San Jose Takes Landlords to Task—and to Court—Over Scofflaw Massage Parlor Tenants

Sgt. Rick Galea led the Nov. 30 sting at Bebe Day Spa that resulted in a prostitution arrest and a lawsuit by the city of San Jose to shutter the strip mall massage parlor until it licensed its way aboveboard.

Months passed, but the hole-in-the-wall East Side joint cited in Rubmaps.com reviews as a go-to for transactional sex had yet to obtain the proper permits. So when Galea picked up some overtime stretching into the predawn darkness of April 23, the garland of white lights flickering in the window seemed suspect.

From his marked patrol car, the vice squad veteran says he watched as three men disembarked from a vehicle around 3:30am, knocked on Bebe’s tint-blackened doors and slipped inside for about 10 to 15 minutes.

In Galea’s telling, the prospective johns didn’t fare so well. “They did not get a ‘happy ending’ or a massage,” the officer recounted at a court hearing earlier this week. With just “two girls” working and “three guys” calling, he explained, the would-be clients left.

Galea, who says he’s worked hundreds of similar cases, surmised that the tenant was violating a Feb. 27 court order to stop doing business. He told the city attorney, who alerted the property owner, who gave Bebe Day Spa proprietor Hung Nguyen a three-day eviction notice. Nguyen settled with the city, which slapped him with a $10,000 fine and a 10-year ban from the massage business, and then dipped out. Nuisance abated.

But the landlord—young mother-to-be Shufei Yang—isn’t off the hook just yet. Two days before a June 22 hearing that she thought would resolve litigation over Nguyen’s alleged wrongdoing, the city upped the ante by accusing Yang of criminal contempt for violating the same temporary restraining order targeting Nguyen.

“That poisoned the well,” Yang’s attorney Harpaul Nahal says, “and they only did that because they didn’t want this to end until they got money from my client.”

City Attorney Rick Doyle says that’s kind of the point. Empowered in part by legislation enacted in 2016 that shifted regulatory power from the state to local governments and in part by new case law, San Jose has increasingly sought to hold property owners accountable for problems associated with their real estate investments. One reason is to make an example of absentee landlords. But the primary motivation is more pragmatic: to recover the cost of enforcement.

“The first step is to abate the nuisance, the second step is to collect fines,” Doyle says. “We’re not trying to be ridiculous here, but we want to make sure the point is made and to make sure that there’s a deterrent.”

Under the statewide Red Light Abatement Act, which was passed in 1914 to crack down on San Francisco’s bustling red-light district, cities can board up buildings used for illicit sex work or gambling and, these days, neutralize the cost of doing so by imposing fines up to $25,000 per defendant. San Francisco City Attorney Dennis Herrera used the law last fall to get the property owner and operator of a notorious Financial District brothel to cough up a combined $295,000. The settlement prevents landlord Frank Iavarone from leasing to massage parlors or any “personal service” business for the next decade.

Lisa Spiwak, a founding partner of Southern California-based Spiwak & Iezza commercial collection law firm, says such nuisance abatement cases reflect a broader movement by cities to hold landlords liable for scofflaw lessees. In a 2015 white paper on how property owners can minimize that kind of liability, Spiwak traces the trend back to a 2005 court case from the Southern District of New York in which fashion powerhouse Louis Vuitton secured a permanent injunction against a landlord who leased to several tenants shilling counterfeit handbags.

Vuitton successfully forced the landlord to oust the tenants, post notices that counterfeit goods are illegal and comply with random compliance inspections. Luxury leather-goods maker Coach followed suit, as did Michael Kors and a slew of other designers. Spiwak calls the approach—which cities tend to wield more on the cannabis, gambling and massage industries—“extremely disconcerting.”

“History indicates that landlords are not legally liable for damages caused by their tenant’s illegal activities unless the landlord is aware of the activities and condones or facilitates them,” she writes in her report. “Recent court decisions, however, are changing history and placing greater burdens on landlords in this regard.”

A text exchange in which Shufei Yang tells Bebe Spa's owner to remain closed and comply with the city.

Doyle says it’s reasonable to expect landlords to stay engaged enough with tenants to know what they’re up to, and that the city files anywhere from six to 10 lawsuits a year against property owners who can’t, or won’t, bring their lessees in line. In one case, Doyle’s office litigated to get the Jack-in-the-Box on South First Street to clean up its act.

