OF THE CASE... 2 REASONS FOR GRANTING THE PETITION... 6 A. The Washington Court Persisted in Applying Substantive Due Process Analyses, Grounded in Guimont, 121 Wash. 2d. 586, 602, 603, 854 P.2d 1, Despite the Irreconcilable Clash with Lingle Applying the first part of the Guimont second threshold inquiry, the state court of appeals wrongly held that the City s exercise of police power immunized it from a takings challenge

6 v 2. Exempting the City from a takings challenge by labeling the card room as in the nature of a public nuisance cannot be squared with this Court s jurisprudence regarding the intersection between nuisance and takings claims.. 13 (a) Star Northwest had a property right in its card room (b) This Court s nuisance jurisprudence did not negate Star Northwest s property right. Labeling the card room vice-like and in the nature of a public nuisance should not have blanked Star Northwest s Fifth Amendment takings claim B. Application of the Guimont Test Prevented Star Northwest from Proceeding on its Penn Central Taking Claim, in Irreconcilable Conflict with Lingle CONCLUSION APPENDIX Appendix A: Court of Appeals, State of Washington, Unpublished Opinion (April 4, 2011)... 1a

7 vi Appendix B: Superior Court for the State of Washington in and for the County of King, Order Granting City s Motion for Summary Judgment on Takings Claims (Revised) (July 10, 2009)... 23a Appendix C: Supreme Court of Washington, Order (September 7, 2011)... 27a Appendix D: Appendix E: Appendix F: Appendix G: Kenmore, Washington, Ordinance a29a United States Court of Appeals for the Ninth Circuit, Order (January 7, 2009)... 47a United States Court of Appeals for the Ninth Circuit, Memorandum (May 28, 2008)... 50a United States District Court, Western District of Washington at Seattle, Corrected Order on Motion for Summary Judgment (August 10, 2006)... 60a

8 vii Appendix H: Superior Court of the State of Washington in and for the County of King, Amended Complaint for Injunctive Relief and Damages (October 6, 2006)... 75a

9 viii TABLE OF CITED AUTHORITIES Cases Agins v. City of Tiburon, 447 U.S. 255 (1980)... 9, 22 City of Des Moines v. Gray Businesses, L.L.C., 158 Wash. 2d 1024, 149 P.3d 379 (2006) City of Seattle v. Bittner, 81 Wash. 2d 747, 505 P.2d 126 (1973) City of Seattle v. McCoy, 101 Wash. App. 815, 4 P.3d 159 (2000) Crawford v. Cent. Steam Laundry, 78 Wash. 355 (1914) E. Enters. v. Apfel, 524 U.S. 498 (1998) Edmonds Shopping Center Assocs. v. City of Edmonds, 117 Wash. App. 344, 71 P.3d 233 (2003)...5, 6, 8, 14, 15, 19 Greater New Orleans Broad. Ass n, Inc., v. United States, 527 U.S. 173 (1999) Guimont v. Clarke, 121 Wash. 2d 586, 854 P.2d 1 (1993)...passim Keystone Bituminous Coal Ass n. v. DeBenedictis, 480 U.S. 470 (1987)... 12, 17

10 ix Lee & Eastes v. Pub. Serv. Comm n, 52 Wash. 2d 701, 338 P.2d 700 (1958) Lingle v. Chevron U.S.A., Inc., 544 U.S. 528 (2005)... passim Lucas v. S.C. Coastal Council, 505 U.S (1992)... passim Nw. Greyhound Kennel Ass n v. State, 8 Wash. App. 314, 506 P.2d 878 (1973) Palazzolo v. Rhode Island, 533 U.S. 606 (2001) Paradise, Inc. v. Pierce Cnty., 124 Wash. App. 759, 102 P.3d 173 (2004)...passim Penn Cent. Transp. Co. v. New York City, 438 U.S. 104 (1978)... passim Peste v. Mason Cnty., 159 Wash. 2d 1013, 154 P.3d 919 (2007) Presbytery of Seattle v. King Cnty., 114 Wash. 2d 320, 787 P.2d Rhod-A-Zalea & 35th, Inc., v. Snohomish Cnty., 131 Wash. 2d 1, 959 P.2d 1024 (1998) Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984) San Remo Hotel, L.P. v. City and Cnty. of S.F., 545 U.S. 323 (2005)... 4

11 x Sintra, Inc. v. City of Seattle, 119 Wash. 2d 1, 829 P.2d 765 (1992)... 10, 20 State v. Gedarro, 19 Wash. App. 826, 579 P.2d 949 (1978).. 14, 15 Tarver v. City Comm n In and For City of Bremerton, 72 Wash. 2d 726, 435 P.2d 531 (1967) Tiegs v. Watts, 135 Wash. 2d 1, 954 P.2d 877 (1998) United States v. Edge Broad. Co., 509 U.S. 418 (1993) Webb s Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155 (1980) Williamson Cnty Reg l Planning Comm n v. Hamilton Bank of Johnson City, 473 U.S. 172 (1985)... 1, 4, 7 Constitutional Provisions U.S. Const. amend. I U.S. Const. amend. V...passim U.S. Const. amend. XIV... 4, 10 Statutes 28 U.S.C RCW

12 xi RCW Rules Sup. Ct. R (b)... 1 (c)... 1 Other Authorities Kenmore, Wash., Ordinance passim

