[00:00:56] Speaker 05:
Thank you, Your Honors, and may it please the Court.

[00:00:59] Speaker 05:
Two years ago, a panel of this Court overtly stated that Iton's complaint was, quote, sufficient to state a claim under the Contracts Clause, end quote.

[00:01:08] Speaker 05:
Yet we find ourselves here today arguing over that very issue, an issue addressed not only by a prior panel of this Court, but also by two separate Circuit Courts, both of whom found on pleading standards that broad commercial eviction moratoria violated the Contracts Clause.

[00:02:14] Speaker 04:
in place.

[00:02:16] Speaker 04:
How is it then that these laws

[00:02:43] Speaker 05:
But neither of those moratoria applied to Mr. Iton at the time.

[00:02:48] Speaker 05:
The county's moratoria applied only to unincorporated areas and the City of Lawndale's moratorium did not apply to Mr. Iton because his tenant did not avail himself of it.

[00:02:58] Speaker 05:
There were very specific requirements for the Lawndale moratoria that the tenant had to go through to receive that protection.

[00:03:06] Speaker 05:
The actual ordinance that applied to Mr. Iton

[00:03:23] Speaker 05:
we can induce those additional facts as needed, but the contract had already essentially been entered into.

[00:03:30] Speaker 05:
Mr. Iten had not signed, that's true, but California law doesn't require that.

[00:03:35] Speaker 05:
There had already been a meeting of the minds, the contract existed, and then on September 1st the county goes ahead and passes this large county-wide moratorium on evictions.

[00:03:46] Speaker 05:
So up until that point nothing applied to Mr. Iten, and we also don't think

[00:03:52] Speaker 05:
determinative in this case.

[00:03:55] Speaker 05:
A party's reasonable expectations have never been solely determined on whether a substantial impact has occurred.

[00:04:01] Speaker 05:
Contract law has always given the meaning is established by the terms, and a breach of contract claim doesn't turn on whether or not it was foreseeable that a party would fail to perform.

[00:04:14] Speaker 05:
It operates instead on the terms of the contract itself,

[00:04:38] Speaker 05:
And I can give the example of, for instance, if a landlord chose to rent to a tenant with poor credit, he wouldn't be foreclosed from seeking damages later on, just on the grounds that it was foreseeable that his tenant may not pay.

[00:04:52] Speaker 05:
But even if reasonable investment, reasonable expectations come into play under this Fiend Test here, which you are correct, that is the second prong, those reasonable expectations

[00:05:07] Speaker 05:
reasonable expectations in that sense would have only lasted the two months of the original moratorium that they entered into.

[00:05:13] Speaker 05:
The September contract or the September moratorium that the county agreed to enter into was only supposed to last until October 31st 2020.

[00:05:20] Speaker 05:
It then was extended multiple times and it didn't even end the forbearance period didn't end until 2023.

[00:05:26] Speaker 05:
It was entirely unforeseeable that this was the

[00:05:37] Speaker 01:
old enough to go back to that era.

[00:05:40] Speaker 01:
Things were unsettled at least, but the fact that the county, the town or city, I forget whether Lawndale is which, were doing things like this and other communities all across the country were doing things like this, suggests that the possibility was on the table.

[00:06:23] Speaker 05:
moratorium, both of which found on the pleading standards that the plaintiffs in those cases should survive, are out of New York, which is the Melinda Second Circuit case, and Heights apartment out of the eighth.

[00:06:34] Speaker 01:
I'm not asking questions about legal challenge, I'm saying was a moratorium foreseeable?

[00:06:41] Speaker 01:
And it's hard for me to say that it wasn't, given what was happening in the country

[00:06:49] Speaker 05:
commercial eviction moratorium, but you can also look at the inverse of that, Your Honor, and argue that for six months the county didn't apply anything to Mr. Iten's property.

[00:06:57] Speaker 01:
What do you think foreseeable means?

[00:06:59] Speaker 01:
A certainty or possibility?

[00:07:02] Speaker 01:
It means possibility, but I would say... Okay, so why wasn't it reasonably possible to somebody looking around at that time?

[00:07:19] Speaker 01:
So that means it wasn't reasonably possible, and yet it happened, and how surprising could that have been?

[00:07:26] Speaker 01:
I think it could be very surprising, again.

[00:07:28] Speaker 01:
Why?

[00:07:29] Speaker 01:
Why very surprising?

[00:07:31] Speaker 04:
Why very surprising?

[00:07:32] Speaker 04:
Wondell was in fact, their moratorium was in fact applicable even if his tenant didn't choose to take advantage of it.

