Palmer Kearney Mesa Properties, LP et al v. City of San Diego et al

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
PALMER KEARNEY MESA
PROPERTIES, LP, a California limited
partnership; GH PALMER, INC., a
California corporation,
Plaintiffs,
v.
CITY OF SAN DIEGO, a California
municipal corporation,
Defendant.
Case No.: 23-cv-01755-DMS-BJW
ORDER GRANTING DEFENDANT
CITY OF SAN DIEGO’S MOTION
TO DISMISS SECOND AMENDED
COMPLAINT
Pending before the Court is Defendant City of San Diego’s Motion to Dismiss
Plaintiffs’ Second Amended Complaint (“SAC”) for lack of subject-matter jurisdiction and
for failure to state a claim (“Motion”). (Mot., ECF No. 52). Plaintiffs filed an Opposition
and the City filed a Reply. (Opp’n, ECF No. 56; Reply, ECF No. 59). Plaintiffs twice filed
supplemental authority. 	(Palmer First Suppl., ECF No. 61; Palmer Second Suppl., ECF
No. 67). The City filed supplemental authority, which Plaintiffs objected to and moved to
strike.1 (City Suppl., ECF No. 65; Palmer Objs., ECF No. 66). For the following reasons,
the City’s Motion is granted.
1 Plaintiffs moved to strike Defendant’s Notice of Supplemental Authority because it was filed without
leave of court and cited an unpublished case that relied on a “discredited” plurality opinion. (ECF No.
66). However, this Order does not rely on the cited decision and as such, Plaintiffs’ Motion to Strike is
DENIED AS MOOT.
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I. 	BACKGROUND
A. The IAHR
In this action, Plaintiffs challenge the validity of the City’s inclusionary Affordable
Housing Regulations (“IAHR”). 	S.D., Cal., Municipal Code §§ 142.1301–1314 (2025);
(see SAC, ECF No. 42). 	The City first adopted the IAHR in 2003 with the purpose of
“encourag[ing] diverse and balanced neighborhoods with housing available for households
of all income levels.” 	§ 142.1301. 	The City explained that the intent behind the IAHR
was to “ensure that when developing the limited supply of developable land, housing
opportunities for persons of all income levels are provided.” 	Id. 	The IAHR has been
amended several times since 2003. In its current form, the IAHR requires developers of
certain new developments to set aside 10% of residential units for low-income households
“at a cost, including an allowance for utilities, that does not exceed 30 percent of 60 percent
of median income.” § 142.1304(a). This requirement applies to new developments of five
or more units in the “Coastal Overlay Zone” and to new developments of ten or more units
elsewhere in the City. 	§ 142.1302. 	The San Diego Housing Commission determines
qualifications for occupancy of IAHR affordable units. § 142.1312. The affordable units
remain restricted for “a period of not less than 55 years” by covenants recorded in the
deeds. §§ 142.1304(f), 142.1313. In lieu of setting aside restricted units, the IAHR allows
developers to pay in-lieu fees which are “deposited into the Affordable Housing Fund.” §
142.1306(d). The in-lieu fees are currently assessed at $25.92 per square foot of proposed
construction. 	Requirements for Inclusionary Affordable Housing, The City of S.D.,
https://www.sandiego.gov/development-services/forms-publications/information-
bulletins/532.2
2 “Effective July 1, 2024, the Inclusionary In Lieu Fee shall be $25.00 per square foot of net building area
of unrestricted market-rate residential development. 	The Inclusionary In Lieu Fee shall be updated
annually based on the annual increase in the Construction Costs Index (CCI) published by Engineering
News Record for Los Angeles . . . .” S.D., Cal., Municipal Code § 142.1306(a).
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There are three categories of exemptions from IAHR requirements:
(1) Residential development located in the North City Future Urbanizing
Area that is within Proposition A Lands of the City of San Diego or any
project located in an area of the City that was previously located in the
North City Future Urbanizing Area;
(2) Rehabilitation of an existing building that does not result in a net increase
of dwelling units on the premises; and
(3) Density bonus units if the development meets the minimum thresholds set
by California Government Code §§ 65915–65918.
§ 142.1303(a)–(c). 	The City may also approve a “variance, waiver, adjustment, or
reduction” on two grounds. 	§ 142.1311. 	First, the City may grant a modification if the
decision maker makes all of the following findings:
(1) Special circumstances, unique to that development, justify granting the
variance, waiver, adjustment, or reduction;
(2) The development would not be feasible without the modification;
(3) A specific and substantial financial hardship would occur if the variance,
waiver, adjustment, or reduction were not granted; and
(4) No alternative means of compliance are available which would be more
effective in attaining 	the purposes 	of this Division 	than the relief
requested.
§ 142.1311(a). Second, the City can grant a modification if it “makes findings that applying
the requirements of [the IAHR] would take property in violation of the United States or
California Constitutions.” § 142.1311(b).
B. Plaintiffs and the Kearney Mesa Project
Plaintiffs in this case are residential property developers: (1) Palmer Kearney Mesa
Properties, L.P., a California limited partnership doing business in San Diego County, and
(2) GH Palmer, Inc., a California corporation doing business across California including in
San Diego County (collectively, “Plaintiffs” or “Palmer”). 	(SAC ¶¶ 13–14). 	Palmer is
engaged in residential property development across San Diego County and California. (Id.
¶ 15). Relevant here, Palmer seeks to build a large mixed-use development consisting of
1,642 residential units and approximately 32,000 square feet of retail space (“Project”)
located at Clairemont Mesa Boulevard, Convoy Street, and Raytheon Road, within the City
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of San Diego. (Id. ¶¶ 16–17). The property is in an area zoned for the kind of multi-family
residential development this Project proposes and accordingly, “no further quasi-legislative
or discretionary City approvals are required, and the Project is considered as a by-right
proposal, subject only to further ministerial review by City Staff.” (Id. ¶ 16).
In December 2022, Palmer alleges it submitted a detailed plan to the City for review
as part of its application for building permits. 	(Id. ¶ 86). 	The application indicated the
Project should be “exempt from” the IAHR’s requirement of setting aside 10% of newly
constructed units as affordable units or payment of in-lieu fees but also indicated that “in
the absence of any other feasible alternative or opportunity to object,” Palmer would
comply with the IAHR by payment of “in-lieu fees.” 	(Id.). 	On June 6, 2023, the City’s
preliminary review of the Project “did not grant Plaintiffs’ request for exemption” and
indicated the Project would be “subject to ‘the inclusionary affordable housing fee per
[section] 142.1306.’” 	(Id. ¶ 87). 	Palmer wrote to the City seeking clarification on its
failure to acknowledge the request for an exemption. (Id. ¶ 88). On August 11, 2023, the
City responded in writing asking Palmer why it believed the Project qualified for an
exemption. (Id. ¶ 89). In the email, the City identified three types of exemptions, none of
which applied to the Project. 	(Id. ¶¶ 89–90). 	Palmer believed any further pursuit of
administrative relief would be futile and did not respond further about an IAHR exemption.
(Id. ¶¶ 90, 94).
C. Claims and Procedural History
On September 22, 2023, Palmer filed a Complaint raising five claims for relief under
the U.S. Constitution, California Constitution, and various state laws.3 (ECF No. 1). On
March 4, 2024, the City filed a motion to dismiss for lack of subject-matter jurisdiction and
for failure to state a claim. (ECF No. 13). After briefing and a hearing on May 17, 2024,
3 The Mayor and City Council of the City of San Diego were named as defendants in the initial, first
amended, and second amended complaints, but each time were dismissed without prejudice pursuant to a
joint motion. (See ECF Nos. 10, 25, 48).
