by William W. Abbott

In San Remo Hotel v. City and County of San Francisco (2005) 125 S.Ct. 2491, the United States Supreme Court ventured once again in the area of takings jurisprudence, addressing the circumstances in which property owners may be trapped in state court rather than federal district court. As disappointed property owners typically prefer federal court, the San Remo decision is important and overdue as a clarification as to litigation tactics.

San Remo is procedurally complicated. The plaintiff, a hotel owner, challenged a hotel conversion ordinance (a “facial challenge”) as well as conditions imposed on a conversion permit (an “as-applied challenge”) in both federal and state courts. The state court proceeding was stayed pending federal review. The federal court declined to rule on the facial challenge (deferring to the state court proceedings to resolve the land use issues), and concluded that the “as-applied” challenge was not ripe for adjudication, relying on the Supreme Court decision in Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City (1985) 473 U.S. 172, 195.

In the revised state court action, the property owners attempted to hold back their federal claims although, the practical effect of their pleadings was to raise both state and federal theories. The state trial court dismissed the lawsuit, which was reversed in part by the appellate court, holding that the trial court had misapplied the standard of review. The California Supreme Court reversed again ruling against the property owners, noting that while the federal claims had been carved out, the property owners failed to state a claim under either state or federal precedent. (Still with me?) In other words the California court reviewed and ruled on both state and federal claims, even though the property owners undertook to carve out the federal claims from state court review.

Undaunted, the petitioners elected to not appeal the California Supreme Court decision. They filed an amended complaint in federal court, raising their federal claims. Both the federal district court and the Ninth Circuit Court of Appeals rejected the amended filing on the basis of the statute of limitations and because there had been a final judgment, on point in state court.

After reviewing the long standing precedent and federal law requiring that judgments entered in a court of competent jurisdiction be given “full faith and credit”, the United States Supreme Court affirmed the continued viability of these precedents in land use cases. The court effectively said that San Remo Hotel was precluded from getting into federal court on these facts. (“You can check out, but you can never leave.”)

The high court recognized that the petitioners could have litigated their facial challenge in federal court, and litigated their “as-applied” claims in state court. However, the court viewed the San Remo plaintiffs as having first litigated all takings claims in state court. Having obtained a final judgment, the court viewed the plaintiffs as no longer free to litigate in federal court the claims covered by the state judgment.

Noteworthy is that in the concurring opinion, four justices questioned the vitality of the Williamson County decision, thereby signaling that a number of justices were interested in the issue of whether or not a property owner should be required to seek a state remedy for damages resulting from a regulatory takings. Williamson County has effectively shielded cities and counties from liability for land use decisions. For now, Williamson County remains valid. Planners should note the time may be near in which a disappointed property owner can check out of City Hall and check into Hotel Fed. Don’t forget to tip your lawyer.

William W. Abbott is a partner with Abbott and Kindermann, LLP. For questions relating to this article or any other California land use, environmental and planning issues contact Abbott & Kindermann at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, nor the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.