SAN REMO HOTEL v. SAN FRANCISCO
The owners and operators of a hotel in San Francisco sued the city in state court, arguing a $567,000 conversion fee they had to pay in 1996 was an unconstitutional taking of private property. After California courts rejected this argument, the hoteliers argued in federal district court that the fee violated the Fifth Amendment's takings clause. This claim depended on issues identical to those that had been resolved in their state-court suit. The federal full faith and credit statute, however, barred litigants from suing in federal court when that suit was based on issues that had been resolved in state court (the rule of "issue preclusion"). The hoteliers asked the district court to exempt from the statute claims brought under the takings clause.
Should federal courts make an exception to the full faith and credit statute for Fifth Amendment takings clause claims?
Legal provision: Takings Clause
No. In a 9-0 judgment delivered by Justice John Paul Stevens, the Court refused to create an exception to the full faith and credit statute in order to provide a federal forum for litigants seeking to advance federal takings claims. The Court rejected the argument that whenever plaintiffs reserved their federal takings claims in state court, federal courts should review the reserved federal claims, regardless of the issues decided by the state court. Moreover, federal courts were not free to disregard the full faith and credit statute simply to guarantee that all takings plaintiffs can sue in federal court.
Argument of Paul F. Utrecht
Chief Justice Rehnquist: We'll hear argument now in No. 04-340, San Remo Hotel v. the City and County of San Francisco.
Mr. Utrecht, is that--
Mr. Utrecht: Yes, Your Honor.
Mr. Chief Justice, and may it please the Court:
The Ninth Circuit decision in this case should be reversed for three reasons.
The first reason is that the result is unfair and the rationale of the court is unfair.
Justice O'Connor: Well, what are your... exactly what claims are... is your client now raising in Federal court?
I mean, we don't take a case to just decide if something is unfair.
What are the precise claims your client is raising now in Federal court?
Mr. Utrecht: My client is making a facial and as-applied takings challenge to both the hotel conversion ordinance and the regulatory scheme of which it is a part.
And that claim... that Federal--
Justice O'Connor: I somehow thought that your question had boiled down to whether there was issue preclusion here.
Am I wrong?
Mr. Utrecht: --The issue before this Court is whether there's issue preclusion--
Justice O'Connor: I'm talking about the issues in this Court.
Mr. Utrecht: --Okay.
The issue in this Court is whether the Federal takings claim should be precluded under issue preclusion by a State court judgment that did not decide the Federal takings claim and could not have decided the Federal takings claim.
Justice Souter: Well, as I understand, I... I would... I will grant you that there are moments in the... in the Ninth Circuit opinion in which there seems to be a shift back and forth in the rhetoric between claim preclusion and issue preclusion.
But as I understand what the Ninth Circuit held, it did not hold that your claim was necessarily out of court because of claim preclusion.
It held that your claim failed because of the effect of issue preclusion on elements that were common, factual elements common to both the claim in the State court and the claim that you sought to bring in the Federal court.
Am... am I correct about that, about what the Ninth Circuit held?
Mr. Utrecht: The Ninth Circuit did limit its holding to issue preclusion.
It did not rule on claim preclusion.
Justice Souter: Okay.
Mr. Utrecht: The other part of your question about whether it was based on factual determinations could not have been based on factual determinations.
Instead, it was based on the prior State court determination that we did not state a claim... state a cause of action under California law for State compensation.
Chief Justice Rehnquist: Well, the Supreme Court of California decided only the State constitutional question, did it not?
Mr. Utrecht: That's correct, Mr. Chief Justice.
And because of that, we have never had an opportunity to have our Federal takings claim decided on the merits.
We believe that that undermines the Federal courts' primacy in deciding Federal questions, particularly Federal constitutional questions.
We also believe--
Justice O'Connor: Well, it was this Court's decision in the Williamson County case that led you and I assume other lawyers in these takings cases to return to State court and try to litigate everything.
Isn't that right?
Mr. Utrecht: --This Court in Williamson County said that before you could bring a Federal takings claim, you had to go to State court and seek compensation under State law.
Justice O'Connor: And you haven't asked us to revisit that Williamson County case, have you?
Mr. Utrecht: We have not asked that this Court reconsider the decision in Williamson County.
Justice O'Connor: Maybe you should have.
Mr. Utrecht: Well, at this point I don't think that we can.
Perhaps we could have in 1998 when the Ninth Circuit applied the Williamson County case and ordered us to go to State court with our unripe Federal claims, unripe under this Court's holding in Williamson.
But I think that at this point the question before the Court is given that we've complied with the procedural requirements that this Court established in Williamson County, are we now precluded by issue preclusion in the second litigation that this Court ordered because of the State court compensation ruling.
Justice Scalia: Mr. Utrecht, you... you refer to the primacy of Federal courts.
I'm... I'm not clear as to whether you are arguing for a different disposition where suit is first brought in Federal court erroneously because there's been no exhaustion and then the plaintiff is sent back to State court from the situation in which a plaintiff does the right thing and goes to State court immediately.
Now, in that case, would... would you still argue for primacy of the Federal court?
Mr. Utrecht: Absolutely, Your Honor.
I think that what this Court established in Williamson County is a two separate litigation scheme.
The first litigation concerns State compensation, and the second litigation concerns the Federal takings claim.
Justice Scalia: So... so your case does not hinge on the fact that when the State court acted, there was a pending... a pending Federal case asking for the Federal constitutional question to be resolved by a Federal court.
Mr. Utrecht: That's correct.
I think that the Second Circuit got this issue correct in the Santini case when it concluded that whether you started in Federal court and were ordered to proceed to State court under Williamson County or you looked at the Williamson County case and said, I'm going to start in State court because that's what Williamson County says that I'm required to do, it doesn't matter.
It shouldn't matter for purposes of issue preclusion on the Federal takings claim once it has been made ripe under the procedures required by Williamson County.
Justice Ginsburg: Is it your position that issue preclusion doesn't apply at all, or that there was no issue decided in the State court proceeding that carries over into the Federal proceeding?
Which one is it?
