San Remo Hotel L.P. v. City And County Of San Francisco

125 S.Ct. 2491 (2005)

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Nature of the Case

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Facts

San Remo (P) is a three-story, 62-unit hotel in the Fisherman's Wharf neighborhood in San Francisco. In 1979, San Francisco's Board of Supervisors responded to 'a severe shortage' of affordable rental housing for elderly, disabled, and low-income persons by instituting a moratorium on the conversion of residential hotel units into tourist units. San Francisco (D) passed a Hotel Conversion Ordinance. Under the 1981 version of the HCO, a hotel owner could convert residential units into tourist units only by obtaining a conversion permit. Permits could be obtained only by constructing new residential units, rehabilitating old ones, or paying an 'in lieu' fee into the City's Residential Hotel Preservation Fund Account. In 1990, D increased the size of the 'in lieu' fee hotel owners must pay when converting residential units. The 1981 HCO required that each hotel 'file an initial unit usage report containing' the 'number of residential and tourist units in the hotels as of September 23, 1979.' Jean Iribarren was operating the San Remo Hotel, pursuant to a lease from P. Iribarren filed the initial usage report for the hotel, which erroneously reported that all of the rooms in the hotel were 'residential' units. D then zoned the San Remo Hotel as 'residential hotel' -- in other words, a hotel that consisted entirely of residential units. Ps were thus required to apply for a conditional use permit to do business officially as a 'tourist hotel.' Ps applied to convert all of the rooms in the San Remo Hotel into tourist use rooms under the relevant HCO provisions and requested a conditional use permit under the applicable zoning laws. Ps could convert, but they had to pay a $567,000 'in lieu' fee. Ps appealed, arguing that the HCO requirement was unconstitutional and otherwise improperly applied to their hotel. P then filed for a writ of administrative mandamus in California Superior Court. That action lay dormant for several years, and the parties ultimately agreed to stay that action after P filed for relief in Federal District Court. In federal court, P alleged four counts of due process (substantive and procedural) and takings (facial and as-applied) violations under the Fifth and Fourteenth Amendments, one count seeking damages under 42 U.S.C. § 1983 for those violations, and one pendent state law claim. The District Court granted D summary judgment. The claim was untimely under the applicable statute of limitations, and that the as-applied takings claim was unripe under Williamson County. On appeal, P claimed that the court should not decide their federal claims, but instead should abstain under Pullman Co., because a return to state court could conceivably moot the remaining federal questions. The Court of Appeals agreed with respect to the facial challenge. That claim, the court reasoned, was 'ripe the instant the 1990 HCO was enacted,' and appropriate for Pullman abstention principally because the 'entire case' hinged on the propriety of the planning commission's zoning designation -- the precise subject of the pending state mandamus action. It affirmed the District Court's determination that P's as-applied takings claim -- the claim that the application of the HCO to the San Remo Hotel violated the Takings Clause -- was unripe. Because Ps had failed to pursue an inverse condemnation action in state court, they had not yet been denied just compensation as contemplated by Williamson County. The Ninth Circuit's told Ps would be free to raise their federal takings claims in the California courts. If, however, they wanted to 'retain [their] right to return to federal court for adjudication of [their] federal claim, [they] must make an appropriate reservation in state court.' Ps attempted to do just that. The state trial court dismissed Ps' amended complaint, but the intermediate appellate court reversed. The claim that the payment of the 'in lieu' fee effected a taking should have been evaluated under heightened scrutiny. Under more exacting scrutiny, the fee failed this Court's 'essential nexus' and 'rough proportionality' tests because it was based on the original flawed designation that the San Remo Hotel was an entirely 'residential use' facility. The California Supreme Court reversed over the partial dissent of three justices. The court initially noted that petitioners had reserved their federal causes of action and had sought no relief for any violation of the Federal Constitution. In the portion of its opinion discussing the Takings Clause of the California Constitution, however, the court noted that 'we appear to have construed the clauses congruently.' The state court decided to 'analyze their takings claim under the relevant decisions of both this court and the United States Supreme Court.' The court rejected the argument that heightened scrutiny should apply, emphasizing the distinction between discretionary exactions imposed by executive officials on an ad hoc basis and '`generally applicable zoning regulations'' involving '`legislative determinations.'' Applying the 'reasonable relationship' test, the court upheld the HCO on its face and as-applied to petitioners. Ps returned to Federal District Court by filing an amended complaint based on the complaint that they had filed prior to invoking Pullman abstention. The District Court held the facial attack on the HCO was barred by the statute of limitations, and by the general rule of issue preclusion. The District Court reasoned that 28 U.S.C. § 1738 requires federal courts to give preclusive effect to any state court judgment that would have preclusive effect under the laws of the State in which the judgment was rendered. Because California courts had interpreted the relevant substantive state takings law coextensively with federal law, petitioners' federal claims constituted the same claims that had already been resolved in state court. The Court of Appeals affirmed. The court rejected petitioners' contention that general preclusion principles should be cast aside whenever plaintiffs 'must litigate in state court pursuant to Pullman and/or Williamson County.' It applied the general issue preclusion doctrine. The Supreme Court granted certiorari.