13 1 INTRODUCTION Petitioner Star Northwest respectfully submits this Petition for a Writ of Certiorari to review the judgment of the Washington Court of Appeals. OPINIONS BELOW Star Northwest initially filed its Fifth Amendment takings claim in the United States District Court for the Western District of Washington. That court dismissed Star Northwest's claim as unripe until tried in state court under the Williamson County, 473 U.S. 172, line of cases. The opinion of the federal district court, filed August 10, 2006, is available at 2006 U.S. Dist. LEXIS 53769, and is reprinted in the Appendix hereto, pp. 60a-74a. Star Northwest appealed to the Ninth Circuit, which affirmed in two unpublished memoranda. The memoranda are available at 308 Fed. Appx. 62 (Jan. 7, 2009) and 280 Fed. Appx. 654 (May 28, 2008), reprinted in the Appendix, pp. 47a- 59a. This Court declined review. 129 S. Ct Meanwhile, Star Northwest filed in Washington state court. The trial court dismissed Star Northwest's Fifth Amendment takings claim on summary judgment. The trial court's order is reprinted in the Appendix, pp. 23a-26a. The Washington state court of appeals affirmed in an unpublished opinion available at 2011 Wash. App. LEXIS 800 (Apr. 4, 2011), reprinted in the Appendix, pp. 1a-22a. The Washington Supreme Court denied review Wash. LEXIS 729 (Sept. 7, 2011), reprinted in the Appendix, pp. 27a-28a.

14 2 BASIS FOR JURISDICTION On September 7, 2011, the Washington Supreme Court denied Star Northwest s Petition for Review of the April 4, 2011, opinion of Division 1 of the Court of Appeals of the State of Washington. No order was made respecting hearing, and Star Northwest did not seek an extension of time to file the petition for a writ of certiorari. No cross-petition for a writ of certiorari is made. 28 U.S.C confers on this Court the jurisdiction to review and decide the question presented. No Rule 29.4(b) or (c) notifications were required. CONSTITUTIONAL PROVISIONS, TREATIES, STATUTES, ORDINANCES, AND REGULATIONS The Fifth Amendment to the United States Constitution provides in relevant part: [N]or shall private property be taken for public use without just compensation. The text of the relevant City of Kenmore, Washington, ordinance banning card rooms is set out in the Appendix. App., infra, 29a-46a. STATEMENT OF THE CASE Star Northwest operated the 11 th Frame card room, a bowling alley, restaurant, and bar in the City of Kenmore, Washington (the City ). The 11 th Frame card room had been operating continuously at that location since the mid-1970s and did not close until the 2009 effective date of the City card room ban challenged in this action. No other card rooms

15 3 operated in the City. Star Northwest s bowling alley had been in continuous operation at the same location since 1958, 40 years before the City incorporated. Since 1997, Star Northwest had invested approximately $5.5 million in improving the 11 th Frame, as well as Star Northwest s bowling alley, restaurant, and bar. Since before Star Northwest acquired it, the 11 th Frame had been continuously licensed for card room operations by the Washington State Gambling Commission. The 11 th Frame had no history of unusual criminal activity, and the City s record is devoid of any negative impact of the card room on the community. In December 2005, the City Council considered Kenmore Ordinance No which purported to ban all card rooms in the City. The City Council voted to remove the ordinance s provision allowing Star Northwest to operate its card room through 2006, intentionally denying Star Northwest its right to operate the card room for even the duration of its current license. As adopted, Kenmore Ordinance No (the Ordinance ) did not provide for the payment of any compensation for the closure of existing card room operations or for an amortization period. App., infra, 29a-46a. The Ordinance was scheduled to become effective just 10 days after the City Council adopted it. 3 The City never explained the purpose of the immediate ban of all card rooms, and the Ordinance states no purpose. 3 Under a temporary restraining order and subsequent preliminary injunction, the card room remained open until 2009.

16 4 Closure of the 11 th Frame in its Kenmore location meant total loss of the card room business because there were no viable locations in King County for a reestablished card room, bowling alley, restaurant, and bar. Even if a location could be found, the costs of moving the business and the delay in rebuilding goodwill prevented relocation. Furthermore, the profits from the card room subsidized Star Northwest s bowling alley, the restaurant, the employee benefits, and Star Northwest s community and charitable activities. Thus, closure of the 11 th Frame stripped the value of Star Northwest s entire business investment, calculated at $4,936,000, as of December 31, In December 2005, before the Ordinance became effective, Star Northwest filed suit against the City of Kenmore and Kenmore City Council in the United States District Court for the Western District of Washington seeking injunctive relief and damages, alleging, in part, that the Ordinance violated (1) its Fifth Amendment right to compensation for the taking of private property and (2) its Fourteenth Amendment right to substantive due process. In August 2006, the federal district court granted summary judgment dismissing Star Northwest s Fifth Amendment claim as unripe under Williamson County, 473 U.S. at , 4 and dismissing the Fourteenth Amendment claim 4 Citing San Remo Hotel, L.P. v. City and County of San Francisco, 545 U.S. 323 (2005), Star Northwest argued to the federal district court that pursuing its Fifth Amendment takings claim in Washington state court would be futile, given the state of law in Washington. The district court nevertheless dismissed as unripe until tried in state court. App., infra, 68a-69a.