What... you suggested... you said, number one, no facts were found.
The question was whether there was sufficient statements to survive a 12(b)(6) or its counterpart dismissal motion.
Mr. Utrecht: Our... our primary position is that issue preclusion does not apply for the same reasons that this Court found that issue preclusion did not apply in England when you were required to do two separate litigations.
The question of whether the Ninth Circuit correctly applied issue preclusion law... we also raise that as our last argument in our opening brief, but our primary argument here today is that issue preclusion should not apply at all to Federal--
Justice Ginsburg: And if it did... if it did apply, what issues would be precluded?
Mr. Utrecht: --In our position no issue should be precluded because under California law, which the Ninth Circuit was obligated to apply, only identical issues that are resolved under a different set of laws can be precluded in the second proceeding, and there was no identical issue finding by the Ninth Circuit.
Instead, the Ninth Circuit applied its equivalent determination finding.
But I think that the... the real issue before this Court is not the California preclusion law question, but the real issue is whether this Court's decision in England should... or the rationale of this Court's decision in England should be applied to the very similar circumstances raised by--
Justice Kennedy: Is... excuse me.
Is... is it your position that there is an exaction here?
Mr. Utrecht: --Yes, Your Honor.
Justice Kennedy: It... are... are you bound by a finding in the State court that there was no exaction, or was there no such finding?
Mr. Utrecht: I don't believe there was such a finding.
I think that the California Supreme Court decided that the exaction met the State law compensation requirements and did not--
Justice Kennedy: Was the... was the Ninth Circuit wrong in indicating that there was no exaction?
That's the way I read its opinion.
Mr. Utrecht: --I... I don't read the Ninth Circuit's opinion as saying there was no exaction.
I think the Ninth Circuit held that the exaction was imposed by legislation rather than by an administrative proceeding, and because of that, it was subject to a different standard than exactions imposed in administrative proceedings.
But I think there's no question in this case that an... an exaction was imposed and was actually paid.
This is not a... this is not a case where there's an issue about whether the exaction was imposed.
The issues were what standard was used to review that exaction and whether the exaction was constitutional.
Justice Kennedy: But... but the Ninth Circuit seemed to think that Dolan doesn't apply, and I take it that you would say that it does.
Mr. Utrecht: Well, I think this Court has not decided whether exactions imposed by legislation are treated differently than exactions imposed by administrative proceedings.
The State court in this case determined that under State compensation law that mattered.
But this Court has not decided that.
The Ninth Circuit seemed to indicate that it was in general agreement with the California Supreme Court, but again, because it didn't actually decide the merits, it just decided that there was an equivalent determination under State law, it didn't get to the final question of whether this was an exaction and what the proper standard was.
Justice Scalia: And you don't want us get that... to that question either, whether Dolan applies or not.
Mr. Utrecht: I did want this Court to get to that question, but when this Court rejected question 2, I think this Court decided that it did not want to get to that question.
But we... and we did not brief that question because this Court did not grant certiorari on question number 2.
But we definitely did want this Court to decide that question, and obviously, if... since the Court can't decide it in this case, we would, obviously, want the Court to decide it in some other case, hopefully before this case is finally resolved in the courts.
Justice Ginsburg: Mr. Utrecht, if I understand the respondents' brief correctly, there is on pages 10 and 11 a whole list of issues that they say were determined... raised, litigated, and determined in the State court.
So, for example, that the HCO's housing replacement fees bear a reasonable relationship to loss of housing, the use of a defined historical measure... measurement point reasonably related to the HCO's... and it goes on for a paragraph, citing issues that respondents say that were raised, litigated, and decided in the California Supreme Court.
Mr. Utrecht: I think that technically what the California Supreme Court decided was that our facts did not state a cause of action under State law.
What they cite here as findings are actually discussions of the legal issues raised by the State court complaint under State law.
They don't amount to a factual finding.
There was no trial.
There was no summary judgment motion.
There was no evidence presented on any of these points.
Chief Justice Rehnquist: How did the case go up?
On a motion to dismiss?
Mr. Utrecht: --The case in State court went up on a motion to dismiss, which was granted by the trial court, reversed by the State court of appeal, and then affirmed by the California Supreme Court.
Justice Souter: So, in effect, then maybe... are you saying this, that there is no issue preclusion here because the... the ruling that there was no statement of a cause of action was, in fact, a disposition of the claim without there being any resolution of any fact issue upon which the claim might depend.
Is that what you're saying?
And therefore... and... and that is the reason why there is no issue preclusion?
Is that your argument?
Mr. Utrecht: That's not the argument that we made in this Court.
That is an argument that we made in the lower courts.
The argument that we're making in this Court is rather that under the England case... or rather, the rationale of the England case, there shouldn't be any issue preclusion whether or not the State courts made any factual findings.
I don't think that the question as framed by Your Honor is presented by the briefs.
I mean, obviously, that was a contention of ours.
We think that's a correct statement of how the case should have been resolved by the Ninth Circuit, but the Ninth Circuit instead chose not to look at that issue or not to decide the case on that issue, but instead to decide under its prior precedents of Dodd and Palomar, that issue preclusion applied and then applied its own formulation of the equivalent--
Justice Ginsburg: But... but isn't there an essential step to find out that there were issues?
Because I think the way you're phrasing the question, it says, if there were issues decided, they weren't precluded.
But if there are no issues, that's... that's not what's involved in this case.
The simplest ground on which you could knock out issue preclusion is that no issues were decided.
Mr. Utrecht: --That would be a simple route to knocking out the case.
The Ninth Circuit rejected that argument.
That question did not seem cert-worthy and--
Justice Ginsburg: What... what were the issues that the Ninth Circuit thought were decided?
Mr. Utrecht: --I can't quite tell.
I think what the Ninth Circuit said was that because State law and Federal law on this question was similar, at least in the Ninth Circuit's understanding, that the State court determination was an equivalent determination.
Once they made that finding, that there was an equivalent determination under State law, the Ninth Circuit decided that the claim must be precluded by issue preclusion.