“It had become a place where pimps were hanging out, prostitutes, drug dealers and what have you,” Doyle says. “It turned out that the owners lived in Oakland, and we notified them that we were going to sue unless they took some responsibility, installed new lighting, fencing or whatever it took to keep the problems out.”

Yet Yang contends that going after landlords takes things a step too far. Private property owners shouldn’t foot the bill for costly police stings and code enforcement sweeps that target rogue tenants, Nahal adds in agreement.

“Since when has the city abdicated its police powers to landlords?” he asks outside Yang’s tan-stuccoed tile-roofed strip mall. “If someone breaks the law, police should arrest them. You shouldn’t expect landlords to do the work for them.”

If the court rules in favor of the city, Yang and her husband could end up with a six-figure judgment and a settlement that would allow the city to randomly inspect not only the emptied-out Bebe Day Spa storefront but the rest of their property, which they bought in 2016 for $5.4 million. “That could lead to a chilling effect,” Nahal argues. “Who’s going to want to do business with them?”

And while San Jose’s legal team accuses the Yangs of turning a blind eye to Nguyen’s apparently fly-by-night massage racket, the couple says they tried to work with the city to resolve the problem as soon as they heard about it. In court filings, Nahal attached copies of cellphone text messages in which Yang expressly tells Nguyen to comply with the city and in which he tells her that he obtained permits to convert the shop into a nail salon.

Doyle doesn’t buy it. In the city’s eyes, Galea’s April 23 stakeout proved that Nguyen wasn’t obeying the terms of the court order—and the Yangs are guilty by association.

“The city taxpayers shouldn’t have to foot the bill for this kind of thing,” Doyle says. “It’s the landlords who made money off of this, profiting off of the illegal activity that was going on, so they should be the ones paying.”

Doyle says, it would be wise for landlords who lease to tenants running those kinds of businesses to ask for documentary proof that they’re up to code. Of the 250 or so massage parlors in San Jose, according to a report by the nonprofit Polaris Project, only 14 are licensed with the San Jose Police Department. Thus, Doyle notes, it’s safe to assume that most could use that kind of accountability.

“If the landlord doesn’t know, then they should know,” he says. “It’s like the proverbial line about the piano player at the brothel not knowing what’s going on in the back.”

Shufei Yang's husband visits the vacant storefront where Bebe Spa used to be. (Photo by Jennifer Wadsworth)

Jennifer Wadsworth is the news editor for San Jose Inside and Metro Newspaper. Email tips to [email protected] or follow her on Twitter at @jennwadsworth.

17 Comments

  1. A young mother to be and her child’s lives are about to be upheaved because consenting adults wanted to have sex?

    What message are we sending when we want adults to understand they have to have consent – or risk legal trouble. But also…. consent between adults will cause legal trouble?

    We’re blurring the lines of consent.
    We’re causing a lifetime of legal, financial, and career punishment for a young mother to be because she rented out a store front.
    We’re filling up already crowded prisons.
    And we’re making women willingly *or unwillingly* in this life unable to pay taxes, get health insurance, or feel like they can call the cops if they need help.

    because…??

    • Lol, a lot of hyperbole in your comment. The property is owned by a husband and wife and it says worth atleast $5.4 million. I don’t think the lady is suffering anything that is lifetime worthy, just a sizeable fine which probably would be negotiated down.

  2. So now SJ wants to enforce against massage parlors? After allowing them to florish for a decade. Complete hypocrisy.

  3. Sam has a plan,,,, And we wonder why the entire city looks like a giant sewer. Interesting priorities

  4. So, how much tax money of our tax money supply was wasted to keep some guys from getting a happy ending?

  5. The Police Dept is doing exactly what it should in this case, and bravo Mr. Doyle for standing your ground. The following statements from Ms Wadsworth’s column sum up this situation nicely:
    “The city taxpayers shouldn’t have to foot the bill for this kind of thing,” Doyle says. “It’s the landlords who made money off of this, profiting off of the illegal activity that was going on, so they should be the ones paying.”
    “If the landlord doesn’t know, then they should know,” he says. “It’s like the proverbial line about the piano player at the brothel not knowing what’s going on in the back.”
    And, in answer to the question “Who’s going to want to do business with them?” An obvious answer is: Those who abide by all aspects of the law.