[00:07:40] Speaker 05:
Wondell's moratorium, his tenant didn't choose, again, you're correct, his tenant did not choose to take advantage of it.

[00:07:46] Speaker 03:
Can I ask you what you mean by that?

[00:07:56] Speaker 03:
related business interruption, but he, when you say he didn't take advantage of it, I just want to be clear that we're, that I'm understanding the facts correctly, he was, he was behind in his rent.

[00:08:05] Speaker 03:
He was behind in his rent.

[00:08:07] Speaker 03:
Okay, so when you answered Judge Akuta's question, you meant about not taking advantage of it, that he hadn't given notice?

[00:08:14] Speaker 05:
He had not given notice, and that you were also required under the Lawndale moratorium to supply evidence of your inability to pay.

[00:08:21] Speaker 05:
He didn't do that.

[00:08:22] Speaker 05:
He did neither of those things.

[00:08:23] Speaker 03:
Okay, but it, but

[00:08:25] Speaker 03:
If you could circle back to Judge Acuta's question, I didn't mean to interrupt, but I want to make sure we're on the same page here, because her point was it did apply.

[00:08:32] Speaker 05:
It existed, but it was not applicable to his property.

[00:08:34] Speaker 05:
His tenant had not taken advantage of it, so there was no moratorium.

[00:08:37] Speaker 01:
It was applicable to his property.

[00:08:39] Speaker 01:
That's not the same as the tenant didn't take advantage of.

[00:08:41] Speaker 01:
It did apply to that property, didn't it?

[00:08:45] Speaker 01:
The tenant could have given the notice and so forth.

[00:08:48] Speaker 01:
It wasn't a question that your client's property was carved out.

[00:08:52] Speaker 01:
It wasn't covered by the moratorium.

[00:09:02] Speaker 01:
rights properly under it, but it did apply.

[00:09:06] Speaker 01:
So how is it not reasonably possible that that moratorium would be broadened?

[00:09:12] Speaker 05:
Your Honor, whether or not the county would decide to enact a moratorium that would apply to incorporated cities after Lawndale already had one, there might have been murmurings of it, but that does not

[00:09:34] Speaker 01:
me that foreseeability means possible, not certainty.

[00:09:39] Speaker 01:
And it's hard for me to understand how we could argue, we could conclude that it was not possible that the county would do what it did.

[00:09:48] Speaker 05:
Well, Your Honor, again, possibility, certainty, we're operating on a sliding scale here for what it actually entails.

[00:09:56] Speaker 03:
We're looking at his expectations for performance under the

[00:10:03] Speaker 03:
and the tenant was already in arrears.

[00:10:06] Speaker 05:
And if you even take that position, then it was only foreseeable that it would have lasted the two months.

[00:10:11] Speaker 05:
Three years?

[00:10:12] Speaker 05:
But what's the hit?

[00:10:14] Speaker 05:
Is that the moratorium?

[00:10:15] Speaker 05:
What's the hit in your sentence?

[00:10:17] Speaker 05:
The moratorium that the county adopted in September of 2020.

[00:10:20] Speaker 03:
The one that actually... But in August, the tenant was already in arrears, and Judge Ikuta's point is

[00:10:35] Speaker 03:
figure out why there was a reasonable expectation, a contract, you know, an expectation that the tenant would perform.

[00:10:43] Speaker 03:
Because that's what we have to look at.

[00:10:44] Speaker 03:
We have to look at whether or not this moratorium interfered with his reasonable contract expectations.

[00:10:50] Speaker 03:
And that, you're missing me right there.

[00:10:51] Speaker 03:
You're losing me right there.

[00:10:53] Speaker 05:
Well, Your Honor, when you're looking at the reasonable expectations, you're looking at, again, what was possible

[00:11:06] Speaker 05:
it's been implemented specifically I believe it's the Texaco case that specifically requires that it that type of foreseeability be predicated I can find the actual quote for it oh here examining substantial impact in terms of the contract and the industry generally not on predicating changes in the law so it's when you're looking at reasonable

[00:11:45] Speaker 01:
that's what life was like then and so I have a hard time understanding why it wouldn't have been reasonably foreseeable to somebody at that point in time that these conditions were going to continue past October and this kind of protection of commercial tenants might be continued.

[00:12:09] Speaker 05:
Well your honor again looking at

[00:12:28] Speaker 05:
second prong of the contracts clause analysis.

[00:12:30] Speaker 05:
But commercially, you're looking at something further removed from the stated goal of keeping people in their homes and stopping the spread of COVID-19.