Justice Ginsburg: Well, issue preclusion does extend to questions of law, as well as fact.
Mr. Utrecht: It does extend to questions of law.
The problem, of course, is that the State court question of law that was decided was whether our... we were entitled to compensation under State compensation law.
The State court did not decide whether we were entitled to just compensation under the Fifth Amendment.
Justice Scalia: I thought they said that their... their compensation law was congruent with ours?
Mr. Utrecht: The California Supreme Court did say that its compensation law--
Justice Scalia: What do you... what do you think that means?
Mr. Utrecht: --I think that means that the California Supreme Court would like to believe that its law is congruent with this Court's decisions.
I think that, in fact, the California Supreme Court does not follow this Court's precedents in this area of law, and I think we actually argued the first time that we were in front of the Ninth Circuit, that it was futile to go to State court precisely for that reason.
That argument was also rejected by the Ninth Circuit.
I think that it cannot be that the State courts are going to be the... our final arbiter of whether their law is in fact congruent with Federal law or not.
It left either to this Court--
Chief Justice Rehnquist: What do you understand the word congruent to mean?
Mr. Utrecht: --I think congruent means that it's equivalent.
I think... I think the Ninth Circuit's view of an equivalent determination is that it's close.
It's close enough for government work, perhaps.
Justice Breyer: What... what is the claim you want to make?
That is, my reading of the California State court opinion says you came into their court and you said, look, this ordinance in San Francisco violates the Fifth Amendment, I guess, because it doesn't make any sense.
The... there's no good basis, no sound basis for requiring us to pay a fee in order to convert rooms.
Anyway, the room isn't a house.
Anyway, it makes no sense as applied to us.
Anyway, they admit they just want to raise revenue.
Anyway, we're going to give the tenant a place to live for the rest of his life.
Those were the claims.
And in each case, the California Supreme Court said you're wrong.
You're wrong because it does help preserve rooms, because it does have a reasonable purpose in a city that's crowded, because the tenant who's there for life might move out, and we want to keep the room even if he moves out because he dies.
And anyway, it's not an issue of whether your case is special.
This makes sense as a general rule.
They decided it.
You raised it.
They decided it.
Now, what else is it you want to raise in Federal court?
Mr. Utrecht: I think that what's important is the very beginning of your question.
You said that we said in State court that it violated the Fifth Amendment.
Justice Breyer: I don't know if you said it.
I just said that that is what I read in the California Supreme Court opinion that Justice Werdegar wrote.
And so what I'm asking you is whether they should have or whether they shouldn't have, they did seem to decide those five issues.
And so my question to you is, what else do you want to raise?
Mr. Utrecht: The California Supreme Court decided whether those legal propositions were relevant under the State constitution and the State compensation--
Justice Breyer: I thought it decided a different thing.
I thought that it decided that in part that was the reason for their decision.
But the reason they reached their decision is they thought on each of those five matters that the City of San Francisco had a reasonable legislative purpose for its ordinance.
Mr. Utrecht: --And they made that decision under State law.
Justice Breyer: Just as, suppose, for example, they had decided that the hotel clerk or the temporary manager did speak English, and in fact, he was a scholar of English.
And suppose that that had been the key matter for its decision of State law.
I take it, if you came into Federal court, even if the issue were quite different, you would be bound by that factual determination.
That's why I'm asking you.
It seems to me here they have decided matters of whether there was a reasonable purpose or not for this particular ordinance and as applied to you.
Now, what else do you want to raise in Federal court that was not encompassed by what I just described?
Mr. Utrecht: --In the hypothetical that Your Honor gave of a factual determination that the clerk spoke English well, that fact under the England case and under England's rationale would be subject to relitigation in Federal court in the Pullman context.
And we believe that there's no significant difference between our context and the Pullman context.
I do recognize that that is contrary to the normal rules of res judicata.
The normal rules of res judicata are designed to prevent exactly what this Court decided should be... should happen--
Justice Breyer: No, but am I right?
I'm just trying to narrow the issue in my mind.
Am I right you want to raise one, two, three, four, or five of those issues that I just described and nothing more?
Mr. Utrecht: --The factual claims--
Justice Breyer: Am I right about that?
Mr. Utrecht: --Yes, Your Honor.
The factual claims that we're making in Federal court are the same factual claims that we made in the State court--
Justice Kennedy: Well, but is there precedent that what is reasonable for the State constitution is always reasonable for the Federal Constitution?
Mr. Utrecht: --That--
Justice Kennedy: I mean, this is somewhat different than simply a specific factual finding.
Mr. Utrecht: --Well, in this particular case, they found that the facts that we alleged did not give rise to a right to compensation under State law.
And this Court in Williamson said once you've been denied compensation in State court, once it's certain that the State courts will not provide you relief under State law, you have a ripe Federal takings claim.
At that point, the Federal courts must be able to look at the factual questions underpinning the Federal takings analysis, so that the questions of whether in fact this law substantially advances a legitimate government interest or it interferes unduly with the reasonable investment-backed expectations under Penn Central, which requires a detailed ad hoc factual analysis, that that must be done by the Federal courts and cannot be precluded by a State court determination that is not considering the Federal questions at the time or... and it cannot even under this Court's decision in Williamson County... cannot consider the Federal question that's at issue.
The... the city... the city contends that... that a decision in our favor would result in--
Justice Stevens: May I interrupt?
Because I'm just not following one part of your argument.
Are you saying that the Pennsylvania analysis, the ad hoc analysis, was not made in the State court?
Mr. Utrecht: --No, I'm not saying that it was not made.
I'm saying that a State court disposed of that claim without doing a factual trial, but simply based on the allegations in the complaint.
Justice Stevens: Why... now, why should that not be binding on you if your allegations were, in fact, insufficient under Penn Central?
Mr. Utrecht: The court did not find that they were insufficient under Penn Central.
The court found that under State compensation law, which it believed was congruent with this Court's decision in Penn Central--
Justice Stevens: Well, I can understand how you should be free to argue that in fact the two rules are not congruent, that there's broader recovery under the Federal system.
