The Daily Journal - Feb 3, 2005
Property Owners Should Have Access to Federal Courts

Forum Column
By Michael M. Berger

Some people believe that they ought to be able to sue in federal courts to vindicate rights guaranteed by the U.S. Constitution. And, indeed, many people can do so at will.

For example, if you have a complaint about a school district's sex-abuse policy, you can take that directly to federal court. Gonzalez v. Ysleta Independent School District, 996 F.2d 745 (5th Cir. 1993). Same goes for random drug testing of students (Board of Education v. Earls, 536 U.S. 822 (2002)), and the use of force during arrests (Beck v. City of Pittsburgh, 89 F.3d 966 (3d Cir. 1996)) - even the question of whether extortion of outsiders is official municipal policy. Roma Construction Co. v. aRusso, 96 F.3d 566 (1st Cir. 1996).

But not property owners claiming that their land has been taken for public use without compensation in violation of the Fifth Amendment. They alone are required to file suit in state court, seeking relief under state law, as a supposed precondition to entering the federal courthouse. See Williamson County Regional Planning Commission v. Hamilton Bank, 473 U.S. 172 (1985).

To make matters worse, or at least more complex, if the municipal defendant in one of those state-court takings suits decides that it would prefer to litigate in federal court, then it has the absolute right to remove the case to federal court. City of Chicago v. International College of Surgeons, 522 U.S. 156 (1997).

The real kicker is that, by one of the clearest statutes ever to come out of a legislative body, Congress proclaimed that cases could be removed from state to federal court only if the plaintiff could have brought the case in federal court in the first place. 28 U.S.C. Section 1441(a). But if the plaintiff is a property owner with a Fifth Amendment claim for compensation, the case could not have been brought in federal court. The Williamson County rule forbids it. You can't make this stuff up. It's a columnist's dream but a litigant's nightmare.

This is a tangled web that the Supreme Court finally has given itself the opportunity to unravel in the next six months, with its grant of certiorari in San Remo Hotel v. City & County of San Francisco, 364 F.3d 1088 (9th Cir. 2004), certiorari granted, No. 04-340.

The plaintiffs in San Remo are the owners of a small hotel in San Francisco that the city views as part of its moderate-income housing stock, and the owners want to use as a tourist hotel. Under San Francisco's strict ordinances, the only way for the owners to accomplish their goal is by paying more than half a million dollars in ransom. They thought that would be an unconstitutional taking of their property, and they sued - in federal court - for redress.

In light of the Supreme Court's clear message in Williamson County, the federal courts abstained from hearing the case until it had been aired on the state court side of the street. When they tried that, the owners got the result they anticipated. The state Supreme Court (by a sharply divided 4-3 vote) ruled against them. See San Remo Hotel v. City & County of San Francisco, 27 Cal.4th 643 (2002).

So back they went to federal court, only to be thrown out again. This time, the 9th U.S. Circuit Court of Appeals concluded that the hearing in the state courts was the "equivalent" of what the owners would have received in federal court, and thus the state proceedings precluded any federal litigation.

If one reads the Supreme Court's Williamson County decision, that is not what the high court envisioned. The clear wording of its opinion said merely that an immediate federal suit, without vetting the issues first under state law, would be "premature" and "unripe" - not that it would be moribund or dead on arrival.

Even commentators who believe that property owners' regulatory takings claims ought to be banished to state courts have been candid in conceding that the Supreme Court's plain words in Williamson County lead property owners to believe that they will be welcomed into federal court once they have sued, and lost, in state court. Indeed, one of them termed the current practice in many federal circuits (including the 9th Circuit) of dismissing such federal complaints a "fraud or hoax on landowners." "Ripeness and Forum Selection in Fifth Amendment Takings Litigation," 11 J.LandUse&Envtl.L. 37 (1995).

The author of that term is not alone. Members of the scholarly community have tripped over one another trying to devise suitably harsh words to describe the jurisdictional mess created by Williamson County. They range from "odd," "unpleasant" and "unfortunate" at the mild end of the spectrum through "absurd," "nonsense," "Kafkaesque" and (in a play on vogue words) "a weapon of mass obstruction." "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 UrbanLawyer 671 (2004).

Even some federal courts have expressed their discomfort with what they see as the inevitable tension between Williamson County's requirement of state court "ripening" and standard federal rules of claim and issue preclusion (res judicata and collateral estoppel if your legal education was acquired more than a couple of decades ago).

The 11th Circuit said it would consider adapting a procedure approved by the Supreme Court in abstention cases, that is, filing a notice in the state-court proceedings that all federal issues were reserved for federal court litigation and only state issues were submitted to the state courts. Fields v. Sarasota-Manatee Airport Authority, 953 F.2d 1299 (11th Cir. 1992).

That may work in the Southeast, where the 11th Circuit holds sway; it doesn't work on the West Coast. The plaintiffs in San Remo Hotel filed such a reservation in the state courts, and it is clear from both the majority and dissenting opinions in the state Supreme Court that the state courts acknowledged that split of the issues. Nonetheless, when the case returned to federal court, the 9th Circuit refused to allow it to proceed.

The 2nd Circuit formally created such a reservation procedure, concluding that the alternative would leave property owners with no access to federal courts at all, something that that court thought was not acceptable. It even applied the new rule retroactively to a party who had not filed any reservation in the Connecticut courts. Santini v. Connecticut Hazardous Waste Management Service, 342 F.3d 118 (2003).
 
The 6th Circuit recently joined in the criticism, concluding that the clear language of Williamson County contemplates that regulatory takings claimants who lose in state courts thereafter will be able to have their day - in a trial on the merits - in federal court. DLX Inc. v. Commonwealth of Kentucky, 381 F.3d 511 (6th Cir. 2004).

Even the 8th Circuit, which declined to resolve the problem and allow federal court litigation, candidly acknowledged that the presence of both Williamson County, which prevents property owners from suing in federal court, and City of Chicago, which allows municipal defendants to remove cases to federal court immediately, discloses an "anomalous ... gap in Supreme Court jurisprudence." Kottschade v. City of Rochester, 319 F.3d 1038 (8th Cir. 2003). That court concluded that only the Supreme Court could resolve the conundrum.

Congress, by the way, has tried its hand at resolution. Twice, in two different sessions, the House of Representatives tried to invoke Congress' power to control the jurisdiction of the federal courts and overwhelmingly passed bills to permit property owners to sue in federal court without a detour through state court.

Each time, the legislation died in the Senate when, despite having the support of a majority of senators, the bills could not muster the 60 votes needed to invoke cloture and overcome threatened filibusters.

So the matter is, as it should be, in the hands of the Supreme Court. Briefs are being filed, and the case is set for oral argument in late March. Because the court recesses for the summer at the end of June and generally files opinions in all argued cases before the justices leave town, an answer should be forthcoming soon.

The court simply could reaffirm Williamson County without change, but that seems unlikely in light of the intense criticism and the bizarre way it is operating in the lower courts. Or the court could decide that its idea of "ripening" takings litigation in state court was a failed experiment. Or it could instruct lower federal courts that - in this special circumstance, because of the specific rule of Williamson County - the general rules of claim and issue preclusion simply do not apply. One way or another, the ripeness mess that has been worsening since 1985 will be dealt with. Watch this space for further discussion.

Michael M. Berger is a partner in the Los Angeles office of Manatt, Phelps & Phillips, where he co-chairs the firm's appellate practice group.