[00:12:38] Speaker 03:
It's tougher in a commercial context, I'll grant you that.

[00:12:41] Speaker 03:
It's a much tighter means to unfit if you're talking about a residential premises, for sure.

[00:12:46] Speaker 03:
And in this case, there's at least the allegation that this tenant didn't even close up shop.

[00:12:52] Speaker 05:
Yes, Your Honor, he was an essential business.

[00:12:54] Speaker 05:
It was open throughout the pendency of COVID-19.

[00:12:57] Speaker 03:
I don't think your claim is frivolous.

[00:12:59] Speaker 03:
It is troubling, to be sure.

[00:13:02] Speaker 03:
But there was this moratoria in place that summer.

[00:13:05] Speaker 03:
I keep coming back to that.

[00:13:06] Speaker 03:
What's your best response to that?

[00:13:09] Speaker 05:
Your Honor, there was a moratoria in place that summer, and I think we're getting caught on what is applicable to Mr. Iten's property.

[00:13:16] Speaker 03:
I think that's right.

[00:13:17] Speaker 03:
Why do you think it wasn't applicable?

[00:13:19] Speaker 03:
The tenant had not availed himself of it.

[00:13:50] Speaker 04:
There is a moratorium, and your tenant isn't paying rent, and the tenant merely has to give notice and take those steps for a moratorium.

[00:13:59] Speaker 04:
So it's hard for me to see how it wasn't reasonably expectable that the tenant would avail himself of the moratorium.

[00:14:07] Speaker 05:
That's correct, Your Honor.

[00:14:08] Speaker 05:
I mean, it is a question about why would you re-enter into the lease.

[00:14:14] Speaker 05:
But if you think back to that time, he has a choice whether or not he's going to have a hold over a tenant where you have no protection.

[00:14:19] Speaker 05:
You still can't get him out.

[00:14:21] Speaker 05:
or would you have a piece of paper?

[00:14:23] Speaker 05:
Why would we get him out?

[00:14:24] Speaker 05:
Is that because of the eviction moratorium?

[00:14:26] Speaker 05:
Well, the lease that he had lasted until August

[00:15:09] Speaker 02:
May it please the court, Edward L. Zanters on behalf of the county of Los Angeles.

[00:15:15] Speaker 02:
The honor council start off by suggesting that the, this court has already determined there's a viable cause of action.

[00:15:21] Speaker 02:
As I'm sure you're aware, the prior decision only addressed standing.

[00:15:25] Speaker 02:
This issue of the timing that the regulations actually came up as a fallback argument and the court refused to go there and said, we're going to let the district court address that issue.

[00:15:36] Speaker 02:
And that's why we're here today, because the district court has addressed that issue.

[00:15:41] Speaker 02:
A couple things, you know, the comments that the Law and Dale provision did not apply because somehow the tenant did not take advantage of it.

[00:16:11] Speaker 02:
supposed to get them.

[00:16:13] Speaker 02:
In terms of the substantial impairment, they've identified four things.

[00:16:20] Speaker 02:
It's the fact that you can't recover late rent.

[00:16:26] Speaker 02:
You can't evict for non-payment if it's COVID related.

[00:16:28] Speaker 02:
You can't get your payments if it's COVID related.

[00:16:43] Speaker 02:
uh, in the county, it was 12 months.

[00:16:47] Speaker 02:
All of these, quote-unquote, substantial impairments, other than the slight difference between 6 and 12 months, are identical in both Lawndale and, uh, the county resolution.

[00:16:58] Speaker 02:
That's what their claim is about in terms of claiming substantial impairment.

[00:17:02] Speaker 02:
They are the exact same arguments, uh, or exact same conditions.

[00:17:06] Speaker 01:
What is it that gives the county the right to say you can never collect interest?

[00:17:12] Speaker 01:
Do you mean the late fees?

[00:17:14] Speaker 01:
Well, no, I think it's more than late fees.

[00:17:16] Speaker 01:
I think I saw something that said interest.

[00:17:19] Speaker 01:
I mean, money has time value, and apparently the counties decided to disregard that to say not just extra late fees, but interest on late payments is something that can't be collected, as I understand it.

[00:17:45] Speaker 02:
and said, under this fiend's second prom, that that's not enough, that it's still reasonable and appropriate.

[00:17:53] Speaker 02:
But that's not really a first-prong issue.

[00:17:55] Speaker 02:
That's a second-prong issue.

[00:17:57] Speaker 02:
And the first-prong issue is the issue of foreseeability.

[00:18:00] Speaker 02:
Do you even get to that analysis?