But if we decided that the two... if we agreed with them that they were congruent, then why should not issue preclusion apply?
Mr. Utrecht: --Issue preclusion should not apply because it prevents the Federal courts from deciding the Federal takings questions.
Justice Stevens: Yes, but... but it's just a conclusion from issues that have... have been resolved on which normally we would defer to the State court.
Now, why... why shouldn't we defer here again?
Mr. Utrecht: --You shouldn't defer here because in Williamson County, you required that parties go through two litigations.
Justice Stevens: Right.
Mr. Utrecht: And all the rules of res judicata are designed to prevent two litigations and to require a single litigation.
It makes no sense, in the context of a two-litigation system that this Court set up, to then impose issue preclusion.
Justice O'Connor: But it isn't--
Justice Stevens: That doesn't make sense.
Justice O'Connor: --It isn't clear from Williamson County that this Court envisioned two... two separate determinations of fact issues: one in State court and one in Federal.
That isn't clear from the face of Williamson County.
That was a case where it was thought, at least, by members of the Court that the claims in that case just weren't ripe yet.
Mr. Utrecht: --Correct.
Justice O'Connor: And I don't... I didn't understand it to set up parallel systems of factual determinations.
Mr. Utrecht: It clearly set up parallel systems of litigation.
It did not discuss the question of what happens in the second litigation, but I think that this Court in England decided the proper solution to a situation where the Federal law requires--
Justice O'Connor: Well, England was an abstention case and had to deal with the effect of 28 U.S. Code 1738, the Full Faith and Credit Act.
But I didn't think that the England case just totally destroyed the notion of full faith and credit--
Mr. Utrecht: --The England case--
Justice O'Connor: --as... as applied section 1738.
Mr. Utrecht: --The England case held that when you're required to do two separate litigations, the first in State court and the second in Federal court as a result of Pullman abstention, that in the second case there would be no factual or legal issues that were decided in the State court that would be preclusive in deciding the Federal claims--
Justice Breyer: My--
Justice O'Connor: This is not a... a Pullman abstention case here.
Mr. Utrecht: --As it comes to this Court, it is not a Pullman abstention case.
Justice O'Connor: No.
Mr. Utrecht: It is a case where Williamson County has held that before you can bring your Federal takings claim, you must first go to State court and obtain a determination of whether you're entitled to compensation.
Chief Justice Rehnquist: I don't think that Williamson County ever contemplated that you would have to take your case all the way to the supreme court of the State.
Now, it may be that you had no choice once you got into the State court.
Mr. Utrecht: I think that's correct, Mr. Chief Justice.
The Williamson County case says that you have to go to State court and use the State procedures available for State compensation.
You cannot do that without going through the appellate procedure provided by the State courts--
Chief Justice Rehnquist: Do you think Williamson County by its terms spoke of going to State court and... rather than just a State administrative proceeding?
Mr. Utrecht: --As... as I read the Williamson County opinion, it says that you have to use the State procedures that are available to obtain compensation.
And the State procedures in California are an inverse condemnation claim under State law, i.e., a State compensation claim, which, as I read Williamson County... and I think all the other practitioners of takings law read Williamson County... means that you have to go to State court and ask for compensation before you can proceed to Federal court.
Now, it is possible that a State could have an administrative procedure instead of a judicial procedure in order to decide takings claim... rather, to decide State compensation claims.
If there were such an administrative procedure for obtaining State compensation, then that perhaps is what Williamson County envisioned that you would follow.
But I think Williamson County says whatever procedure is provided by the State, you have to exhaust that and obtain a denial from the State of your right to compensation before you can proceed to Federal court.
Justice Scalia: If you... if you disagreed with the resolution of an issue by the State court, which issue would be determinative of your Federal claim, if we hold against you here?
Do you think you would have a right to appeal that State court... State supreme court resolution of that issue to this Court?
Mr. Utrecht: No.
Justice Scalia: What... what strikes me as strange about this... this system is... is not leaving it to the State courts to make these decisions.
That's perfectly fine.
We do that all the time.
But these are decisions that are going to be conclusive on... on a Federal claim, and yet there's no way to... to appeal from the State supreme court here.
Mr. Utrecht: I think that's exactly the problem.
That was the problem we faced when the California Supreme Court did not decide our Federal claims.
I think because they only decided our State claims, we were not able to seek certiorari on the merits from the State supreme court decision, and then I think the procedure contemplated by this Court in Williamson County was that you could return to Federal court with your Federal claim once the State compensation claim--
Chief Justice Rehnquist: Didn't you seek to reserve the Federal question in the... in the State court litigation?
Mr. Utrecht: --We did reserve the Federal question in the State court litigation.
I'd like to reserve the balance of my time.
Argument of Seth P. Waxman
Chief Justice Rehnquist: Very well, Mr. Utrecht.
Mr. Waxman: Mr. Chief Justice, and may it please the Court:
The respondents had a full and fair opportunity to litigate every issue relevant to their Federal claims.
When they came to Federal court, they agreed that, with one exception, all of the relevant issues, both the ultimate issue of a reasonable relationship and all of the predicate issues that we recited, as Justice Ginsburg noted, at pages 10 and 11 of our brief, had already been litigated.
They said that they... there was one difference, which is that they claimed that under the Fifth Amendment, the level of scrutiny under a substantially advances claim, which is what they were litigating, was the Nollan/Dolan test of rough proportionality, not the more deferential standard of review that the California Supreme Court applied in its decision.
And as to that issue, they received a full litigation and adjudication on the merits in the courts below.
They petitioned this Court on that substantive question.
Chief Justice Rehnquist: You say the courts below.
Are you talking about the California State courts or the Ninth Circuit?
Mr. Waxman: Mr. Chief Justice, here I was referring to the district court and the Ninth Circuit following the California Supreme Court's decision.
They came to the courts and said there's one thing that's different.
There's one element that's different, and that is Nollan and Dolan.
Heightened scrutiny should apply to a financial exaction of this sort.
The California Supreme Court disagreed under California law.
We want to litigate that issue here, and they did.
