Pacific Grove prevails in a lawsuit that challenged its right to limit vacation rentals.

Four years ago, Pacific Grove’s actions to curtail short-term vacation rentals came under attack through two lawsuits, one brought by a group of vacation rental owners who asked for an injunction to stop a lottery held by the city in May 2018 to distribute STR permits that resulted in a cap on the number of rentals. The other was brought by two couples, former permit holders who lost out to that lottery.

The injunction failed in large part because Monterey County Superior Court Judge Marla O. Anderson wasn’t buying the argument that the owners—calling themselves STRONGpg—had a vested right in renewing their licenses. She told them they don’t have those rights in licenses that will expire, because the rights expire upon the license's expiration date.

Anderson also told STRONGpg the case would likely be unsuccessful if they pursued it further, in part because governments have the right to make decisions for the good of the community.

The rights of landowners are subordinate, Anderson said. The lottery went ahead as planned and a citizen-created measure to limit vacation rentals in Pacific Grove, Measure M, won six months later in November 2018, further restricting the number of vacation rentals.

The very points made by Anderson then are now part of a ruling by a panel of three judges of the California Sixth Appellate District Court on Oct. 14 against the plaintiffs in the second lawsuit, William Hobbs et al. v. City of Pacific Grove.

That lawsuit was brought in June 2018 by former P.G. property owners Bill and Sue Hobbs and another couple, Donald and Irma Shirkey. They were represented by attorneys from the conservative Goldwater Institute based in Arizona.

The couples lost the case in Monterey County Superior Court in 2019 and appealed. Oral arguments were heard before the three appellate judges on Oct. 11. (The Hobbs’ sold the home in question last year and were not a part of the appellate decision.)

The ruling authored by Judge Cynthia C. Lie cited reasons for the decision against the plaintiffs including that the plaintiffs failed to show they had vested rights in their licenses being renewed year after year. They also failed to show they were denied due process. Not every citizen adversely affected by passage of statues can assert due process rights, based on case law, the ruling states.

The ruling also states that if there’s a legitimate governmental interest, limiting the use of property for the public welfare does not violate a citizen’s due process rights.

The court also used Carmel’s successful defense against a lawsuit in 1991 challenging the city’s ban on short-term rentals as a reason for why Pacific Grove had a right to limit the rentals for the city’s welfare. In addition, despite not being able to use their homes as short-term vacation rentals, the property owners retained economically viable uses of their properties, such as living there, allowing guests to stay without paying for the visit, renting the homes for at least 30 days or more or selling their homes.

“Because the [city’s short-term rental] ordinance is rationally related to the city’s goal of enhancing and maintaining its residential character, it was not so clearly arbitrary and unreasonable as to offend substantive process,” the ruling states.

The judges ruled in favor of the city and required that the plaintiffs pay for the city’s costs of the appeal.