[00:18:02] Speaker 01:
You started talking about, is there substantial impairment?

[00:18:05] Speaker 01:
And it seemed to me, at least to that one piece, that I understand what we said in our residential decision.

[00:18:16] Speaker ?:
is, but it means, so you brought it up.

[00:18:19] Speaker 02:
Okay, well, but I may derange if we won't, but I brought it up as saying that issue exists under the Lawandale provision and under the counties, it's under both.

[00:18:29] Speaker 02:
So my point is in terms of foreseeability, if it's an existing law, it's incorporated into the contract, it's part of the terms.

[00:18:38] Speaker 02:
If there's a new one, then you look at the nature of the

[00:18:44] Speaker 02:
regulation is the same type as before.

[00:18:48] Speaker 02:
So I think we're talking about two slightly different facts.

[00:18:53] Speaker 02:
You know, there may be discussion under the second prong, but we're talking about the first prong where the Lawandale provisions and the county provisions are essentially the same.

[00:19:06] Speaker 02:
There's also discussion about the timing as to when all of this happened.

[00:19:10] Speaker 02:
The complaint alleges

[00:19:16] Speaker 02:
which is the day that the resolution took effect.

[00:19:19] Speaker 02:
They're now coming back in their

[00:19:53] Speaker 03:
a meeting of the minds in August.

[00:19:55] Speaker 02:
It doesn't matter.

[00:19:56] Speaker 02:
Well, I don't think there's a binding contract if it's not signed.

[00:19:59] Speaker 03:
I'm just trying to, if you could respond to her argument, her argument was different.

[00:20:02] Speaker 02:
Well, if there's a meeting of the minds in August, that's a time when the law and the ordinance plainly existed.

[00:20:08] Speaker 03:
Uh, there's an issue, you know, the, the, uh, Mr. Why was it she could amend to state that the contract for the new lease happened in August?

[00:20:17] Speaker 02:
I don't, that's not, she's not saying that, that it,

[00:20:25] Speaker 03:
No, she didn't.

[00:20:25] Speaker 03:
She was very careful to say there was a meeting of minds in August, and it wasn't a meet until September.

[00:20:32] Speaker 02:
Okay.

[00:20:33] Speaker 02:
But again, there was no signed contract under her analysis until September, so they could have walked out.

[00:20:38] Speaker 01:
Even in non-pandemic circumstances, leases that begin on September 1st have almost certainly been agreed upon before that date.

[00:20:46] Speaker 01:
Absolutely.

[00:20:46] Speaker 01:
So I think that's really all she's trying to say, and it's pretty plausible to me.

[00:20:51] Speaker 01:
Well, and I agree with that.

[00:20:52] Speaker 01:
It probably wasn't negotiated.

[00:21:17] Speaker 02:
Law and Dale ordinance is in effect and applies and will be incorporated within whatever agreement they're talking about.

[00:21:23] Speaker 02:
If you're talking about September, the county resolution applies and is incorporated within whatever agreement they're talking about.

[00:21:30] Speaker 04:
Is there any reason why having not actually taken advantage of the Law and Dale moratorium, they would be foreclosed from taking advantage of it, say, in September?

[00:21:44] Speaker 04:
Lieutenant?

[00:22:01] Speaker 02:
didn't apply with the County Morse word.

[00:22:05] Speaker 02:
But could the tenant have done so after the new lease?

[00:22:10] Speaker 02:
Uh, it depends.

[00:22:14] Speaker 02:
Well, I guess, again, I'm confused as to what your question is.

[00:22:19] Speaker 02:
I mean, could the tenant have complied

[00:22:22] Speaker 02:
I don't think the tenant never paid rent at any moment, so I don't think that.

[00:22:27] Speaker 03:
Could the tenant have given written notice that the reason for not paying the August rent was COVID-related financial distress?

[00:22:34] Speaker 03:
Is it your position that that notice would have had to happen in early August?

[00:22:40] Speaker 02:
The tenant has never given any notice at all.

[00:22:44] Speaker 03:
I understand, but I'm asking a different question, and my question.

[00:22:46] Speaker 02:
I don't think it would have made a difference if the tenant did it in August or September

[00:23:12] Speaker 02:
I don't know the answer to that because I think that that's beyond this record in terms of, you know, what we know is that the tenant never paid rent, the tenant never complied with any notice provision under any resolution.

[00:23:28] Speaker 02:
Presumably, if the tenant was asked to come up with

[00:23:41] Speaker 02:
presumably it could have.

[00:23:44] Speaker 02:
I don't know why, you know, if they could comply, they didn't, but the landlord certainly never sought to enforce that.