The district court ruled against them on the merits.
The Ninth Circuit ruled against them on the merits.
They petitioned this Court in question 2.
This Court denied review.
In all other respects, their claims... their case under their Federal claims, which were not claim-precluded, were, as the district court found, quote, based on the exact same facts and circumstances argued before the State courts.
Now, they... their case here boils down... and it's quite clear from their reply brief, and Mr. Utrecht has reaffirmed it... to an argument that this Court's 1963 decision in England ought to be extended to the Williamson County context.
Now, I believe that England is distinguishable... highly distinguishable from the facts or the circumstances of a Williamson County remand for any number of reasons that I can explain.
But ultimately my point is this.
England is fatal to them.
If England were extended to this circumstance, they would lose, and that is because in England, the Court was entirely clear that as to the State law issue that the Supreme Court said should be presented to the Louisiana courts first for determination, there was no doubt that issue preclusion was going to apply to that.
The question was whether or not principles of preclusion would bar them from coming back to Federal court otherwise.
In other words, in England, the question... there was a challenge by chiropractors to a State law that said chiropractors have to go to medical school or something like that.
A Federal complaint was raised under 1983, saying that violates our Fourteenth Amendment rights.
The Supreme Court said, well, wait a minute.
We're not sure that the Louisiana law covers chiropractors, and if it doesn't, we can avoid the Federal constitutional question.
So we're going to, in effect, certify to the Louisiana courts the question, the State law question, whether chiropractors are covered.
Chief Justice Rehnquist: Well, I mean, they didn't really certify it.
Mr. Waxman: --No.
They used... they... they abstained under the Pullman doctrine which, as this Court has explained, is a procedure that is akin to the certification process where States use it.
But in any event, no one... when... no one would have thought for a moment that having gone to litigate that State law issue in State court, if they had lost, England... the chiropractors could come back and say, okay, we think that we shouldn't have to comply with this law for two reasons: one, because we're not covered by the law even though the Louisiana courts thought so; and two, if we were, the Fourteenth Amendment would prohibit it.
They... the question on which you granted review is limited to those issues, and there is a fair question on the record in this case whether any of those issues are really before the Court now.
But as to those issues, for which Williamson County requires that a party resort first to State procedures, whether issue preclusion applies, and the... the extension of England by analogy to this would dictate the answer yes.
It may not apply if... if you extend England to all other types of issues that a party may litigate along with their Williamson County ripening exercise.
But the very determination that Federal law requires them to obtain under State law, prior to stating a ripe Federal constitutional claim, of course, gets issue preclusion.
Now, the question was asked--
Justice O'Connor: Do you think it's open to us to reconsider aspects of Williamson County in this case?
Mr. Waxman: --I don't think... well, I would have to take a very deep breath before I told the Court that it was not open to the Court to reconsider just about anything that touched on it.
I think it would be--
Justice O'Connor: It... frankly, it isn't clear to me that the Court ever contemplated just cutting off any determination in Federal court of takings claims in the way that it seems to work out by application of Williamson County.
Mr. Waxman: --Let me explain why I think it would be imprudent for the Court to resolve it and then explain why I think it's fair to say that the Court didn't consider one way or the other principles of preclusion in application of the Full Faith and Credit Act in Williamson County.
Justice O'Connor: Well, it's clear we didn't.
So now we're faced with the consequences of that, and it looks to me like the lower courts have run pretty far with Williamson County.
So what's a takings claimant supposed to do?
Mr. Waxman: Well, I think it would be imprudent to decide... I... I think that the Court will have to elaborate on the Williamson County requirement and how the procedures work.
I hope, after all the preparation for this argument, I'll be able to participate in some way in that debate because it's a really interesting question.
But it's not presented here because even if you were to reconsider Williamson County, even if you were to overrule it, it wouldn't affect the outcome here.
We know two things are true in this case, whatever Williamson County means doesn't mean or shouldn't mean.
Every issue relevant to the Federal constitutional claims was fully and fairly litigated in this case, and we also know that under--
Chief Justice Rehnquist: Well, now, wait a minute.
You don't mean that the Fifth Amendment question was fully and fairly litigated in the Supreme Court of California.
Mr. Waxman: --No.
The Supreme Court of California said that it was not deciding the Federal... the Fifth Amendment Federal constitutional question.
But they... they concede that all of the issues that make up the... the Federal constitutional question were fully and fairly litigated in the California courts except the question of whether the Fifth Amendment, as opposed to the California takings provision, is entitled to--
Chief Justice Rehnquist: Well, what--
Mr. Waxman: --to Nollan and Dolan.
And that was litigated here.
Chief Justice Rehnquist: --What preclusion law do you apply?
The Ninth Circuit apparently applied Oregon preclusion law.
Mr. Waxman: The... it's... the Full Faith and Credit Act requires that you... requires that you apply the preclusion law of the State that rendered the judgment to which--
Chief Justice Rehnquist: Which would be California.
Mr. Waxman: --Which would be California.
And I do think, with respect, Mr. Chief Justice, that the California Supreme Court... I'm sorry... the Ninth Circuit made clear that it was applying California preclusion law.
It cited the California Supreme... a... California authorities, and it correctly recited the elements of the California preclusion law in this regard.
It did make reference to its prior determination in Dodd v. Hood River, which was an Oregon case, in which the Ninth Circuit decided that an England reservation in the Williamson County context was effective with respect to claim preclusion but not issue preclusion.
And in that respect... and this I think goes back to Justice O'Connor's question about, you know, what... what could we have been thinking or not thinking in Williamson County... the... the Dodd case provides a pretty good example.
At the time this Court decided Williamson County, many, probably most States did not have a substantive takings jurisprudence that was akin to the Federal standard.
For example, California itself, New York didn't provide compensation for regulatory takings at all.
In those States, there would be no question of either claim or issue preclusion because in the course of deciding whether or not compensation was due under State law, there would be few, if any, common issues decided.
Now, as the Ninth Circuit explained in Dodd v. Hood River, Oregon recognizes... in the context of regulatory takings, recognizes an Agins type claim, that is where you are completely denied all economic value to your... I'm sorry... a Lucas claim, but they don't recognize the Penn Central standard.
