San Remo Hotel: When Ship Comes In – But Only Passes By

Los Angeles Daily Journal

Twenty years ago, the U.S. Supreme Court established a “ripeness” hurdle for property owners wanting to litigate Fifth Amendment claims that government regulations took their property for public use without compensation. To give federal courts jurisdiction to hear them, the owners first have to sue in state court under state law to determine whether the state will provide any compensatory remedy—and they must lose their state court suits. (If the owners recover compensation in their state court suits, there would obviously be no need for further litigation.) ( Williamson County Reg. Plan. Agency v. Hamilton Bank, 473 U.S. 172 [1985].)

In the ensuing decades a group of cases has developed in the lower courts that can only be described as jurisprudential nonsense. The result of those decisions has not been ripeness; it has been rot. Upon filing their ripened suits in federal court, such litigants have been told that the state court judgment precluded trial of the federal claims.

Other courts have held that, because the federal guarantee against uncompensated takings for public use is virtually identical to state constitutional counterparts, litigation of the state claim also precludes litigation under the federal Constitution in either state or federal court.

Topping it off was the decision by the Supreme Court itself in City of Chicago v. International College of Surgeons, 522 U.S. 156 (1997). There, the High Court held that a municipality sued for a regulatory taking in state court had the absolute right under 28 U.S.C. § 1441(a) to remove the case to federal court for trial.

Thus, the upshot was that if a property owner filed suit in federal court, the municipal defendant could routinely have the case dismissed as unripe, forcing the owner to file the same suit in state court. When in state court, however, the municipal defendant could take the same case and remove it to federal court—the same place from which it had just been dismissed. Sauce for this goose is apparently not sauce for this gander. You can’t make up stuff like this.

Legal commentators have had a field day, casting aspersions ranging from “ironic” and “paradoxical” to “absurd,” “draconian,” and “Kafkaesque.” (These and others too numerous to recount are collected in Michael M. Berger & Gideon Kanner, Shell Game! You Can’t Get There From Here: Supreme Court Ripeness Jurisprudence in Takings Cases at Long Last Reaches the Self-Parody Stage, 36 The Urban Lawyer 671 [2004].)

Property owners and their lawyers have tried for years to get courts in general, and the Supreme Court in particular, to straighten out this mess. Some lower courts have joined the commentators and refused to play the game, devising procedural ways to comply with Williamson County by requiring suit in state court, but complying with common sense by not thereby losing the right ever to darken a federal courthouse with the case. (E.g., Santini v. Connecticut Hazardous Waste Management Service, 342 F.3d 118 [2003].)

Having refused a number of opportunities, the Supreme Court finally granted certiorari in San Remo Hotel v. City & County of San Francisco, 1988 DJDAR 7265 (decided June 20, 2005). The case is factually interesting, but irrelevant, as the Court’s opinion focuses on procedure rather than substance. Suffice it to note that the case involved a San Francisco ordinance whose effect was to require the owners of a small hotel to pay the city a ransom of $567,000 as the price for converting their partially residential hotel (i.e., catering in part to long term, generally lower income people) to a tourist hotel.

When the Supreme Court decided to review the case, those who practice in the field thought that the Court would finally take the opportunity to straighten out the mess that Williamson County had created. After all, the hotel owners had presented two issues in their petition, one dealing with the merits and the other with the process—and the Court said it would review only the procedural issue.

The primary lesson in this decision is that, if the Supreme Court wanted to shed any light on the Williamson County jurisdictional game, it chose the wrong case. The five-Justice lead opinion barely mentions Williamson County, notes none of the problems it has created for lower courts and litigants, and does nothing to bring sense out of chaos.

Too bad. Since the Court has dropped to its current level of deciding only 75 or so cases each Term, one would hope that the cases chosen would actually lay troublesome issues to rest. San Remo, however, was procedurally snakebit.

Unlike typical regulatory taking cases since Williamson County, the property owners here filed suit in federal court before obtaining a state court decision. The trial court held that a facial challenge to the ordinance was too late, while an as-applied challenge was unripe, or too early. On appeal, the owners asked the Ninth Circuit to abstain under Railroad Comm’n v. Pullman Co., 312 U.S. 496 (1941) so they could test their claims in state court. The Ninth Circuit obliged as to the facial claim.