[00:23:52] Speaker 02:
Again, we don't know that on this record.

[00:23:55] Speaker 02:
Another point I'd like to make is there seems to be a focus that the county resolution was to expire in October 31.

[00:24:03] Speaker 02:
You know, Judge Clifton said that's really not the issue.

[00:24:07] Speaker 02:
I think the question in terms of foreseeable

[00:24:12] Speaker 02:
contract is being entered, is it foreseeable at that point that this pandemic could continue?

[00:24:20] Speaker 02:
And there's tremendous uncertainty, as you said.

[00:24:22] Speaker 02:
The Bondale ordinance, the county ordinance, they're all tied to the existence of the emergency.

[00:24:33] Speaker 02:
And so the

[00:24:50] Speaker 02:
that it would have been a no fault, excuse me, it would have been a fault situation where under the county resolution under Lawndale, he could have kicked him out because they only protect non-payment of COVID plus no fault evictions.

[00:25:07] Speaker 02:
And that would have been a fault situation.

[00:25:09] Speaker 02:
So the attendant would have had no right to stay any longer.

[00:25:15] Speaker 02:
There's comments that have been made that

[00:25:18] Speaker 02:
This is not foreseeable, as the court said.

[00:25:21] Speaker 02:
It certainly was in California.

[00:25:23] Speaker 02:
When the county passed the resolution, it conducted a survey of incorporated cities within LA County.

[00:25:32] Speaker 02:
31 of 34, including Lawndale, had commercial evictions.

[00:25:37] Speaker 02:
There were commercial eviction provisions all over California at the time, and that's what matters.

[00:25:44] Speaker 02:
It's not what's happening elsewhere in the country.

[00:25:51] Speaker 02:
Sure, I mean, there's a lot of different restrictions, but yes, the moratorium.

[00:25:58] Speaker 02:
Yeah.

[00:26:01] Speaker 02:
There's also been comments that every case that's out there has found that these commercial moratorium are unlawful.

[00:26:13] Speaker 02:
It makes it sound like there's a

[00:26:26] Speaker 02:
And what the court looked at was the fact that that was a permanent bar that you would never be able to enforce a permanent guarantee at any moment if the non-payment was because of COVID.

[00:26:39] Speaker 02:
And the court said there's a tribal issue under Sphene's second prong given that permanent bar.

[00:26:46] Speaker 02:
That has nothing to do with the commercial moratorium that we are talking about today.

[00:26:50] Speaker 02:
The only case I know of that has actually looked at commercial

[00:26:58] Speaker 02:
San Diego decision set in our papers that was affirmed by the Ninth Circuit on takings grounds.

[00:27:03] Speaker 02:
It was a different, you know, analysis.

[00:27:05] Speaker 02:
They didn't reach the contract clause issue.

[00:27:08] Speaker 02:
But that is one where they looked at it and upheld the resolution against the contract clause challenge, and that's the only one I know of.

[00:27:18] Speaker 02:
And part of the reason I think for the difference in why we have so many

[00:28:06] Speaker 02:
And that's the reason for it.

[00:28:08] Speaker 02:
At this point, I don't know if the court has any questions for me.

[00:28:14] Speaker 02:
Apparently not.

[00:28:16] Speaker 04:
I will submit.

[00:28:16] Speaker 04:
Thank you.

[00:28:17] Speaker 04:
Thank you.

[00:28:18] Speaker 04:
You have some time for rebuttal.

[00:28:24] Speaker 05:
Thank you, Your Honor.

[00:28:38] Speaker 05:
to rule on the 12b6.

[00:28:47] Speaker 05:
at least for the purposes of filing a complaint, has alleged the obligations of his contract have been taken away or materially lessened.

[00:28:54] Speaker 05:
That is sufficient to state the claim under the Contracts Clause.

[00:28:58] Speaker 05:
Dealing with the Lawndale Ordinance, I'd ask this Court to look at the request for judicial notice.

[00:29:03] Speaker 05:
It has the Lawndale Ordinance in it, Exhibit 4.

[00:29:06] Speaker 05:
That was very different from the County of Moratorium that was adopted too, and the significant differences being with the late fees and interest that, again, were

[00:29:16] Speaker 05:
just like the personal guarantee in Melinda's.

[00:29:19] Speaker 05:
Melinda's Heights Apartment Association are two circuit court cases dealing with commercial eviction moratorium.

[00:29:25] Speaker 05:
In the Bowles case, that didn't even discuss the difference between commercial and residential moratoria.

[00:29:32] Speaker 05:
It only dealt with