The San Francisco Chronicle - March 29, 2005
Justices give hearing to hotel's owners in fee dispute with S.F.
Federal challenge sought for ordinance on low-cost housing

Lawyers for a North Beach hotel and the city of San Francisco faced off before the U.S. Supreme Court on Monday over whether the hotel owners can challenge a city housing fee in federal court after losing in state court.

Owners of the San Remo Hotel, a 62-unit Victorian building on Mason Street, claim their property rights are violated by San Francisco's hotel conversion ordinance. The ordinance, originally passed in 1981 and intended to preserve low-cost housing, requires owners of residential hotels to pay a fee or provide replacement units before they convert low-income residential housing rooms to short-term tourist units. It affects about 18,000 rooms in 500 hotels in the city.

The San Remo's owners, brothers Tom and Robert Field, hit with a $567,000 fee, sued in state courts for violation of their property rights and lost at the California Supreme Court, which upheld the ordinance in 2002. At the same time, the Fields pursued a suit in federal court, arguing that the limit on the use of their property was an unconstitutional government "taking,'' requiring compensation.

The issue at Monday's hearing before the nation's high court was whether property owners can sue over constitutional claims in federal court after losing on similar claims in state courts.

Attorney Seth Waxman, representing San Francisco, said the San Remo's owners had already had their day in court. Paul Utrecht, lawyer for the owners, disagreed.

"We have never had an opportunity to have a federal takings claim decided on the merits,'' he said.

But Justice Stephen Breyer told Utrecht that the California court had already decided that the ordinance had a reasonable purpose. "What else do you want to raise?'' he asked. Justice Sandra Day O'Connor questioned whether the high court had ever envisioned two parallel court systems to determine the same facts.

The hotel owners drew support from property-rights advocates, including the National Association of Realtors, which argued in court papers that federal court intervention was essential in light of "California's abysmal record'' in protecting property from confiscation. The city was backed by municipal governments and state chief justices.
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