17 5 on its merits. App., infra, 60a-74a. The Ninth Circuit affirmed. 5 App., infra, 47a-59a. Meanwhile, because the federal district court had dismissed Star Northwest s Fifth Amendment takings claim as unripe until adjudicated in state court, Star Northwest filed an action in Washington state court (King County Superior Court). Star Northwest expressly alleged, among other claims, a taking under the Fifth Amendment. In 2009, the state court granted the City s motion for summary judgment on Star Northwest s Fifth Amendment takings claim and dismissed the suit. Star Northwest timely appealed to the Court of Appeals of the State of Washington. On April 4, 2011, Division 1 of the Court of Appeals of the State of Washington issued an unpublished decision, affirming the trial court s dismissal. App., infra, 1a-22a. The court of appeals reasoned that its pre-lingle, 544 U.S. 528, decisions, Edmonds Shopping Center Associates v. City of Edmonds, 117 Wash. App. 344, 71 P.3d 233 (2003), and Paradise, Inc. v. Pierce County, 124 Wash. App. 759, 102 P.3d 173 (2004), controlled. Following Paradise, the court held that as the card room ban was an exercise of the City s police power, no takings claim could be stated, effectively denying Star Northwest access to the ad hoc takings analysis articulated in Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978). This outcome resulted from Paradise s and Edmonds s application of Guimont v. Clarke, 121 Wash. 2d 586, 854 P.2d 1 (1993) the Washington 5 Star Northwest filed with this Court a Petition for Writ of Certiorari, but the Petition was not granted.

18 6 Supreme Court s amalgam of Fifth Amendment takings jurisprudence. The court of appeals applied Paradise and Guimont to label Star Northwest s card room as in the nature of a public nuisance so not entitled to proceed on a takings claim. Although the court acknowledged that Lingle might affect part of the Guimont takings test, it nevertheless applied Guimont. Star Northwest timely sought review in the Washington Supreme Court, but on September 7, 2011, that court denied Star Northwest s request. App., infra, 27a-28a. REASONS FOR GRANTING THE PETITION Below, in contravention to this Court s direction in Lingle, 544 U.S. 528, the Washington court of appeals applied substantive due process considerations to dismiss Star Northwest s Fifth Amendment takings claim. The state court held that it was controlled by two prior Washington court of appeals decisions that predated Lingle: Edmonds, 117 Wash. App. 344, 71 P.3d 233, and Paradise, 124 Wash. App. 795, 102 P.3d 174. App., infra, 15a-16a. Deeming itself controlled by Edmonds and Paradise, the state court of appeals applied those holdings to label Star Northwest s card room in the nature of a public nuisance ineligible to seek compensation for its business taken by the City s regulation banning card rooms. The Washington Court of Appeals erred when it applied Edmonds and Paradise. Both those opinions followed the Washington Supreme Court s opinion in

19 7 Guimont, 121 Wash. 2d 586, 854 P.2d 1, which folds substantive due process inquiries into Fifth Amendment takings claims. This contravenes Lingle. Moreover, misapplying Lucas v. South Carolina Coastal Council, 505 U.S (1992), Edmonds and Paradise had erroneously concluded that a card room business may be terminated without just compensation under an exercise of police power because it is vice-like or in the nature of a nuisance. The effect of the court of appeals application of Edmonds and Paradise was severe; it deprived Star Northwest of the opportunity to ever have the state court consider the evidence supporting its Penn Central regulatory takings claim. The Washington Supreme Court has now denied review of its lower courts misapplication of Fifth Amendment takings law in both Paradise (review denied 154 Wash. 2d 1027, 120 P.3d 73 (2005)), and this action (App., infra, 27a-28a). Under Washington s state of the law, no gambling business (or similarly historically highly-regulated business) can ever receive compensation when forced to close under the police power regulation of a local government. Of even broader impact, Washington s formulation of Fifth Amendment takings claims sets additional hurdles in front of any plaintiff not only proprietors of card room or other gambling businesses that alleges a taking of property for which just compensation must be paid. Lingle assures that such hurdles cannot be placed and need not be jumped. As state courts serve as the initial (and often final) forum for federal takings claims, see Williamson County, 473 U.S. 172, this Court should issue a Writ of Certiorari and correct Washington s failure to apply takings principles expressed in Lingle.

20 8 A. The Washington Court Persisted in Applying Substantive Due Process Analyses, Grounded in Guimont, 121 Wash. 2d. 586, 602, 603, 854 P.2d 1, Despite the Irreconcilable Clash with Lingle. The court of appeals applied substantive due process principles not takings principles to deprive Star Northwest of its Fifth Amendment taking claim. This resulted from the state court deeming itself controlled by Paradise, 102 P.3d 173, and Edmonds, 71 P.3d 233, which had applied the substantive due process-infused Fifth Amendment takings analysis in Guimont. App., infra, 16a. As further explained in Part B infra, Guimont imposes on Fifth Amendment takings plaintiffs two threshold inquiries that must be answered before the Washington court will engage in a takings analysis. Guimont, 854 P.2d at 10. The second threshold inquiry is wholly grounded in substantive due process considerations, which the court of appeals applied against Star Northwest. This was unremedied error, as this Court s 2005 watershed takings opinion, Lingle, 544 U.S. 528, announced that substantive due process considerations play no part in takings claims analyses. In the Lingle opinion, a unanimous Court clarified conflicting principles in takings jurisprudence to remind the lower courts that the crux of a Fifth Amendment takings analysis is, truly, analysis regarding whether property has been taken: the common touchstone of regulatory takings jurisprudence is to identify regulatory actions that are functionally equivalent to the classic taking in which government directly appropriates private property or ousts the owner from his domain; all tests for a taking

