Chicago Board of Realtors, Inc. v. City of Chicago

CUDAHY, Circuit Judge.

On September 8, 1986, the Chicago City Council enacted the Chicago Residential Landlord and Tenant Ordinance (the "Ordinance"), , recasting the relative rights and obligations of most residential landlords and tenants in Chicago. Plaintiffs-appellants are Chicago property owners or managers and organizations representing their interests. Defendants-appellees are the City of Chicago and its Mayor. Also before the court are three individual tenants and nine organizations representing Chicago tenants. Plaintiffs challenged the constitutionality of the Ordinance and sought a temporary restraining order and a preliminary injunction to prevent its enforcement.

I. The Ordinance

The Ordinance, by its own terms, was passed by the Chicago City Council:

in order to protect and promote the public health, safety and welfare of its citizens, to establish the rights and obligations of the landlord and the tenant in the rental of dwelling units, and to encourage the landlord and the tenant to maintain and improve the quality of housing.

By its terms the Ordinance applies to all rental agreements for dwelling units located in Chicago, with exceptions for owner-occupied buildings of six or fewer units; dwelling units in hotels, motels, boarding houses and the like; accommodations in hospitals, not-for-profit shelters and school dormitories; and units in cooperatives occupied by holders of proprietary leases. The Ordinance governs leases either entered into or to be performed after October 15, 1986.

Landlords are required to maintain dwelling units in compliance with all applicable municipal code provisions and with certain other specified standards. Landlords have the authority, after notice to the tenant, to terminate a lease if the tenant fails to pay rent or otherwise comply with lease requirements. If the landlord accepts the full rent due under a lease knowing that payments are in default, the landlord thereby waives the right to terminate the lease for that default. Except in case of emergency, the landlord must provide notice two days before entering a unit for maintenance, repairs or inspections.

After notice to the landlord, tenants are granted authority to withhold rent in an amount reflecting the reasonable value of any material noncompliance with the lease by the landlord. Alternatively, tenants can, again after notice, opt to repair certain minor defects or deficiencies and deduct their reasonable cost from the rent. Tenants are required to keep their units clean and safe, to use appliances and utilities in a reasonable manner and to avoid disturbing neighbors' "peaceful enjoyment of the premises."

II. Preliminary Injunction Standards

A plaintiff seeking a preliminary injunction must demonstrate: (1) a threat of irreparable harm without an adequate remedy at law; (2) some likelihood of success on the merits of the claim; (3) a balance of relative harm weighing in favor of granting the injunction; and (4) compatability of the injunction and the public interest. Judge Parsons, after expedited hearings in the district court and a detailed consideration of the plaintiffs' several claims, concluded that the plaintiffs had not shown the requisite reasonable likelihood of prevailing on the merits. As indicated below, we agree.

III. Likelihood of Prevailing on the Merits

In the district court the plaintiffs argued that the Ordinance on its face violated the following constitutional doctrines or provisions: the contract clause, procedural due process, the void-for-vagueness doctrine, substantive due process, equal protection, the takings clause and the commerce clause. The plaintiffs also argued that the Ordinance was preempted by the Illinois Real Estate License Act of 1983, and that enforcement of the Ordinance was or would be violative of the plaintiffs' civil rights protected under 42 U.S.C. § 1983 (1982). The district court concluded that the plaintiffs had not shown a reasonable likelihood of prevailing on any of these claims.

B. Procedural Due Process

The plaintiffs assert that the Ordinance deprives them of protected property rights without procedural due process as guaranteed by the fourteenth amendment. The essence of this argument seems to be that the Ordinance is unconstitutional because it delegates to tenants -- inherently biased decisionmakers -- a broad discretion to withhold rent while retaining possession of a landlord's property. See Appellants' Brief at 13 ("It is the City's failure to provide such [clear] standards and procedural protections in the Ordinance which deprives Plaintiffs of their right to procedural due process. . . .")

The first step in this inquiry, of course, is to determine what, if any, state action exists. We are not convinced that actions taken by tenants, pursuant to the Ordinance, comprise state action. A law that defines rights, obligations or remedies among private parties does not thereby transform every private enforcement of that law into state action. See Blum v. Yaretsky, 457 U.S. 991, 1003, 73 L. Ed. 2d 534, 102 S. Ct. 2777 (1982). The Supreme Court considered the issue of what action by a private citizen constitutes state action in Flagg Brothers, Inc. v. Brooks, 436 U.S. 149, 56 L. Ed. 2d 185, 98 S. Ct. 1729 (1978), where the Court held that a warehouseman's forced sale of a debtor's goods, pursuant to New York law, was not state action, because by merely delegating a power to resolve disputes, New York had not delegated any "exclusive public function." Id. at 161. To the extent that the Ordinance shifts from the landlord to the tenant the power initially to determine whether the premises are in accordance with the lease terms (and with municipal standards embodied in the terms), the Ordinance has readjusted property rights. But this is not a delegation of an exclusive public function; it does not import state action into every action a tenant or landlord might take. We believe that neither a landlord's unlawful lock-out of a tenant nor a tenant's unlawful withholding of rent from a landlord would of itself involve state action. See Hinman v. Lincoln Towing Serv., Inc., 771 F.2d 189, 192-93 (7th Cir. 1985)(regulation by state does not render towing company a state actor); Bernstein v. Lind-Waldock & Co., 738 F.2d 179, 186 (7th Cir. 1984) (act of commodity exchange is not state action despite heavy regulation of the exchange and its undertaking some policy functions). This analysis does not end the matter, however, because the plaintiffs charge that the Ordinance itself, enacted by the City, works a deprivation of protected property rights.