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the Court took the motion under submission. (See ECF Nos. 14, 15, 18). On August 22,
2024, the Court granted the City’s motion.4 (Mot. to Dismiss Order (“MTD Order”), ECF
No. 20). Palmer thereafter filed a First Amended Complaint (“FAC”). (ECF No. 21). On
October 29, 2024, the Court granted a joint motion to stay the case while the City Council
considered Palmer’s IAHR waiver application. (ECF No. 27). On April 10, 2025, Palmer
moved for relief from the order staying the case, reconsideration of the motion to dismiss
order, leave to amend the complaint, and injunctive relief directing the City to “unbundle”
Palmer’s IAHR waiver application from its other ministerial permit applications. 	(ECF
No. 30). The City responded in opposition and Palmer replied. (ECF Nos. 37, 38). On
May 23, 2025, the Court lifted the stay, found reconsideration of the motion to dismiss
order to be unnecessary given the amended complaint, granted leave to amend, and denied
injunctive relief. 	(ECF No. 41). 	On June 13, 2025, Palmer filed its SAC. 	On July 10,
2025, Palmer filed a Motion for a Preliminary Injunction, which the Court later denied.5
(ECF Nos. 49, 60). On July 14, 2025, the City filed the Motion to Dismiss currently before
the Court. (Mot., ECF No. 52). After full briefing, the Court vacated the hearing, finding
the matter suitable for decision without oral argument. 	(ECF No. 62). 	The Parties filed
supplemental authority on September 23, November 6, and November 14, 2025. 	(ECF
Nos. 61, 65, 67).
Palmer’s SAC asserts four claims. 	First, that the IAHR constitutes a taking in
4 The Court dismissed Palmer’s as-applied constitutional law claims as unripe until there was a final
determination from the City. 	(MTD Order 10–21). 	Palmer’s facial due process and equal protection
claims were dismissed on the merits. 	(Id. at 22–25). 	The Proposition 26 claim was dismissed with
prejudice after the Court found that amendment would be futile. (Id. at 25–26). Palmer’s claim that the
City unconstitutionally failed to justify the IAHR exactions was dismissed as having no legal basis, but
the Court specified that the theory could be incorporated into the takings claims. 	(Id. at 26). 	The
California Mitigation Fee Act (“CMFA”) claim was dismissed with leave to amend since it depended on
the IAHR fees being unlawful exactions. (Id. at 26–27). Finally, the Court dismissed the claim alleging
the improper calculation of costs justifying IAHR exactions as having no legal basis but allowed the theory
to be raised as part of the CMFA claim. (Id. at 27).
5 Palmer moved for a preliminary injunction prohibiting the City from requesting additional engineering
information, bundling the Building Permit Application with the IAHR Waiver application, and expiring
the Building Permit Application. (ECF No. 49).
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violation of the Fifth and Fourteenth Amendments of the U.S. Constitution, brought under
42 U.S.C. § 1983. 	(SAC ¶¶ 125–160). 	Second, that the IAHR constitutes a taking in
violation of article I, section 19 of the California Constitution. (Id. ¶¶ 161–168). Third,
that the IAHR violates the California Mitigation Fee Act (“CMFA”). 	(Id. ¶¶ 169–175).
Fourth, for the “Wrongful and Arbitrary Imposition of Unjustified Demands for Extraneous
Discretionary Approvals and Unjustified Threats to Expire Plaintiffs’ Valid and Complete
Building Permit Application.” (Id. ¶¶ 176–182). Palmer’s takings claims are brought both
facially and as-applied under a per se physical taking theory and a land-use exaction theory.
(Id. ¶¶ 128–160, 163–164).
The City now moves to dismiss all of the claims asserted in the SAC. As to the first
and second claims, the City argues that Palmer failed to allege sufficient factual matter to
state facial takings claims. 	(Mot. 23–24). 	Even if facial takings claims were properly
alleged, the City argues the claims are time-barred and further, cannot be based on a
Nollan/Dolan exactions theory. (Id. at 24); see Nollan v. Cal. Coastal Comm’n, 483 U.S.
825 (1987); Dolan v. City of Tigard, 512 U.S. 374, 377 (1994). 	The City argues that
Palmer’s as-applied takings claims are still unripe because they do not meet the finality
requirement or California’s administrative exhaustion requirement. (Mot. 17–19). Finally,
the City asserts that all of the takings claims should be dismissed because Palmer seeks
equitable relief when monetary damages are available, the IAHR does not effect a physical
taking, and the IAHR’s requirements are not unlawful exactions. 	(Id. at 22–23, 26–40).
As to the third claim, the City argues that the IAHR’s in-lieu fees are not “fees” within the
meaning of the CMFA and thus not subject to its requirements. (Id. at 40–41). As to the
fourth claim, the City argues there is no legal basis for the claim and thus no entitlement to
equitable relief. (Id. at 41–42).
II. 	LEGAL STANDARD
A. Rule 12(b)(1)
Federal Rule of Civil Procedure 12(b)(1) permits a party to seek dismissal of an
action for lack of subject-matter jurisdiction. 	“Because standing and ripeness pertain to
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federal courts’ subject matter jurisdiction, they are properly raised in a Rule 12(b)(1)
motion to dismiss.” Chandler v. State Farm Mut. Auto. Ins. Co., 598 F.3d 1115, 1122 (9th
Cir. 2010). Rule 12(b)(1) jurisdictional challenges can be either facial or factual. Safe Air
for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). When a motion to dismiss
attacks subject-matter jurisdiction on the face of the complaint, the court assumes the
factual allegations in the complaint are true and draws all reasonable inferences in the
plaintiff’s favor. 	Doe v. Holy See, 557 F.3d 1066, 1073 (9th Cir. 2009). 	The court will
then evaluate whether the complaint alleges “sufficient factual matter, accepted as true” to
invoke federal court jurisdiction. Terenkian v. Republic of Iraq, 694 F.3d 1122, 1131 (9th
Cir. 2012) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)) (applying the Iqbal
standard to a 12(b)(1) jurisdictional challenge).
In a factual challenge, the moving party “disputes the truth of the allegations that,
by themselves, would otherwise invoke federal jurisdiction.” 	Safe Air, 373 F.3d at 1039.
Unlike with a facial attack, the court need not accept the allegations in the complaint as
true. 	Id. 	Instead, “the plaintiff must support [their] jurisdictional allegations with
competent proof under the same evidentiary standard that governs in the summary
judgment context.” 	Leite v. Crane Co., 749 F.3d 1117, 1121 (9th Cir. 2014) (citation
modified). Thus, the plaintiff bears the burden of proving subject-matter jurisdiction by a
preponderance of the evidence and to prevail, “must furnish affidavits or other evidence
necessary to satisfy [their] burden.” Safe Air, 373 F.3d at 1039 (quoting Savage v. Glendale
Union High Sch., 343 F.3d 1036, 1039 n.2 (9th Cir. 2003)); see Leite, 749 F.3d at 1121.
Here, the City converted its Rule 12(b)(1) motion “into a factual motion by
presenting affidavits or other evidence” attached to the motion. Safe Air, 373 F.3d at 1039
(quoting Savage, 343 F.3d at 1039 n.2); (see Decl. of Lee H. Roistacher, ECF No. 52-2;
Decl. of Travis Cleveland (“Cleveland Decl.”), ECF No. 52-3). 	In response, Palmer
presented an affidavit and exhibits of its own. (Decl. of Geoff Palmer, ECF No. 56-1); see
supra note 10. The Court may now “resolve [the] factual disputes itself.” Leite, 749 F.3d
at 1121–22 (noting an exception when jurisdictional and merits questions are intertwined).
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Palmer will prevail if it can show by a preponderance of the evidence that this Court has
subject-matter jurisdiction. See id. at 1121.