They don't provide compensation unless you are denied all economic value.
Justice Stevens: Mr. Waxman, can I ask you this question?
Supposing the California court had decided the Federal... the Federal Fifth Amendment question or in the... the England supposing the Louisiana State court had decided the Fourteenth Amendment question, would there be issue preclusion on that issue in... in that... in that sequence?
Mr. Waxman: Issue preclusion or claim preclusion?
Justice Stevens: Either one.
Mr. Waxman: I think the answer is there... if England... if the England decision were extended to the Williamson County context, there would not be claim preclusion.
We think it shouldn't be extended, and therefore if they litigated both their State claim and their Federal claim in State court, we think they would be barred both by issue and claim preclusion.
Justice Scalia: Of course, they could have come up here, though.
I mean, maybe that was their mistake in not making their Federal claim in the California court.
The California court would have denied their State claim, presumably denied their Federal claim, and... and both could have come up here I suppose.
Or... or would the California's... would California's determination of the State questions preclude a separate determination of the Federal questions?
Mr. Waxman: I... I don't... I don't think so, Justice Scalia.
I think it was certainly open to them and the... the Ninth Circuit, in its first opinion, made clear that it was open to them, when they went... when they did their Williamson County ripening, to also litigate the Federal constitutional question.
And in that instance, if they lost in the California courts, of course, they could have petitioned.
They couldn't... if they lost on the State constitution, the court would have had to reach the Federal constitutional question as well.
But I think, Justice Scalia, more to your point about what actually happened here, I think that a very good argument... I... I don't think that there's really much doubt that if they had petitioned for certiorari from the California Supreme Court decision, you could easily have granted review under Zacchini and Michigan v. Long and Ruiz because the California Supreme Court said, to be sure we are deciding only the State constitutional question.
We are not ruling on the Fifth Amendment.
But they made very clear that, whatever congruent means... they made very clear that they looked to this Court's statements and expositions about the meaning of the Fifth Amendment to construe the claims the same.
And as this Court said in Ohio v. Reiner, I think 2 years ago, when a State court's interpretation of State law has been influenced by an accompanying interpretation of Federal law, we may review.
And in fact, if you think about it, think of almost every takings case that you've decided since Williamson County.
With the exception of the Tahoe compact cases, they are all from State court decisions.
Lucas, Palazzolo, First English, Nolan and Dollan, Yee, Pennell, McDonald, San Diego, they are all--
Justice Kennedy: Monterey... Monterey Dunes was from the United States district court.
Mr. Waxman: --Yes, because that was a case... that's the other one that I was thinking of this morning.
That was a case that was filed in the district court and litigated in the district court.
And it raises a real anomaly about whether or not this case even really presents the question on which you granted review because their... the theory that they have pursued in State court and at this round in Federal court is that there is a takings violation under both the State and the Federal Constitution under the so-called substantially advances prong.
Their complaints allege a Penn Central violation, but their briefs in the lower court... in the lower Federal courts in this proceeding and in the State courts don't discuss Penn Central at all, as the California Supreme Court in footnote 14 of its opinion explained.
So if this is just a substantially advances claim, it raises the question, number one, whether in the context of legislation, there is a substantially advances prong in the Fifth Amendment, a question that you're... you're asked... that you are presumably addressing in Lingle v. Chevron.
If there is, it raises the separate question posed by this Court's decision in Yee whether that is a claim for compensation.
In other words, what this Court said in Yee is when you challenge, under the Fifth Amendment, legislation on the grounds that it doesn't substantially advance a legitimate government objective, this Court said, that's not a claim for compensation.
That is a claim that the ordinance be struck down and not applied.
And that's what they're litigating here.
Now, they have... and so the question is if it's not a claim for compensation, is it subject to Williamson County ripening?
Why should you have to go to State court?
So there are a lot of this... the Conference of State Chief Justices have filed an amicus brief in support actually of us in this case, saying we don't see that the facts of this case present the question on which you granted review.
I think it's fairer to say it's not clear because the petitioners did challenge this ordinance not only on its face, but as applied.
And although the district court below found that it wasn't a real as-applied challenge because they couldn't in any meaningful way distinguish themselves from the other 500 residential hotels in San Francisco, all of whom are concededly subject to the hotel conversion ordinance.
At least I suppose in theory, there is some claim for compensation for the temporary period in which they were subject to the hotel conversion ordinance.
So I... I don't know.
I... you granted cert in the case.
We'd like to get the... the question answered, but I think the reason this long disquisition, Justice Kennedy, about Del Monte Dunes is in Del Monte Dunes, it was a substantially advance claim, and I think it was thought that there was no need to engage in Williamson County ripening.
Justice Souter: Let's take a... may I... may I, in effect, approach it with a simpler example, which... which is not this case, but I... I just want to know how... how the... the systems work together.
Let's assume that, in fact, a... a Lucas kind of claim had been involved, and the... the State courts said we understand Lucas.
We're applying Lucas.
And in point of fact, following the Lucas standard, there are plenty of uses that are still left on this land, so that there's no taking under... under Lucas.
And let's assume that they... they go through the State system.
They don't petition here for cert. Instead, they go into the... the district court with a Fifth Amendment claim.
Is it open to them in the district court to make this argument?
Don't apply issue preclusion to our Lucas claim.
The Lucas... to... to the... to the determinations, the reasonable use determination in... in Lucas.
Don't do it because although the State court purported to be applying Lucas, it really was not.
It was not following the Lucas standard.
It was applying something much more favorable to the State.
And therefore, any determination on that issue should not get preclusion here.
We ought to be able to litigate de novo even though, on the face of it, we seemed to have litigated the Lucas issue and the State court decided it.
Could they make that argument?
And... and if it were sound, would... would preclusion principles give way?
Mr. Waxman: At most... I mean, they could certainly make the argument.
At most, preclusion would give way on the ultimate Lucas question, not all of the subsidiary issues that were resolved en route to that determination, issues akin to the ones that we recited at pages 10 and 11 of our brief.
