Today’s Decision in San Remo Hotel v. City of San Francisco

Overview

In an opinion written by Justice Stevens and joined by Justices Scalia, Souter, Ginbsburg, and Breyer, the Court declined to create an exception to the full faith and credit statute, 28 U.S.C. 1738, to provide a federal forum for takings claims where the federal constitutional issue has already been decided by a state court.

Under Williamson County Regional Planning CommÂ’ission v. Hamilton Bank of Johnson City, federal takings claims are not ripe until a final state court judgment denying compensation. Therefore, before filing a takings claim in federal court litigants must seek compensation in state court. However, under 28 U.S.C. 1738, if a state court judgment resolves the federal constitutional question, it must be given preclusive effect by the federal courts.

In their state-court action seeking compensation, petitioners in this case had sought to reserve their federal takings claims in order to preserve their ability to file in federal court if they lost in state court. However, they did assert a takings claim under the California Constitution, and in rejecting their claim the California Supreme Court found that the state and federal takings clauses are co-extensive. The Supreme Court affirmed the Ninth Circuit’s determination that Section 1738 requires federal courts to give the California judgment preclusive effect on the federal constitutional issue.

In combination with Williamson County, which held that a federal takings claim is not ripe until a final state court judgment denying compensation, this decision means that “as a practical matter, a significant number of plaintiffs will necessarily litigate their federal takings claims in state courts.” Slip Op. at 22. However, the Court explained that it is well settled that there is no generalized right to have federal claims heard in federal court. Moreover, it noted that it will not create exceptions to Section 1738 absent express or implied partial repeal by a later statute, and that there is no such statute here.

Chief Justice Rehnquist, joined by Justices O’Connor, Kennedy, and Thomas, wrote an opinion concurring in the judgment. He agreed with the majority’s disposition of the issues in this case, but wrote separately to explain his view that in a future case the Court should reconsider Williamson County‘s state-litigation requirement. He argued that neither the constitution nor prudential considerations require that takings claims be heard in state courts, and that it is therefore anomalous to single out takings claims for a state-litigation requirement.

Continue reading for more background information on the case.

Background

SCOTUSBlog’s full summary of the background and procedural history of this case is here. What follows is an abbreviated summary.

Petitioners own a tourist hotel in San Francisco. The city’s housing regulations, instituted in 1981, classified the rooms in the hotel as “residential” rather than “tourist use.” As a result, the hotel was subject to a body of rules intended to maintain the city’s supply of affordable housing. In 1990, the city imposed more restrictive regulations that essentially precluded operation of the San Remo as a tourist hotel.

Petitioners sought to reclassify the rooms in the hotel for tourist use, but in exchange the city demanded a fee of more than $500,000. Petitioners then challenged the regulatory scheme in federal district court, asserting both facial and as-applied Takings Clause claims.

The district court held that the as-applied claim was not ripe because petitioners had not sought compensation via inverse condemnation as required by Williamson County. The court also rejected the facial challenge because it was barred by the statute of limitations.

On appeal, the Ninth Circuit agreed that the as-applied challenge was unripe, but held that the federal courts should abstain from deciding the facial challenge under Railroad CommÂ’n of Texas v. Pullman Co. because a pending state court proceeding challenging the validity of the initial classification of the San Remo as “residential” could have mooted petitioners federal claims.

In the state court action, petitioners pursued not only the administrative challenge to the initial classification of the hotel that led the Ninth Circuit to abstain, but also Takings challenges under the state constitution. The California Supreme Court rejected these challenges, and in so doing it noted that the California state Takings Clause is co-extensive with the Fifth Amendment’s Takings Clause.

Petitioners then sought to file an amended complaint in federal district court. However, the district court found that their claims were barred by issue preclusion. Because the California Supreme Court had analyzed their claim under both the state and federal cosntitutions, the district court found that it was required by the “full faith and credit statute,” 28 U.S.C. 1738, to give the state court judgment preclusive effect. The Ninth Circuit affirmed.