B. Rule 12(b)(6)
Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss on the
grounds that a complaint “fail[s] to state a claim upon which relief can be granted.” 	“A
Rule 12(b)(6) motion tests the legal sufficiency of a claim.” 	Navarro v. Block, 250 F.3d
729, 732 (9th Cir. 2001). 	To survive a motion to dismiss, “a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its
face.’” 	Iqbal, 556 U.S. at 678 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). 	“A claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Id.
In reviewing the plausibility of a complaint on a motion to dismiss, a court must
“accept factual allegations in the complaint as true and construe the pleadings in the light
most favorable to the nonmoving party.” 	Manzarek v. St. Paul Fire & Marine Ins. Co.,
519 F.3d 1025, 1031 (9th Cir. 2008). 	But courts are not “required to accept as true
allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable
inferences.” 	In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) (citation
omitted). “Determining whether a complaint states a plausible claim for relief will . . . be
a context-specific task that requires the reviewing court to draw on its judicial experience
and common sense.” Iqbal, 556 U.S. at 679. The “[f]actual allegations must be enough to
raise a right to relief above the speculative level.” 	Twombly, 550 U.S. at 555. 	If the
plaintiff has not “nudged their claims across the line from conceivable to plausible, their
complaint must be dismissed.” Id. at 570.
III. 	DISCUSSION
A. Takings Claims
In 	the 	SAC, 	Palmer 	alleges 	that 	the 	IAHR’s 	requirements 	amount 	to 	an
uncompensated taking in violation of the U.S. Constitution and California Constitution.
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(SAC ¶¶ 125–168). The Fifth Amendment, applicable to the States through the Fourteenth
Amendment, prohibits “private property be[ing] taken for public use, without just
compensation.” 	U.S. Const. amend. V; Tyler v. Hennepin County, 598 U.S. 631, 637
(2023). Article I, section 19 of the California Constitution similarly provides that “Private
property may be taken or damaged for a public use . . . only when just compensation . . .
has first been paid.” Cal. Const. art. I, § 19. As these provisions are generally construed
congruently, the Court analyzes them together. 	See Cote v. Off. of Cal. State Controller,
No. 23-15375, 2024 WL 1108546, at *1 (9th Cir. Mar. 14, 2024) (citing San Remo Hotel
L.P. v. City and County of San Francisco, 41 P.3d 87, 100–01 (Cal. 2002)); Lafayette
Bollinger Dev. LLC v. Town of Moraga, 311 Cal. Rptr. 3d 273, 295 n.10 (Cal. Ct. App.
2023) (“The federal and California constitutional provisions are construed ‘congruently,’
except with regard to a difference in scope that is not relevant here.”). As noted, Palmer
alleges its takings claims both facially and as-applied. 	(SAC ¶¶ 128–160, 163). 	Facial
takings challenges assert “that the mere enactment of a statute constitutes a taking.”
Ventura Mobilehome Cmtys. Owners Ass’n v. City of San Buenaventura, 371 F.3d 1046,
1051 (9th Cir. 2004) (quoting Levald, Inc. v. City of Palm Desert, 998 F.2d 680, 686 (9th
Cir. 1993)). 	As-applied takings challenges allege “that the particular impact of a
government 	action 	on 	a 	specific 	piece 	of 	property 	requires 	the 	payment 	of 	just
compensation.” 	Id. 	The Court first addresses the City’s arguments concerning Palmer’s
facial takings claims.
1. 	Facial Takings Claims
a. Sufficient Factual Matter
The City argues that Palmer failed to allege sufficient facts to support its facial
challenges. (Mot. 23–24). Although this Court previously interpreted Palmer’s Complaint
as raising only as-applied takings claims, the FAC explicitly alleged facial challenges.
(MTD Order 9; see ECF No. 21-1). Palmer now alleges that the IAHR is unconstitutional
“in all or at least the great majority of cases wherein the property is or may be subjected to
[it].” (SAC ¶¶ 140, 159). This satisfies the pleading standard that plaintiffs must “plausibly
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allege that ‘no set of circumstances exists under which’ the IAHR may validly apply.”
(MTD Order 9 (quoting United States v. Salerno, 481 U.S. 739, 745 (1987))). Accordingly,
the Court finds that Palmer has adequately alleged facial claims.
b. Time-Bar
The City argues that any facial takings claims are nevertheless time-barred. (Mot.
24–26). 	The statute of limitations for federal claims brought under 42 U.S.C. § 1983 is
that of the forum state’s statute of limitations for personal injury actions. Bird v. Dep’t of
Hum. Servs., 935 F.3d 738, 743 (9th Cir. 2019). 	Thus, the statute of limitations for
Palmer’s federal takings claim is two years. 	Colony Cove Props., LLC v. City of Carson,
640 F.3d 948, 956 (9th Cir. 2011) (citing Cal. Civ. Proc. Code § 335.1 (West 2025)). The
statute of limitations for a facial takings claim under the California Constitution is ninety
days. 616 Croft Ave., LLC v. City of West Hollywood, 207 Cal. Rptr. 3d 729, 735 (Cal. Ct.
App. 2016) (citing Cal. Gov’t Code § 65009(c)(1) (West 2025)). 	For facial takings
challenges, the limitations period begins to run when the ordinance is enacted. 	Colony
Cove, 640 F.3d at 956; Hensler v. City of Glendale, 876 P.2d 1043, 1056 (Cal. 1994); see
County of Sonoma v. Superior Ct., 118 Cal. Rptr. 3d 915, 928–29 (Cal. Ct. App. 2010)
(distinguishing Travis v. County of Santa Cruz, 94 P.3d 538 (Cal. 2004)). This is because
“[i]n other contexts, the harm inflicted by the statute is continuing, or does not occur until
the statute is enforced,” whereas a facial takings challenge alleges “that the very enactment
of the statute has reduced the value of the property or has effected a transfer of a property
interest.” Levald, 998 F.2d at 688. 	The question here is when Palmer’s facial challenge
began to accrue.
The City argues that the challenged requirements were already in place by July 1,
2020, at the latest, when the IAHR was amended by ordinance O-21167. 	(Mot. 25–26).
Palmer, on the other hand, contends that the increase of in-lieu fees in July 2023 and 2024
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restarted the limitations period.6 (Opp’n 29–31). However, amending a statute typically
does not restart a limitations period unless there is a substantive amendment which “alter[s]
the effect of the ordinance upon the plaintiff[].” 	Colony Cove, 640 F.3d at 957 (quoting
Action Apartment Ass’n, Inc. v. Santa Monica Rent Control Bd., 509 F.3d 1020, 1027 (9th
Cir. 2007)); see Arcadia Dev. Co. v. City of Morgan Hill, 86 Cal. Rptr. 3d 598, 610 (Cal.
Ct. App. 2008) (assessing whether the reenactment of a ten-year ordinance was a
“substantive change”).7
6 Palmer alleges that “the City amended the IAHR in July 2023, . . . and again in July 2024, to amend and
increase the exactions demanded.” (Opp’n 30; SAC ¶¶ 78–79). It appears, however, that the fee amounts
through 2024 were already established by the 2020 amendments to the IAHR. (See ECF No. 13-3 at 67–
68; SAC ¶ 77). 	It is doubtful whether this type of phased implementation constitutes the type of
“amendment” relevant to the accrual of limitations periods. Nevertheless, because statute of limitations
challenges are evaluated under a Rule 12(b)(6) standard requiring courts to accept the complaint’s factual
allegations as true, and because the City does not appear to contest Palmer’s characterization, the Court
assumes for purposes of this analysis that the fee changes constitute amendments. See Saeedy v. Regents
of Univ. of Cal., No. 22-55667, 2023 WL 4422300, at *1 (9th Cir. July 10, 2023); (Reply 9–10). Palmer
also contends that the City’s Request for Judicial Notice reflects “several more recent amendments to the
IAHR,” but does not brief the issue or identify any specific post-2020 amendment that altered the
regulatory requirements it challenges. 	(Opp’n 30 (citing SAC ¶ 132); see Mot. 11–12 (describing
amendments to methods of compliance, Coastal Zone applicability, and other ancillary provisions)).
