San Remo Hotel v. San Francisco

In San Remo Hotel, et. al. v. San Francisco, et. al., decided on June 20, 2005, the United States Supreme Court considered the “narrow question” of whether it “should create an exception to the full faith and credit statute [28 U.S.C. § 1738] . . . in order to provide a federal forum for litigants who seek to advance federal takings claims that are not ripe until the entry of a final state judgment denying just compensation.” 125 S.Ct. 2491, 2501 (2005). In order to understand the Supreme Court’s answer to this question, a brief discussion of the procedural history of this matter and related case decisions is warranted.

In this case, hotel owners filed suit, among other litigation, in federal court challenging the constitutionality of a hotel conversion ordinance (HCO), which required payment of a hefty fee upon conversion of residential rooms to hotel units, on grounds that it effected a taking without just compensation on its face and as applied. The federal district court issued summary judgment against the hotel owners holding that their facial takings challenge was untimely and that the as-applied takings claim was unripe under Williams County Regional Planning Comm’n v. Hamilton Bank of Johnson City, which stands for the proposition that takings claims are not ripe until a litigant, first, has exhausted all State remedies and failed to obtain “adequate compensation for the taking.” 473 U.S. 172, 195 (1985). On appeal, the Ninth Circuit Court of Appeals reversed the district court holding that the facial constitutional challenge was ripe for adjudication, but opting to abstain from ruling upon this claim pursuant to Railroad Comm’n of Tex. v. Pullman Co., 312 U.S. 496 (1941) on grounds that a ruling by the state court on the hotel owners pending action for a writ of administrative mandamus could moot the federal questions. The Court of Appeals affirmed the district court’s ruling that the as-applied takings claim was unripe due to the hotel owners’ failure to pursue an inverse condemnation action in state court.

Following the Court of Appeals’ decision, the hotel owners reactivated their state court action for writ of administrative mandamus and reserved their right to return to federal district court for adjudication of their facial takings claim pursuant to England v. Louisiana Bd. of Medical Examiners, 375 U.S. 411 (1964). However, the “petitioners advanced more than just the claims on which the federal court had abstained, and phrased their state claims in language that sounded in the rules and standards established and refined by this Court’s takings jurisprudence.” San Remo Hotel, 125 S.Ct. at 2497-2498.

At the conclusion of state court review, which resulted in a dismissal of the hotel owners’ complaint, the hotel owners returned to federal district court to litigate the facial takings claim. According to the Supreme Court’s procedural history of the case, the district court threw out the facial constitutional challenge based upon its being barred by the statute of limitations and the general issue preclusion doctrine, as encompassed by the full faith and credit statute, “[b]ecause California courts had interpreted the relevant substantive state takings law coextensively with federal law, [and therefore] petitioners’ federal claims constituted the same claims that had already been resolved in state court.” Ibid. at 2500. The Ninth Circuit Court of Appeals affirmed the ruling of the district court and the Supreme Court, after granting certiorari, affirmed.

The Supreme Court rejected the hotel owners’ contention that they should be allowed to return to federal court to resolve their federal takings claims. The Court began its analysis by stating that “[o]ur holding in England does not support petitioners’ attempt to relitigate issues resolved by the California courts.” Ibid. at 2503.

Of course, the Supreme Court recognized that the petitioners’ “ultimate submission” could not be disposed of by England alone, but rather required the Supreme Court to address the question of whether federal courts should apply ordinary preclusion rules to state-court judgments when a case, as here, is forced into state court by the ripeness requirement of Williamson County. The Supreme Court ruled against the hotel owners in disposing of this issue.

We have repeatedly held . . . that issues actually decided in valid
state-court judgments may well deprive plaintiffs of the ‘right’ to
have their federal claims relitigated in federal court. This is so
even when the plaintiff would have preferred not to litigate in
state court, but was required to do so by statute or prudential

Ibid. at 2504.

As such, “[f]ederal courts . . . are not free to disregard 28 U.S.C. § 1738 simply to guarantee that all takings plaintiffs can have their day in federal court.” Ibid. at 2501-2502. Therefore, unless Congress shall express an “intent to exempt from the full faith and credit statute federal takings claims[,] . . . we [shall] apply our normal assumption that the weighty interests in finality and comity trump the interest in giving losing litigants access to an additional appellate tribunal.” Ibid. at 2505.

The concurring opinion of the Supreme Court, written by the late Justice Rehnquist (deceased), severely criticizes the theoretical underpinnings and the practical application of Williamson County. According to Justice Rehnquist, “[i]t is not clear to me that Williamson County was correct in demanding that, once a government entity has reached a final decision with respect to a claimant’s property, the claimant must seek compensation in state court before bringing a federal takings claim in federal court.” Ibid. at 2508. Indeed, “[i]t is not obvious that either constitutional or prudential principles require claimants to utilize all state compensation procedures[]” and, therefore, “further reflection and experience lead me to think that the justifications for its state-litigation requirement are suspect, while its impact on takings plaintiffs is dramatic.” Ibid. at 2509-2510. Justice Rehnquist concluded by calling upon the Court to “reconsider whether plaintiffs asserting a Fifth Amendment takings claim based on the final decision of a state or local government entity must first seek compensation in state courts.” Ibid. at 2510.