Real Estate Cases To Watch In The 2nd Half Of 2017

A challenge to President Donald Trump’s planned U.S.-Mexico border wall, cases in Florida and California against Airbnb, and an Illinois U.S. Securities and Exchange Commission suit against an EB-5 senior housing developer are among the cases real estate lawyers will be keeping their eyes on in the second half of 2017.

The pair of suits against Airbnb, brought by Apartment Investment and Management Co. and other plaintiffs, come as cities across the country continue to try to figure out how to regulate short-term rentals offered by Airbnb and other sites, while the EB-5 suit follows a record EB-5 fraud case at a pair of ski resorts in Vermont earlier this year.

Here, Law360 looks at cases real estate lawyers will be watching in the second half of 2017.

Border Wall Challenge

In early June, the Center for Biological Diversity gave notice to the U.S. Department of Homeland Security and U.S. Customs and Border Protection that it intended to file a lawsuit seeking more information about the environmental impact Trump’s promised border wall would have.

The organization in May made a Freedom of Information Act request for environmental review documents, but did not receive any.

The Center then said in June that there is “no evidence” that the administration conducted an environmental review, which is required by federal law for such a project. It filed a suit in district court in California at the end of the month.

“We’re calling out the Trump administration’s disturbing failure to study how these border wall prototypes will hurt communities and endangered wildlife,” Anchun Jean Su, a lawyer at the Center for Biological Diversity, said in a statement in mid-June. “The administration can’t pick and choose which laws to follow. This project requires compliance with federal environmental laws that protect people and wildlife.”

Among the Center for Biological Diversity’s concerns in the Otay Mesa area along the border are the future of several endangered species in the region, including the Quino checkerspot butterfly.

The Center for Biological Diversity is represented by Anchun Jean Su, Brian Segee and John Peter Rose.

The case is Center for Biological Diversity v. U.S. Department of Homeland Security et al., case number 3:17-cv-01215-GPC-WVG, in the U.S. District Court for the Southern District of California.

California Marijuana Ordinances

The California Supreme Court earlier this year unanimously agreed to hear a case that deals with the question of how the state’s environmental act applies when it comes to questions of marijuana dispensary ordinances.

At issue is whether certain marijuana operations in San Diego qualify as “projects” under California Environmental Quality Act, and thus whether they are subject to the long and costly CEQA review process.

“The case challenges the city of San Diego’s ordinance that allowed amended municipal codes to govern marijuana dispensaries and growing operations. … The city adopted this new ordinance without addressing the CEQA environmental review, as it felt that the ‘project’ did not need to be subjected to an evaluation,” said Andrew Raines of Raines Feldman LLP.

The city had argued that such an ordinance was not a “project” and thus did not require CEQA review, and a trial court agreed, saying ordinances for medical marijuana operations do not qualify as projects for CEQA purposes.

Marijuana was recently legalized in California through Proposition 64.

“As time goes on, it is assumed that local agencies, such as CEQA, will develop strategies to contest the new laws. Given all of the previous CEQA cases in California Supreme Court, it will be interesting to see how this case concludes, as it sets a precedent for more marijuana cases in the future,” Raines said.

Plaintiff Union of Medical Marijuana Patients Inc. is represented by Jamie Thomas Hall and Julian Killen Quattlebaum 

The city of San Diego is represented by Glenn Thomas Spitzer of the San Diego City Attorney’s Office.

The case is Union of Medical Marijuana Patients Inc. v. City of San Diego, case number S238563, in the California Supreme Court.

SEC EB-5 Suit

In June, the SEC filed a suit against Chicago EB-5 lawyer Seyed Taher Kameli, claiming he misused and improperly commingled part of a pot of $88.7 million he raised through EB-5, as investors thought their capital was being used for a senior housing project in Chicago or Florida, and the lawsuit comes as Congress this fall will have to take up the issue of extending or changing EB-5.

According to the SEC’s complaint, Kameli claimed to have 226 investors who were each putting up $500,000 toward a senior living project, but rather than put all of the $88.7 million into a senior living project, Kameli moved millions of that sum to other projects, to make payments unrelated to the project and even to the benefit of himself, his brother and his companies.

“Kameli’s misconduct has put investors’ contributions to the funds, and the promised investment returns on those investment amounts, at risk,” the SEC’s complaint in June states. “Further, Kameli’s misconduct has jeopardized investors’ chances at obtaining permanent U.S. residency through the EB-5 visa program.”

