No Taking Clause Exception to Full Faith and Credit Statute in San Remo Hotel v City and County of San Francisco

In San Remo Hotel v City and County of San Francisco, 545 U.S. 323 (2005), the U.S. Supreme Court declined 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. Accordingly, litigants are not entitled to bring federal takings claims in federal court if the issues have already been litigated in state court.

Full Faith and Credit Clause

Article IV, §1, of the U.S. Constitution, provides that “Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State. And the Congress may by general Laws prescribe the Manner in which such Acts, Records and Proceedings shall be proved, and the Effect thereof.” In 1790, Congress enacted the first version of the full faith and credit statute. The current version of the statute, 28 U.S.C. § 1738, provides that “judicial proceedings . . . shall have the same full faith and credit in every court within the United States and its Territories and Possessions as they have by law or usage in the courts of such State … .” This statute has long been understood to encompass the doctrines of res judicata, or “claim preclusion,” and collateral estoppel, or “issue preclusion.”

Facts of San Remo Hotel v City and County of San Francisco

The owners of a San Francisco hotel filed suit over the application of an ordinance requiring them to pay a $567,000 fee for converting residential rooms to tourist rooms. They initially sought mandamus in California state court, but that action was stayed when they filed suit in Federal District Court asserting facial and as-applied challenges to the ordinance under the Fifth Amendment’s Takings Clause. Although the District Court granted the city summary judgment, the Ninth Circuit abstained from ruling on the facial challenge under Railroad Comm’n of Tex. v. Pullman Co., 312 U.S. 496 (1941), because the pending state mandamus action could moot the federal question. The court did, however, affirm the District Court’s ruling that the as-applied claim was unripe.

In the state court proceeding, the petitioners sought to reserve the right to return to federal court for adjudication of their federal takings claims. Ultimately, the California courts rejected petitioners’ various state-law takings claims, and they returned to the Federal District Court, advancing a series of federal takings claims that depended on issues identical to those previously resolved in the state courts. In order to avoid being barred from suit by the general rule of issue preclusion, petitioners asked the District Court to exempt their federal takings claims from the reach of the full faith and credit statute, 28 U.S.C. § 1738.

Relying on the Supreme Court’s decision in Williamson County Regional Planning Comm’n v. Hamilton Bank of Johnson City, 473 U.S. 172 (1985), which held that takings claims are not ripe until a State fails “to provide adequate compensation for the taking,” the petitioners argued that, unless courts disregard §1738 in takings cases, plaintiffs will be forced to litigate their claims in state court without any realistic possibility of ever obtaining federal review. The District Court ruled that the petitioners’ facial attack was barred by issue preclusion, reasoning that §1738 requires federal courts to give preclusive effect to any state-court judgment that would have such effect under the State’s laws. The court added that because California courts had interpreted the relevant substantive state takings law coextensively with federal law, petitioners’ federal claims constituted the same claims the state courts had already resolved. The Ninth Circuit affirmed. In so ruling, the federal appeals court rejected petitioners’ contention that general preclusion principles should be cast aside whenever plaintiffs must litigate in state court under Pullman and/or Williamson County.

Supreme Court’s Decision in San Remo Hotel v City and County of San Francisco

The Court unanimously 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. Justice John Paul Stevens wrote on behalf of the Court.

The Court rejected the argument that whenever plaintiffs reserved their federal takings claims in state court under England v. Louisiana Bd. of Medical Examiners, 375 U.S. 411 (1964) federal courts should review the reserved federal claims, regardless of the issues decided by the state court. Asa Justice Stevens explained:

Although petitioners were certainly entitled to reserve some of their federal claims … England does not support their erroneous expectation that their reservation would fully negate the preclusive effect of the state-court judgment with respect to any and all federal issues that might arise in the future federal litigation.

The Court further held that federal courts are not free to disregard §1738 simply to guarantee that all takings plaintiffs can have their day in federal court. “State courts are fully competent to adjudicate constitutional challenges to local land-use decisions,” Justice Stevens wrote. “Indeed, state courts undoubtedly have more experience than federal courts do in resolving the complex factual, technical, and legal questions related to zoning and land-use regulations.”