Without more, this amounts to a conclusory assertion that the Court need not accept as true. 	See in re
Gilead Scis. Sec. Litig., 536 F.3d at 1055. The Court therefore limits its accrual analysis to the July 2023
and July 2024 fee changes.
7 Palmer cites Barratt for the proposition that fee increases restart the statute of limitations clock. (Opp’n
30–31); Barratt Am. Inc. v. City of Rancho Cucamonga, 124 P.3d 719, 728 (Cal. 2005). However, Barratt
was interpreting the CMFA, which explicitly provides a limitations period for challenging an ordinance
“modifying or amending an existing fee.” Cal. Gov’t Code § 66022 (West 2025). As Barratt examined
the “local agency’s statutory duties . . . . especially in light of the facts [of the] case,” courts have declined
to extend it beyond a CMFA context. Barratt, 124 P.3d at 728; see City of Gridley v. Superior Ct., 325
Cal. Rptr. 3d 641, 648 (Cal. Ct. App. 2024). Instead, the proper test is that applied in Arcadia: whether
the plaintiff “is challenging a new plan” which constitutes a “substantive change.” 86 Cal. Rptr. 3d at
609, 610. Although Arcadia discusses the reasoning of Barratt in doing its own analysis, it does so within
the context of the CMFA’s language and statutory scheme. Arcadia, 86 Cal. Rptr. 3d at 605–06. Here,
unlike in Arcadia and Barratt, the changes made to the in-lieu fees reflect previously scheduled annual
updates, rather than an extension of the duration of a regulation. 	Furthermore, time-barring Palmer’s
claim is consistent with the express purpose of the ninety-day limit in section 65009, which seeks to
“provide certainty for property owners and local governments” and reduce the “chilling effect” of delayed
litigation. Cal. Gov’t Code § 65009 (West 2025).
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Here, the amendments were annual updates to the in-lieu fees already required by
the regulatory scheme. See § 142.1306(a). Palmer’s facial challenge, by contrast, is to the
core mechanism of the IAHR: the set-aside requirement or in-lieu fee alternative, along
with the recording requirement. (SAC ¶¶ 134, 138, 143, 150, 163, 164). A facial takings
challenge, by definition, alleges “that the very enactment of the statute” resulted in “a single
harm, measurable and compensable when the statute [was] passed.” 	Levald, 998 F.2d at
688. If the IAHR regulatory scheme itself constituted such a harm, as Palmer alleges, then
it was on notice no later than 2020. 	The annual in-lieu fee increases did not alter the
fundamental structure of the IAHR or its effect on developers like Palmer. Therefore, the
annual fee updates are not substantive amendments that restart the statute of limitations for
facial challenges. 	As July 1, 2020 was the latest possible accrual date, Palmer’s federal
and California facial takings claims became time-barred on July 1, 2022 and September
29, 2020, respectively. Palmer filed its original complaint on September 22, 2023, so “the
running of the statute is apparent on the face of the complaint.” Von Saher v. Norton Simon
Museum of Art at Pasadena, 592 F.3d 954, 969 (9th Cir. 2010); see also Int’l Engine Parts,
Inc. v. Feddersen & Co., 888 P.2d 1279, 1282 (Cal. 1995) (where “the relevant facts are
not in dispute, the application of the statute of limitations may be decided as a question of
law”). 	Accordingly, Palmer’s facial takings claims are dismissed with prejudice as
untimely.8 The Court now turns to Palmer’s as-applied takings claims.
2. 	As-Applied Takings Claims
a. Ripeness
The City argues that Palmer’s as-applied takings claims remain unripe because the
City Council has not yet ruled on Palmer’s waiver application. 	(Mot. 17–19). 	Palmer
responds that the finality requirement does not apply to the types of claims now alleged in
the SAC, making the claims ripe. 	(Opp’n 15–21). 	Palmer further argues that the City’s
8 In light of this determination, the Court declines to address the City’s assertion that Nollan/Dolan claims
cannot be brought facially.
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actions and prolonged delays have demonstrated the futility of seeking administrative
relief. (Id. at 21–23).
Article III of the U.S. Constitution limits federal courts to deciding cases or
controversies. 	U.S. Const. art. III, § 2. 	Implicit in this limitation is the ripeness
requirement that a case must “present concrete legal issues” to prevent courts from
“entangling themselves in abstract disagreements.” 	Colwell v. Dep’t of Health & Hum.
Servs., 558 F.3d 1112, 1123 (9th Cir. 2009) (citation modified). 	The Court’s previous
order in this case dismissed Palmer’s as-applied takings claims as unripe. 	(MTD Order
10–22). The Court concluded that the claims did not meet the finality requirement because
the City had not reached a conclusive determination and there remained avenues available
for the City to clarify or change its position. 	(Id. at 11). 	In the time since that Order,
several things have changed. Palmer has since pursued administrative relief in the form of
a waiver application that was deemed complete on October 29, 2024. (Cleveland Decl. ¶
9). 	City staff completed review of the application and notified Palmer that they “would
make a recommendation of denial to the Planning Commission, and that the Commission,
in turn, would recommend that the City Council deny the request.” (Id. ¶ 10). Palmer also
filed its FAC before the case was stayed for almost seven months. (See ECF Nos. 21, 27,
41). 	Palmer then filed its SAC alleging fewer claims and theories than in the original
complaint. (SAC; see also FAC).
The City argues that Palmer has failed to meet the finality requirement reaffirmed in
Pakdel. (Mot. 17 (citing Pakdel v. City and County of San Francisco, 594 U.S. 474, 475,
480 (2021)); see MTD Order 10–19). 	However, this ignores the fact that Palmer has
abandoned its regulatory theory and now proceeds solely under physical taking and land-
use exaction theories. 	(SAC ¶¶ 128–160, 163–164; see FAC at 26 n.4). 	This change is
dispositive. The Williamson County finality requirement, affirmed in Pakdel, “applies only
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to regulatory, not per se, takings.”9 Fowler v. Guerin, 899 F.3d 1112, 1117 (9th Cir. 2018);
Williamson, 473 U.S. 172, overruled by, Knick, 588 U.S. 180. 	Accordingly, there is no
longer a finality requirement and the relevant question is simply whether there is a ripe
case or controversy within the meaning of Article III.10
9 Williamson County “established two distinct requirements for taking claims under the rubric of ripeness.”
Dodd v. Hood River County, 59 F.3d 852, 858 (9th Cir. 1995). First, the government must have “reached
a final decision regarding the application of the regulations to the property at issue.” Williamson Cnty.
Reg’l Plan. Comm’n v. Hamilton Bank of Johnson City, 473 U.S. 172, 186 (1985). Second, “the owner
[must have] unsuccessfully attempted to obtain just compensation through the procedures provided by the
State.” Id. at 195. Prior to the overruling of Williamson County, the Ninth Circuit consistently held that
the first requirement only applied to regulatory takings claims. 	See Fowler v. Guerin, 899 F.3d 1112,
1117 (9th Cir. 2018); Vacation Vill., Inc. v. Clark County, 497 F.3d 902, 912 (9th Cir. 2007); Daniel v.
