Kavanau v. Santa Monica Rent Control Board, 16 Cal. 4th 761 (1997)

Citation: Kavanau v. Santa Monica Rent Control Board, 16 Cal. 4th 761 (1997)
Parent Document: Kavanau v. Santa Monica Rent Control Board, 16 Cal. 4th 761 (1997)
Jurisdiction: California (state)
Effective Date: 1997-08-26
Original Source: https://www.courtlistener.com/opinion/5607899/kavanau-v-santa-monica-rent-con... ↗

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In the context of price control, which includes rent control, courts generally find that a regulation bears “a reasonable relation to a proper legislative purpose” so long as the law does not deprive investors of a “fair return” and thereby become “confiscatory.” (Pipeline Co., supra, 315 U.S. at pp. 584, 585 [62 S.Ct. at pp. 742, 743]; see also Power Comm’n v. Hope Gas Co. (1944) 320 U.S. 591, 602-603 [64 S.Ct. 281, 288, 88 L.Ed. 333] (Hope Gas); 20th Century Ins. Co. v. Garamendi (1994) 8 Cal.4th 216, 292-296 [32 Cal.Rptr.2d 807, 878 P.2d 566] (20th Century); Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d 805, 816 [258 Cal.Rptr. 161, 771 P.2d 1247] (Calfarm); Guidelines, supra, 35 Rutgers L.Rev. at pp. 781-817.) Determining prices that will provide a fair return “involves a balancing of the investor and the consumer interests.” (Hope Gas, supra, 320 U.S. at p. 603 [64 S.Ct. at p. 288].) “It is the product of expert judgment which carries a presumption of validity.” (Id. at p. 602 [64 S.Ct. at p. 288].) A reviewing court focuses on whether the regulatory agency took relevant investor interests into account. (Permian Basin Area Rate Cases (1968) 390 U.S. 747, 770 [88 S.Ct. 1344, 1361-1362, 20 L.Ed.2d 312] (Permian Basin); Pipeline Co., supra, 315 U.S. *772at p. 586 [62 S.Ct. at p. 743].) One of these investor interests is a “return . . . commensurate with returns on investments in other enterprises having corresponding risks. That return, moreover, should be sufficient to . . . attract capital.” (Hope Gas, supra, 320 U.S. at p. 603 [64 S.Ct. at p. 288].) Though due process protections generally focus on method, not result, in the context of price regulation “it is the result reached not the method employed which is controlling. [Citations.] It is not theory but the impact of the [price regulation] which counts.” (Id. at p. 602 [64 S.Ct. at pp. 287-288].) In sum, when considering whether a price regulation violates due process, a “court must determine whether the [regulation] may reasonably be expected to maintain financial integrity, attract necessary capital, and fairly compensate investors for the risks they have assumed, and yet provide appropriate protection for the relevant public interests, both existing and foreseeable.” (Permian Basin, supra, 390 U.S. at p. 792 [88 S.Ct. at p. 1373].)

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