In the California courts, the owners lost in the trial court, won in the Court of Appeal, and eventually lost 4-3 in the California Supreme Court. (San Remo Hotel v. City & County of San Francisco, 27 Cal.4th 643 [2002].) Then they sought to return to federal court, where they were told that their state court endeavors were the “equivalent” of a federal trial, so the case had to be dismissed.

Thus, rather than dealing with the real issue and confronting the shortcomings of Williamson County, the Supreme Court’s lead opinion focused on two things: the Full Faith and Credit Act, and procedure under Pullman abstention orders.

The property owners had not directly attacked Williamson County. Instead, their argument was that if the Supreme Court meant what it said there—that a regulatory taking case was only unripe for federal adjudication “until” state court remedies had been unsuccessfully sought—then the decision in the state courts could not preclude federal litigation.

All the opinion decides is that if Williamson County remains the law—not challenged in this case—then the Full Faith and Credit Act, 28 U.S.C. § 1738, mandates that federal courts respect the decision made in state court and preclude further litigation.

If that sounds vaguely circular, that’s because it is. The Court’s “Congress made me do it” rationale, although valid in many instances, rings a bit hollow in this case, where no one but the Court itself invented the Williamson County rule. But for attempted compliance with that rule, this case never would have seen the inside of a California courthouse.

For those who claim that Williamson County was Constitutionally mandated because the Fifth Amendment bars only takings without compensation and there is no way to know whether compensation will be paid until suit is brought in state court, I ask that you demonstrate where the Fifth Amendment mandates anything more than a municipal refusal, something clearly present here, as in all regulatory taking cases. It says nothing about state court adjudication—no matter how many times you read it.

The rule was one of convenience (at least for federal courts, whose dockets were presumptively cleared of a number of cases), not one of constitutional mandate. The Supreme Court created it, and the Supreme Court can change it. If only it gets a case that is procedurally cleaner than this one.

That Williamson County was in trouble was clear from the oral argument. Early in the property owners’ presentation, Justice O’Connor confirmed that the owners had not challenged Williamson County itself. Her response: “Maybe you should have.” Later, in a colloquy with the city’s lawyer, Justice O’Connor noted that “frankly, it isn’t clear to me that the Court ever contemplated just cutting off any determination in Federal court of takings claims in the way that it seems to work out by application of Williamson County.”

When the decision finally came down, four Justices signed the Chief Justice’s concurring opinion which opened by saying, “I write separately to explain why I think part of our decision in Williamson County. . . may have been mistaken.”

That concurring opinion then went on to catalogue some of the shortcomings noted by lower courts and legal commentators, challenging the core precept that the Constitution somehow requires state court litigation. That, said the four Justices, is “not clear,” “not obvious,” and “not supported” by the cases relied on there.

More problematic, they said, is that “the Court has not explained why we should hand authority over federal takings claims to state courts,” something that is not done with respect to other Bill of Rights guarantees. That regulatory taking claims have been “singled out” to be shunted to state courts is an anomaly that ought to be dealt with.

The concurring opinion ends on a note of semi-embarrassment: “I joined the opinion of the Court in Williamson County. But 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.”

Returning to our belief that the Court simply picked the wrong case, the concurrence notes that the Williamson County issue wasn’t raised here by the parties and, because of the state court trial, preclusion doctrine made any attempt to deal with Williamson County academic.

Williamson Countys days ought to be numbered. The Court has now been sensitized to the problems it has created and the lack of justification behind it. If—when—the right case comes along, Williamson County should share the fate of other experiments that the Court has ultimately consigned to oblivion.

In the meantime, be wary of those who claim victory over the supposed desires of property owners to run municipalities through two trials over the same issue. The reason for challenging Williamson County is to reduce the trial load to one case, but to allow the plaintiff to choose the venue, just as plaintiffs in other cases do.

This article was originally published in the July 11, 2005 issue of the Los Angeles Daily Journal.

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