The enactment of the Ordinance itself undoubtedly represents state action. The Ordinance, however, does not deprive the plaintiffs of rights in property without due process. The plaintiffs' strongest argument is that the Ordinance provides inadequate post-deprivation remedies by which a landlord can challenge rent withholdings and regain possession. But the Ordinance does not significantly alter the preexisting post-deprivation remedy, the Illinois Forcible Entry and Detainer Act, Ill. Rev. Stat. ch. 110, para. 9-101 et seq. Plaintiffs have not shown that the Forcible Entry and Detainer Act is an unconstitutionally slow or onerous procedure. Cf. Pleasure Driveway & Park Dist. v. Kurek, 27 Ill. App. 3d 60, 325 N.E.2d 650 (3d Dist. 1975) (Forcible Entry and Detainer Act comports with procedural due process). If the Ordinance had established a new post-deprivation procedure by which, for instance, a landlord could not recover possession for five years after a rent default, the plaintiffs would have a much stronger case.

The Ordinance prohibits a late payment penalty exceeding $ 10 per month. This undoubtedly will cost some landlords some money. But a law that imposes heavier economic burdens on some group of citizens is not thereby rendered unconstitutional. The procedure the landlords were due in this respect was accorded them -- in the legislature.

In addition, the Ordinance requires that landlords attach a copy of the Ordinance to each lease. It is inconceivable that this violates procedural due process.

We conclude that the Ordinance simply readjusts the balance in the long-standing landlord-tenant relationship. Nothing suggests that the Ordinance itself works a deprivation of property without procedural due process. Rather, the Ordinance appears merely to shift some bargaining power to the tenant. This in itself does not violate procedural due process. Cf. Fisher v. City of Berkeley, 37 Cal. 3d 644, 693 P.2d 261, 209 Cal. Rptr. 682 (1984) (en banc) (upholding rent withholding procedures).

C. Void-for-Vagueness

The Ordinance establishes certain standards with which the leasing of residential property must comply. The plaintiffs argue that the standards provided are so vague as to violate due process. We disagree. When challenged on vagueness grounds, economic regulatory laws are subject to less stringent standards than are laws applicable, for example, to speech. Laws imposing only civil penalties and not threatening, for instance, rights of expression are not scrutinized with unusual vigor. A facial challenge to the vagueness of a law that does not restrict constitutionally protected conduct can prevail "only if the enactment is impermissibly vague in all of its applications." Id. at 495.

In defining what constitutes a landlord's "material noncompliance" with a lease, the Ordinance incorporates municipal laws and regulations and provides twenty-seven examples of what the term means. Ordinance, ch. 193.1-11. This is clear and detailed treatment; the provisions are not vague. In addition, the Ordinance prohibits an otherwise lawful entry into leased premises if the entry is accomplished in an "unreasonable manner," id. ch. 193.1-6, and the Ordinance establishes an evidentiary presumption of retaliatory eviction in certain circumstances. Neither of these provisions fails to provide adequate warning of what violates the Ordinance, and both provisions sufficiently guide enforcement. The Ordinance is not unconstitutionally vague. It describes with adequate specificity the mutual rights and obligations of landlord and tenant.

D. Substantive Due Process

The heart of the plaintiffs' attack on the Ordinance, if gauged by rhetorical passion, seems to involve substantive due process: "Stripped of the platitudes, the Ordinance . . . places the unprotected liberties of tenants above the protected property rights of landlords. . . . [The] Ordinance goes too far." Likening the Ordinance to the felling of a forest of property rights, the plaintiffs warn: "As courts allow more trees to be felled for the sake of labels, who can predict which will be the last tree, leaving but a forest of stumps and decaying logs . . . forever changing the fabric of our country." Id. at 10.

Passionate concern is not, however, enough to demonstrate a violation of substantive due process. Legislative acts "adjusting the burdens and benefits of economic life" are presumed constitutional, and "the burden is on one complaining of a due process violation to establish that the legislature has acted in an arbitrary and irrational way." We are quite sure that the city has the authority to legislate in order to regulate the landlord-tenant relationship and promote better housing. See Ill. Const. art. VII, § 6(a); City of Evanston v. Create, Inc., 85 Ill. 2d 101, 113, 421 N.E.2d 196, 51 Ill. Dec. 688 (1981). In its detailed assignment of relative rights and obligations, we believe, without appraising its wisdom, that the Ordinance is rationally related to, and directly purports to further, these legitimate purposes. We cannot say that substantive due process is violated.

IV. Conclusion

After reviewing the merits of the plaintiffs' several constitutional challenges to the Ordinance, we agree with the district court that, on the record before us, the plaintiffs have not shown any reasonable likelihood of prevailing on any claim. It is therefore unnecessary to consider the remaining three factors governing when a preliminary injunction will issue-irreparable harm, a balancing of potential harms and a consideration of the public interest. We note only that the plaintiffs, in describing their "irreparable harm," focus on lost rental income and additional administrative expenses. We doubt whether such calculable injuries would outweigh the expressed interest of the city in improving living conditions of tenants.

The judgment of the district court is AFFIRMED.

[Concurring opinion omitted]