U.S. Supreme Court Finds for City in San Remo Case

High Court Holds that Plaintiffs May Not Relitigate in Federal Court Their Failed Claim That S.F.’s Hotel Conversion Ordinance is an Unconstitutional ‘Taking’

WASHINGTON (June 20, 2005) — City Attorney Dennis Herrera today applauded a unanimous decision released this morning by the United States Supreme Court in the matter of San Remo Hotel v. City and County of San Francisco, which held that local and state governments regulating private property to protect the environment, affordable housing, and other community interests should not be forced to defend these regulations twice-first in state court, and then again in federal court. Justice John Paul Stevens delivered the opinion of the Court, which was joined by Justices Antonin Scalia, David Hackett Souter, Ruth Bader Ginsburg and Stephen G. Breyer. Chief Justice William H. Rehnquist filed an opinion concurring in the judgment, in which Justices Sandra Day O’Connor, Anthony M. Kennedy and Clarence Thomas joined.

Writing for the Court, Justice Stevens declared that once property owners challenging regulations have a full and fair hearing in state court, they are not entitled to “a second bite at the apple” by refiling the same challenge in federal court to try their claim a second time. “State courts are fully competent to adjudicate constitutional challenges to local land-use decisions,” 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.” The decision affirms a previous ruling by the U.S. Court of Appeals for the Ninth Circuit.

“The issue decided by the high court in San Remo solidifies the legal foundation upon which San Francisco’s Hotel Conversion Ordinance stands,” Herrera said. “But the decision has significance well beyond a single San Francisco ordinance. Had the result in this case been otherwise, the enormous costs of a duplicative defense of social and economic regulation would have a chilling effect on essential environmental, health, and safety regulation for all local governments. It is hard to put a figure on the value of this decision to the entire nation.”

In March, San Francisco argued before the U.S. Supreme Court in defense of its Hotel Conversion Ordinance (HCO) after a decade-long onslaught by attorneys for the San Remo Hotel. The HCO, enacted in 1981, prevents owners of single-room-occupancy residential hotels from converting their units historically used for tenants into lodging for tourists, which is typically more lucrative, unless steps are taken to ameliorate the lost housing. Those steps include: replacing the converted units through construction of an equal number of units for residents; rehabilitating an equal number of residential hotel units; or making an “in lieu payment” to the San Francisco Residential Hotel Preservation Fund to cover some of the construction costs for new units to replace those being converted. The longstanding measure is critically important to preservation of affordable housing in one of the nation’s least affordable housing markets.

The San Remo Hotel, whose owners illegally converted their hotel to a permanent tourist hotel in 1993, filed their suit in federal court, claiming that the HCO effected a “taking” of the hotel because the HCO did not “substantially advance” any legitimate government purpose. When the federal district court dismissed their claim because San Remo waited too long to bring the suit, San Remo decided to shop for a different, hopefully more favorable, forum. After five years of litigation, San Remo snatched delay from the jaws of defeat by asking the federal appellate court to vacate the district court’s judgment and send San Remo to state court to reassert its takings challenge to the HCO.

San Remo, however, was no more successful in the state courts. After four more years of litigation in the California courts, the California Supreme Court ruled against the San Remo, finding that the HCO substantially advanced the City’s legitimate interest in preserving affordable housing for the elderly, disabled, and low-income families. The California high court also rejected San Remo’s claim that it should be exempt from the HCO because it was historically a tourist hotel. The Court found to the contrary and ruled that San Remo’s historic use was primarily as a residential hotel.

Not satisfied with a full and fair hearing on the merits of its challenge to the HCO in the state’s trial, appellate and supreme courts, the San Remo again shopped for a more favorable forum. It attempted to return to federal court with the same arguments it had pressed initially in the federal court, and later in the state court. San Remo claimed that because it “reserved” its federal takings claim in state court for later litigation in federal court, it was entitled to another hearing of its takings claim in the federal court.

“It is hard to conceive of a more wasteful and unfair result than the outcome urged by the San Remo plaintiffs, where the government must win a suit twice to defend one of its laws, but a property owner need only win once. Federal law prevents this unfair result, as the high court held today,” said Andrew Schwartz, the former San Francisco deputy city attorney who recently joined the law firm of Shute, Mihaly & Weinberger LLP and has worked continuously on the case since its inception. “The Full Faith and Credit Act, one of the oldest federal statutes, requires the federal courts to give the same respect to a judgment of a state court that a court of that state would give to that judgment. Here, the California Supreme Court ruled against the San Remo on every one of its claims. California courts would certainly not allow the San Remo to simply refile its case and start over. Therefore, under the Full Faith and Credit Act, the federal courts are also bound by that judgment. The Ninth Circuit correctly ruled that San Remo had its day in court and lost. San Francisco is very pleased that the Supreme Court today affirmed that result.”

Supporting the City and County of San Francisco as amici curiae (friends of the court) in the case were the Conference of Chief Justices; the states of New York, Connecticut, Vermont, New Jersey, Colorado, Delaware, Hawaii, Maryland, Missouri, Montana, Oklahoma and West Virginia; National Association of Counties; National League of Cities; Council of State Governments; National Conference of State Legislatures; U.S. Conference of Mayors; International Municipal Lawyers Association; International City/County Management Association; California State Association of Counties; League of California Cities and the American Planning Association.

The case is San Remo Hotel et al. v. City and County of San Francisco et al, Supreme Court of the United States, No. 04-340. An electronic version of the decision is available online on the City Attorney’s Web site at https://www.sfgov.org/cityattorney/.