San Remo Hotel, L.P. v. City and County of San Francisco: U.S. Supreme Court Refuses to Create Exception in Takings Cases

The Court has considered whether a litigant has a right to bring federal takings claims in federal court, even if the issues have already been litigated in state court.

Robert and Thomas Field ("Owners") purchased The San Remo Hotel ("Hotel") in the 1970s. Historically, the Hotel had both long-term residents as well as tourists staying on the premises. A San Francisco ("City") ordinance ("Ordinance") was approved in 1979 (later amended) which regulated the conversion of residential hotels, based on a perceived shortage of affordable housing in the city. As part of the Ordinance, the Hotel was required to report the number of long-term residents on the premises. An employee of the Hotel erroneously reported in 1979 that the entire Hotel was used as residential housing, which caused the Hotel to be improperly classified as a "residential hotel".

In 1990, the Owners decided to use the Hotel exclusively for tourists. Because of the Hotel's classification as residential hotel, the City required that the Owners seek City approval for such a conversion. The City granted the conversion request, but attached a number of conditions, including the payment of a $567,000 fee. The Owners appealed this decision, but the City's Board of Supervisors rejected the appeal.

The Owners filed lawsuit in California state court in 1993, seeking to overturn the City's decision. This action was stayed, as the Owners also filed a lawsuit in federal court. The federal lawsuit alleged violations of due process as well as violations of the Takings Clause in the Constitution of the United States. The Takings Clause of the Fifth Amendment, applicable to state and local governments via the Fourteenth Amendment, prohibits the government from taking private property without "just compensation." The Owners argued that the Takings Clause made the Ordinance facially invalid (invalid as written) and also invalid as applied by the City.

The Federal District Court ruled in favor of the City. The court ruled that the facial challenge to the Ordinance was barred by the statute of limitations and the as-applied challenge could not be considered by the court because of the Supreme Court’s Williamson County decision. Williamson County requires that a party bringing a takings claim in federal court must first receive a final denial of compensation under the procedures established by the applicable state laws. Since the Owners had not exhausted all of their remedies under California law, the court ruled that it was premature for a federal court to consider their as-applied takings claims.

The Owners appealed to the Court of Appeals for the Ninth Circuit. The Owners argued that their takings claims should not be considered by the Ninth Circuit, but instead the court should abstain from considering the issues until the state court action was resolved. The Ninth agreed to abstain from deciding the facial challenge to the Ordinance, but stated that the as-applied challenge was not ripe for controversy because of Williamson County. The Ninth Circuit also stated that if the Owners wanted a federal court to consider their federal takings claims, they would need to reserve those issues in the state court litigation.

Owners then restarted their state court litigation, claiming to only seek relief under California law. While the Owners stated they were reserving their federal claims, they now raised all of the same allegations made in their federal lawsuit before the state trial court. The state trial court dismissed the lawsuit, but the appellate court reversed, finding that the fee the City proposed charging the Owners could constitute a taking. The California Supreme Court reversed, finding that the Ordinance did not constitute a taking as-applied because the formula used to calculate the $567,000 fee was fixed and applicable to a broad class of owners. The court stated that federal takings law and California takings law were in agreement, and so the court reached its decision through looking at decisions under both sets of laws. Thus, the California Supreme Court reinstated the trial court's dismissal of the Owners lawsuit.

The Owners did not appeal the decision of the California Supreme Court. Instead, the Owners reopened their federal lawsuit. This time, the Federal District Court determined that a federal statute stating that "judicial proceedings…shall have the same full faith and credit in every court within the United States" ("Statute") barred the court from considering matters that were already decided by the California state courts. Since the California courts had considered all of the issues raised in the federal lawsuit, the court dismissed the lawsuit. The Court of Appeals affirmed, agreeing that the Statute barred the federal court from reconsidering matters already decided upon by the California state courts. The Owners appealed.

The Supreme Court of the United States affirmed the rulings of the lower courts. The Owners argued that they had reserved their federal issues before the state courts, and so should be allowed to have their claims for violations of the Takings Clause considered by the federal courts. The Owners sought an exception to the Statute, as they argued that the Williamson County requirements forced them to bring their takings claims in state court and so the federal courts should not be bound by the decisions of the state courts. The Owners argued that this exception would assure that the Owners' federal claims were considered by a federal court.

The Court rejected these arguments. First, the Court stated that the Owners had not properly reserved the federal issues in state court proceedings. Even though the Owners had claimed to reserve the federal issues during the state court proceedings, in fact all of the same issues were raised and considered by the California state courts. Since the Owners had failed to reserve their federal takings claims during the state court litigation, they could not now raise these issues in federal court.

Second, the Court rejected Owners' proposed exception to the Statute. The premise of this argument was that litigants have a right to have their federal takings claims heard by a federal court. The Court found there was no such right. Indeed, the Court stated that many decisions have set forth the proposition that a state court judgment may deprive a litigant of the right to bring a federal lawsuit. The Court also stated that it could not create an exception to the Statute because only Congress could create such an exception. Therefore, the Court affirmed the rulings of the lower courts, as the Statute did not allow the Owners to relitigate issues already decided during the state court litigation.

Four justices issued a concurring opinion. While the four concurring justices agreed the Statute barred a federal court's reconsideration of the Owners' takings claims, these justices stated that the court should reconsider the requirements of Williamson County.

San Remo Hotel, L.P. v. City and County of San Francisco, 125 S. Ct. 2491 (U.S. 2005).

Editor's Note: NAR joined in an amicus curiae brief filed by the Pacific Legal Foundation urging the U.S. Supreme Court to accept review of this case, per the recommendation of NAR's Legal Action Committee.