That is, if the district... if the State court finds, you know, that the property is in such and such a place and on such and such a year, this thing happened or that the ordinance, as it applied, had this effect or that effect, there certainly would be no possible argument that issue preclusion wouldn't apply because they... those were necessary determinations and they had a full and fair opportunity to determine it.
As to the ultimate issue, this would be... the Full Faith and Credit Act directs the Federal court to ask what would the law of California say about this.
If they tried to then bring their Federal constitutional Lucas theory in State court, would issue preclusion or claim preclusion principles bar a second bite at the litigation apple?
The answer ordinarily... and you've asked me to assume that the tests that they have... they purport to be stating the Federal standard.
Ordinarily the answer would be no if the argument simply is they made a mistake.
I mean, that's... that's what happens in issue preclusion.
That's what in Allen v. McCurry and... and all of the cases in which this Court has applied full faith and credit, Kremer and... and... I'm forgetting the names of the other cases.
The argument was, yes, they thought they were adjudicating rights under the Fourth Amendment, but they were wrong, and issue preclusion shouldn't apply.
I'm... I'm qualifying my answer a little bit because I do think that if you came to Federal court and said, look, this was a sham or they... they... their analysis was so skewed that it can't fairly be said that they were really applying the Federal standard, something like, you know, the... the AEDPA standard now that... that you get review if it's an... not just an incorrect determination, but a wholly unreasonable application of law or fact.
Then I think you would look and see, well, would a State court say, well, that's right.
I mean, if your allegation is that they were so far off the reservation that it really wasn't a determination of that issue, I think you get a new review.
I mean, I do think--
Justice Kennedy: Well, was there an allegation--
Justice Souter: I guess in the--
Justice Kennedy: --at any point here... was there an allegation at any point here that the State procedures were inadequate to protect property rights?
Mr. Waxman: --No, to the contrary.
Not only... there's no Pullman issue presented in this case, but the procedural posture of this case demonstrates, if anything, a full-throated appeal to the State courts.
Justice Kennedy: Well--
Mr. Waxman: They--
Justice Kennedy: Well, it's not so much that weren't appellate procedures, but that the procedures and the variance procedures and... and a multiplicity of agencies here were just so complex that it amounted to an... inadequate remedies to protect against a taking.
Mr. Waxman: --There have been absolutely no such allegations made in this case.
And I think a... I think that the San Remo would have to concede that although there was a plethora of litigation in the State courts and in the lower Federal courts about the zoning determinations and whether a conditional use permit was or wasn't required, the... the hotel conversion ordinance, the ordinance that requires the payment of this in lieu fee, applies across the board to all residential hotels based... wherever they're located in the city, whether they're in a historic district or not and whether they have to be rezoned or not.
It was a simple, straightforward question about whether an ordinance that says if you run a residential hotel or you have residential rooms that you have certified as of the date the ordinance was enacted and you want to change them permanently to full-time tourist use, you have to bring an equivalent number of units on line or you have to pay an in lieu fee to the city's building fund.
And they made a challenge, like many people have, that substantively that violates the Federal and State takings clause.
That is a taking of private property without just compensation.
But it applies to all the residential hotels in the city wherever they're located, regardless of whether they need variances or... or anything like that.
Now, in this case they went first to the Superior Court in San Francisco and they filed an administrative mandamus claim challenging the zoning determination that was made in their case because they're in a historic district.
And at the same time, they went to the Federal court and they raised all of their takings claims with respect to the ordinance and the zoning issues.
They got a preliminary injunction in Federal court which was then... but then lost a summary... they had summary judgment issued against them on all the substantive... all the claims in their case.
When they came to the Ninth Circuit, they asked the Ninth Circuit to abstain under Pullman because they had this municipal law question pending in the superior court.
It had been pending for 5 years, and that might somehow obviate or change the constitutional question.
And they then went to... they... the... the Ninth Circuit noted that it was rather unusual for the plaintiff to be invoking Pullman abstention and certainly to be doing so for the first time on appeal after losing in the district court, but nonetheless, the Ninth Circuit said fine.
And they then went to State court, and they pressed not only their pending municipal law question, but they also made their takings claims under Penn Central and under the substantially advance prong both as applied and both facial under the State constitution.
And they received a full and fair hearing on those claims in the superior court, in the court of appeal where they won, and in the California Supreme Court where they ultimately lost 4 to 3.
There... I don't believe there is any argument made or available in this case that there was a denial of a full and fair opportunity to litigate those issues as to which preclusion is required.
Justice Ginsburg: But they said there was no litigation because it was just decided.
They didn't plead enough to state a claim for relief.
Mr. Waxman: Well, the... the California Supreme Court decision makes clear at page 113a of the petition appendix that it decided the takings claims, the substantially advance claims, on a demurrer and that they decided it, therefore, based on the factual allegations of the complaint, matters subject to judicial notice, of which there were many, and facts and circumstances that were not disputed.
I mean, it... there's no such thing, I don't believe, as the resolution of a legal claim in which no issues are decided.
There were plenty of issues decided in this case.
Justice Souter: --Decided but not litigated.
I mean, the... the problem is that... that claim preclusion normally assumes that the issue is, in fact, litigated.
Mr. Waxman: Well--
Justice Souter: And his... he's arguing it was not.
Mr. Waxman: --The... the issue of whether or not the hotel... whether or not the... San Francisco's hotel conversion ordinance was reasonably related to the city's objective was litigated with a vengeance.
It was litigated to the point of dozens, if not hundreds of pages in the State court.
The State court... the State courts made a number of subsidiary findings leading to their conclusion that, both on its face and as applied, the hotel conversion ordinance was reasonably related to the city's legitimate objective of retaining low-cost rental housing for the elderly, the disabled, and the poor.
Justice Souter: Tell me how that statement that you just made, fully litigated, squares with the fact that... I thought you said a moment ago it was decided on a demurrer.
Mr. Waxman: It's--
Justice Souter: I'm... I'm confused here.