21 9 focus directly upon the severity of the burden that government imposes upon private property rights. Lingle, 544 U.S. at 539. In clarifying takings claims common touchstone, the Lingle Court rejected the former pervasive commingling of substantive due process and takings analyses. Specifically, the Court rejected the substantially advances takings analysis derived from Agins v. City of Tiburon, 447 U.S. 255, 260 (1980), because it probes the regulation s underlying validity, a proper test for a substantive due process challenge rather than a takings challenge. Lingle, 544 U.S. at 543. But, more expansively than simply rejecting Agins substantially advances term in a takings context, the Court explained that a takings analysis should be formed around the questions of the magnitude and distribution of a regulation s impacts. Lingle, 544 U.S. at 529. Challenges to the validity of the regulation itself (e.g., Does the regulation mitigate harm? Does the regulation impose the conferring of public benefits?), the Court clarified, properly belong to a substantive due process challenge which logically precedes a takings challenge. Id. at 543. The Court explained: if a regulation is invalid because of subject matter or methodology, no amount of compensation can correct it. Id. Such a regulation violates due process rights. However, a regulation that may otherwise be valid in nature, may still go too far in its impact on a property owner and, thus, constitute a taking of property requiring compensation. Id. at In plainer words, even if a regulation survives a substantive due process challenge and is enacted for a public use, it may still constitute a taking for which compensation is due.

22 10 Under Lingle, a regulation is first tested under a Fourteenth Amendment substantive due process test and a Fifth Amendment public use test, and if the regulation is not invalidated under those tests, is then subjected to a Fifth Amendment claim for just compensation. See Lingle, 544 U.S. at 543 (a substantive due process inquiry is logically prior to and distinct from the question whether a regulation effects a taking ). A regulation s survival of a substantive due process challenge does not immunize it from a takings challenge, but this was precisely the outcome for Star Northwest due to the state court of appeals application of Guimont s second threshold inquiry. The Guimont second threshold inquiry is itself divided into two parts, which ask: Part 1 of Guimont second threshold inquiry: [W]hether the challenged regulation safeguards the public interest in health, safety, the environment or the fiscal integrity of an area. Part 2 of Guimont second threshold inquiry: [W]hether the regulation seeks less to prevent a harm than to impose on those regulated the requirement of providing an affirmative public benefit. Guimont, 854 P.2d at 10. Both parts of Guimont s second threshold inquiry resonate in substantive due process, not takings. See, e.g., Sintra, Inc. v. City of Seattle, 119 Wash. 2d 1, 15, 829 P.2d 765, 772 (1992) ( The threshold test is designed to prevent undue chilling on legislative bodies attempts to properly and

23 11 carefully structure land use regulations which prevent public harms ). And compare Lingle, 544 U.S. at 543 (the question of whether a regulation advances a state interest answers whether it satisfies a substantive due process challenge, not whether it constitutes a taking of private property for which compensation must be paid). 1. Applying the first part of the Guimont second threshold inquiry, the state court of appeals wrongly held that the City s exercise of police power immunized it from a takings challenge. The first part of Guimont s second threshold inquiry asks whether the challenged regulation safeguards the public interest in health, safety, the environment or the fiscal integrity of an area. 854 P.2d at 10. Below, the Washington court of appeals answered this part adversely to Star Northwest solely by labeling the Ordinance as an exercise of police power. App., infra, 19a (citing the Washington State Gambling Act s provision at RCW allowing cities to ban gambling within their jurisdiction as ipso facto evidence of police power authority). The Washington court s opinion indicates an erroneous view that as long as the City was acting under its police power it does not face a viable Fifth Amendment challenge. This Court has rejected the state court s view and observed that a bald assertion that a regulation is made under a government s police power does not insulate the government from paying just compensation. See, e.g. Palazzolo v. Rhode Island, 533 U.S. 606, 635 (2001) (O Connor, J., concurring) ( The first question is whether the enactment or

24 12 application of a regulation constitutes a valid exercise of the police power. The next question is whether the State must compensate a property owner for a diminution in value effected by the State s exercise of its police power ) (emphasis added). See also Penn Central, 438 U.S. at 145, 149 ( A taking does not become a non-compensable exercise of police power simply because the government in its grace allows the owner to make some reasonable use of his property ). Again, this Court has instructed that even though a legitimate exercise of the police power will satisfy the public use clause of the Fifth Amendment takings protection, claiming that a regulation is enacted through valid police power means does not answer whether compensation must be paid. Keystone Bituminous Coal Ass n. v. DeBenedictis, 480 U.S. 470, 492 (1987) (holding that while the public use requirement of the takings clause may be coterminous with the scope of a sovereign s police powers, the just compensation requirement must also and independently be satisfied when a taking occurs). And see Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1014, 1020 (1984) (a taking that is permissible by virtue of its satisfaction of the public use requirement is still subject to payment of just compensation). Below, the Washington court of appeals relied on the police power discussion in Paradise, 102 P.3d at 179, which failed to make the distinction that police power actions demonstrate that a regulation effects a public use but does not answer whether compensation is owed for a taking. That question is answered by measuring the magnitude of the regulation s impact. Lingle, 544 U.S. at 540. Other than to find no Lucas total economic loss, App., infra, 18a-19a, the state court never considered the