County of Santa Barbara, 288 F.3d 375, 382 (9th Cir. 2002). 	In 2019, Knick overruled Williamson
County’s second prong, finding that property owners were “not required to seek and be denied
compensation in state court before bringing a federal claim.” Gearing v. City of Half Moon Bay, 54 F.4th
1144, 1148 (9th Cir. 2022) (citing Knick v. Township of Scott, 588 U.S. 180 (2019)). 	In 2021, Pakdel
clarified the finality requirement standard, but in doing so confirmed that it only applies “[w]hen a plaintiff
alleges a regulatory taking in violation of the Fifth Amendment.” Pakdel, 594 U.S. at 475, 479 (emphasis
added) (“Because a plaintiff who asserts a regulatory taking must prove that the government regulation
has gone too far, the court must first know how far the regulation goes.” (citation modified) (emphasis
added)). This limitation has been confirmed in the language of post-Pakdel Ninth Circuit decisions. See
Garza v. Woods, 150 F.4th 1118, 1125 (9th Cir. 2025); Mendelson v. San Mateo County, No. 23-15494,
2024 WL 3518319, at *1 (9th Cir. July 24, 2024); Patel v. City of South El Monte, No. 21-55546, 2022
WL 738625, at *2 (9th Cir. Mar. 11, 2022); Ralston v. County of San Mateo, No. 21-16489, 2022 WL
16570800, at *1 (9th Cir. Nov. 1, 2022). 	The factors that a court must examine in a regulatory taking
case, like economic impact and interference with reasonable investment-backed expectations, “simply
cannot be evaluated until the administrative agency has arrived at a final, definitive position regarding
how it will apply the regulations at issue to the particular land in question.” Williamson Cnty., 473 U.S. at
191; see Pa. Cent. Transp. Co. v. City of New York, 438 U.S. 104, 124 (1978). However, this reasoning
does not apply to physical takings or land-use exaction claims, which do not turn on whether a regulation
has gone “too far” but instead allege a per se taking. Koontz v. St. Johns River Water Mgmt. Dist., 570
U.S. 595, 614 (2013) (contrasting the ad hoc, factual inquiry of regulatory takings with the per se approach
for land-use exactions); Newberg Crestview, LLC v. City of Newberg, No. 3:22-cv-1289-AR, 2023 WL
8372167, at *5 (D. Or. Dec. 4, 2023).
10 Palmer argues that the 12(b)(1) standard should not be applied in this case because “the specific ripeness
requirements applicable to land use disputes are not jurisdictional.” (Opp’n 12–13). As the Court finds
that the finality requirement does not apply to the claims at issue, it need not resolve this question. See
Fowler, 899 F.3d at 1116 n.1 (noting the Supreme Court has not “resolve[d] the continuing vitality of the
prudential ripeness doctrine”). 	The Court also does not reach Palmer’s arguments regarding de facto
finality, futility, or the ripeness standard for declaratory relief claims. (See Opp’n 20–23).
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Constitutional ripeness “is synonymous with the injury-in-fact prong of the standing
inquiry.” 	Twitter, Inc. v. Paxton, 56 F.4th 1170, 1173 (9th Cir. 2022). 	Therefore, “an
injury must involve an invasion of a legally protected interest that is (a) concrete and
particularized, and (b) actual or imminent, not conjectural or hypothetical.” 	Id. (citation
modified). The City has made it clear that the IAHR applies to Palmer’s project, whether
or not the waiver application is granted. (See SAC ¶ 87). “An allegation of future injury
may suffice if the threatened injury is certainly impending, or there is a substantial risk that
the harm will occur.” 	Susan B. Anthony List v. Driehaus, 573 U.S. 149, 158 (2014)
(citation modified). The Parties’ dispute over whether the IAHR effects an unconstitutional
taking or violates state law presents a concrete legal controversy that is far from “imaginary
or wholly speculative.” Id. at 160 (quoting Babbitt v. United Farm Workers Nat’l Union,
442 U.S. 289, 302 (1979)). Accordingly, Palmer’s as-applied taking claims are ripe.
b. Exhaustion
California imposes an additional requirement for Palmer’s state law claims. Unlike
federal claims, “the rule of exhaustion of administrative remedies is well established in
California jurisprudence.” 	Campbell v. Regents of Univ. of Cal., 106 P.3d 976, 982 (Cal.
2005); see Knick, 588 U.S. at 185 (“The settled rule is that exhaustion of state remedies is
not a prerequisite to an action under 42 U.S.C. § 1983.” (citation modified)). 	The rule
requires that “where an administrative remedy is provided by statute, relief must be sought
from the administrative body and this remedy exhausted before the courts will act.”
Abelleira v. Dist. Ct. of Appeal, 109 P.2d 942, 949 (Cal. 1941). 	However, there are a
number of “flexible” exceptions. 	Campbell, 106 P.3d at 983. 	As noted in McAllister v.
County of Monterey, 54 Cal. Rptr. 3d 116, 129–30 (Cal. Ct. App. 2007), exceptions:
are commonly recognized when the administrative remedy is unavailable,
when it is inadequate, or when it would be futile to pursue it. Other exceptions
include situations where the agency indulges in unreasonable delay, when the
subject matter lies outside the administrative agency’s jurisdiction, or when
pursuit of an administrative remedy would result in irreparable harm. To this
list must be added exceptions where important questions of constitutional law
or public policy governing agency authority are tendered.
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Id. (citation modified). Several of these exceptions may apply here—including futility and
questions of constitutional law—but the unreasonable delay exception is most apparent.11
The City argues that Palmer has not exhausted administrative remedies because there
has been no final decision from City Council. (Mot. 17–19). However, the circumstances
have changed significantly since this Court’s prior order dismissing Palmer’s claims.
(MTD Order 20–21). At that time, Palmer had not pursued a modification under section
142.1311(b). (Id.). Palmer has now done so. (SAC ¶ 29). Palmer’s waiver application
was deemed complete on October 29, 2024. 	(Cleveland Decl. ¶ 9). 	Furthermore, on
January 30, 2025, City staff sent a letter notifying Palmer that a Planning Commission
hearing would likely take place in the spring with a City Council hearing to follow in the
summer. (ECF No. 52-6 at 1–3). To the Court’s knowledge, neither hearing has occurred.
More than fourteen months have now passed without the City scheduling a hearing before
the final decision maker. 	(Cleveland Decl. ¶ 9). 	Requiring Palmer to wait indefinitely
would not serve the purposes underlying the exhaustion doctrine. See McAllister, 54 Cal.
Rptr. 3d at 129–30; City of San Jose v. Operating Eng’rs Loc. Union No. 3, 232 P.3d 701,
708 (Cal. 2010) (exhaustion “does not apply when the administrative procedure is too slow
to be effective”). Accordingly, the Court concludes that Palmer has satisfied California’s
exhaustion requirement and proceeds to the merits of the as-applied takings claims.
c. 	Physical Taking
Palmer alleges that the IAHR effects a per se physical taking by requiring developers
to set aside a percentage of units for occupancy by low-income tenants at below-market
rents, or alternatively, to pay in-lieu fees. (SAC ¶¶ 128–137, 163). According to Palmer,
this requirement appropriates its property rights by forcing it to accept uninvited occupants
and surrender control over rental rates. 	(Opp’n 24–25). 	The City argues that Palmer’s
physical takings claims fail as a matter of law because the IAHR does not compel any
11 As the Court ultimately concludes that Palmer’s as-applied takings claims fail on the merits, the
exhaustion question is not dispositive.
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physical occupation of its property but merely regulates voluntary entry into the rental
housing market. (Mot. 26–35).
As noted, the Takings Clause of the Fifth Amendment provides that private property
shall not “be taken for public use, without just compensation.” U.S. Const. amend. V; Tyler,
598 U.S. at 637. Similarly, the California Constitution specifies that “Private property may
be taken or damaged for a public use . . . only when just compensation . . . has first been
paid.” Cal. Const. art. I, § 19; see Lafayette, 311 Cal. Rptr. 3d at 295 n.10. A per se physical
taking occurs when “the government physically acquires private property for a public use.”
