Page Mill has also sued East Palo Alto and the County, claiming the city violated the Brown Act (which governs public disclosures) during its revision of the Rent Stabilization Ordinance. And on Sept. 16, the San Mateo County Local Agency Formation Commission will consider a request by Page Mill's affiliate company, Woodland Park LLC, to remove the neighborhood south and west of U.S. Highway 101 from East Palo Alto altogether.
Tuesday's injunction was requested by four tenants who accused Page Mill of hiking rents in violation of the city's rent-control ordinance. The tenants' lawyers argued that the company formed an assortment of sham limited-liability companies largely to avoid having to comply with the ordinance.
San Mateo County Superior Court Judge Steven Dylina granted the plaintiffs' request for a preliminary injunction enjoining Page Mill and its many alternate entities from "collecting or enforcing any rent increases imposed on plaintiffs and other tenants living in properties owned by the LLC defendants since they took ownership of the properties." The ruling also bars Page Mill from imposing rent increases on plaintiffs and other tenants while the litigation is ongoing.
Most of Tuesday's arguments focused on the relationship between Page Mill and more than a dozen smaller companies, each of which owns four or fewer units. East Palo Alto's ordinance, which limits how much rents can be increased each year, includes a "mom and pop" provision that exempts landlords that own four or fewer units.
Tenants' attorneys Robert Hawk and Ryan Marsh, both from the Palo Alto firm Hogan & Hartson, argued that Page Mill acted in bad faith when it characterized its limited liability companies as entities separate from itself.
Hawk argued that Page Mill typically treats all the apartments owned by these companies as its own when it sends out newsletters to tenants or applies for loans. But Page Mill suddenly starts treating the companies as separate companies when it wants to raise rents.
Hawk also alluded to Page Mill's petition to the county Local Agency Formation Commission, in which Woodland Park, LLC, describes itself as an entity that manages about 1,700 units in the Woodland Park neighborhood.
"It is inherently bad faith. It is inherently inequitable when the defendants, time and time again, where it's convenient, asserted themselves as a common organization," Hawk said. "But, on the other hand, when it's convenient, they asserted themselves as separate entities."
Marsh cited statements from numerous tenants, some of whom said they had to go without medication, cancel doctor appointments, collect cans to make money or move out after seeing their rents increased by more than 40 percent last year. He noted that three of the four plaintiff no longer live in Page Mill-owned properties.
Page Mill's attorney Christine Griffith, from the San Francisco firm Ellman, Burke, Hoffman & Johnson, argued that Page Mill's system of forming smaller entities is very common in real-estate management. She also said Page Mill never denied that the companies are all related.
"There is no evidence of subterfuge; there is no evidence of a hidden agenda," Griffith said.
Dylina said the plaintiffs "have shown that there will be an 'inequitable result' if the entities are treated separately for the purpose of applying the (rent-stabilization ordinance)."
But Dylina also said he has seen no evidence demonstrating that Page Mill formed its network of limited-liability corporations for fraudulent or deceptive purposes. The company's organization, he ruled, could be based on legitimate purposes.
The tenants' attorneys will now compose the court-granted injunction, which would then be reviewed by Page Mill's attorneys and take effect at the end of the month.
Meanwhile, Page Mill is attempting to get the area where its apartments are located — south and west of U.S. Highway 101 and south Menlo Park — taken away from East Palo Alto.
Woodland Park's attorney William Ross states that Woodland Park has experienced inadequate law enforcement, street maintenance and street lighting in the area where its properties are located. It calls for the area to be turned into a "community service district," an entity authorized to provide police, fire and other types of services within its boundaries.
But Page Mill's request is unlikely to be met, said Martha Poyatos, the executive officer of the county Local Agency Formation Commission. Poyatos said she will recommend that the commission maintain East Palo Alto's current sphere of influence. Though she acknowledged some of Page Mill's concerns, she said these concerns could be addressed in other ways besides changing the city's boundaries. The company's request, she said, is very unusual.
"The city and Page Mill currently have the opportunity to address the concerns," Poyatos said. "There is no need to create other layers of government to do that."
The report by commission staff recommends that East Palo Alto make an effort to address Woodland Park's concerns. It specifically recommends that the city "provide for increased communication, outreach and opportunity for feedback with neighborhoods like Woodland Park west of 101, to establish priorities to better meet service needs." But removing the area from East Palo Alto's service area wouldn't make financial sense, it argues.
"Formation of a community service district and exclusion of this area from the City of East Palo Alto service would result in limited revenues for a small neighborhood to provide municipal services, a reduction in revenues to the city and loss of economies of scale," the report states.
Finally, the Palo Alto Police Department has recently concluded an internal investigation on Lt. Tim Morgan, a former police lieutenant who moonlighted for Page Mill while still on the Palo Alto police force. The department's policy prohibits officers from accepting any security-related employment that could have the appearance of a conflict of interest.
Morgan's involvement with Page Mill became publicized after Chris Lund, a leading tenant advocate, spotted Morgan taking pictures on his property and called the police. Morgan has since resigned from the Palo Alto Police Department.
In one e-mail, Morgan describes his position as a consultant who provides "assistance to the management company regarding security and security-preparedness issues."
Palo Alto police cannot release the results of the investigation because it is a "personnel issue," department spokesman Sgt. Dan Ryan said.
This story contains 1112 words.
Stories older than 90 days are available only to subscribing members. Please help sustain quality local journalism by becoming a subscribing member today.
If you are already a subscriber, please log in so you can continue to enjoy unlimited access to stories and archives. Subscriptions start at $5 per month and may be cancelled at any time.