The Recorder - Dec 13, 2004
Justices Docket Hotel Law
By Pam Smith

The U.S. Supreme Court pushed the light at the end of the tunnel out of sight Friday for three San Francisco lawyers who have spent more than a decade battling over the constitutionality of a city hotel law.

Nevertheless, Paul Utrecht and Andrew Zacks had reason to celebrate when the high court agreed to review the Ninth Circuit's April opinion in a case brought by owners of the San Remo Hotel.

The two Montgomery Street attorneys sued the city of San Francisco in federal and state court in 1993, asserting that requiring hotel owners to pay fees to change from a residential to a tourist hotel amounted to illegal takings. The San Remo Hotel's owners had paid $567,000 to convert their North Beach establishment.

The law is meant to help retain affordable housing, with the city using money from the fees to offset the cost of building housing lost through conversion.

San Remo Hotel v. City and County of San Francisco, 04-340, progressed through the federal courts until 1998, when the Ninth Circuit U.S. Court of Appeals decided the hotel owners' federal takings claims weren't ripe because they hadn't yet sought compensation in state court.

So the state case moved forward, where the two lawyers' longtime courtroom opponent in the case, Deputy City Attorney Andrew Schwartz, ultimately got the upper hand.

Schwartz won at the state Supreme Court over the objections of three dissenters -- including Justice Janice Rogers Brown, who during oral argument referred to the required fees as "ransom."

Utrecht and Zacks returned to the Ninth Circuit to resume their federal case, but the appeals court told them in an April opinion that, in light of the state Supreme Court's decision, their clients were barred from "re-litigating" the takings issues in federal court.

"The claims here are identical on the facts and the law," Schwartz said Friday. To let plaintiffs press an identical claim in federal court, Schwartz maintains, wouldn't be fair to public agencies "who would be exposed to double jeopardy."

Utrecht said Friday that the federal courts apply heightened scrutiny to this kind of legislative exaction, while the state courts applied "a deferential level" of scrutiny.

In their cert petition, the plaintiffs argued that the Ninth Circuit's rule on issue preclusion, combined with a ripeness requirement that the Ninth Circuit cited in its 1998 decision, basically means that takings claims can never be considered on the merits in any federal court.

The case, said Utrecht, has been "a long and winding road." It could end at the high court if the city wins. But if the justices side with the hotel owners on their procedural argument, San Remo will return to lower courts for further fighting on the merits.

Amici curiae have lined up on both sides, with groups such as the League of California Cities aligning with the city, and others, such as the National Association of Realtors, backing the plaintiffs.