Pharm. Rsch. & Mfrs. of Am. v. Stolfi, 153 F.4th 795, 833 (9th Cir. 2025) (citation
modified). 	This occurs whenever the government “authorizes [a] compelled physical
invasion,” which can be anything from “flood[ing] a landowner’s property” to “requir[ing]
the landowner to suffer the installation of a cable.” Yee v. City of Escondido, 503 U.S. 519,
527 (1992).
The threshold question is whether the government required the property owner to
submit to occupation or merely regulated the owner’s use of their own property. See Yee,
503 U.S. at 527. “This element of required acquiescence is at the heart of the concept of
occupation.” FCC v. Fla. Power Corp., 480 U.S. 245, 252 (1987). The critical distinction
is between an invitee and “an interloper with a government license.” Id. at 252–53. In the
housing context, “it is the invitation, not the rent, that makes the difference.” Id. at 252.
By voluntarily entering the rental market, a property owner extends that invitation, and the
government may then regulate the terms of the relationship without creating a physical
invasion. See Yee, 503 U.S. at 527–28 (1992). Palmer relies on Cedar Point, in which the
Supreme Court noted “the right to exclude is one of the most treasured rights of property
ownership.” Cedar Point Nursery v. Hassid, 594 U.S. 139, 149 (2021) (citation modified).
But Cedar Point itself recognized that regulations compelling an invasion and those
regulating how a property owner treats invitees are “readily distinguishable.” 	Id. at 157;
see 74 Pinehurst LLC v. New York, 59 F.4th 557, 563 (2d Cir. 2023) (distinguishing Cedar
Point in the context of rent control). Indeed, the Supreme Court “has consistently affirmed
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that States have broad power to regulate housing conditions in general and the landlord-
tenant relationship in particular without paying compensation for all economic injuries that
such regulation entails.” 	Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419,
440 (1982). “The government may place ceilings on the rents the landowner can charge or
require the landowner to accept tenants he does not like without automatically having to
pay compensation.” 	Yee, 503 U.S. at 529 (citation modified). 	Accordingly, laws
“regulating the economic relations of landlords and tenants are not per se takings.” 	Fla.
Power, 480 U.S. at 252.
Applying this framework, the IAHR does not effect a physical taking. Palmer retains
the choice of whether to develop its property, build residential housing, and enter the rental
market. See 74 Pinehurst, 59 F.4th at 564 (no one forced plaintiffs “to place their properties
into the regulated housing market”). If Palmer does choose to develop rental housing of
ten or more units, the IAHR requires that either ten percent be made available to low- or
very-low-income households at restricted rents, or that Palmer pay in-lieu fees.12 See §§
142.1302–1305. This regulatory structure is consistent with those that courts have upheld
against physical takings challenges. In Yee, the Supreme Court rejected a physical takings
claim where the owners “voluntarily rented their land to mobile home owners” and were
not compelled to continue to do so. 503 U.S. at 527–28. The Court found that the “tenants
were invited . . . not forced upon [the owners] by the government.” Id. at 528. Courts have
applied this reasoning to uphold a variety of landlord-tenant regulations against physical
takings challenges.13 So too here. 	If Palmer proceeds with the Project, any tenants,
12 Palmer invokes a footnote from Loretto for the proposition that “a landlord’s ability to rent his property
may not be conditioned on his forfeiting the right to compensation for a physical occupation.” (Opp’n 25;
SAC ¶ 133 (quoting Loretto, 458 U.S. at 439 n.17)). However, Yee addressed and rejected this precise
argument, finding the point inapplicable when “the ordinance does not effect a physical taking in the first
place.” Yee, 503 U.S. at 532.
13 See, e.g., Ballinger v. City of Oakland, 24 F.4th 1287, 1293 (9th Cir. 2022) (relocation fee “merely
regulates . . . the relationship between landlord and tenant.” (citation modified)); Hotop v. City of San
Jose, 982 F.3d 710, 716 (9th Cir. 2020) (rent control ordinance “does not work any type of per se taking”);
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including those occupying affordable units, will be lessees invited by Palmer, not
interlopers imposed by the City.14 Unlike the union organizers in Cedar Point—strangers
granted access by government regulation—tenants under the IAHR enter through the
normal voluntary landlord-tenant relationship. The IAHR “merely regulate[s] [Palmer’s]
use of [the] land by regulating the relationship between landlord and tenant.” Yee, 503 U.S.
at 528. 	Therefore, Palmer’s as-applied takings claims brought under a physical taking
theory fail as a matter of law.
d. Land-Use Exaction
Palmer also brings its as-applied takings claims under an unconstitutional conditions
theory. (SAC ¶¶ 141–149, 164). Palmer contends that the IAHR constitutes an unlawful
exaction because it conditions permit approval on either setting aside ten percent of rental
units as affordable housing, secured for fifty-five years, or paying substantial in-lieu fees.
Id. 	Palmer argues these conditions lack the nexus and proportionality required by the
Nollan/Dolan line of cases. Id. The City responds that the IAHR is not an exaction at all
Bols v. Newsom, No. 22-56006, 2024 WL 208141, at *1–2 (9th Cir. Jan. 19, 2024) (commercial eviction
moratorium not a physical taking where tenants voluntarily invited); El Papel, LLC v. City of Seattle, No.
22-35656, 2023 WL 7040314, at *2 (9th Cir. Oct. 26, 2023) (“The Landlords here chose to use their
property as residential rentals.”); 1210 Cacique St., LLC v. City of Santa Barbara, No. CV 23-8152 PA
(RAOx), 2024 WL 1600323, at *5 (C.D. Cal. Mar. 1, 2024) (rent control not a physical taking); Williams
v. Alameda County, 642 F. Supp. 3d 1001, 1016 (N.D. Cal. 2022) (“The Ninth Circuit has held consistently
that laws governing the landlord-tenant relationship are not subject to a categorical per se takings
analysis.”); Pakdel v. City and County of San Francisco, 636 F. Supp. 3d 1065, 1074 (N.D. Cal. 2022)
(lifetime lease requirement not a physical taking where plaintiffs “voluntarily rent out their property”);
Farhoud v. Brown, No. 3:20-cv-2226-JR, 2022 WL 326092, at *10 (D. Or. Feb. 3, 2022) (contrasting
Cedar Point with eviction moratorium at issue); S. Cal. Rental Hous. Ass’n v. County of San Diego, 550
F. Supp. 3d 853, 866 (S.D. Cal. 2021) (no physical taking where “landowners [] invited the renters to
inhabit their rental units, make them their homes, and abide by the rental agreements”).
14 Palmer argues that the IAHR still infringes on its right to exclude by forcing it to accept low-income
tenants it would not otherwise choose. (SAC ¶ 132). The Supreme Court rejected this exact reasoning in
Yee, finding just because “they voluntarily open their property to occupation by others, petitioners cannot
assert a per se right to compensation based on their inability to exclude particular individuals.” Yee, 503
U.S. at 531 (first citing Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241, 259, 261 (1964); and
then citing PruneYard Shopping Ctr. v. Robins, 447 U.S. 74, 82–84 (1980)).
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because it would not be a compensable taking if imposed outside of the permitting process.
(Mot. 35–40).
The unconstitutional conditions doctrine “provides that the government may not
require a person to give up a constitutional right . . . in exchange for a discretionary benefit
conferred by the government where the benefit has little or no relationship to the property.”
Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 547 (2005). 	The Nollan/Dolan theory
“involve[s] a special application of this doctrine that protects the Fifth Amendment right
to just compensation for property the government takes when owners apply for land-use
permits. 	Koontz, 570 U.S. at 604 (citation modified); Nollan, 483 U.S. 825; Dolan, 512
U.S. 374. 	Nollan held that permit conditions demanding a conveyance of property must
have an “essential nexus” to the government’s land-use interest. 483 U.S. at 837. 	Dolan
added 	the 	requirement 	that 	permit 	conditions 	have 	“rough 	proportionality” 	to 	the
development’s impact on the land-use interest. 512 U.S. at 391. In Koontz, the Supreme
Court extended this framework to monetary exactions. 	570 U.S. at 612. 	In Sheetz, the
Supreme Court clarified that these requirements apply to administrative and legislative
permit conditions. Sheetz v. County of El Dorado, 601 U.S. 267, 280 (2024).