25 13 magnitude of impact of the Ordinance banning card rooms, and the Washington Supreme Court refused review. 2. Exempting the City from a takings challenge by labeling the card room as in the nature of a public nuisance cannot be squared with this Court s jurisprudence regarding the intersection between nuisance and takings claims. The second part of Guimont s second threshold inquiry (also applied in Paradise) asks whether the regulation seeks less to prevent a harm than to impose on those regulated the requirement of providing an affirmative public benefit. 854 P.2d at 10. On this second part, the Washington court ruled against Star Northwest by labeling its card room use as in the nature of public nuisance and, thus, impliedly not a property right subject to Fifth Amendment protection. The state court s pronouncement cannot be harmonized with this Court s Fifth Amendment takings and nuisance jurisprudence set forth in, inter alia, Lucas, 505 U.S (a) Star Northwest had a property right in its card room. To begin, the Fifth Amendment takings clause protecting property rights does not itself create property rights; rather, property rights are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law. Webb s Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 161 (1980) (citations

26 14 omitted); see also Lucas, 505 U.S. at 1030 (citations omitted) (recognizing that property rights are defined by state law). Under Washington law, Star Northwest s card room business was a property right. Lee & Eastes v. Pub. Serv. Comm n, 52 Wash. 2d 701, 704, 338 P.2d 700, 702 (1958) ( the right to operate a lawful business is a property right ) (internal citations omitted). The verity that a card room, like every business, is a property right was treated as a matter of course in the two opinions on which the Washington court of appeals extensively relied, Edmonds, 71 P.3d at 241 (assumes card room business has a property right subject to Fifth Amendment takings considerations) and Paradise, 102 P.3d at 178 (same). See also City of Seattle v. McCoy, 101 Wash. App. 815, 4 P.3d 159 (2000) (the abatement of a business was a taking requiring just compensation). And see Rhod-A-Zalea & 35 th, Inc., v. Snohomish County, 131 Wash. 2d 1, 9, 959 P.2d 1024, 1029 (1998) ( Local governments, of course, can terminate nonconforming uses but they are constitutionally required to provide a reasonable amortization period ). The Washington court of appeals treatment of this property right demonstrates its failure to apply this Court s direction in Lingle that due process considerations have no role in takings analysis. The court of appeals noted Washington legislature s regulatory structure, which allowed card rooms to be banned and concluded that card room use is a legislative privilege not an inherent right. App., infra, 20a-21a (quoting State v. Gedarro, 19 Wash. App. 826, 829, 579 P.2d 949, 951 (1978)). However, review of Gedarro confirms that, in the context of a

27 15 Fifth Amendment takings claim, it is irrelevant whether gambling is a legislative privilege or an inherent right. Gedarro applied substantive due process and equal protection principles that have no place in a takings analysis. 579 P.2d at 951. Rather, the court of appeals citation of Gedarro confirms the Washington courts continued insistence on applying due process principles in a takings analysis. Footnote 41 of the court of appeals opinion crystallizes the problem. App., infra, 21a. There, the court of appeals states, without explanation, that for Fifth Amendment purposes gambling is different than other businesses in that it is deemed a public nuisance and different principles apply with regard to legislative authority over operators of gambling businesses. This does not satisfy Lingle as it rejected consideration of the validity of any related regulation. (b) This Court s nuisance jurisprudence did not negate Star Northwest s property right. Labeling the card room vicelike and in the nature of a public nuisance should not have blanked Star Northwest s Fifth Amendment takings claim. The Washington court of appeals, like the Edmonds and Paradise courts before it, concluded that a card room is fundamentally different from other businesses because it is in the nature of a nuisance; therefore, Star Northwest had no entitlement to Fifth Amendment compensation. In so holding, the court erred by giving credence to the label of nuisance-like.

28 16 In Lucas, this Court clarified that the nuisance exception depriving a Fifth Amendment takings plaintiff of holding a viable claim is narrow. Lucas, 505 U.S. at The Lucas Court rejected the notion that a noxious-use justification could serve as the basis for departing from the rule that total takings must be compensated; otherwise, the Court observed, departure would virtually always be allowed. Lucas, 505 U.S. at Instead, government may resist compensation only if the logically antecedent inquiry into the nature of the owner s estate shows that the proscribed use interests were not part of his title to begin with. Id. at 1027 (emphasis added). The Court explained: A law or decree [prohibiting all economically beneficial use] must, in other words, do no more than duplicate the result that could have been achieved in the courts by adjacent landowners (or other uniquely affected persons) under the State s law of private nuisance, or by the State under its complementary power to abate nuisances that affect the public generally, or otherwise. The principal otherwise that we have in mind is litigation absolving the State (or private parties) of liability for the destruction of real and personal property, in cases of actual necessity, to prevent the spreading of a fire or to forestall other grave threats to the lives and property of others. Id. at 1029 & n.16 (emphasis added). In other words, government avoids paying compensation only if the use at issue was not lawful when the property interest was created. See Lucas, 505 U.S. at 1030 (legislation

