Monday’s Argument in San Remo Hotel

On Monday the Court will hear oral arguments in No. 04-340, San Remo Hotel v. San Francisco.

The issue before the Court is whether or not a Fifth Amendment takings claim, brought in federal court, is barred by issue preclusion based on a judgment denying compensation solely under state law, which was rendered in a state court proceeding that was required to ripen the federal takings claim.

The San Remo Hotel has something of an illustrious history. Owned by Tom and Robert Field since 1970, after the 1989 San Francisco earthquake they opened up its rooms to homeless families free of charge. The hotel, which had a significant number of residential units, also served as a sanctuary after the 1906 earthquake and subsequent fires.

Twenty-five years ago, San Francisco first enacted a housing conversion ordinance in response to a city-wide decrease in residential hotel units. The ordinance subjects hotel owners desiring to convert residential hotel units to tourist units to significant fees; as amended nine years ago, the ordinance now requires hotel owners to pay the city up to 80% of the renovation cost. In 1996 the Fields thus paid the city $567,000 when they converted the San Remo to a tourist-focused budget hotel. They then took the city to federal court, arguing that the ordinance is an unconstitutional taking under both the California and the United States Constitutions.

The district court held, and the Ninth Circuit agreed, that the Fields’s federal takings claim was unripe, and that the Fields needed to seek compensation in state court before pursuing their case on the federal level. Now, after having pursued their state claims in the California courts, they want their money back

In 2001, the California Court of Appeals overturned a judgment against the Hotel, holding that the city needed a clearer justification for the ordinance’s fees. But, in 2002 the California Supreme Court reversed. While holding only that the ordinance did not violate the state’s constitution, the California Supreme Court explained that it would “analyze [the Hotel’s] takings claim under the relevant decisions of both this court and the United States Supreme Court” because state and federal takings laws were, for the most part, coextensive.

Then, in federal court later that year, the U.S. District Court ruled – and the Ninth Circuit agreed – that the Fields’s federal takings claim was prohibited by issue preclusion, relying on the Supreme Court’s 1985 decision in Williamson County Planning Commission v. Hamilton Bank of Johnson City. Under Willliamson, the Fields are required to pursue their claim in state court before seeking a federal remedy. Specifically, the Ninth Circuit found that preclusion can bar federal takings claims even though the state court proceedings were required to ripen those claims if the substantive federal takings law is the same as California’s state compensation law. This decision created a circuit split, as the Second Circuit ruled in 2003 that such claims are permitted. The Supreme Court is being asked to resolve this conflict.

The Petitioners argue that because the state court proceedings were required to ripen the federal takings claim under Williamson County, the federal courts are required to disregard the decision of the state court and reach the federal takings claim on the merits because the state court did not consider the federal constitutional claim, much less rule on it. They also contend that even if issue preclusion applies to some takings cases, the Ninth Circuit’s decision to apply it in this case was wrong because their decision did not turn on California law. Rather, the Ninth Circuit applied an “equivalent determination” test to determine whether to give preclusive effect to the California judgment. This test, first articulated in Dodd v. Hood River County, 59 F.3d 852, 863 (9th Cir. 1995), and based on Oregon law, asks the Court to make a determination of whether or not the state takings claim was ‘an equivalent determination’ of the federal takings claim.

The city argues that the Full Faith and Credit Act requires federal courts to give a state judgment the same preclusive effect that it would have in the State’s own courts. Because the Petitioners litigated their state takings claims through to a final judgment from the state supreme court, which held that they had failed to state a valid claim, they should not be able to present the same allegations to the federal courts, because the claims petitioners were pressing turned on issues identical to those already addressed by the state court.

Paul Utrecht of San Francisco, in his first appearance before the Supreme Court, will argue the case for the petitioners. Former Solicitor General Seth Waxman will argue on behalf of the City and County of San Francisco.

On the Docket has done a feature story on the case.

Here is the Ninth Circuit’s opinion and the merits briefs.
Here are the Washington Legal Foundation’s and the San Francisco City Attorney’s positions on the case.