Rui One Corp. v. City of Berkeley

Opinion by Judge Wardlaw; Dissent by Judge Bybee

As the cost of living skyrockets around the country, and in the San Francisco Bay Area in particular, the face of American poverty is changing dramatically. More and more frequently, full-time, minimum-wage workers are unable to support their families’ basic needs. See Jim Newton, L.A.’s Growing Pay Gap Looms as Political Issue Poverty, L.A. Times, Sept. 7, 1999, at A1 (“Today’s poverty icon is a working mother, toiling eight hours or more a day at a job that does not pay enough to cover the rent, clothe the baby or provide a life of even minimal comfort.”). Recognizing the plight of its own working poor, the City of Berkeley, California, has joined dozens of other cities nationwide to help bridge the gap between federal and state laws setting the minimum wage — the real value of which has decreased over the past few decades — and the costs of modern urban living by enacting “living wage” ordinances. These ordinances require certain employers to pay their employees wages approximating the real cost of living in the locality, which is often significantly higher than the applicable state or federal minimum wage. Although these…

dissenting:

Laws that work an “impairment of a State’s own contracts ... face more stringent examination under the Contract *1158 Clause than [do] laws regulating contractual relationships between private parties .... ” Allied Structural Steel Co. v. Spannaus, 438 U.S. 234 , 244 n. 15, 98 S.Ct. 2716 , 57 L.Ed.2d 727 (1978). There is a good reason for this. Parties enter into contracts to “order their personal and business affairs according to their particular needs and interests. Once arranged, those rights and obligations are binding under the law, and the parties are entitled to rely on them.” Id. at 245 , 98 S.Ct. 2716 . When the state is a party, there is an additional risk that it will employ its sovereign powers to alter the settled terms of the contract. Although the temptation to secure by legislation what a state has failed to achieve through negotiation is great, the Contract Clause commands that states resist this temptation.

The City of Berkeley succumbed to this temptation by employing its sovereign power to secure terms that it failed to negotiate in its proprietary capacity with RUI. Through the Marina Amendment, the City imposed obligations on a small number of…