    • There wouldn’t be a bill to foot if Doyle just let consenting adults do as they please as long as no-one is being forced to be the giver or the receiver of a happy ending.
      Where’s the old COYOTE when we need it?

  6. We, as a City have tools to hold private property owners accountable for cleaning up illegal acts on their properties, however, we need to get our own house in order. I have observed what I believe to be drug dealing and prostitution activity occurring within a block of the City Hall complex. We residents need to hold our City government accountable for enforcing the law, if we are to be a positive example to these private property owners, and we will need to be vocal in our support of the SJPD when “social justice” activists inevitably loudly criticize our police officers for enforcing the law.

    • Wow coming from the same guy that helped swing the wrecking ball into the SJPD during the Measure B fiasco. Just wow! Perhaps downtown City Hall can be its own beat within the downtown patrol district and assign officers permanently to city hall? Oh wait thats what they did for this upcoming patrol bid. Very nice now how about all the blight across the city? Between the encampments that are up against residents backyard fences to prostitution and gambling Id say you bozos got exactly what the cops told you would happen. Good luck reeling in the snowball. With social media warriors and viral videos the police are a joke. Thanks Shane and gang

  7. Shakedown. The city is going to turn these retail plazas into tax shelters and collect $200 vacancy tax instead of thousands in sales tax. The city council sings a different tune when dealing with landlords preemptively removing tenants for the safety of other tenants, as on display during the JCE fiasco.

    Progressivism is the new righteous religion attendant with all a righteous religion’s hypocrisy.

    • These particular mini malls that house the rub and tugs and coffee shops barely pay squat in taxes. The gambling, happy endings and ice coffee are all under the table cash. Its a culture thing so no this does zero to the tax base. Meanwhile city hall creates new stupid pet projects. SJ has truly become a dirty lawless town. The local MSM has stopped reporting crime ie grandma shot in the head during a driving gun battle between gang members at Jackson and San Antonio…. Crickets nothing to see here.

      • I don’t know anything about these places. My comment is more centered on the heavy-handedness this city council immediately resorts to with property owners. Vacancy tax, forcibly abdicating policing responsibility, price controls on labor and rent, arbitrarily and universally nullify contract clauses. CA has always had a difficult business environment for small/independent owners, but this group of “leaders” are taking it to dangerous levels.

  8. I get a massage about once every week from many places in Santa Clara County especially San Jose….. Over and over again, I have never received even one single offer to give me a “happy ending” ….I find what the police department did here atrocious, as look at the facts: The police found someone at 2:30 in the morning and arrested them!.. How in the world would a landlord know at 2:30 in the morning what is going on around a business that they live 50 miles from? This is a joke!.. All of this money being wasted on Cops who don’t do anything anyway, can’t find a crime if they tried, going after ladies who provide an excellent service helping with people’s injured backs, necks and feet, but they have to find a crime at 2:30 in the morning and then blame it on the property owner? Are you kidding me?

    • Most people who get regular massage as you claim to do, usually stick to one or two places once they find a competent massage person. And an above board place usually is licensed for massage and has certified and licensed therapist. Your claims about going to many massage places for getting a legitimate massage raises many questions to say the least.

      Decriminalization is a separate issue and I have nothing against consenting adults doing things in private. But that has nothing to do with storefronts and owners violating the law or turning a blind eye.

    • Leonard are you really that naive. The happy endings are occurring during regular business hours as well. You and I both know that the propery owners know whats up. Now with that being said I do not agree with the heavy handidness of this city council. The police dept follows directions from the mayor who taps the chief. Actually I cant believe they were able to shoe string together enough cops to form a vice unit. Good times in the cesspool

  9. this is very sad ….just to see that many people just think in the money that this places generate for the public” I been seen this places opened and open like taco trucks all over the city most of them in law income sides with women dressed very provocative inside of the massage place to get man disturbed enough to have them consent for extras” this is a direct problem for the society give business licence to do business as a massage place when the city knows that at the end 90% of them will be turning parlors with women that not even speak English and the only thing they do is prostitution. If the city wants to give Licences just make sure the licence reeds “parlor and take the massage word out of the paper they already gave enough bad reputation to good professional businesses.

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