Mr. Waxman: --It's the application of law to fact.
What the Court decided... this Court said, I think in Yee--
Justice Souter: But you're... you're saying that the facts were... were independently developed before the demurrer was filed and granted?
Mr. Waxman: --Yes.
The... the courts were asked to take judicial notice of a number of things.
Justice Souter: So it was not decided simply on pleadings.
Mr. Waxman: --No.
Justice Souter: Okay.
Mr. Waxman: I mean, what the court--
Chief Justice Rehnquist: A demurrer--
Mr. Waxman: --I'm sorry.
Chief Justice Rehnquist: --A demurrer is decided on the pleadings, isn't it?
Mr. Waxman: Well, it... what the court said... and I think this is a... what the California Supreme Court said at page... I think it was page 113a and they also reiterate this point at page 139a, footnote 12... is this is a demurrer.
So we take... we accept as true the allegations of the complaint.
Plus, we take judicial notice of all the things that the parties asked us to take notice of, which are matters of public record, of which there were many, many, many in this case, including, for example, the fact that every year from 1990... well, every year from the... from 1983 on, when they took over operation of this property, they filed with the city an annual report that listed that, A, the determination that all 62 of their rooms were for residential use and then explained... and then stated out the exact number of rooms by quarter that were, in fact, used by... for long-term residences and those that, during the summer months, were used for tourist use.
The court took judicial notice of that, as it was appropriate, en route to its decision... this is a subsidiary issue I suppose... that the conversion of this hotel to full-time tourist use would, in fact, cause a loss in the stock of available affordable housing.
That was an issue that was determined in this case.
And the ultimate question decided by the court was a mixed question.
It was the application of law to fact, as this Court explained, I think in Yee, is characteristic of substantially advances claims.
Thank you very much.
Rebuttal of Paul F. Utrecht
Chief Justice Rehnquist: Thank you, Mr. Waxman.
Mr. Utrecht, you have 4 minutes remaining.
Mr. Utrecht: Thank you, Your Honor.
There's no question that Williamson County creates problems.
The Ninth Circuit in this case did not just issue a Pullman abstention order the first time we were there.
They dismissed our as-applied claims as unripe.
It dismissed our facial claim based on economic viability as unripe.
So we're squarely within the context contemplated by Williamson County; i.e., we proceeded in State court with our State compensation claim in order to ripen the Federal claim.
The city acknowledges, as a result of that, that there's no claim preclusion.
And this Court's decision in Migra says that if there's a reason not to apply claim preclusion, there should also be a reason not to apply issue preclusion, that there should be an exception for both or an exception for neither.
In this case, in addition to acknowledging an exception for claim preclusion, Mr. Waxman also acknowledged that if the State court was, as I... my notes show, so far off the reservation, the Federal court could revisit the question.
The problem, of course, with so far off the reservation is that might be a good test for this Court to adopt, but if the city's position is correct, this Court does not have that opportunity.
This Court is stuck with whatever law the State imposes under issue preclusion.
So this Court is not free, if the city is correct, to create some special exception.
I think the only basis for finding a separate exception in this case is the one that this Court set out in England.
I see no reason that it shouldn't be extended to this circumstance.
Unless there are any questions, I have nothing further.
Chief Justice Rehnquist: Thank you, Mr. Utrecht.
The case is submitted.
Argument of Chief Justice
Mr. Justice: The opinion of the Court in San Remo Hotel versus San Francisco will be announced by Justice Stevens.
Argument of Justice Stevens
Mr. Stevens: Petitioners own and operate the San Remo Hotel in San Francisco, California.
In 1993, in response to petitioners' request to convert their property from a residential hotel into a full time tourist hotel, the City Planning Commission required them to meet a number of conditions including the payment of a conversion fee of $567,000.00.
Petitioners sued in Federal Court contending that the conditions constituted a taking of their property without just compensation in violation of the Fifth Amendment of the Federal Constitution.
The Federal District Court and Court of Appeals however, both found that petitioners had not yet been denied just compensation for the taking because they had never asked the State Court to provide them with just compensations.
Thus, the courts held petitioners did not have a right Fifth Amendment injury under our decision Williamson County Regional Planning against the Hamilton Bank of Johnson City.
The Federal Courts dismissed petitioners' unripened claim and agreed to abstain from deciding the rest of petitioners' claims while they return to State Court.
Back in State Court, petitioners raised essentially the same takings claims that they had tried to advance in Federal Court.
After the California Courts denied petitioners' claim on the merits, they attempted to reraise the same issues back in the Federal District Court.
Petitioners argued that they had reserved their federal claims under a case called England against Louisiana and a Board of Medical Examiners, and therefore that preclusion doctrine should not prevent them from retaining a fresh review of the underlying issues in the litigation.
They also argued that the full faith and credit statute which requires Federal Courts to give full faith and credit to state judicial proceedings should not apply because they had been forced to litigate their claims involuntarily in State Court.
The Ninth Circuit Court of Appeals disagreed.
The Court held that the doctrine of issue preclusion prevented the Court from revisiting all issues that were actually decided in the State Court.
Here, because the Court found California takings law coextensive with federal law, all of the underlying issues raised by petitioners' federal complaint had already been decided in full by State Courts.
The Court declined that petitioners' invitation to create a judicial exception to the full faith and credit statute rejecting the argument that Williamson County's requirement that takings claims must first be advanced in State Courts is unfair if applied to preclude relitigation in Federal Court.
For reasons that are fully stated in our written opinion, we agree with the Ninth Circuit.
We do not read our England decision to permit the type of relitigation petitioners requested here.
Moreover, none of our prior cases permit us to create a judicial exception to a validly enacted congressional statute simply to afford a litigant the opportunity to raise a federal claim in a federal forum.
Finally, because we do not read Williamson County to preclude takings claims from being fully litigated in State Courts, there is no cause to except takings plaintiff from the full faith and credit statute.
The judgment of the Ninth Circuit is therefore affirmed.
The Chief Justice has written an opinion concurring in the judgment in which Justices O'Connor, Kennedy and Thomas have joined.