However, Nollan/Dolan scrutiny does not apply to every permit condition. 	“A
predicate for any unconstitutional conditions claim is that the government could not have
constitutionally ordered the person asserting the claim to do what it attempted to pressure
that person into doing.” 	Koontz, 570 U.S. at 612. “In the takings context, Nollan/Dolan
scrutiny therefore applies only when the condition at issue would have been a compensable
taking if imposed outside the permitting process.” Sheetz, 601 U.S. at 281 (Sotomayor, J.,
concurring); see also Koontz, 570 U.S. at 612 (“[W]e began our analysis in both Nollan
and Dolan by observing that if the government had directly seized the easements it sought
to obtain through the permitting process, it would have committed a per se taking.”). The
California Supreme Court applied this principle in CBIA, holding that an inclusionary
housing ordinance requiring developers to sell a percentage of units at affordable prices
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did not constitute an exaction triggering Nollan/Dolan scrutiny. Cal. Bldg. Indus. Ass’n v.
City of San Jose (“CBIA”), 351 P.3d 974, 990 (Cal. 2015). The court explained:
Nothing in Koontz suggests that the unconstitutional conditions doctrine under
Nollan and Dolan would apply where the government simply restricts the use
of property without demanding the conveyance of some identifiable protected
property interest (a dedication of property or the payment of money) as a
condition of approval. 	It is the governmental requirement that the property
owner convey some identifiable property interest that constitutes a so-called
“exaction” under the takings clause and that brings the unconstitutional
conditions doctrine into play.
Id.15 The ordinance at issue in CBIA did “not require the developer to dedicate any portion
of its property to the public or to pay any money to the public. Instead, like many other
land use regulations, [the] condition simply place[d] a restriction on the way the developer
[could] use its property.” 	Id. at 991. The court concluded that the ordinance was not an
exaction because it fell “within what we have already described as municipalities’ general
broad discretion to regulate the use of real property to serve the legitimate interests of the
general public and the community at large.”16 Id. 	The Ninth Circuit follows the same
15 Palmer argues that post-Sheetz, courts must apply Nollan/Dolan scrutiny to legislative permit conditions
like the IAHR. (Opp’n 26 (citing Sheetz, 601 U.S. at 280)). This is mistaken. Sheetz addressed which
governmental bodies have permit conditions subject to Nollan/Dolan scrutiny, not what qualifies as an
exaction, as confirmed in Justice Sotomayor’s concurrence. 	Sheetz, 601 U.S. at 281 (Sotomayor, J.,
concurring). Therefore, Sheetz did not disturb CBIA’s reasoning that where there was no physical taking,
in the case of an inclusionary housing ordinance, there could not be an exaction. See Sheetz v. County of
El Dorado, 335 Cal. Rptr. 3d 316, 330 (Cal. Ct. App. 2025) (unpublished) (citing CBIA, 351 P.3d at 989–
90) (“We begin our analysis by addressing the threshold or antecedent question Justice Sotomayor
identified in her concurring opinion in this case.”); Benedetti v. County of Marin, 336 Cal. Rptr. 3d 571,
579 (Cal. Ct. App. 2025) (applying Nollan/Dolan post-Sheetz and citing CBIA for the proposition that
“there can be no valid unconstitutional-conditions takings claim without a government exaction of
property”).
16 Palmer attempts to distinguish CBIA on the grounds that it involved for-sale housing, as opposed to
rental housing. (Opp’n 32–33). This distinction is immaterial. CBIA’s holding turned on the nature of
the regulatory requirement, not the type of housing involved, as evidenced by both its language and its
invocation of Yee. CBIA, 351 P.3d at 991 (citing Yee, 503 U.S. at 532). Nor does the IAHR’s recording
requirement transform the regulation into an exaction. 	Palmer contends that CBIA is distinguishable
because the restrictions at issue there operated on future purchasers, whereas here, developers retain
ownership and bear the ongoing burden directly. (Opp’n 32–33). But CBIA’s conclusion was categorical:
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approach. 	In Ballinger, the court emphasized that “the starting point to our analysis of
exactions claims is still whether the substance of the condition . . . would be a taking
independent of the conditioned benefit.” Ballinger v. City of Oakland, 24 F.4th 1287, 1300
(9th Cir. 2022). Ultimately, “whatever the government action is, it must condition the grant
of a benefit on an unconstitutional taking.” Id. at 1299.
Here, Palmer contends that the set-aside requirement and in-lieu fees do not pass
Nollan/Dolan scrutiny and are thus unconstitutional. 	(SAC ¶¶ 141–149, 164). 	Yet, as
discussed, the threshold question is whether the IAHR effects a taking at all. 	For the
reasons discussed in the previous section, the Court concludes it does not. The IAHR, like
the ordinance in CBIA, regulates the use of property rather than appropriates it. The set-
aside requirement does not compel Palmer to give the property to the public, it merely
regulates the terms on which it can rent certain units. See CBIA, 351 P.3d at 991 (“[T]his
condition simply places a restriction on the way the developer may use its property by
limiting the price for which the developer may offer some of its units for sale.”). The in-
lieu fee option further undermines Palmer’s argument because courts have found it to be
“particularly inappropriate” to find a per se taking where “waivers, alternate compliance
methods, and cost-offsetting provisions are available.” Alto Eldorado P’ship v. County of
Santa Fe, 634 F.3d 1170, 1178 n.4 (10th Cir. 2011); see CBIA, 351 P.3d at 1002. As the
IAHR would not constitute a taking if imposed outside of the permit process, Nollan/Dolan
scrutiny does not apply. Therefore, Palmer’s as-applied takings claims under the U.S. and
California Constitutions fail as a matter of law and are dismissed with prejudice.17
recording “does not transform these [affordability] requirements into property interests possessed by the
city. Recordation simply assures that would-be purchasers of the affordable units are on notice regarding
the restrictions relating to resale and is no different from the routine recording of other types of land use
restrictions that are intended to continue for a specified period of time.” CBIA, 351 P.3d at 996.
17 The Court does not reach the City’s argument that Palmer’s takings claims improperly seek equitable
relief when monetary damages are available. (Mot. 22–23).
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B. CMFA Claim
Palmer’s third claim alleges that the IAHR violates the CMFA. Cal. Gov’t Code §§
66000–66006 (West 2025); (SAC ¶¶ 173–175). Specifically, Palmer contends that the City
failed to make the required findings, demonstrate a reasonable relationship between the in-
lieu fees and the development’s impact, identify the public facilities funded by the fees,
and adopt a nexus study. 	(SAC ¶ 173). 	Palmer also invokes section 66001(g) which
prohibits certain fees from including “the costs attributable to existing deficiencies in
public facilities.” 	Id. 	The City argues that the CMFA does not apply because the in-lieu
fees are not “fees” within the meaning of the Act. (Mot. 40–41).
The CMFA “creates uniform procedures for local agencies to follow in establishing,
imposing, collecting, accounting for, and using development fees.” Walker v. City of San
Clemente, 192 Cal. Rptr. 3d 635, 640 (Cal. Ct. App. 2015). The Act defines a fee as:
a 	monetary 	exaction 	other 	than 	a 	tax 	or 	special 	assessment, 	whether
established for a broad class of projects by legislation of general applicability
or imposed on a specific project on an ad hoc basis, that is charged by a local
agency to the applicant in connection with approval of a development project
for the purpose of defraying all or a portion of the cost of public facilities
related to the development project
§ 66000(b) (emphasis added). 	“‘Public facilities’ includes public improvements, public
services, and community amenities.” 	§ 66000(d). 	The threshold question is therefore
whether a fee is imposed for the purpose of defraying the cost of public facilities. If the
fee in question does not fall under this definition, then it is not subject to the CMFA.