29 17 that expressly prohibits what was always unlawful does not entitle a property owner to compensation). On this point, Lucas s holding should be measured against a prior United States Supreme Court opinion cited in Paradise v. Pierce County, 124 Wash. App. 759, 102 P.3d 173 (2004). Paradise invoked the nuisance analysis from Keystone, 480 U.S. 470, which like Lucas explained that if evidence showed that a particular use was injurious or noxious, the property could be taken without compensation. Keystone, 480 U.S. at 489. And see id. at 492 n.20 ( The nuisance exception to the taking guarantee is not coterminous with police power itself ) (quoting Penn Central, 438 U.S. at 145 (Rehnquist. C.J. dissenting)). In its rejection of noxious-use justifications, Lucas further limited the scope of Keystone s nuisance analysis which had more broadly endorsed business regulation. See Lucas, 505 U.S (Stevens, J., dissenting) ( Under our reasoning in Mugler, a State s decision to prohibit or to regulate certain uses of property is not a compensable taking just because the particular uses were previously lawful. Under the Court s opinion today, however, if a State should decide to prohibit the manufacture of asbestos, cigarettes, or concealable firearms, for example, it must be prepared to pay for the adverse economic consequences of its decision ) (emphasis added). Star Northwest s card room did not fall within Lucas s narrow nuisance exception because there was no evidence that the card room was always unlawful. Star Northwest acquired the card room in 1997, long

30 18 after the passage of and in compliance with the Washington Gambling Act. Washington s nuisance law provides that Nothing which is done or maintained under the express authority of a statute, can be deemed a nuisance. RCW (unmodified since 1881); see also Tiegs v. Watts, 135 Wash. 2d 1, 13, 954 P.2d 877, 883 (1998) ( A lawful business is never a nuisance per se ). The card room was a lawful business when Star Northwest acquired it, and the City did not argue or offer evidence that, subsequent to the business s establishment, the nature of Star Northwest s card room operations created a nuisance. 6 Nor can the determination that the business constitutes a nuisance be based on moral objections to the type of business conducted. See Crawford v. Central Steam Laundry, 78 Wash. 355, 357, 139 P. 56, 57 (1914) (a business does not rise to the level of nuisance merely because it is productive of inconvenience or shocks the taste ). Rather than independently look to Lucas, below the Washington court of appeals mechanically applied Paradise s erroneous Lucas interpretation that gambling activities are in the nature of a public nuisance so there simply is no showing that the ordinance [banning card rooms] goes beyond regulating a public harm. App. infra, 21a. The court of appeals also relied on opinions interpreting the due 6 Even if the City had alleged that the card room interfered with the use and enjoyment of property, determinations of whether a business constitutes a nuisance are fact-laden inquiries that should have been evaluated by the trier of fact rather than resolved on summary judgment. See Tiegs, 954 P.2d at 884 (the question of whether a business created a nuisance is one for the jury ).

31 19 process clause, not the taking clause. App., infra, 20a, nn. 38, 39 (citing City of Seattle v. Bittner, 81 Wash. 2d 747, 751, 505 P.2d 126, (1973); Tarver v. City Comm n In and For City of Bremerton, 72 Wash. 2d 726, 731, 435 P.2d 531, 534 (1967); Northwest Greyhound Kennel Ass n v. State, 8 Wash. App. 314, 320, 506 P.2d 878, 882 (1973)). As discussed above, Lingle forbids the use of substantive due process considerations in claims for compensation under the Fifth Amendment taking clause. Finally, summary labeling of Star Northwest s card room as in the nature of a public nuisance fails under federal traditions. This Court has noted that whatever the prior policy, the federal policy of discouraging gambling in general, and casino gambling in particular, is now decidedly equivocal. Greater New Orleans Broadcasting Ass n, Inc., v. United States, 527 U.S. 173, 187 (1999). 7 B. Application of the Guimont Test Prevented Star Northwest from Proceeding on its Penn Central Taking Claim, in Irreconcilable Conflict with Lingle. As argued above, the source of the Washington court of appeals error was application of Guimont, as followed in Edmonds and Paradise, because the Guimont second threshold inquiry is impermissibly 7 Earlier decisions in this case had relied on United States v. Edge Broadcasting Co., 509 U.S. 418 (1993), a First Amendment case. See, e.g., App., infra, 66a. Edge Broadcasting stands only for the proposition that speech about gambling may be restricted. Edge Broadcasting, 509 U.S. at 424. Such conclusion has no bearing on the property right at issue in a Fifth Amendment takings claim.