The EB-5 program has drawn heightened scrutiny over the past years as Congress has tried to make changes to address fraud in the system.

In April, Raymond James & Associates Inc. agreed to pay investors in two Vermont ski area projects $150 million in the largest-ever EB-5 fraud case.

EB-5 will expire later this year if Congress doesn’t renew it, although it’s widely believed Congress will at a minimum renew the program. The bigger question is what changes, if any, the program might see.

The SEC is represented by Eric Phillips, Alyssa Qualls, Tracy Lo and BeLinda Mathie.

The case is U.S. Securities and Exchange Commission v. Seyed Taher Kameli et al., case number 1:17-cv-04686, in the U.S. District Court for the Northern District of Illinois, Eastern Division.

Seattle Democracy Voucher Program

Seattle in 2015 passed Initiative 122, the so-called “democracy voucher” program that provides city residents four $25 vouchers to give to city-elected office candidates during election cycles, and a recent lawsuit filed by the Pacific Legal Foundation on behalf of Seattle property owners claims the program violates First Amendment rights of property owners in the city.

The first of its kind in the nation, proponents see the program as a test to see if it might work on other cities and states, although Washington voters recently rejected a statewide version, according to Pacific Legal.

Since the First Amendment includes the right to freely speak and also to refrain from speaking, Pacific Legal argues the initiative forces property owners to pay for the political speech of others, since the voucher program is paid for through a property tax.

“If we can obtain a court ruling here that government cannot force property owners or anyone else to serve as unwilling sponsors for other people’s campaign contributions, we can hopefully prevent similar First Amendment violations elsewhere,” Ethan Blevins of Pacific Legal Foundation told Law360.

“This will give us a chance to enhance First Amendment protections outside those contexts and further the development of this area of First Amendment jurisprudence,” Blevins added.

The initiative, called “Honest Elections Seattle,” passed with 63 percent of voters approving it.

The plaintiffs are represented by Ethan Blevins and Brian Hodges of the Pacific Legal Foundation.

The case is Mark Elster and Sarah Pynchon v. City of Seattle, case number 17-2-16501-8, in the King County Superior Court.

Aimco Airbnb Suits

Denver-based Apartment Investment & Management Co. has filed a pair of lawsuits against Airbnb seeking monetary damages and seeking to prevent Airbnb from assisting Aimco tenants in renting out units on a short-term basis, and the suit could provide further clarity on just what obligations Airbnb has.

Aimco claims it reached out to Airbnb during three separate months in 2016 to notify the company that Airbnb listings for Aimco properties violated lease terms, and claims Airbnb continued to allow Aimco units to be rented out short-term.

Aimco’s leases do not allow for short-term sublets through Airbnb or any other company.

“It is not acceptable to us that Airbnb actively promotes and profits from deliberate breaches of our leases, and does so in utter disregard of the disrespectful and unsafe situations created for our full-time residents and their families,” Aimco CEO Terry Considine said in a statement earlier this year.

“We are asking the courts to compensate Aimco for our losses and to enjoin Airbnb from participation in further illegal activity at our properties so that our law-abiding residents can enjoy a high quality living experience,” Considine added in a statement.

The disputes are the latest in a yearslong saga that has played out, as cities as well as companies try to determine how to respond to Airbnb.

San Francisco has recently legalized short-term rentals provided homeowners follow certain procedures, while short-term rentals in New York are illegal.

The plaintiffs in the California case are represented by Robert O’Brien and R.C. Harlan of Larson O’Brien LLP and Michael Williams of Wheeler Trigg O’Donnell LLP.

The plaintiffs in the Florida case are represented by Dario Perez of Shutts & Bowen LLP.

Airbnb is represented by Sara Holladay-Tobias, Emily Rottmann and Monica Forbes of McGuire Woods LLP.

The California case is La Park La Brea A LLC et al. v. Airbnb Inc. et al., case number BC650575, in the Superior Court of the State of California for the County of Los Angeles.

The Florida case is Bay Parc Plaza Apartments LP et al. v. Airbnb Inc. et al., case number 2017-003624-CA-01, in the Circuit Court of the 11th Judicial Circuit in and for Miami-Dade County, Florida.


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