Palmer argues the CMFA applies because the in-lieu fees here fall under the broad
“scope of fees and exactions imposed by local governments in connection with approval
of development projects.” (SAC ¶ 173). However, California courts have squarely held
that affordable housing in-lieu fees are not fees within the meaning of the CMFA.18 In 616
18 Palmer cites Hamilton and Walker in support of its argument that in-lieu fees fall within the scope of
the CMFA. (Opp’n 34). However, this reliance is misplaced. In Hamilton, the court held that parking
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Croft, an appeals court considered an ordinance which, like here, required developers to
rent or sell a portion of their newly constructed units at below-market rates or pay in-lieu
fees to fund affordable housing. 207 Cal. Rptr. 3d at 733. Relying on a California Supreme
Court decision, the court held that affordable housing in-lieu fees do not fall under the
CMFA because their purpose “is not to defray the cost of increased demand on public
services resulting from [the] specific development project, but rather to combat the overall
lack of affordable housing.” Id. at 736 (citing CBIA, 351 P.3d at 979). The court in Cherk
reached the same conclusion. Cherk, 2018 WL 6583442, at *7 (“[A]n in-lieu housing fee
is not an exaction subject to the Act when the fee’s purpose is not to mitigate the adverse
impact of the particular development but is instead to enhance the public welfare by
promoting the use of available land for the development of affordable housing.”).19
The reasoning of 616 Croft and Cherk applies with equal force here.20 The IAHR’s
stated purpose is to “encourage diverse and balanced neighborhoods with housing available
in-lieu fees were subject to the CMFA specifically because they were “directed at mitigating a particular
adverse effect of the development proposal under consideration.” Hamilton & High, LLC v. City of Palo
Alto, 306 Cal. Rptr. 3d 154, 173 (Cal. Ct. App. 2023) (citation modified). Critically, the court cited to 616
Croft and found its reading of the Act consistent with theirs. Id. at 173 (citing 616 Croft, 207 Cal. Rptr.
3d 729). 	Similarly, Walker involved fees to “defray the cost of acquiring and constructing new beach
parking facilities” as an impact of the new development. 	192 Cal. Rptr. 3d at 638. 	These cases are
therefore unpersuasive. See Cherk v. County of Marin, No. A153579, 2018 WL 6583442, at *7 (Cal. Ct.
App. Dec. 14, 2018) (unpublished) (distinguishing Sterling Park, L.P. v. City of Palo Alto, 310 P.3d 925
(Cal. 2013)).
19 “Though we have sometimes been willing to rely in part on unpublished decisions as evidence
supporting a particular reading of California law in limited instances, we are also sensitive to the concern
that unpublished decisions of the California Courts of Appeal may not be cited as authority in state court,
Cal. R. Ct. 8.1115(a)–(b).” Li v. ArcSoft, Inc., 160 F.4th 1063, 1066 (9th Cir. 2025) (citation omitted).
20 “In the absence of a pronouncement by the highest court of a state, the federal courts must follow the
decision of the intermediate appellate courts of the state unless there is convincing evidence that the
highest court of the state would decide differently.” AGK Sierra De Montserrat, L.P. v. Comerica Bank,
109 F.4th 1132, 1136 (9th Cir. 2024) (quoting Owen ex rel. Owen v. United States, 713 F.2d 1461, 1464
(9th Cir. 1983)). Here, 616 Croft’s holding is consistent with CBIA’s reasoning that inclusionary housing
requirements serve “broad general welfare purposes” and there is no reason to think the highest court
would decide differently here. 616 Croft, 207 Cal. Rptr. 3d at 738; CBIA, 351 P.3d at 1000 (“Like other
zoning or land use regulations that are intended to shape and enhance the character and quality of life of
the community as a whole, San Jose’s inclusionary housing ordinance is intended to advance purposes
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for households of all income levels” and “ensure that when developing the limited supply
of developable land, housing opportunities for persons of all income levels are provided.”
§ 142.1301. 	This is precisely the type of broad public welfare purpose identified in 616
Croft and Cherk. 	The IAHR in-lieu fees are not imposed to defray the cost of public
facilities impacted by the Project but to “enhance the public welfare by promoting the use
of available land for the development of housing that would be available to low- and
moderate-income households.” 	616 Croft, 207 Cal. Rptr. 3d at 736. 	Accordingly, the
IAHR’s in-lieu fees are not “fees” within the meaning of the CMFA. 	Accordingly, this
claim is dismissed with prejudice.
C. Unjustified Demands Claim
Palmer seeks declaratory and injunctive relief for the “Wrongful and Arbitrary
Imposition 	of 	Unjustified 	Demands 	for 	Extraneous 	Discretionary 	Approvals 	and
Unjustified Threats to Expire Plaintiffs’ Valid and Complete Building Permit Application.”
(SAC ¶¶ 176–182). Specifically, Palmer alleges the City is improperly demanding newly
raised administrative submissions, bundling unrelated applications, subjecting the Project
to new discretionary administrative reviews, and threatening to expire Palmer’s building
permit application. 	Id. 	The City moves to dismiss on the grounds that Palmer does not
identify a legal basis for the claim. (Mot. 41–43).
“A plaintiff seeking a permanent injunction must satisfy a four-factor test before a
court may grant such relief.” 	Monsanto Co. v. Geertson Seed Farms, 561 U.S. 139, 156
(2010) (citation modified). However, before that test is reached, the plaintiff must establish
an underlying legal claim. Fierro v. Cap. One, N.A., 620 F. Supp. 3d 1105, 1112–13 (S.D.
Cal. 2022) (“Indeed, declaratory and injunctive relief are not independent claims, rather
they are forms of relief.” (citation modified)). 	Palmer’s fourth claim does not identify a
regulation, statute, or constitutional provision that the City violates. In the briefing, Palmer
beyond mitigating the impacts or effects that are attributable to a particular development or project and
instead to produce a widespread public benefit.” (citation modified)).
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invokes Perry v. Sindermann for the proposition that the government may not retaliate
against a person for exercising constitutional rights. 408 U.S. 593, 594 (1972); (Opp’n 34–
35). However, that analysis involved a First Amendment retaliation claim, which Palmer
does not allege here. 	Moreover, the Court previously denied Palmer’s request for a
preliminary injunction which sought substantially the same relief. (ECF No. 60). As this
claim has no legal basis, amendment would be futile and it is dismissed with prejudice.21
IV. 	CONCLUSION AND ORDER
For the reasons set out above, the Court GRANTS the City’s Motion to Dismiss.
The case is DISMISSED WITH PREJUDICE.
IT IS SO ORDERED.
Dated: January 16, 2026
________________________________
Hon. Dana M. Sabraw
United States District Judge
21 The Court is mindful that leave to amend should be given “freely . . . when justice so requires.” Fed.
R. Civ. P. 15(a). However, courts may deny leave in the presence of “undue delay, bad faith or dilatory
motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed,
undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of
amendment.” Foman v. Davis, 371 U.S. 178, 182 (1962). As discussed in this Order, Plaintiffs’ claims
“lack[] a cognizable legal theory.” Somers v. Apple, Inc., 729 F.3d 953, 959 (9th Cir. 2013). Therefore,
“because Plaintiffs have not shown that any new factual allegations could alter these conclusions based
on settled precedent, amendment would be futile.” Parents for Priv. v. Barr, 949 F.3d 1210, 1239 (9th
Cir. 2020).
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