32 20 saturated with substantive due process nature considerations rather than takings magnitude considerations. Guimont s takings construct also poses a more fundamental problem for Star Northwest, and indeed all Fifth Amendment takings plaintiffs in Washington. Twelve years before this Court decided Lingle, in Guimont, the Washington Supreme Court decided to fashion a single, sequential analysis to be applied to every Fifth Amendment takings claim, whether the plaintiff alleged a physical invasion, deprivation of all economically viable use, or a Penn Central takings claim for a regulation that has gone too far. Guimont, 854 P.2d at This Guimont amalgamated test expressly applies to takings claims asserted under the Fifth Amendment. Guimont, 854 P.2d at 5. 9 As explained below, the Guimont test deprives plaintiffs of judicial access to their Fifth Amendment takings claims, the promise of which Lingle reaffirmed. 8 The Washington Supreme Court first set out a single, allencompassing Fifth Amendment takings analysis in 1990 in Presbytery of Seattle v. King County, 114 Wash. 2d 320, 787 P.2d 907. The Guimont court reordered Presbytery s takings analysis after this Court decided Lucas, 505 U.S. 1003, in The Washington Supreme Court recognizes that federal law should control because the issue concerns the deprivation of a federal right. Sintra, 829 P.2d at 772 ( [T]he issue before the court here concerns the deprivation of a federal right. State law may provide useful guidance in this determination, but federal law is ultimately controlling ). Despite this recognition, the state supreme court declined to accept review and correct Guimont in light of Lingle.

33 21 Under the Guimont amalgam, a plaintiff alleging a Fifth Amendment takings claim must first pass through two threshold inquiries (the second of which was analyzed, supra) to determine, per the Washington Supreme Court, whether a takings analysis may even be reached. For reference, the two threshold inquiries are stated as follows: First threshold inquiry: Second threshold inquiry: The court asks whether the regulation destroys or derogates any fundamental attribute of property ownership: including the right to possess; to exclude others; or to dispose of property. The court asks whether the challenged regulation safeguards the public interest in health, safety, the environment or the fiscal integrity of an area, or whether the regulation seeks less to prevent a harm than to impose on those regulated the requirement of providing an affirmative public benefit. Guimont, 854 P.2d at 10 If the plaintiff does not satisfy the two threshold inquiries, the trial court dismisses the takings claim without ever reaching a takings analysis. Id. at 603. Only if the plaintiff survives the two threshold inquiries does Guimont allow the trial court to engage in a takings analysis. Id. Then, the Guimont takings analysis consists of two additional parts. First, the court examines whether the regulation substantially

34 22 advances a legitimate state interest. Id. at 11. This examination is the same Agins analysis that Lingle expressly excised from takings analyses. 544 U.S. at 545 ( our holding today [is] that the substantially advances formula is not a valid takings test ). In Star Northwest s case, below, the Washington court of appeals described this part of the Guimont test as potentially problematic under Lingle, but it declined to resolve the issue. App., infra, 17a-18a, n.31. Second, for regulations passing the substantially advances examination, the Washington analysis finally engages in a Penn Central-type ad hoc inquiry, considering: (1) The regulation s economic impact on the property; (2) The extent of the regulation s interference with investment-backed expectations; and, (3) The character of the government action. Guimont, 854 P.2d at 11; compare Penn Central, 438 U.S. at 124 (stating the same three factors). To summarize, a plaintiff in Washington state court wishing to proceed on a Penn Central regulatory takings claim must first (1) satisfy two threshold inquiries and (2) address whether the regulation substantially advances a legitimate interest. In irreconcilable contrast, Lingle assures a plaintiff direct access to a Penn Central regulatory takings claim. After rejecting the substantially advances takings analysis, the Lingle Court clarified its takings jurisprudence and reaffirmed that plaintiffs can

35 23 employ one of the forms of takings tests to Fifth Amendment regulatory takings claims, including a Penn Central regulatory taking claim: [W]e reaffirm that a plaintiff seeking to challenge a government regulation as an uncompensated taking of private property may proceed under one of the other theories discussed above by alleging a physical taking, a Lucas-type total regulatory taking, a Penn Central taking, or a land-use exaction violating the standards set forth in Nollan and Dolan. Lingle, 544 U.S. at 548. Thus, although Lingle provides express authority for a plaintiff like Star Northwest to proceed directly on a Penn Central claim alleging a regulatory taking, Washington s Guimont test stands in the way. Below, Star Northwest did not satisfy Guimont s substantive due process-clad second threshold inquiry, so it never reached its Penn Central claim. And, permitting Star Northwest to litigate its Penn Central regulatory takings claim 10 would not be mere perfunctory constitutional courtesy. In Penn Central, the Court provided three factors for courts to consider when weighing a takings claim that a regulation had gone too far: (1) the economic impact of the regulation; (2) the extent to which the regulation has interfered 10 Star Northwest also alleged a total takings claim pursuant to Lucas, 505 U.S This Court s invalidation of the Guimont analysis should entitle Star Northwest to return to state court to present evidence that the card room ban resulted in loss of all economically viable use of the card room business.

36 24 with distinct investment-backed expectations; and (3) the character of the government action. See id. Star Northwest had evidence on all three factors; the issues should have gone to the trier of fact. 11 When the Washington Supreme Court denied review, 12 it forced all plaintiffs in Washington stating a Fifth Amendment takings claim whether or not in analogous factual circumstances to Star 11 Penn Central Factor 1: Economic impact. Star Northwest had evidence that the shutting down of its card room would have devastating economic impact on Star Northwest s business. See Eastern Enterprises v. Apfel, 524 U.S. 498, 529 (1998) ( considerable financial burden met first Penn Central prong). Penn Central Factor 2: Investment-backed expectations. Over the prior 12 years, Star Northwest had invested approximately $500,000 per year ($5.5 million) in the business. In late 2005, Star Northwest borrowed $500,000 to upgrade facilities. Penn Central Factor 3: Character of the government action. Post-Lingle, courts should apply the character of government action prong to rather than weigh government objectives measure the degree to which the challenged regulation approaches the level of a physical invasion. See Penn Central, 438 U.S. at 124, affirmed by Lingle, 544 U.S. at Star Northwest s evidence showed that the Ordinance is tantamount to a physical invasion of Star Northwest s card room and, indeed, its entire business operations. 12 On other post-lingle occasions, the Washington Supreme Court has declined to review a Washington court of appeals opinion that followed Guimont. Peste v. Mason County, 159 Wash. 2d 1013, 154 P.3d 919 (2007) (declining review of 133 Wash. App. 456, 136 P.3d 140 (2006)); City of Des Moines v. Gray Businesses, L.L.C., 158 Wash. 2d 1024, 149 P.3d 379 (2006) (declining review of 130 Wash. App. 600, 124 P.3d 324 (2005)).

37 25 Northwest s to continue struggling to hurdle Guimont s substantive due process-grounded barriers. Lingle precludes this. CONCLUSION The Petition for Writ of Certiorari should be granted. Respectfully submitted. PAUL J. DAYTON Counsel of Record LESLIE C. CLARK Short Cressman & Burgess PLLC 999 Third Avenue, Suite 3000 Seattle, WA Telephone: (206) pdayton@scblaw.com Counsel for Petitioner Star Northwest, Inc.

38 APPENDIX

39 i APPENDIX TABLE OF CONTENTS Appendix A: Court of Appeals, State of Washington, Unpublished Opinion (April 4, 2011)... 1a Appendix B: Superior Court for the State of Washington in and for the County of King, Order Granting City s Motion for Summary Judgment on Takings Claims (Revised) (July 10, 2009)... 23a Appendix C: Supreme Court of Washington, Order (September 7, 2011)... 27a Appendix D: Appendix E: Appendix F: Kenmore, Washington, Ordinance a United States Court of Appeals for the Ninth Circuit, Order (January 7, 2009)... 47a United States Court of Appeals for the Ninth Circuit, Memorandum (May 28, 2008)... 50a

40 ii Appendix G: Appendix H: United States District Court, Western District of Washington at Seattle, Corrected Order on Motion for Summary Judgment (August 10, 2006)... 60a Superior Court of the State of Washington in and for the County of King, Amended Complaint for Injunctive Relief and Damages (October 6, 2006)... 75a

41 1a APPENDIX A IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON No DIVISION ONE [Filed April 4, 2011] STAR NORTHWEST, INC., d/b/a ) KENMORE LANES and 11 th FRAME ) RESTAURANT & LOUNGE, a ) Washington corporation, ) ) Appellant, ) ) v. ) ) CITY OF KENMORE, a Washington ) municipal corporation, and KENMORE ) CITY COUNCIL, the legislative body ) of the City of Kenmore, ) ) Respondents. ) ) UNPUBLISHED OPINION GROSSE, J. An ordinance that requires a specified percentage of gambling tax revenue be dedicated to a purpose other than enforcement of the gambling act does not violate RCW where the

42 2a ordinance contains a proviso that insures that the revenue collected from the tax is put in the first instance to the purpose of enforcing the gambling act. Further, an ordinance banning all card rooms within a city does not constitute an unconstitutional taking as applied to the operator of a card room where the ordinance does not deprive the operator of all economically viable use of its property and there is no showing that the ordinance goes beyond regulating a public harm. Accordingly, the city of Kenmore s ordinance imposing a card room tax of 15 percent of gross revenue is not invalid under RCW , nor does the application of its ordinance banning all card rooms to Star Northwest, Inc. constitute a taking in violation of the Fifth Amendment. We affirm. FACTS Star Northwest, Inc. operated a card room, restaurant, bowling alley, bar, and arcade in leased premises located in the city of Kenmore (Kenmore). This appeal involves Star Northwest s challenge to two of Kenmore s ordinances. One ordinance, enacted in 2004, raised Kenmore s tax on card rooms from 11 percent to 15 percent and provided for the dedication of a portion of the tax revenue to the funding of capital facility projects. The other ordinance at issue is a 2005 ordinance banning all card rooms in Kenmore. Ordinance Increasing Gambling Tax In 1998, Kenmore enacted Ordinance No , which established a gambling tax on card rooms. The ordinance provided:

43 3a C. Social card playing: Operators shall pay a tax equal to eleven percent (11%) of the gross receipts from such games. Star Northwest operated a card room as part of its business and, accordingly, was subject to this tax. In December 2004, Kenmore enacted Ordinance No , which raised the card room tax from 11 percent to 15 percent of gross revenue and imposed requirements as to the expenditure of the card room tax revenue. The amended ordinance provides: C. Social Card Games Playing. Operators shall pay a tax equal to eleven fifteen percent of the gross receipts from such games. An amount equal to four fifteenths of the social card game tax paid by operators of social card games shall be dedicated to funding City Capital Facilities Plan projects; provided, however, that revenue collected from this tax shall be expended primarily for the purpose of enforcement of gambling laws pursuant to RCW Ordinance Banning Card Rooms In December 2005, Kenmore enacted Ordinance No banning all card rooms within the city. Star Northwest closed its card room in 2009 after expiration of an injunction allowing the card room to remain open. Federal and State Court Litigation After the ordinance banning card rooms was enacted, but before it became effective, Star Northwest